House Bill text for HB0008

HOUSE BILL 8

49th legislature - STATE OF NEW MEXICO - first session, 2009

INTRODUCED BY

Ben Lujan

FOR THE REVENUE STABILIZATION AND TAX POLICY COMMITTEE

AN ACT

RELATING TO TAXATION; EXPANDING THE ALLOWANCE OF WITHHOLDING AMOUNTS FOR ESTIMATED TAX PURPOSES; PROVIDING A PAYMENT DATE FOR THE FIRST QUARTERLY PAYMENT OF ESTIMATED CORPORATE INCOME TAX; AMENDING THE FILM PRODUCTION TAX CREDIT TO PROVIDE FOR WITHHOLDING BY FILM PERFORMING ARTIST ENTITIES AND CHANGING DEFINITIONS; EXPANDING COVERAGE OF THE WITHHOLDING TAX ACT; PROVIDING A CREDIT AND REQUIRING ELECTRONIC FILING OF WITHHOLDING INFORMATION RETURNS BY CERTAIN EMPLOYERS AND PAYORS FOR VARIOUS AGENCIES; EXPANDING COVERAGE OF THE OIL AND GAS PROCEEDS WITHHOLDING TAX ACT AND IMPOSING WITHHOLDING RATES; IMPOSING A PENALTY; CREATING A GROSS RECEIPTS TAX EXEMPTION FOR FILM PERFORMING ARTIST ENTITIES; RECONCILING MULTIPLE AMENDMENTS TO THE SAME SECTION OF LAW IN LAWS 2003; AMENDING AND ENACTING SECTIONS OF THE NMSA 1978; DECLARING AN EMERGENCY.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF NEW MEXICO:

Section 1. Section 7-2-12.2 NMSA 1978 (being Laws 1996, Chapter 17, Section 1, as amended) is amended to read:

"7-2-12.2. ESTIMATED TAX DUE--PAYMENT OF ESTIMATED

TAX--PENALTY.--

A. Except as otherwise provided in this section, [every] an individual who is required to file an income tax return under the Income Tax Act shall pay the required annual payment in installments through either withholding or estimated tax payments.

B. For the purposes of this section:

(1) "required annual payment" means the lesser of:

(a) ninety percent of the tax shown on the return of the taxable year or, if no return is filed, ninety percent of the tax for the taxable year; or

(b) one hundred percent of the tax shown on the return for the preceding taxable year if the preceding taxable year was a taxable year of twelve months and the taxpayer filed a New Mexico tax return for that preceding taxable year; and

(2) "tax" means the tax imposed under Section 7-2-3 NMSA 1978 less any amount allowed for applicable credits and rebates provided by the Income Tax Act.

C. There shall be four required installments for each taxable year. If a taxpayer is not liable for estimated tax payments on March 31, but becomes liable for estimated tax at some point after March 31, [he] the taxpayer must make estimated tax payments as follows:

(1) if the taxpayer becomes required to pay estimated tax after March 31 and before June 1, fifty percent of the required annual payment must be paid on or before June 15, twenty-five percent on September 15 and twenty-five percent on or before January 15 of the following taxable year;

(2) if the taxpayer becomes required to pay estimated tax after May 31, but before September 1, the taxpayer must pay seventy-five percent of the required annual payment on or before September 15 and twenty-five percent on or before January 15 of the following taxable year; and

(3) if the taxpayer becomes required to pay estimated tax after August 31, the taxpayer must pay one hundred percent of the required annual payment on or before January 15 of the following taxable year.

D. Except as otherwise provided in this section, for taxpayers reporting on a calendar year basis, estimated payments of the required annual payment are due on or before April 15, June 15 and September 15 of the taxable year and January 15 of the following taxable year. For taxpayers reporting on a fiscal year other than a calendar year, the due dates for the installments are the fifteenth day of the fourth, sixth and ninth months of the fiscal year and the fifteenth day of the first month following the fiscal year.

E. A rancher or farmer who expects to receive at least two-thirds of [his] gross income for the taxable year from ranching or farming, or who has received at least two-thirds of [his] gross income for the previous taxable year from ranching or farming, may:

(1) pay the required annual payment for the taxable year in one installment on or before January 15 of the following taxable year; or

(2) on or before March 1 of the following taxable year, file a return for the taxable year and pay in full the amount computed on the return as payable.

[No] A penalty under Subsection G of this section shall not be imposed unless the rancher or farmer underpays [his] the tax by more than one-third. If a joint return is filed, a rancher or farmer must consider [his or her] a spouse's gross income in determining whether at least two-thirds of gross income is from ranching or farming.

F. For the purposes of this section, the amount of tax deducted and withheld with respect to a taxpayer under the Withholding Tax Act or the Oil and Gas Proceeds Withholding Tax Act shall be deemed a payment of estimated tax. An equal part of the amount of withheld tax shall be deemed paid on each due date for the applicable taxable year unless the taxpayer establishes the dates on which all amounts were actually withheld. In that case, the amounts withheld shall be deemed payments of estimated tax on the dates on which the amounts were actually withheld. The taxpayer may apply the provisions of this subsection separately to wage withholding and any other amounts withheld under the Withholding Tax Act or the Oil and Gas Proceeds Withholding Tax Act.

G. Except as otherwise provided in this section, in the case of an underpayment of the required annual payment by a taxpayer, there shall be added to the tax a penalty determined by applying the rate specified in Subsection B of Section 7-1-67 NMSA 1978 to the amount of the underpayment for the period of the underpayment, provided:

(1) the amount of the underpayment shall be the excess of the amount of the required annual payment over the amount, if any, paid on or before the due date for the installment;

(2) the period of the underpayment runs from the due date for the installment to whichever of the following dates is earlier:

(a) the fifteenth day of the fourth month following the close of the taxable year; or

(b) with respect to any portion of the underpayment, the date on which the portion was paid; and

(3) a payment of estimated tax shall be credited against unpaid or underpaid installments in the order in which the installments are required to be paid.

H. No penalty shall be imposed under Subsection G of this section for any taxable year if:

(1) the difference between the following is less than five hundred dollars ($500):

(a) the tax shown on the return for the taxable year or, when no return is filed, the tax for the taxable year; and

(b) any amount withheld under the provisions of the Withholding Tax Act or the Oil and Gas Proceeds Withholding Tax Act for that taxpayer for that taxable year;

(2) the [individual's] taxpayer's preceding taxable year was a taxable year of twelve months, the [individual] taxpayer did not have a tax liability for the preceding taxable year and the [individual] taxpayer was a resident of New Mexico for the entire taxable year;

(3) through either withholding or estimated tax payments, the [individual] taxpayer paid the required annual payment as defined in Subsection B of this section; or

(4) the secretary determines that the underpayment was not due to fraud, negligence or disregard of rules and regulations.

I. If on or before January 31 of the following taxable year the taxpayer files a return for the taxable year and pays in full the amount computed on the return as payable, then [no] a penalty under Subsection G of this section shall not be imposed on an underpayment of the fourth required installment for the taxable year.

J. This section applies to taxable years of less than twelve months and to taxpayers reporting on a fiscal year other than a calendar year in the manner determined by regulation or instruction of the secretary.

K. Except as otherwise provided in Subsection L of this section, this section applies to any estate or trust.

L. This section does not apply to any trust that is subject to the tax imposed by Section 511 of the Internal Revenue Code or that is a private foundation. For a taxable year that ends before the date two years after the date of the decedent's death, this section does not apply to:

(1) the estate of the decedent; or

(2) any trust all of which was treated under Subpart E of Part I of Subchapter J of Chapter 1 of the Internal Revenue Code as owned by the decedent and to which the residue of the decedent's estate will pass under the decedent's will or, if no will is admitted to probate, that is the trust primarily responsible for paying debts, taxes and expenses of administration.

M. The provisions of this section do not apply to first-year residents."

Section 2. Section 7-2A-9.1 NMSA 1978 (being Laws 1986, Chapter 5, Section 1, as amended by Laws 2003, Chapter 86, Section 2 and by Laws 2003, Chapter 295, Section 1) is amended to read:

"7-2A-9.1. ESTIMATED TAX DUE--PAYMENT OF ESTIMATED TAX--PENALTY--EXEMPTION.--

A. Every taxpayer shall pay estimated corporate income tax to the state of New Mexico during its taxable year if its tax after applicable credits is five thousand dollars ($5,000) or more in the current taxable year. A taxpayer to which this section applies shall calculate estimated tax by one of the following methods:

(1) estimating the amount of tax due, net of any credits, for the current taxable year, provided that the estimated amount is at least eighty percent of the amount determined to be due for the taxable year;

(2) using as the estimate an amount equal to one hundred percent of the tax due for the previous taxable year, if the previous taxable year was a full twelve-month year;

(3) using as the estimate an amount equal to one hundred ten percent of the tax due for the taxable year immediately preceding the previous taxable year, if the taxable year immediately preceding the previous taxable year was a full twelve-month year and the return for the previous taxable year has not been filed and the extended due date for filing that return has not occurred at the time the first installment is due for the taxable year; or

(4) estimating the amount of tax due, net of any credits, for each fiscal quarter of the current taxable year, provided that the estimated amount is at least eighty percent of the amount determined to be due for that quarter.

B. If Subsection A of this section applies, the amount of estimated tax shall be paid in installments as provided in this subsection. Twenty-five percent of the estimated tax calculated under Paragraph (1), (2) or (3) of Subsection A of this section or one hundred percent of the estimated tax calculated under Paragraph (4) of Subsection A of this section is due on or before the following dates: the fifteenth day of the fourth month of the taxable year, the fifteenth day of the sixth month of the taxable year, the fifteenth day of the ninth month of the taxable year and the fifteenth day of the twelfth month of the taxable year. Application of this subsection to a taxable year that is a fractional part of a year shall be determined by regulation of the secretary.

C. Every taxpayer to which Subsection A of this section applies that fails to pay the estimated tax when due or that makes estimated tax payments during the taxable year that are less than the lesser of eighty percent of the income tax imposed on the taxpayer under the Corporate Income and Franchise Tax Act or the amount required by Paragraph (2), (3) or (4) of Subsection A of this section shall be subject to the interest and penalty provisions of Sections 7-1-67 and 7-1-69 NMSA 1978 on the underpayment.

D. For purposes of this section, the amount of underpayment shall be the excess of the amount of the installment that would be required to be paid if the estimated tax were equal to eighty percent of the tax shown on the return for the taxable year or the amount required by Paragraph (2), (3) or (4) of Subsection A of this section or, if no return was filed, eighty percent of the tax for the taxable year for which the estimated tax is due less the amount, if any, of the installment paid on or before the last date prescribed for payment.

E. For purposes of this section, the period of

underpayment shall run from the date the installment was required to be paid to whichever of the following dates is earlier:

(1) the fifteenth day of the third month following the end of the taxable year; or

(2) with respect to any portion of the underpayment, the date on which such portion is paid. For the purposes of this paragraph, a payment of estimated tax on any installment date shall be applied as a payment of any previous underpayment only to the extent such payment exceeds the amount of the installment determined under Subsection D of this section due on such installment date.

F. For the purposes of this section, the amount of tax deducted and withheld with respect to a taxpayer [by a remitter] under the Withholding Tax Act or the Oil and Gas Proceeds Withholding Tax Act shall be deemed a payment of estimated tax. An equal amount of the amount of withheld tax shall be deemed paid on each due date for the applicable taxable year unless the taxpayer establishes the dates on which all amounts were actually withheld, in which case the amounts withheld shall be deemed payments of estimated tax on the dates on which the amounts were actually withheld. The taxpayer may apply the provisions of this subsection separately to amounts withheld under the Withholding Tax Act or the Oil and Gas Proceeds Withholding Tax Act."

Section 3. Section 7-2F-2 NMSA 1978 (being Laws 2003, Chapter 127, Section 2, as amended) is amended to read:

"7-2F-2. DEFINITIONS.--As used in Chapter 7, Article 2F NMSA 1978:

A. "commercial audiovisual product" means a film or a videogame intended for commercial exploitation;

B. "direct production expenditure" means a transaction that is subject to taxation in New Mexico, including:

(1) payment of wages, fringe benefits or fees for talent, management or labor to a person who is a New Mexico resident for purposes of the Income Tax Act;

(2) payment to a [personal services corporation] film performing artist entity for the services of a performing artist if the entity:

(a) [the personal services corporation] pays gross receipts tax in New Mexico on the portion of those payments qualifying for the tax credit; and

(b) [the performing artist receiving payments from the personal services corporation pays New Mexico income tax] deducts and remits withheld income tax pursuant to Subsection D of Section 7-3-12 NMSA 1978; and

(3) any of the following provided by a vendor:

(a) the story and scenario to be used for a film;

(b) set construction and operations, wardrobe, accessories and related services;

(d) editing and related services;

(e) rental of facilities and equipment;

(f) leasing of vehicles, not including the chartering of aircraft for out-of-state transportation; however, New Mexico-based chartered aircraft for in-state transportation directly attributable to the production shall be considered a direct production expenditure;

(g) food or lodging;

(h) commercial airfare if purchased through a New Mexico-based travel agency or travel company for travel to and from New Mexico or within New Mexico that is directly attributable to the production;

(i) insurance coverage and bonding if purchased through a New Mexico-based insurance agent; and

(j) other direct costs of producing a film in accordance with generally accepted entertainment industry practice;

C. "federal new markets tax credit program" means the tax credit program codified as Section 45D of the United States Internal Revenue Code of 1986, as amended;

D. "film" means a single media or multimedia program, excluding advertising messages other than national or regional advertising messages intended for exhibition, that:

(1) is fixed on film, digital medium, videotape, computer disc, laser disc or other similar delivery medium;

(2) can be viewed or reproduced;

(3) is not intended to and does not violate a provision of Chapter 30, Article 37 NMSA 1978; and

(4) is intended for reasonable commercial exploitation for the delivery medium used;

E. "film performing artist entity" means a personal service corporation or other business association that receives payments for the services of a performing artist;

[E.] F. "film production company" means a person that produces one or more films or any part of a film; [and]

G. "Internal Revenue Code" means "Internal Revenue Code" as that term is defined in the Tax Administration Act;

H. "personal service corporation" means "personal service corporation" as that term is defined in the Internal Revenue Code; and

[F.] I. "postproduction expenditure" means an expenditure for editing, Foley recording, automatic dialogue replacement, sound editing, special effects, including computer-generated imagery or other effects, scoring and music editing, beginning and end credits, negative cutting, soundtrack production, dubbing, subtitling or addition of sound or visual effects; but not including an expenditure for advertising, marketing, distribution or expense payments."

Section 4. Section 7-3-2 NMSA 1978 (being Laws 1990, Chapter 64, Section 1, as amended) is amended to read:

"7-3-2. DEFINITIONS.--As used in the Withholding Tax Act:

A. "department" means the taxation and revenue department, the secretary of taxation and revenue or any employee of the department exercising authority lawfully delegated to that employee by the secretary;

B. "employee" means either an individual domiciled within the state who performs services either within or without the state for an employer or, to the extent permitted by law, an individual domiciled outside of the state who performs services within the state for an employer;

C. "employer" means a person, or an officer, agent or employee of that person, having control of the payment of wages, doing business in or deriving income from sources within the state for whom an individual performs or performed any service as the employee of that person, except that if the person for whom the individual performs or performed the services does not have control over the payment of the wages for such services, "employer" means the person having control of the payment of wages;

D. "film performing artist entity" means a personal service corporation or other business association that receives payments for the services of a performing artist for the purposes of the film production tax credit;

[D.] E. "Internal Revenue Code" means the Internal Revenue Code of 1986, as amended;

[E.] F. "owner" means a partner in a partnership not taxed as a corporation for federal income tax purposes for the taxable year, a shareholder of an S corporation or of a corporation other than an S corporation that is not taxed as a corporation for federal income tax purposes for the taxable year, a member of a limited liability company or any similar person holding an ownership interest in any pass-through entity;

[F.] G. "pass-through entity" means:

(1) a film performing artist entity; or

(2) any other business association other than:

[(1)] (a) a sole proprietorship;

[(2)] (b) an estate or trust that does not distribute income to beneficiaries;

[(3)] (c) a corporation, limited liability company, partnership or other entity not a sole proprietorship taxed as a corporation for federal income tax purposes for the taxable year; or

[(4)] (d) a partnership that is organized as an investment partnership in which the partners' income is derived solely from interest, dividends and sales of securities;

H. "payee" means an individual to whom a payor is making a pension or annuity payment;

[G.] I. "payor" means [any] a person making payment of a pension or annuity to an individual domiciled in New Mexico;

[H.] J. "payroll period" means a period for which a payment of wages is made to [the] an employee by [his] the employee's employer;

[I.] K. "person" means any individual, club, company, cooperative association, corporation, estate, firm, joint venture, partnership, receiver, syndicate, trust or other association, limited liability company, limited liability partnership or gas, water or electric utility owned or operated by a county or municipality and, to the extent permitted by law, any federal, state or other governmental unit or subdivision or an agency, department or instrumentality thereof;

L. "personal service corporation" means "personal service corporation" as that term is defined in the Internal Revenue Code;

[J.] M. "wagerer" means any person who receives winnings that are subject to withholding;

[K.] N. "wages" means remuneration in cash or other form for services performed by an employee for an employer;

[L.] O. "winnings that are subject to withholding" means "winnings which are subject to withholding" as that term is defined in Section 3402 of the Internal Revenue Code;

[M.] P. "withholdee" means:

(1) an individual domiciled in New Mexico receiving a pension or annuity from which an amount of tax is deducted and withheld pursuant to the Withholding Tax Act;

(2) an employee; and

(3) a wagerer; and

[N.] Q. "withholder" means a payor, an employer or any person required to deduct and withhold from winnings that are subject to withholding."

Section 5. Section 7-3-7 NMSA 1978 (being Laws 1961, Chapter 243, Section 8, as amended) is amended to read:

"7-3-7. STATEMENTS OF WITHHOLDING.--

A. Except for employers required to file quarterly withholding information returns pursuant to the Withholding Tax Act or required to file a wage and contribution report to the workforce solutions department pursuant to Section 51-1-12 NMSA 1978, every employer shall file an annual statement of withholding for each employee. [This] The statement shall be in a form prescribed by the department and shall be filed with the department on or before the last day of February of the year following that for which the statement is made. It shall include the total compensation paid the employee and the total amount of tax withheld for the calendar year or portion of a calendar year if the employee has worked less than a full calendar year.

B. Except for payors who file the quarterly withholding information returns pursuant to the Withholding Tax Act, every payor shall file an annual statement of withholding for each individual from whom some portion of a pension or an annuity has been deducted and withheld by that payor. [This] The statement shall be in a form prescribed by the department and shall be filed with the department on or before the last day of February of the year following that for which the statement is made. It shall include the total amount of pension or annuity paid to the individual and the amount of tax withheld for the calendar year.

C. Every person required to deduct and withhold tax from a payment of winnings that are subject to withholding shall file an annual statement of withholding for each wagerer from whom some portion of a payment of winnings has been deducted and withheld by that person. [This] The statement shall be in a form prescribed by the department and shall be filed with the department on or before the last day of February of the year following that for which the statement is made. It shall include the total amount of winnings paid to the individual and the amount of tax withheld for the calendar year. The department may also require any person who is required to submit an information return to the internal revenue service regarding the winnings of another person to submit copies of the return to the department."

Section 6. Section 7-3-12 NMSA 1978 (being Laws 1999, Chapter 14, Section 3, as amended) is amended to read:

"7-3-12. INFORMATION RETURN REQUIRED FROM PASS-THROUGH ENTITY--WITHHOLDING.--

A. A pass-through entity doing business in this state shall file an annual information return with the department on or before the due date of the entity's federal return for the taxable year. The information return shall be signed by the business manager or one of the owners of the pass-through entity.

B. The information return required by this section shall contain all information required by the department, including:

(1) the pass-through entity's gross income;

(2) the pass-through entity's net income;

(3) the amount of each owner's share of the pass-through entity's net income; and

(4) the name, address and tax identification number of each owner entitled to a share of net income.

C. A pass-through entity shall provide to each of its owners sufficient information to enable the owner to comply with the provisions of the Income Tax Act and the Corporate Income and Franchise Tax Act with respect to the owner's share of net income.

D. The pass-through entity shall deduct and withhold from each [nonresident] owner's share of net income an amount equal to the owner's share of net income or, if the pass-through entity is a film performing artist entity that is a personal service corporation, all of its net income shall be deemed its owner-employee's share, and the personal service corporation shall deduct and withhold an amount equal to its owner-employee's share of deemed net income or, if the pass-through entity is a film performing artist entity other than a personal service corporation, any payment made by the entity multiplied by: [a rate set by department regulation]

(1) the highest rate for single individuals provided in Section 7-2-7 NMSA 1978 in the case of an owner that is an individual or entity not taxed as a corporation for federal income tax purposes for the taxable year [the rate shall not exceed the rate for composite returns] and in the case of payments made by a film performing artist entity; or

(2) except for a film performing artist entity, a rate set by a department directive that does not exceed the highest rate provided in Section 7-2A-5 NMSA 1978 in the case of an owner that is a corporation or other entity taxed as a corporation for the taxable year [the rate shall not exceed the maximum rate for corporate income tax].

E. The provisions of Subsection D of this section shall not apply with regard to:

[(1) the share of net income of a nonresident owner that has executed an agreement in accordance with regulations or instructions of the department that the owner will report and pay tax, if required, on its own return pursuant to the Income Tax Act or the Corporate Income and Franchise Tax Act;

(2)] (1) oil and gas proceeds subject to the Oil and Gas Proceeds Withholding Tax Act; or

[(3)] (2) a publicly traded partnership as defined in Subsection (b) of Section 7704 of the Internal Revenue Code, as may be amended or renumbered, and that is not treated as a corporation pursuant to that section.

F. Amounts deducted from the owner's share of net income under the provisions of this section shall be a collected tax. [No] An owner shall not have a right of action against the pass-through entity for any amount deducted and withheld from the owner's share of net income.

G. When a pass-through entity has withheld and deducted an amount pursuant to the Withholding Tax Act from any payment to an owner that is also a pass-through entity, the payee pass-through entity may take credit for the amount withheld in determining any withholding obligation that the payee pass-through entity may have pursuant to the Withholding Tax Act."

Section 7. A new section of the Withholding Tax Act is enacted to read:

"[NEW MATERIAL] WITHHOLDING INFORMATION RETURN REQUIRED--PENALTY.--

A. An employer that has more than fifty employees and is not required to file an unemployment insurance tax form with the workforce solutions department or a payor shall file quarterly a withholding information return with the department on or before the last day of the month following the close of the calendar quarter.

B. The quarterly withholding information return required by this section shall contain all information required by the department, including:

(1) each employee's or payee's social security number;

(2) each employee's or payee's name;

(3) each employee's or payee's gross wages, pensions or annuity payments;

(4) each employee's or payee's state income tax withheld; and

(5) the workers' compensation fees due on behalf of each employee or payee.

C. Each quarterly withholding information return shall be filed with the department using a department-approved electronic medium.

D. Any employer or payor required to file the quarterly withholding information return who fails to do so by the due date or to file the return in accordance with Subsection C of this section is subject to a penalty in the amount of fifty dollars ($50.00)."

Section 8. Section 7-3A-2 NMSA 1978 (being Laws 2003, Chapter 86, Section 5) is amended to read:

"7-3A-2. DEFINITIONS.--As used in the Oil and Gas Proceeds Withholding Tax Act:

B. "oil and gas" means crude oil, natural gas, liquid hydrocarbons or any combination thereof, or carbon dioxide;

C. "oil and gas proceeds" means any amount derived from oil and gas production from any well located in New Mexico and payable as royalty interest, overriding royalty interest, production payment interest, working interest or any other obligation expressed as a right to a specified interest in the cash proceeds received from the sale of oil and gas production or in the cash value of that production, subject to all taxes withheld therefrom pursuant to law; "oil and gas proceeds" excludes "net profits interest" and other types of interest the extent of which cannot be determined with reference to a specified share of the oil and gas production;

D. "person" means an individual, club, company, cooperative association, corporation, estate, firm, joint venture, partnership, receiver, syndicate, trust or other association, limited liability company, limited liability partnership or gas, water or electric utility owned or operated by a county or municipality and, to the extent permitted by law, a federal, state or other governmental unit or subdivision or an agency, a department or an instrumentality thereof;

E. "remittee" means a person that is entitled to payment of oil and gas proceeds by a remitter; and

F. "remitter" means a person that pays oil and gas proceeds to any remittee."

Section 9. Section 7-3A-3 NMSA 1978 (being Laws 2003, Chapter 86, Section 6) is amended to read:

"7-3A-3. WITHHOLDING FROM OIL AND GAS PROCEEDS.--

A. Except as otherwise provided in this section, a remitter shall deduct and withhold from each payment of oil and gas proceeds being made to a remittee an amount equal to the rate specified in Subsection C of this section multiplied by the gross amount that otherwise would have been payable to the remittee. If a remitter receives oil and gas proceeds from which an amount has been deducted and withheld pursuant to the Oil and Gas Proceeds Withholding Tax Act, the remitter may take credit for that amount in determining the amount the remitter must withhold and deduct pursuant to this section in making payments to a remittee.

B. The obligation to deduct and withhold from payments as provided in Subsection A of this section does not apply to payments that are made to:

[(1) remittees with a New Mexico address as shown on internal revenue service form 1099-MISC or successor form;

(2)] (1) the United States, this state or any agency, instrumentality or political subdivision of either;

[(3)] (2) any federally recognized Indian nation, tribe or pueblo or any agency, instrumentality or political subdivision thereof; or

[(4)] (3) organizations that have been granted exemption from the federal income tax by the United States commissioner of internal revenue as organizations described in Section 501(c)(3) of the United States Internal Revenue Code of 1986, as amended.

C. The rate of withholding is: [six and three-fourths percent for the period October 1, 2003 through December 31, 2004. Thereafter the rate shall be set by department regulation; provided that the rate may not exceed the higher of the maximum bracket rate set by Section 7-2-7 NMSA 1978 for the taxable year or the maximum bracket rate set by Section 7-2A-5 NMSA 1978 for the taxable year; and provided further that remitters shall be given ninety days' notice of a change in the rate.]

(1) in the case of an owner that is an individual or entity not taxed as a corporation for federal income tax purposes for the taxable year, the highest rate for single individuals provided in Section 7-2-7 NMSA 1978; or

(2) in the case of an owner that is a corporation or other entity taxed as a corporation for the taxable year, a rate set by department directive that does not exceed the highest rate provided in Section 7-2A-5 NMSA 1978.

D. If the amount to be withheld from a payment to a remittee is less than ten dollars ($10.00), no withholding is required."

Section 10. A new section of the Gross Receipts and Compensating Tax Act is enacted to read:

"[NEW MATERIAL] EXEMPTION--GROSS RECEIPTS TAX--FILM PERFORMING ARTIST ENTITY.--Receipts of a film performing artist entity from another film performing artist entity for the services of a performing artist shall be exempt from the gross receipts tax. As used in this section, a "film performing artist entity" is a personal service corporation or other business association that receives payments for the services of a performing artist for purposes of the film production tax credit."

Section 11. APPLICABILITY.--The provisions of Section 1 of this act are applicable to taxable years beginning on or after January 1, 2010. The provisions of Section 2 of this act are applicable to taxable years beginning on or after January 1, 2009.

Section 12. EFFECTIVE DATE.--The effective date of the provisions of:

A. Sections 1, 5, and 7 through 9 of this act is January 1, 2010; and

B. Sections 3, 4, 6 and 10 of this act is July 1, 2009.

Section 13. EMERGENCY.--It is necessary for the public peace, health and safety that this act take effect immediately.

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