SENATE BILL 99

50th legislature - STATE OF NEW MEXICO - second session, 2012

INTRODUCED BY

Tim Eichenberg

AN ACT

RELATING TO TAXATION; PROVIDING A CORPORATE INCOME TAX CREDIT FOR NEW BUSINESSES; REQUIRING AN INCREMENTAL INCREASE IN EMPLOYMENT TO QUALIFY FOR THE CREDIT; PROVIDING LIMITS AND QUALIFICATIONS; PROVIDING FOR POST-PERFORMANCE ASSESSMENT OF PERFORMANCE OF THE QUALIFYING ACTIVITIES REQUIRED FOR APPROVAL OF THE TAX CREDIT.

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

     SECTION 1. A new section of the Corporate Income and Franchise Tax Act is enacted to read:

     "[NEW MATERIAL] NEW COMMERCIAL ACTIVITY CORPORATE INCOME TAX CREDIT.--

          A. A taxpayer that files a New Mexico corporate income tax return for a taxable year beginning on or after January 1, 2013 but before January 1, 2020 that is a new business that creates economic-based jobs in New Mexico may claim, and the department may allow, a tax credit against the taxpayer's corporate income tax liability of twenty-five percent of the excess above taxes paid to New Mexico in the base year pursuant to the Corporate Income and Franchise Tax Act and the Gross Receipts and Compensating Tax Act. The credit provided in this section may be referred to as the "new commercial activity corporate income tax credit". The department shall allow a new commercial activity corporate income tax credit for a taxpayer that is issued a certificate of eligibility by the economic development department.

          B. The purposes of the new commercial activity corporate income tax credit are to:

                (1) encourage corporations to start up in or relocate to New Mexico and invest significant amounts of capital in the state to start up or relocate;

                (2) increase the number of economic-based jobs available to New Mexico residents in New Mexico; and

                (3) generate new state revenue from construction, employment and business activity developed in New Mexico.

          C. The new commercial activity corporate income tax credit may be claimed for seven consecutive years beginning with the first taxable year in which the taxpayer is eligible to claim the credit.

          D. A taxpayer may be allowed by the department a maximum aggregate amount of new commercial activity corporate income tax credits for the seven-year period for which the taxpayer is able to claim new commercial activity corporate income tax credits not to exceed fifteen percent of the increase in state revenue above the first base year for which the taxpayer has claimed a new commercial activity corporate income tax credit.

          E. Prior to January 1, 2013, the taxation and revenue department and the economic development department shall each adopt rules to implement the provisions of this section for which that department is responsible.

          F. A corporation claiming a new commercial activity corporate income tax credit shall apply to the economic development department for a certificate of eligibility that states that the taxpayer qualifies for a new commercial activity corporate income tax credit on a form and in a manner authorized by the economic development department.

          G. A certificate of eligibility is valid for only the taxpayer that is found eligible by the economic development department to receive a new commercial activity corporate income tax credit and may not be transferred to another taxpayer.

          H. The economic development department shall provide a certificate of eligibility to each taxpayer that has applied for and been found to qualify to receive a new commercial activity corporate income tax credit. The economic development department shall maintain records of the certificates of eligibility issued pursuant to this section.

          I. To be eligible to receive a new commercial activity corporate income tax credit, a taxpayer shall provide the economic development department with:

                (1) evidence of expenditures to establish a new business located in New Mexico;

                (2) evidence of one full year of operation in New Mexico, including evidence of paying eligible employees within the taxable year for which the credit is to be claimed;

                (3) evidence of payment of taxes by the business to the state of New Mexico in the taxable year pursuant to the Corporate Income and Franchise Tax Act and the Gross Receipts and Compensating Tax Act and any other state tax for which the new business is liable; and

                (4) statements signed by the taxpayer authorizing the economic development department and the taxation and revenue department to reveal to the legislature and its agencies information from the taxpayer's tax returns needed to evaluate the effectiveness of the new commercial activity corporate income tax credit in fulfilling its purposes.

          J. To claim the new commercial activity corporate income tax credit, a taxpayer shall submit with the taxpayer's New Mexico corporate income tax return a certificate of eligibility issued pursuant to this section, individually identifiable and displaying the date on which the certificate of eligibility is issued. The certificate of eligibility shall state:

                (1) the details that make the taxpayer eligible to receive the new commercial activity corporate income tax credit;

                (2) the number of eligible employees employed by the taxpayer in the base year;

                (3) the total wages paid by the taxpayer in the base year to employees of the new business for which the credit is being claimed; and

                (4) the amount of the taxpayer's investment to create or relocate the taxpayer's business. 

          K. The department shall provide a credit claim form on which a taxpayer may claim a new commercial activity corporate income tax credit. A credit claim form shall accompany a return filed pursuant to the Corporate Income and Franchise Tax Act in which the taxpayer is applying for a new commercial activity corporate income tax credit. The department shall determine the amount of new commercial activity corporate income tax credit that is allowed the taxpayer for the taxable year by determining the amount of taxes paid by the taxpayer in the base year pursuant to the Corporate Income and Franchise Tax Act and the Gross Receipts and Compensating Tax Act.

          L. The amount of the new commercial activity corporate income tax credit shall be determined by subtracting the tax liability of the taxpayer paid for the base year from the tax liability of the taxpayer for the taxable year for which the taxpayer is claiming the new commercial activity corporate income tax credit and multiplying the difference by twenty-five percent. If the difference is zero or a negative number, then the tax credit for that year shall be zero.

          M. Any amount of the new commercial activity corporate income tax credit that the taxpayer is approved to claim that exceeds the tax liability of the taxpayer for the taxable year, up to the maximum allowable aggregate credit, shall be refunded to the taxpayer.

          N. A taxpayer claiming the new commercial activity corporate income tax credit pursuant to this section is ineligible for a high-wage jobs tax credit or a rural jobs tax credit.

          O. The department shall compile an annual report that includes the following information regarding the last fiscal year:

                (1) the number of taxpayers approved by the department to receive a new commercial activity corporate income tax credit;

                (2) the aggregate amount of new commercial activity corporate income tax credits allowed in the fiscal year;

                (3) the number of economic-based jobs created in the fiscal year by taxpayers claiming the new commercial activity corporate income tax credit;

                (4) the increase in wages paid by taxpayers claiming the new commercial activity corporate income tax credit in the fiscal year; and

                (5) any other information that the department, the legislative finance committee or the revenue stabilization and tax policy committee deems necessary to evaluate the effectiveness of the new commercial activity corporate income tax credit in fulfilling the purposes of this section. Beginning in 2016, the department shall present to the revenue stabilization and tax policy committee an analysis of whether the new commercial activity corporate income tax credit is fulfilling the purposes for which it was created. Recommendations for amending or repealing the new commercial activity corporate income tax based on the analysis shall be included in the report.

          P. As used in this section:

                (1) "average wage" means the annual average wage amount by county as stated on the web site of the bureau of business and economic research at the university of New Mexico as the average annual covered wages by major sector and county found in the economic data tables for the most recent year published for the county in which a taxpayer has established a new business; 

                (2) "base year" means the fiscal year immediately prior to the fiscal year in which the new commercial activity corporate income tax credit is being claimed;

                (3) "business" means a for-profit corporation that is required to pay corporate and franchise taxes pursuant to the Corporate Income and Franchise Tax Act;

                (4) "corporate tax liability" means a taxpayer's corporate income tax liability pursuant to the Corporate Income and Franchise Tax Act;

                (5) "economic-based job" means a job that is occupied for at least forty-eight consecutive weeks by an eligible employee;

                (6) "eligible employee" means an individual who is a resident of New Mexico for purposes of the Income Tax Act, is employed by the taxpayer claiming a new commercial activity corporate income tax credit and is paid a wage in the qualifying period that is at least one hundred percent of the average wage in the county in which the employee is employed;

                (7) "new business" means a corporation:

                     (a) that operates a business in New Mexico that owns or leases real property as a physical address for the business in New Mexico and employs personnel at that physical address;

                     (b) that is required to pay tax pursuant to the Corporate Income and Franchise Tax Act and the Gross Receipts and Compensating Tax Act;

                     (c) that began business operations on or after July 1, 2012; and

                     (d) in which the taxpayer has invested over twenty-five million dollars ($25,000,000);

                (8) "qualifying period" means the period of twelve months beginning on the day an eligible employee begins working in an economic-based job; and

                (9) "wages" means all remuneration in cash and the cash value of remuneration paid in any other form for services performed by an employee for an employer; "wages" includes the value of benefits."

     SECTION 2. EFFECTIVE DATE.--The effective date of the provisions of this act is July 1, 2012.

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