SB0200

SENATE BILL 200

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

INTRODUCED BY

Phil A. Griego

AN ACT

RELATING TO TAXATION; AMENDING AND ENACTING SECTIONS OF THE INCOME TAX ACT, THE CORPORATE INCOME AND FRANCHISE TAX ACT AND THE LAND CONSERVATION INCENTIVES ACT TO PROVIDE FOR THE REFUND OF THE INCOME TAX CREDIT AND THE CORPORATE INCOME TAX CREDIT THAT MAY BE CLAIMED FOR CERTAIN CONVEYANCES OF REAL PROPERTY.

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

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

"[NEW MATERIAL] TAX CREDIT--CONVEYANCES OF LAND OR INTERESTS IN LAND FOR CONSERVATION PURPOSES.--

A. There shall be allowed a refundable tax credit against the tax liability imposed by the Income Tax Act for conveyances of land or interests in land for conservation purposes as defined by 26 C.F.R. Section 1.170A-14 that are made as an unconditional donation in perpetuity to a public or private conservation agency on or after January 1, 2012.

B. The amount of the tax credit claimed per conveyance shall not exceed two hundred fifty thousand dollars ($250,000), or an amount equal to fifty percent of the fair market value of land or interest in land that is donated, whichever is less. Taxpayers who co-own the land or interest in land that is donated may claim the pro rata share of the tax credit allowed pursuant to this section based on their ownership interest in the land or interest in land that is donated.

C. A taxpayer may claim only one tax credit every fifth taxable year.

D. Qualified donations shall include the conveyance in perpetuity of a fee interest in land encumbered by a conservation easement or an interest in land that qualifies as a charitable contribution deduction under Section 170(h) of the Internal Revenue Code. The use and protection of the lands, or interests in land, for conservation purposes as defined by 26 C.F.R. Section 1.170A-14 shall be assured in perpetuity. Dedications of land or an interest in land for open space for the purpose of fulfilling density requirements to obtain subdivision or building permits shall not be considered as qualified donations pursuant to the Land Conservation Incentives Act.

E. The taxpayer must be listed on the deed conveying the land or interest in land to be eligible for the tax credit. Unless the taxpayer inherited the land or interest in land, the taxpayer shall have owned the land or interest in land for a minimum of five years prior to conveying the land or interest in land to the public or private conservation agency.

F. To be eligible for treatment as qualified donations under this section, land or interests in lands must be certified by the secretary of energy, minerals and natural resources as fulfilling a conservation purpose as defined by 26 C.F.R. Section 1.170A-14.

G. A taxpayer may apply for certification of eligibility for the tax credit provided by this section from the energy, minerals and natural resources department. An application for the tax credit shall include all taxpayers who owned the land or interest in land that was donated and identify each taxpayer's ownership interest. If the energy, minerals and natural resources department determines that the application meets the requirements of Subsections A through E of this section and that the land or interest in land conveyed will not adversely affect the property rights of contiguous landowners, it shall issue a certificate of eligibility to the taxpayer. The energy, minerals and natural resources department may issue rules governing the procedure for administering the provisions of this subsection.

H. To receive a tax credit pursuant to this section, a person shall apply to the taxation and revenue department on forms and in the manner prescribed by the taxation and revenue department. The application shall include a certificate of eligibility issued by the energy, minerals and natural resources department pursuant to Subsection G of this section and a "qualified appraisal" prepared by a "qualified appraiser", as those terms are defined under applicable federal laws and regulations governing charitable contributions. The fair market value of qualified donations made pursuant to this section shall be substantiated by a qualified appraisal. The taxation and revenue department may review appraisals to determine if the appraisal is a qualified appraisal. If the taxation and revenue department determines that all of the requirements of this section have been complied with, the taxation and revenue department shall issue to the applicant a document granting the tax credit. The document shall be numbered for identification and declare its date of issuance and the amount of the tax credit allowed for the qualified donation made pursuant to this section.

I. The tax credit represented by a document issued pursuant to Subsection H of this section shall be refunded to the taxpayer. The tax credit shall not be sold, exchanged or otherwise transferred.

J. If a charitable deduction is claimed on the taxpayer's federal income tax for any contribution for which the tax credit provided by this section is claimed, the taxpayer's itemized deductions for New Mexico income tax shall be reduced by the amount of the deduction for the contribution in order to determine the New Mexico taxable income of the taxpayer.

K. For the purposes of this section, "taxpayer" means "taxpayer" as defined in Subsection Z of Section 7-2-2 NMSA 1978.

L. As used in this section, "conservation easement", "interest in land", "land" and "public or private conservation agency" have the meanings as defined in Section 75-9-3 NMSA 1978.

M. This section applies to tax credits claimed pursuant to the Land Conservation Incentives Act for donations made on or after January 1, 2012."

SECTION 2. A new section of the Corporate Income and Franchise Tax Act is enacted to read:

"[NEW MATERIAL] TAX CREDIT--CONVEYANCES OF LAND OR INTERESTS IN LAND FOR CONSERVATION PURPOSES.--

A. There shall be allowed a refundable tax credit against the tax liability imposed by the Corporate Income and Franchise Tax Act for conveyances of land or interests in land for conservation purposes as defined by 26 C.F.R. Section 1.170A-14 that are made as an unconditional donation in perpetuity to a public or private conservation agency on or after January 1, 2012.

B. The amount of the tax credit claimed per conveyance shall not exceed two hundred fifty thousand dollars ($250,000), or an amount equal to fifty percent of the fair market value of land or interest in land that is donated, whichever is less. Taxpayers that co-own the land or interest in land that is donated may claim the pro rata share of the tax credit allowed pursuant to this section based on their ownership interest in the land or interest in land that is donated.

C. A taxpayer may claim only one tax credit every fifth taxable year.

E. The taxpayer shall be listed on the deed conveying the land or interest in land to be eligible for the tax credit. Unless the taxpayer inherited the land or interest in land, the taxpayer shall have owned the land or interest in land for a minimum of five years prior to conveying the land or interest in land to the public or private conservation agency.

G. A taxpayer may apply for certification of eligibility for the tax credit provided by this section from the energy, minerals and natural resources department. An application for the tax credit shall include all taxpayers that owned the land or interest in land that was donated and identify each taxpayer's ownership interest. If the energy, minerals and natural resources department determines that the application meets the requirements of Subsections A through E of this section and that the land or interest in land conveyed will not adversely affect the property rights of contiguous landowners, it shall issue a certificate of eligibility to the taxpayer. The energy, minerals and natural resources department may issue rules governing the procedure for administering the provisions of this subsection.

I. The tax credit represented by a document issued pursuant to Subsection H of this section shall be refunded to the taxpayer. The tax credit shall not be sold, exchanged or otherwise transferred.

K. As used in this section, "taxpayer" means "taxpayer" as defined in Subsection P of Section 7-2A-2 NMSA 1978.

L. As used in this section, "conservation easement", "interest in land", "land" and "public or private conservation agency" have the meanings as defined in Section 75-9-3 NMSA 1978.

M. This section applies to tax credits claimed pursuant to the Land Conservation Incentives Act for donations made on or after January 1, 2012."

SECTION 3. Section 7-2-18.10 NMSA 1978 (being Laws 2003, Chapter 331, Section 7, as amended) is amended to read:

"7-2-18.10. TAX CREDIT--CERTAIN CONVEYANCES OF REAL PROPERTY.--

A. There shall be allowed as a credit against the tax liability imposed by the Income Tax Act, an amount equal to fifty percent of the fair market value of land or interest in land that is conveyed for the purpose of open space, natural resource or biodiversity conservation, agricultural preservation or watershed or historic preservation as an unconditional donation in perpetuity by the landowner or taxpayer to a public or private conservation agency eligible to hold the land and interests therein for conservation or preservation purposes. The fair market value of qualified donations made pursuant to this section shall be substantiated by a "qualified appraisal" prepared by a "qualified appraiser", as those terms are defined under applicable federal laws and regulations governing charitable contributions.

B. The amount of the credit that may be claimed by a taxpayer shall not exceed one hundred thousand dollars ($100,000) for a conveyance made prior to January 1, 2008 and shall not exceed two hundred fifty thousand dollars ($250,000) for a conveyance made on or after that date. In addition, in a taxable year, the credit used may not exceed the amount of individual income tax otherwise due. A portion of the credit that is unused in a taxable year may be carried over for a maximum of twenty consecutive taxable years following the taxable year in which the credit originated until fully expended. A taxpayer may claim only one tax credit per taxable year.

C. Qualified donations shall include the conveyance in perpetuity of a fee interest in real property or a less-than-fee interest in real property, such as a conservation restriction, preservation restriction, agricultural preservation restriction or watershed preservation restriction, pursuant to the Land Use Easement Act and provided that the less-than-fee interest qualifies as a charitable contribution deduction under Section 170(h) of the Internal Revenue Code. Dedications of land for open space for the purpose of fulfilling density requirements to obtain subdivision or building permits shall not be considered as qualified donations pursuant to the Land Conservation Incentives Act.

D. Qualified donations shall be eligible for the tax credit if the donations are made to the state of New Mexico, a political subdivision thereof or a charitable organization described in Section 501(c)(3) of the Internal Revenue Code and that meets the requirements of Section 170(h)(3) of that code.

E. To be eligible for treatment as qualified donations under this section, land or interests in lands must be certified by the secretary of energy, minerals and natural resources as fulfilling the purposes as set forth in Section

75-9-2 NMSA 1978. The use and protection of the lands, or interests therein, for open space, natural area protection, biodiversity habitat conservation, land preservation, agricultural preservation, historic preservation or similar use or purpose of the property shall be assured in perpetuity.

F. A taxpayer may apply for certification of eligibility for the tax credit provided by this section from the energy, minerals and natural resources department. If the energy, minerals and natural resources department determines that the application meets the requirements of this section and that the property conveyed will not adversely affect the property rights of contiguous landowners, it shall issue a certificate of eligibility to the taxpayer, which shall include a calculation of the maximum amount of tax credit for which the taxpayer would be eligible. The energy, minerals and natural resources department may issue rules governing the procedure for administering the provisions of this subsection. G. To receive a credit pursuant to this section, a person shall apply to the taxation and revenue department on forms and in the manner prescribed by the department. The application shall include a certificate of eligibility issued by the energy, minerals and natural resources department pursuant to Subsection F of this section. If all of the requirements of this section have been complied with, the taxation and revenue department shall issue to the applicant a document granting the tax credit. The document shall be numbered for identification and declare its date of issuance and the amount of the tax credit allowed for the qualified donation made pursuant to this section.

H. The tax credit represented by a document issued pursuant to Subsection G of this section for a conveyance made on or after January 1, 2008, or an increment of that tax credit, may be sold, exchanged or otherwise transferred and may be carried forward for a period of twenty taxable years following the taxable year in which the credit originated until fully expended. A tax credit or increment of a tax credit may only be transferred once. The credit may be transferred to any taxpayer. A taxpayer to whom a credit has been transferred may use the credit for the taxable year in which the transfer occurred, and unused amounts may be carried forward to succeeding taxable years, but in no event may the transferred credit be used more than twenty years after it was originally issued.

I. A tax credit issued pursuant to this section shall be transferred through a qualified intermediary. The qualified intermediary shall, by means of a sworn notarized statement, notify the taxation and revenue department of the transfer and of the date of the transfer within ten days of the transfer. Credits shall only be transferred in increments of ten thousand dollars ($10,000) or more. The qualified intermediary shall keep an account of the credits and have the authority to issue sub-numbers registered with the taxation and revenue department and traceable to the original credit.

J. If a charitable deduction is claimed on the taxpayer's federal income tax for any contribution for which the credit provided by this section is claimed, the taxpayer's itemized deductions for New Mexico income tax shall be reduced by the amount of the deduction for the contribution in order to determine the New Mexico taxable income of the taxpayer.

K. For the purposes of this section:

(1) "qualified intermediary" does not include a person who has been previously convicted of a felony, who has had a professional license revoked, who is engaged in the practice defined in Section 61-28B-3 NMSA 1978 and who is identified in Section 61-29-2 NMSA 1978, and does not include any entity owned wholly or in part or employing any of the foregoing persons; and

(2) "taxpayer" means a citizen or resident of the United States, a domestic partnership, a limited liability company, a domestic corporation, an estate, including a foreign estate, or a trust.

L. This section applies to tax credits claimed pursuant to the Land Conservation Incentives Act for donations made before January 1, 2012."

SECTION 4. Section 7-2A-8.9 NMSA 1978 (being Laws 2003, Chapter 331, Section 8, as amended) is amended to read:

"7-2A-8.9. TAX CREDIT--CERTAIN CONVEYANCES OF REAL PROPERTY.--

A. There shall be allowed as a credit against the tax liability imposed by the Corporate Income and Franchise Tax Act an amount equal to fifty percent of the fair market value of land or interest in land that is conveyed for the purpose of open space, natural resource or biodiversity conservation, agricultural preservation or watershed or historic preservation as an unconditional donation in perpetuity by the landowner or taxpayer to a public or private conservation agency eligible to hold the land and interests therein for conservation or preservation purposes. The fair market value of qualified donations made pursuant to this section shall be substantiated by a "qualified appraisal" prepared by a "qualified appraiser", as those terms are defined under applicable federal laws and regulations governing charitable contributions.

B. The amount of the credit that may be claimed by a taxpayer shall not exceed one hundred thousand dollars ($100,000) for a conveyance made prior to January 1, 2008 and shall not exceed two hundred fifty thousand dollars ($250,000) for a conveyance made on or after that date. In addition, in a taxable year, the credit used may not exceed the amount of corporate income tax otherwise due. A portion of the credit that is unused in a taxable year may be carried over for a maximum of twenty consecutive taxable years following the taxable year in which the credit originated until fully expended. A taxpayer may claim only one tax credit per taxable year.

C. Qualified donations shall include the conveyance in perpetuity of a fee interest in real property or a less-than-fee interest in real property, such as a conservation restriction, preservation restriction, agricultural preservation restriction or watershed preservation restriction, pursuant to the Land Use Easement Act; provided that the less-than-fee interest qualifies as a charitable contribution deduction under Section 170(h) of the Internal Revenue Code. Dedications of land for open space for the purpose of fulfilling density requirements to obtain subdivision or building permits shall not be considered as qualified donations pursuant to the Land Conservation Incentives Act.

[5-9-2] 75-9-2 NMSA 1978. The use and protection of the lands, or interests therein, for open space, natural area protection, biodiversity habitat conservation, land preservation, agricultural preservation, historic preservation or similar use or purpose of the property shall be assured in perpetuity.

G. To receive a credit pursuant to this section, a person shall apply to the taxation and revenue department on forms and in the manner prescribed by the department. The application shall include a certificate of eligibility issued by the energy, minerals and natural resources department pursuant to Subsection F of this section. If all of the requirements of this section have been complied with, the taxation and revenue department shall issue to the applicant a document granting the tax credit. The document shall be numbered for identification and declare its date of issuance and the amount of the tax credit allowed for the qualified donation made pursuant to this section.

K. For the purposes of this section:

(2) "taxpayer" means a citizen or resident of the United States, a domestic partnership, a limited liability company, a domestic corporation, an estate, including a foreign estate, or a trust.

L. This section applies to tax credits claimed pursuant to the Land Conservation Incentives Act for donations made before January 1, 2012."

SECTION 5. Section 75-9-2 NMSA 1978 (being Laws 2003, Chapter 331, Section 2) is amended to read:

"75-9-2. PURPOSE.--The purpose of the Land Conservation Incentives Act is to encourage private landowners to be stewards of lands that are important habitat areas or contain significant natural, open space and historic resources by providing private landowners with incentives that encourage the protection of private lands for open space, natural resources, biodiversity conservation, outdoor recreation, farmland and forest land preservation, historic preservation and land conservation purposes that meet the requirements for conservation purposes as defined by 26 C.F.R. Section 1.170A-14."

SECTION 6. Section 75-9-3 NMSA 1978 (being Laws 2003, Chapter 331, Section 3) is amended to read:

"75-9-3. DEFINITIONS.--As used in the Land Conservation Incentives Act:

A. "conservation easement" means a public or private conservation agency's nonpossessory interest in real property imposing any limitation or affirmative obligation, the purpose of which includes retaining or protecting natural or open space values of real property; assuring the availability of real property for agricultural, forest, recreation or open space use; protecting natural resources; or preserving the historical, architectural, archaeological or cultural significance of real property;

[A.] B. "interest in [real property] land" means a right in real property, including access, improvements, water rights, fee simple interest, easement, [and] land use easement, conservation easement, partial interest, mineral right, remainder or future interest or other interest or right in real property. The interest shall comply with the requirements of [the] Section 170(h) of the Internal Revenue Code of 1986; [partial interest, mineral right, remainder or future interest or other interest or right in real property;

B.] C. "land" means real property, including rights of way, easements, privileges and all other rights or interests of a land or description relating to or connected with real property; and

[C.] D. "public or private conservation agency" means a governmental body, including the state of New Mexico or a political subdivision, or a private not-for-profit charitable corporation or trust authorized to do business in New Mexico that is organized and operated for natural resources, land conservation or historic preservation purposes and that has tax-exempt status as a public charity under the federal Internal Revenue Code of 1986, and the power to acquire, hold or maintain land or interests in land. A private not-for-profit charitable corporation or trust shall be a charitable organization described in Section 501(c)(3) of the Internal Revenue Code of 1986 and that meets the requirements of Section 170(h)(3) of that code."

SECTION 7. Section 75-9-4 NMSA 1978 (being Laws 2003, Chapter 331, Section 4) is amended to read:

"75-9-4. ADMINISTRATION.--

A. The Land Conservation Incentives Act shall be administered by the secretary of energy, minerals and natural resources [in consultation with the committee established pursuant to the Natural Lands Protection Act].

B. The secretary of energy, minerals and natural resources may promulgate rules as may be deemed necessary to certify eligible projects for treatment in fulfillment of the purposes of [this] the Land Conservation Incentives Act. The secretary of taxation and revenue, in consultation with the secretary of energy, minerals and natural resources, shall promulgate rules as may be deemed necessary to administer the tax incentives provided for in the Land Conservation Incentives Act and shall coordinate the preparation of the report to the legislature showing the fiscal impact on the treasury of the credits claimed pursuant to that act."

SECTION 8. Section 75-9-5 NMSA 1978 (being Laws 2003, Chapter 331, Section 5) is amended to read:

"75-9-5. APPLICABILITY AND LIMITATIONS.--

A. The tax credits provided by the Land Conservation Incentives Act apply to transfers of land or interests [therein] in land in taxable years beginning on or after January 1, 2004 and all taxable years thereafter.

B. A taxpayer claiming a tax credit pursuant to the Land Conservation Incentives Act may not claim a credit pursuant to a similar law for costs related to the same project.

C. A tax credit that is claimed pursuant to the Land Conservation Incentives Act from the donation of land or an interest in land made by a pass-through tax entity, such as a trust, estate, partnership, limited liability corporation or partnership, limited partnership, S corporation or other fiduciary, shall be used either by an entity in the event it is the taxpayer on behalf of the entity or by the member, manager, partner, shareholder or beneficiary, as the case may be, in proportion to [his] the member's, manager's, partner's, shareholder's or beneficiary's interest in the entity in the event that income, deductions and tax liability pass through the entity to the member, manager, partner, shareholder or beneficiary. Tax credits may not be claimed by both the entity and the member, manager, partner, shareholder or beneficiary for the same donation.

D. A taxpayer is not eligible for a tax credit provided by the Land Conservation Incentives Act if the taxpayer is or has been a subsidiary, partner, manager, member, shareholder or beneficiary of a domestic partnership, limited liability company, domestic corporation or pass-through entity that owns or has owned the donated land or interest in land in the five years preceding the date that the taxpayer conveyed the land or interest in land to the public or private conservation agency."

SECTION 9. APPLICABILITY.--The amendments in Sections 5 through 8 of this act apply to tax credits claimed pursuant to the Land Conservation Incentives Act for donations made on or after January 1, 2012."

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