HOUSE BILL 25

53rd legislature - STATE OF NEW MEXICO - first session, 2017

INTRODUCED BY

Sarah Maestas Barnes and Michael Padilla

AN ACT

RELATING TO PROCUREMENT; ENACTING THE RESIDENT BUSINESS SET-ASIDE ACT; REQUIRING THAT THIRTY-THREE PERCENT OF A CONTRACTING AGENCY'S CONTRACTS BE AWARDED TO RESIDENT BUSINESSES; PROVIDING FOR CERTIFICATION OF RESIDENT BUSINESSES AND RESIDENT CONTRACTORS; REQUIRING REPORTING; PROVIDING PENALTIES.

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

     SECTION 1. [NEW MATERIAL] SHORT TITLE.--This act may be cited as the "Resident Business Set-Aside Act".

     SECTION 2. [NEW MATERIAL] PURPOSE.--The purpose of the Resident Business Set-Aside Act is to encourage the health of the state's economy, which is directly related to the competitive strength and well-being of the state's businesses, by providing an opportunity for businesses to freely enter into business and to grow and expand and by ensuring that a fair proportion of the state's total contracts for construction, property and services is placed with resident businesses.

     SECTION 3. [NEW MATERIAL] DEFINITIONS.--As used in the Resident Business Set-Aside Act:

          A. "contracting agency" means a department, commission, council, board, committee, institution, legislative body, agency, government corporation or official of the executive, legislative or judicial branch of the government of the state;

          B. "department" means the general services department;

          C. "Indian nation, tribe or pueblo" means a federally recognized Indian nation, tribe or pueblo located wholly or partially in New Mexico, including:

                (1) a political subdivision, agency or department of an Indian nation, tribe or pueblo;

                (2) an incorporated or unincorporated enterprise of an Indian nation, tribe or pueblo or of a political subdivision of an Indian nation, tribe or pueblo; or

                (3) a corporation considered to be an Indian nation, tribe or pueblo by the federal government or the state;

          D. "legacy contractor" means a construction business that has been licensed in this state for ten consecutive years;

          E. "new business" means a business that has been in existence for less than three years;

          F. "new contractor" means a business that has been in existence for less than five years;

          G. "relocated business" means a business that moved eighty percent of its total domestic personnel from another state to New Mexico in the past five years;

          H. "resident business" means a business or contractor that has a valid resident business or resident contractor certificate issued by the taxation and revenue department pursuant to Section 5 of the Resident Business Set-Aside Act;

          I. "set-aside contract" means:

                (1) a contract for items of tangible personal property, equipment, construction, services or professional services that is designated as a contract with respect to which bids or proposals are solicited only from a resident business; or

                (2) a portion of a contract when that portion has been designated as a portion with respect to which bids or proposals are solicited and accepted only from a resident business; and

          J. "tangible personal property" means tangible property other than real property that has a physical existence, including supplies, equipment, materials and printed materials.

     SECTION 4. [NEW MATERIAL] CONTRACTING AGENCIES--REQUIREMENTS--DESIGNATION OF SET-ASIDE CONTRACTS.--

          A. Every contracting agency shall award at least thirty-three percent of the total number of its contracts, regardless of whether those contracts were awarded pursuant to a competitive process, to resident businesses. A contract pursuant to the State Use Act that is awarded to a resident business shall be included in the contracting agency's calculation pursuant to this subsection.

          B. Every contracting agency shall, in consultation with the department, develop an annual plan for how it will achieve the purpose and requirements of the Resident Business Set-Aside Act.

          C. Contracting agencies, in consultation with the department, may designate a contract, or a portion thereof, as a resident business set-aside contract pursuant to the Resident Business Set-Aside Act if there is a reasonable expectation that bids or proposals may be obtained from at least three qualified resident businesses that are capable of furnishing the desired items of tangible personal property, equipment, construction, services or professional services at a fair and reasonable price. The designation of the contract shall be made before the contracting agency solicits bids or proposals.

          D. If the department and a contracting agency disagree as to the designation of a resident business set-aside contract or the requirement that a resident business subcontractor perform work on a portion of a contract, the dispute shall be submitted to the state auditor for a final determination within twenty-one days of receipt of written notice of the disagreement.

          E. If the implementation of the purpose or provisions of the Resident Business Set-Aside Act would jeopardize the state's participation in a program from which the state receives federal funds or other benefits, a contracting agency may, in consultation with the department, withdraw the affected contracts from consideration or calculation of a contracting agency's resident business contract awards.

     SECTION 5. [NEW MATERIAL] RESIDENT BUSINESS AND RESIDENT CONTRACTOR--CERTIFICATION.--

          A. To be certified as a resident business, a business shall submit an application to the taxation and revenue department. The application shall include an affidavit from a certified public accountant, licensed attorney or enrolled agent authorized to practice before the internal revenue service setting forth that the business is licensed to do business in this state and:

                (1) that the business has paid property taxes or rent on real property in the state and has paid at least one other tax administered by the state in each of the three years immediately preceding the submission of the affidavit;

                (2) if the business is a new business, that the owner or majority of owners has paid property taxes or rent on real property in the state and has paid at least one other tax administered by the state in each of the three years immediately preceding the submission of the affidavit and has not applied for a resident business or resident contractor certificate pursuant to this section during that time period;

                (3) if the business is a relocated business, that at least eighty percent of the total personnel of the business in each of the years immediately preceding the submission of the affidavit were residents of the state and that, prior to the submission of the affidavit, the business either leased real property for ten years or purchased real property greater than one hundred thousand dollars ($100,000) in value in the state;

                (4) if the business was previously certified pursuant to this subsection and the business has reorganized into one or more different legal entities, was purchased by another legal entity but operates in the state as substantially the same commercial enterprise or has merged with a different legal entity but operates in the state as substantially the same commercial enterprise and the business has obtained a new tax identification number, that the business meets the requirements provided in Paragraph (1) of this subsection; or

                (5) if the business is owned by an Indian nation, tribe or pueblo, that the principal place of business is in the state and that at least eighty percent of the total personnel of the business in each of the years immediately preceding the submission of the affidavit were residents of the state.

          B. To be certified as a resident contractor, a contractor shall submit an application to the taxation and revenue department. The application shall include an affidavit from a certified public accountant, licensed attorney or enrolled agent authorized to practice before the internal revenue service setting forth that the contractor is currently licensed as a contractor in this state and:

                (1) that the contractor has:

                     (a) registered with the state at least one vehicle; and

                     (b) in each of the five years immediately preceding the submission of the affidavit: 1) paid property taxes or rent on real property in the state and paid at least one other tax administered by the state; and 2) paid unemployment insurance on at least three full-time employees who are residents of the state; provided that if a contractor is a legacy contractor, the requirement of at least three full-time employees who are residents of the state is waived;

                (2) if the contractor is a new contractor, that the owner or majority of owners has paid property taxes or rent on real property in the state and has paid at least one other tax administered by the state in each of the five years immediately preceding the submission of the affidavit and has not applied for a resident business or resident contractor certificate pursuant to this section during that time period;

                (3) if the contractor is a relocated business, that at least eighty percent of the total personnel of the business in each of the years immediately preceding the submission of the affidavit were residents of the state and that, prior to the submission of the affidavit, the contractor either leased real property for ten years or purchased real property greater than one hundred thousand dollars ($100,000) in value in the state;

                (4) if the contractor was previously certified pursuant to this subsection and the contractor has reorganized into one or more different legal entities, was purchased by another legal entity but operates in the state as substantially the same enterprise or has merged with a different legal entity but operates in the state as substantially the same commercial enterprise and the contractor has obtained a new tax identification number, that the contractor meets the requirements provided in Paragraph (1) of this subsection; or

                (5) if the contractor is a business owned by an Indian nation, tribe or pueblo, that the principal place of business is in the state and that at least eighty percent of the total personnel of the business in each of the years immediately preceding the submission of the affidavit were residents of the state.

          C. The taxation and revenue department shall prescribe the form and content of an application for certification as a resident business or resident contractor and of the required affidavit.

          D. The taxation and revenue department shall examine applications and affidavits submitted pursuant to this section and, if necessary, may seek additional information to ensure that the business or contractor is eligible to receive a certificate pursuant to the provisions of this section. If the taxation and revenue department determines that an applicant is eligible, it shall issue a certificate. If the taxation and revenue department determines that the applicant is not eligible, it shall issue notification within thirty days. If no notification is provided by the taxation and revenue department, the certificate is deemed approved. A certificate is valid for three years from the date of its issuance; provided that if there is a change of ownership of more than fifty percent, a resident business or resident contractor shall reapply for a certificate.

          E. A business or contractor whose application for a certificate is denied has fifteen days from the date of the taxation and revenue department's decision to file an objection with the taxation and revenue department. The person filing the objection shall submit evidence to support the objection and may request a hearing. The taxation and revenue department shall review the evidence and issue a decision within fifteen days of the filing of the objection.

          F. If, following a hearing and an opportunity to be heard, the taxation and revenue department finds that a business or contractor provided false information to the taxation and revenue department in order to obtain a certificate or that a business or contractor used a certificate to obtain a resident business set-aside contract and the resident business or contractor did not perform work pursuant to the contract that was required to be performed by a resident business or contractor, the business or contractor:

                (1) is not eligible to receive a certificate pursuant to this section for a period of five years from the date on which the taxation and revenue department became aware of the submission of the false information or the failure to perform the contract as required; and

                (2) is subject to an administrative penalty of up to fifty thousand dollars ($50,000) for each violation.

          G. In a decision issued pursuant to Subsection D, E or F of this section, the taxation and revenue department shall state the reasons for the action taken and inform an aggrieved business or contractor of the right to judicial review of the determination pursuant to the provisions of Section 39-3-1.1 NMSA 1978.

          H. The taxation and revenue department may assess a reasonable fee for the issuance of a certificate not to exceed the actual cost of administering the taxation and revenue department's duties pursuant to this section.

          I. The state auditor may audit or review the issuance or validity of certificates.

     SECTION 6. [NEW MATERIAL] ANNUAL REPORT.--

          A. Every contracting agency shall submit an annual report to the department on or before the deadline established by the department. An annual report shall include:

                (1) the total number of contracts that the contracting agency awarded to a resident business, and the total dollar value of those contracts;

                (2) the total number of contracts for which a portion of the contract work was performed by a resident business, and the total dollar value of the work performed pursuant to those contracts;

                (3) the total number of resident business set-aside contracts designated and awarded, and the total dollar value of those contracts;

                (4) the percentage of the contracting agency's total procurement that was awarded to a resident business; and

                (5) the efforts made by the contracting agency to publicize and promote procurement pursuant to the Resident Business Set-Aside Act.

          B. The department shall receive and analyze reports submitted pursuant to this section and, using the report data, shall prepare and submit an annual report to the governor and to the legislature and for publication on the sunshine portal by November 1 of each year, beginning in 2018, to show whether the purpose and the directives of the Resident Business Set-Aside Act were met during the preceding fiscal year.

     SECTION 7. [NEW MATERIAL] CONSULTATION WITH INDUSTRY.--The department shall consult at least every six months with representatives from industries affected by the Resident Business Set-Aside Act to ensure effective implementation of that act.

     SECTION 8. [NEW MATERIAL] RULES.--The department shall promulgate rules necessary to implement the provisions of the Resident Business Set-Aside Act.

     SECTION 9. EFFECTIVE DATE.--The effective date of the provisions of this act is July 1, 2017.

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