SB0438

SENATE BILL 438

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

INTRODUCED BY

George K. Munoz and Ron Griggs

AN ACT

RELATING TO TAXATION; CREATING THE NEW JOBS AND INVESTMENT TAX CREDIT.

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

SECTION 1. Section 7-1-2 NMSA 1978 (being Laws 1965, Chapter 248, Section 2, as amended) is amended to read:

"7-1-2. APPLICABILITY.--The Tax Administration Act applies to and governs:

A. the administration and enforcement of the following taxes or tax acts as they now exist or may hereafter be amended:

(1) Income Tax Act;

(2) Withholding Tax Act;

(3) Venture Capital Investment Act;

(4) Gross Receipts and Compensating Tax Act and any state gross receipts tax;

(5) Liquor Excise Tax Act;

(6) Local Liquor Excise Tax Act;

(7) any municipal local option gross receipts tax;

(8) any county local option gross receipts tax;

(9) Special Fuels Supplier Tax Act;

(10) Gasoline Tax Act;

(11) petroleum products loading fee, which fee shall be considered a tax for the purpose of the Tax Administration Act;

(12) Alternative Fuel Tax Act;

(13) Cigarette Tax Act;

(14) Estate Tax Act;

(15) Railroad Car Company Tax Act;

(16) Investment Credit Act, rural job tax credit, Laboratory Partnership with Small Business Tax Credit Act, Technology Jobs and Research and Development Tax Credit Act, Film Production Tax Credit Act, Affordable Housing Tax Credit Act, [and] high-wage jobs tax credit and new jobs and investment tax credit;

(17) Corporate Income and Franchise Tax Act;

(18) Uniform Division of Income for Tax Purposes Act;

(19) Multistate Tax Compact;

(20) Tobacco Products Tax Act; and

(21) the telecommunications relay service surcharge imposed by Section 63-9F-11 NMSA 1978, which surcharge shall be considered a tax for the purposes of the Tax Administration Act;

B. the administration and enforcement of the following taxes, surtaxes, advanced payments or tax acts as they now exist or may hereafter be amended:

(1) Resources Excise Tax Act;

(2) Severance Tax Act;

(3) any severance surtax;

(4) Oil and Gas Severance Tax Act;

(5) Oil and Gas Conservation Tax Act;

(6) Oil and Gas Emergency School Tax Act;

(7) Oil and Gas Ad Valorem Production Tax Act;

(8) Natural Gas Processors Tax Act;

(9) Oil and Gas Production Equipment Ad Valorem Tax Act;

(10) Copper Production Ad Valorem Tax Act;

(11) any advance payment required to be made by any act specified in this subsection, which advance payment shall be considered a tax for the purposes of the Tax Administration Act;

(12) Enhanced Oil Recovery Act;

(13) Natural Gas and Crude Oil Production Incentive Act; and

(14) intergovernmental production tax credit and intergovernmental production equipment tax credit;

C. the administration and enforcement of the following taxes, surcharges, fees or acts as they now exist or may hereafter be amended:

(1) Weight Distance Tax Act;

(2) the workers' compensation fee authorized by Section 52-5-19 NMSA 1978, which fee shall be considered a tax for purposes of the Tax Administration Act;

(3) Uniform Unclaimed Property Act (1995);

(4) 911 emergency surcharge and the network and database surcharge, which surcharges shall be considered taxes for purposes of the Tax Administration Act;

(5) the solid waste assessment fee authorized by the Solid Waste Act, which fee shall be considered a tax for purposes of the Tax Administration Act;

(6) the water conservation fee imposed by Section 74-1-13 NMSA 1978, which fee shall be considered a tax for the purposes of the Tax Administration Act; and

(7) the gaming tax imposed pursuant to the Gaming Control Act; and

D. the administration and enforcement of all other laws, with respect to which the department is charged with responsibilities pursuant to the Tax Administration Act, but only to the extent that the other laws do not conflict with the Tax Administration Act."

SECTION 2. A new Section 7-9G-3 NMSA 1978 is enacted to read:

"7-9G-3. [NEW MATERIAL] NEW JOBS AND INVESTMENT TAX CREDIT.--

A. Prior to January 1, 2038, a taxpayer that creates and maintains new jobs and makes a capital investment in the state may apply for, and the taxation and revenue department may allow, a credit against the taxpayer's tax liabilities imposed pursuant to the Income Tax Act and the Corporate Income and Franchise Tax Act and certain liabilities pursuant to the Gross Receipts and Compensating Tax Act. The credit provided by this section may be referred to as the "new jobs and investment tax credit".

B. The purpose of the new jobs and investment tax credit is to encourage businesses to start, relocate or expand their operations in New Mexico.

C. The amount of the tax credit provided by this section shall equal the following percentages of a taxpayer's tax liabilities pursuant to the Income Tax Act, the Corporate Income and Franchise Tax Act and the Gross Receipts and Compensating Tax Act, excluding any amount collected with respect to local option gross receipts taxes; provided that the taxpayer meets all the requirements of this section:

(1) one hundred percent for each of the first ten years after receiving the certificate of eligibility pursuant to Subsection J of this section; and

(2) each year thereafter, the percentage shall be reduced by ten percent until the percentage equals zero percent; provided that no amount of credit shall be allowed after December 31, 2037.

D. To be eligible for the tax credit provided by this section, a taxpayer shall, beginning January 1, 2017 and prior to applying for a certificate of eligibility pursuant to Subsection J of this section:

(1) create two hundred fifty new jobs; and

(2) make a capital investment in this state of at least fifty million dollars ($50,000,000).

E. To continue to be eligible for the tax credit provided by this section, a taxpayer shall maintain two hundred fifty new jobs in each reporting period. If an individual that was hired to occupy a new job is no longer employed by the eligible employer, the taxpayer shall replace the individual to occupy the new job to remain eligible for the tax credit.

F. To claim the tax credit provided by this section, a taxpayer shall apply for approval to the taxation and revenue department after the close of the taxpayer's reporting period, but not later than twelve months following the end of that reporting period. The application shall be made on forms and in a manner required by the taxation and revenue department and shall include information the taxation and revenue department may require to determine the amount of credit due to the taxpayer. The initial application shall include a certificate of eligibility issued by the economic development department pursuant to Subsection J of this section. Subsequent applicants shall include evidence that the taxpayer maintained two hundred fifty new jobs in the reporting period for which the application applies.

G. A job shall not be considered a new job pursuant to this section if:

(1) the job is created due to a business merger or acquisition or other change in business organization;

(2) the person occupying the job was terminated from employment in New Mexico by another employer involved in the business merger or acquisition or other change in business organization with the taxpayer; or

(3) the job is performed by:

(a) the person who performed the job or its functional equivalent prior to the business merger or acquisition or other change in business organization; or

(b) a person replacing the person who performed the job or its functional equivalent prior to a business merger or acquisition or other change in business organization.

H. Notwithstanding the provisions of Subsection G of this section, a job that was created by an employer and for which an application for a tax credit was received and is under review by the economic development department, and the business subsequently goes through a merger or acquisition or other change in business organization, the job may be considered a new job if all other requirements of this section are met.

I. A job shall not be considered a new job pursuant to this section if the job is created due to a taxpayer entering into a contract or becoming a subcontractor to a contract with a governmental entity that replaces one or more entities performing functionally equivalent services for the governmental entity unless the job is one that was not being performed by an employee of the replaced entity.

J. A taxpayer may apply for a certificate of eligibility for the tax credit provided by this section from the economic development department. If the economic development department determines that a taxpayer has met the requirements of this section, it shall issue a certificate of eligibility to the taxpayer. An application for the certificate shall include the following information and any other information required by the economic development department to determine if a taxpayer has met the requirements of this section:

(1) for each new job, the number of weeks the individual occupied the position;

(2) the total number of new jobs created by the taxpayer in New Mexico beginning January 1, 2017 and the date of application for the certificate of eligibility; and

(3) evidence that, beginning January 1, 2017, the taxpayer made a capital investment of at least fifty million dollars ($50,000,000) in this state.

K. A taxpayer allowed a credit pursuant to this section shall report the amount of the credit to the taxation and revenue department in a manner required by the department.

L. The taxation and revenue department shall compile an annual report on the tax credit provided by this section that shall include the number of taxpayers approved by the department to receive the credit, the aggregate amount of credits approved, the total number of new jobs created, the total amount of capital investment made and any other information necessary to evaluate the cost of the tax credit and whether the tax credit is performing the purpose for which it was created. Each year that the tax credit is in effect, the taxation and revenue department shall present the annual report to the revenue stabilization and tax policy committee and the legislative finance committee.

M. As used in this section:

(1) "capital investment" means capital investment in equipment, land, buildings or infrastructure, any of which is necessary to support new or expanding business activity;

(2) "eligible employer" means an employer that:

(a) sold and delivered more than fifty percent of its goods produced in New Mexico or non-retail services performed in New Mexico to persons outside New Mexico for use or resale outside New Mexico; and

(b) is receiving or is eligible to receive development training program assistance pursuant to Section 21-19-7 NMSA 1978 during the applicable qualifying period;

(3) "new job" means a job created in New Mexico by an eligible employer that is occupied full-time for at least forty-eight weeks in a year by an individual who is a resident of New Mexico and who is not an individual who:

(a) bears any of the relationships described in Subsection (a) of Section 152 of the federal Internal Revenue Code of 1986 to the employer or, if the employer is a corporation, to an individual who owns, directly or indirectly, more than fifty percent in value of the outstanding stock of the corporation or, if the employer is an entity other than a corporation, to an individual who owns, directly or indirectly, more than fifty percent of the capital and profits interest in the entity;

(b) if the employer is an estate or trust, is a grantor, beneficiary or fiduciary of the estate or trust or is an individual who bears any of the relationships described in Subsection (a) of Section 152 of the federal Internal Revenue Code of 1986 to a grantor, beneficiary or fiduciary of the estate or trust; or

(c) is working or has worked as an employee or as an independent contractor for an entity that, directly or indirectly, owns stock in a corporation of the eligible employer or other interest of the eligible employer that represents fifty percent or more of the total voting power of that entity or has a value equal to fifty percent or more of the capital and profits interest in the entity; and

(4) "resident" means "resident" as that term is used in the Income Tax Act."

SECTION 3. APPLICABILITY.--The provisions of this act apply to taxable years beginning on or after January 1, 2017.

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