45th legislature - STATE OF NEW MEXICO - second session, 2002

RELATING TO TAXATION; PROVIDING FOR INCOME TAX AND CORPORATE INCOME TAX CREDITS FOR INVESTMENTS IN CLEANING WATER PRODUCED FROM OIL AND GAS DRILLING.

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] CREDIT FOR PRODUCED WATER.--

A. A taxpayer who files an individual New Mexico income tax return who is not a dependent of another taxpayer and who produces water in the course of drilling for oil or gas may take a tax credit in an amount equal to one thousand dollars ($1,000) per acre-foot of produced water not to exceed four hundred thousand dollars ($400,000) per year if the following conditions are met:

(1) the taxpayer discharges the water into the Pecos river in compliance with the requirements of the New Mexico Water Quality Act, the New Mexico water quality control commission regulations and the federal clean water acts;

(2) the taxpayer discharges the water in a manner approved by the interstate stream commission to contribute to delivery obligations pursuant to the Pecos River Compact; and

(3) the produced water discharged into the Pecos river is available for appropriation only to meet terms of the Pecos River Compact.

B. A husband and wife who file separate returns for a taxable year in which they could have filed a joint return may each claim only one-half of the credit that would have been allowed on a joint return.

C. The tax credit provided in this section may only be deducted from the taxpayer's personal income tax liability. Any portion of the tax credit provided in this section that remains unused at the end of the taxpayer's taxable year may be carried forward for three consecutive taxable years.

D. As used in this section, "produced water" means water produced from oil or gas drilling from a depth of three thousand feet or more below the surface."

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

"[NEW MATERIAL] CREDIT FOR PRODUCED WATER.--

A. A taxpayer that files a New Mexico corporate income tax return that produces water in the course of drilling for oil or gas may take a tax credit in an amount equal to one thousand dollars ($1,000) per acre-foot of produced water not to exceed four hundred thousand dollars ($400,000) per year if the following conditions are met:

(1) the taxpayer discharges the water into the Pecos river in compliance with the requirements of the New Mexico Water Quality Act, the New Mexico water quality control commission regulations and the federal clean water acts;

(2) the taxpayer discharges the water in a manner approved by the interstate stream commission to contribute to delivery obligations pursuant to the Pecos River Compact; and

(3) the produced water discharged into the Pecos river is available for appropriation only to meet terms of the Pecos River Compact.

B. The tax credit provided in this section may only be deducted from the taxpayer's corporate income tax liability. Any portion of the tax credit provided in this section that remains unused at the end of the taxpayer's taxable year may be carried forward for three consecutive taxable years.

C. As used in this section, "produced water" means water produced from oil or gas drilling from a depth of three thousand feet or more below the surface."

Section 3. DELAYED REPEAL.--Sections 1 and 2 of this act are repealed effective January 1, 2006.

Section 4. APPLICABILITY.--The provisions of this act apply to taxable years beginning on or after January 1, 2002.