46th legislature - STATE OF NEW MEXICO - first session, 2003

RELATING TO TAXATION; REQUIRING WITHHOLDING FROM PAYMENTS OF OIL AND GAS PROCEEDS TO NONRESIDENTS AND CERTAIN OTHER PERSONS; DISTRIBUTING THE RECEIPTS TO THE LEGISLATIVE RETIREMENT FUND.

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

Section 1. A new section of the Tax Administration Act is enacted to read:

"[NEW MATERIAL] DISTRIBUTION OF CERTAIN WITHHOLDING PAYMENTS.--A distribution pursuant to Section 7-1-6.1 NMSA 1978 shall be made to the legislative retirement fund in an amount equal to the net receipts attributable to amounts deducted and withheld pursuant to Subsection E of Section 7-3-3 NMSA 1978."

Section 2. Section 7-2A-9.1 NMSA 1978 (being Laws 1986, Chapter 5, Section 1, as amended) is amended to read:

"7-2A-9.1. ESTIMATED TAX DUE--PAYMENT OF ESTIMATED TAX--PENALTY--EXEMPTION.--

A. Every taxpayer shall pay estimated corporate income tax to the state of New Mexico during its taxable year if its tax after applicable credits for such taxable year can reasonably be expected to be five thousand dollars ($5,000) or more. A taxpayer to which this section applies shall calculate estimated tax by one of the following methods:

(1) estimating the amount of tax due, net of any credits, for the current taxable year, provided that the estimated amount is at least eighty percent of the amount determined to be due for the taxable year;

(2) using as the estimate an amount equal to one hundred percent of the tax due for the previous taxable year, if the previous taxable year was a full twelve-month year and if the amount due for that previous taxable year was at least five thousand dollars ($5,000); or

(3) using as the estimate an amount equal to one hundred ten percent of the tax due for the taxable year immediately preceding the previous taxable year, if the taxable year immediately preceding the previous taxable year was a full twelve-month year, the amount due for the taxable year immediately preceding the previous taxable year was at least five thousand dollars ($5,000) and the return for the previous taxable year has not been filed and the extended due date for filing that return has not occurred at the time the first installment is due for the taxable year.

B. If Subsection A of this section applies, the amount of estimated tax shall be paid in installments as follows: twenty-five percent of the estimated tax is due on or before the fifteenth day of the fourth month of the taxable year, another twenty-five percent is due on or before the fifteenth day of the sixth month of the taxable year, another twenty-five percent is due on or before the fifteenth day of the ninth month of the taxable year and the final twenty-five percent is due on or before the fifteenth day of the twelfth month of the taxable year. Application of this subsection to a taxable year that is a fractional part of a year shall be determined by regulation of the secretary.

C. Every taxpayer to which Subsection A of this section applies that fails to pay the estimated tax when due or that makes estimated tax payments during the taxable year that are less than the lesser of eighty percent of the income tax imposed on the taxpayer under the Corporate Income and Franchise Tax Act or the amount required by Paragraph (2) or (3) of Subsection A of this section shall be subject to the interest and penalty provisions of Sections 7-1-67 and 7-1-69 NMSA 1978 on the underpayment.

D. For purposes of this section, the amount of underpayment shall be the excess of the amount of the installment that would be required to be paid if the estimated tax were equal to eighty percent of the tax shown on the return for the taxable year or the amount required by Paragraph (2) or (3) of Subsection A of this section or, if no return was filed, eighty percent of the tax for the taxable year for which the estimated tax is due less the amount, if any, of the installment paid on or before the last date prescribed for payment.

E. For purposes of this section, the period of

underpayment shall run from the date the installment was required to be paid to whichever of the following dates is earlier:

(1) the fifteenth day of the third month following the end of the taxable year; or

(2) with respect to any portion of the underpayment, the date on which such portion is paid. For the purposes of this paragraph, a payment of estimated tax on any installment date shall be applied as a payment of any previous underpayment only to the extent such payment exceeds the amount of the installment determined under Subsection D of this section due on such installment date.

F. For the purposes of this section, the amount of tax deducted and withheld with respect to a taxpayer by a remitter under the Withholding Tax Act shall be deemed a payment of estimated tax. An equal amount of the amount of withheld tax shall be deemed paid on each due date for the applicable taxable year unless the taxpayer establishes the dates on which all amounts were actually withheld, in which case the amounts withheld shall be deemed payments of estimated tax on the dates on which the amounts were actually withheld."

Section 3. Section 7-3-2 NMSA 1978 (being Laws 1990, Chapter 64, Section 1, as amended) is amended to read:

"7-3-2. DEFINITIONS.--As used in the Withholding Tax Act:

A. "department" means the taxation and revenue department, the secretary of taxation and revenue or any employee of the department exercising authority lawfully delegated to that employee by the secretary;

B. "employee" means either an individual domiciled within the state who performs services either within or without the state for an employer or, to the extent permitted by law, an individual domiciled outside of the state who performs services within the state for an employer;

C. "employer" means a person, or an officer, agent or employee of that person, having control of the payment of wages, doing business in or deriving income from sources within the state for whom an individual performs or performed any service as the employee of that person, except that if the person for whom the individual performs or performed the services does not have control over the payment of the wages for such services, "employer" means the person having control of the payment of wages;

D. "Internal Revenue Code" means the Internal Revenue Code of 1986, as amended;

E. "oil and gas" means crude oil, natural gas, casinghead gas, condensate or any other related hydrocarbons, or carbon dioxide;

F. "oil and gas proceeds" means all payments derived from oil and gas production from any well located in New Mexico, whether royalty interest, overriding royalty interest, production payment interest or working interest, expressed as a right to a specified interest in the cash proceeds received from the sale of oil and gas production or in the cash value of that production, subject to all taxes withheld therefrom pursuant to law, but excluding "net profits interests" and other types of interest the extent of which cannot be determined with reference to a specified share of the oil and gas production;

[E.] G. "owner" means a partner in a partnership not taxed as a corporation for federal income tax purposes for the taxable year, a shareholder of an S corporation or of a corporation other than an S corporation that is not taxed as a corporation for federal income tax purposes for the taxable year, a member of a limited liability company or any similar person holding an ownership interest in any pass-through entity;

[F.] H. "pass-through entity" means any business association other than:

(1) a sole proprietorship;

(2) an estate or trust;

(3) a corporation, limited liability company, partnership or other entity not a sole proprietorship taxed as a corporation for federal income tax purposes for the taxable year; or

(4) a partnership that is organized as an investment partnership in which the partners' income is derived solely from interest, dividends and sales of securities;

[G.] I. "payor" means [any] a person making payment of a pension or annuity to an individual domiciled in New Mexico;

[H.] J. "payroll period" means a period for which a payment of wages is made to [the] an employee by his employer;

[I.] K. "person" means [any] an individual, a club, a company, a cooperative association, a corporation, an estate, a firm, a joint venture, a partnership, a receiver, a syndicate, a trust or other association and, to the extent permitted by law, [any] a federal, state or other governmental unit or subdivision or an agency, a department or an instrumentality thereof;

L. "remitter" means a person that pays oil and gas proceeds to:

(1) a nonresident individual who is entitled to the proceeds; or

(2) a person, other than an individual, who is entitled to the proceeds and who has not notified the remitter of the person's taxpayer identification number issued by the department;

[J.] M. "wagerer" means any person who receives winnings that are subject to withholding;

[K.] N. "wages" means remuneration in cash or other form for services performed by an employee for an employer;

[L.] O. "winnings that are subject to withholding" means "winnings which are subject to withholding" as that term is defined in Section 3402 of the Internal Revenue Code;

[M.] P. "withholdee" means:

(1) an individual domiciled in New Mexico receiving a pension or annuity from which an amount of tax is deducted and withheld pursuant to the Withholding Tax Act;

(2) an employee; [and]

(3) a nonresident individual who is entitled to the payment of oil and gas proceeds by a remitter;

(4) a person, other than an individual, who is entitled to the payment of oil and gas proceeds by a remitter and who has not notified the remitter of the person's taxpayer identification number issued by the department; and

[(3)] (5) a wagerer; and

[N.] Q. "withholder" means a payor, an employer or any person required to deduct and withhold from winnings that are subject to withholding or a remitter."

Section 4. Section 7-3-3 NMSA 1978 (being Laws 1961, Chapter 243, Section 3, as amended) is amended to read:

"7-3-3. TAX WITHHELD AT SOURCE.--

A. Every employer who deducts and withholds a portion of an employee's wages for payment of income tax under the provisions of the Internal Revenue Code shall deduct and withhold an amount for each payroll period computed from a state withholding tax table furnished by the department; provided:

(1) if the employee instructs the employer to withhold a greater amount, the employer shall deduct and withhold the greater amount;

(2) if the employee is not a resident of New Mexico and is to perform services in New Mexico for fifteen or fewer days cumulatively during the calendar year, the employer is not required to deduct and withhold an amount from that employee's wages; and

(3) if the aggregate monthly amount withheld under this section would be less than one dollar ($1.00) for an employee, the employer shall not be required to deduct and withhold wages in regard to that employee.

B. The department shall devise and furnish a state withholding tax table based on statutes made and provided to employers required to withhold amounts under this section. This table shall be devised to provide for a yearly aggregate withholding that will approximate the state income tax liability of average taxpayers in each exemption category.

C. If an individual requests in writing that the payor deduct and withhold an amount from the amount of the pension or annuity due the individual, the payor making payment of a pension or annuity to an individual domiciled in New Mexico shall deduct and withhold the amount requested to be deducted and withheld, provided that the payor is not required to deduct and withhold any amount less than ten dollars ($10.00) per payment. The written request shall include the payee's name, current address, taxpayer identification number and, if applicable, the contract, policy or account number to which the request applies.

D. Every person in New Mexico who is required by the provisions of the Internal Revenue Code to deduct and withhold federal tax from payment of winnings that are subject to withholding shall deduct and withhold from such payment a tax in an amount equal to six percent of the winnings, except that an Indian nation, tribe or pueblo or an agency, department, subdivision or instrumentality thereof is not required to deduct or withhold from payments made to members or spouses of members of that Indian nation, tribe or pueblo.

E. If the amount required to be withheld is at least ten dollars ($10.00) for any period of one month or more, a remitter shall deduct and withhold as a withholding tax six and seventy-five hundredths percent of oil and gas proceeds payable to:

(1) a nonresident individual; or

(2) a person, other than an individual, who has not notified the remitter of the person's taxpayer identification number issued by the department."

Section 5. Section 7-3-4 NMSA 1978 (being Laws 1961, Chapter 243, Section 4, as amended) is amended to read:

"7-3-4. DEDUCTIONS CONSIDERED TAXES.--Amounts deducted under the provisions of the Withholding Tax Act shall be a collected tax. No employee shall have a right of action against the employer for any amount deducted and withheld from the employee's wages. No individual who has instructed a payor to deduct and withhold an amount from the pension or annuity due that individual shall have a right of action against a payor for any amount deducted and withheld pursuant to the instruction. No wagerer who receives winnings that are subject to withholding shall have a right of action against the person who deducted and withheld an amount from the wagerer's winnings for the amount deducted and withheld. No withholdee who receives oil and gas proceeds from a remitter has a right of action against the remitter for the amount deducted and withheld pursuant to Subsection E of Section 7-3-3 NMSA 1978."

Section 6. Section 7-3-7 NMSA 1978 (being Laws 1961, Chapter 243, Section 8, as amended) is amended to read:

"7-3-7. STATEMENTS OF WITHHOLDING.--

A. Every employer shall file an annual statement of withholding for each employee. This statement shall be in a form prescribed by the department and shall be filed with the department on or before the last day of February of the year following that for which the statement is made. It shall include the total compensation paid the employee and the total amount of tax withheld for the calendar year or portion of a calendar year if the employee has worked less than a full calendar year.

B. Every payor shall file an annual statement of withholding for each individual from whom some portion of a pension or an annuity has been deducted and withheld by that payor. This statement shall be in a form prescribed by the department and shall be filed with the department on or before the last day of February of the year following that for which the statement is made. It shall include the total amount of pension or annuity paid to the individual and the amount of tax withheld for the calendar year.

C. Every person required to deduct and withhold tax from a payment of winnings that are subject to withholding shall file an annual statement of withholding for each wagerer from whom some portion of a payment of winnings has been deducted and withheld by that person. This statement shall be in a form prescribed by the department and shall be filed with the department on or before the last day of February of the year following that for which the statement is made. It shall include the total amount of winnings paid to the individual and the amount of tax withheld for the calendar year. The department may also require any person who is required to submit an information return to the internal revenue service regarding the winnings of another person to submit copies of the return to the department.

D. A remitter shall file an annual statement of withholding for each withholdee from whom a part of oil and gas proceeds has been deducted and withheld by the remitter. The statement shall be in a form prescribed by the department and shall be filed with the department on or before the last day of February of the year following that for which the statement is made. It shall include the total amount of the oil and gas proceeds paid to the withholdee and the amount of tax withheld for the calendar year."

Section 7. Section 7-3-9 NMSA 1978 (being Laws 1961, Chapter 243, Section 11, as amended) is amended to read:

"7-3-9. WITHHELD AMOUNTS CREDITED AGAINST TAX.--The entire amount of income upon which tax was deducted and withheld shall be included in the gross income of the withholdee for state income tax or corporate income tax purposes. The amount of tax deducted and withheld under the provisions of the Withholding Tax Act during the taxable year shall be credited against any state income tax or corporate income tax liability for that taxable year."

Section 8. EFFECTIVE DATE--CONTINGENCY.--

A. Except as provided in Subsection B of this section, the effective date of the provisions of this act is July 1, 2003.

B. This act is contingent upon the enactment into law of Senate Bill 620 by the first session of the forty-sixth legislature or a substantially similar bill that creates the legislative retirement fund. If no such bill is enacted into law, the provisions of this act shall not become effective.