AN ACT

RELATING TO TAXATION; EXEMPTING PUBLICLY TRADED PARTNERSHIPS FROM INFORMATION RETURN FILING REQUIREMENTS PURSUANT TO THE WITHHOLDING TAX ACT.

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

     Section 1. Section 7-3-12 NMSA 1978 (being Laws 1999, Chapter 14, Section 3, as amended) is amended to read:

     "7-3-12. INFORMATION RETURN REQUIRED FROM PASS-THROUGH ENTITY--WITHHOLDING.--

          A. A pass-through entity doing business in this state shall file an annual information return with the department on or before the due date of the entity's federal return for the taxable year. The information return shall be signed by the business manager or one of the owners of the pass-through entity.

          B. The information return required by this section shall contain all information required by the department, including:

                (1) the pass-through entity's gross income;

                (2) the pass-through entity's net income;

                (3) the amount of each owner's share of the pass-through entity's net income; and

                (4) the name, address and tax identification number of each owner entitled to a share of net income.

          C. A pass-through entity shall provide to each of its owners sufficient information to enable the owner to comply with the provisions of the Income Tax Act and the Corporate Income and Franchise Tax Act with respect to the owner's share of net income.

          D. The pass-through entity shall deduct and withhold from each nonresident owner's share of net income an amount equal to the owner's share of net income multiplied by a rate set by department regulation. In the case of an owner that is an individual or entity not taxed as a corporation for federal income tax purposes for the taxable year, the rate shall not exceed the rate for composite returns. In the case of an owner that is a corporation or other entity taxed as a corporation for the taxable year, the rate shall not exceed the maximum rate for corporate income tax.

          E. The provisions of Subsection D of this section shall not apply with regard to:

                (1) the share of net income of a nonresident owner that has executed an agreement in accordance with regulations or instructions of the department that the owner will report and pay tax, if required, on its own return pursuant to the Income Tax Act or the Corporate Income and Franchise Tax Act;

                (2) oil and gas proceeds subject to the Oil and Gas Proceeds Withholding Tax Act; or

                (3) a publicly traded partnership as defined in Subsection (b) of Section 7704 of the Internal Revenue Code, as may be amended or renumbered, and that is not treated as a corporation pursuant to that section.

          F. Amounts deducted from the owner's share of net income under the provisions of this section shall be a collected tax. No owner shall have a right of action against the pass-through entity for any amount deducted and withheld from the owner's share of net income."

     Section 2. APPLICABILITY.--The provisions of this act are applicable to taxable years beginning on or after January 1, 2005.