HOUSE BILL 396

48th legislature - STATE OF NEW MEXICO - first session, 2007

INTRODUCED BY

Daniel P. Silva

AN ACT

RELATING TO TAXATION; PROVIDING FOR A GROSS RECEIPTS TAX CREDIT FOR CERTAIN BUSINESS-RELATED SERVICES; PROVIDING FOR ADJUSTED DISTRIBUTIONS.

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 ADJUSTMENT--TAX ADMINISTRATION SUSPENSE FUND--BUSINESS SERVICES TAX CREDIT.--Distributions from the tax administration suspense fund of revenue attributable to the gross receipts tax shall be adjusted for the full cost of business services tax credits issued."    

     Section 2. A new section of the Gross Receipts and Compensating Tax Act is enacted to read:

     "[NEW MATERIAL] BUSINESS SERVICES TAX CREDIT.--

          A. The tax credit provided in this section may be referred to as the "business services tax credit". The purpose of the business services tax credit is to reduce the tax burden on businesses that results from multiple impositions of transactional taxes upon the sale or use of services that businesses purchase.

          B. A qualified taxpayer that owns a business with gross receipts in the previous calendar year that do not exceed three hundred thousand dollars ($300,000) may apply for, and the department may allow, a business services tax credit for qualified expenditures made during a tax reporting period in an amount equal to:

                (1) three and seven hundred seventy-five thousandths percent of those qualified expenditures for the purchase of a service within a municipality; and

                (2) five percent of those qualified expenditures for the purchase of a service within an unincorporated area of a county.

          C. Except as provided in Subsection D of this section, the business services tax credit may be claimed against the gross receipts tax or the compensating tax for which the taxpayer would be liable for a tax reporting period in which the qualified expenditure was paid or in later periods. In no case may the credit taken exceed the total gross receipts tax or compensating tax due for the reporting period. After the initial reporting period in which part of the credit for a qualified expenditure was claimed, any excess credit may be carried forward and used in future reporting periods for three years.

          D. Gross receipts taxes of entities that form a group of entities that, through one or more intermediaries, control, are controlled by or are under common control with other entities in that group shall be aggregated. Qualified expenditures of those entities shall be aggregated for the purposes of determining the aggregate business services tax credit for the group of entities. The aggregate business services tax credit may be claimed against the aggregate gross receipts taxes of the group of entities.

          E. For the purposes of this section:

                (1) "qualified expenditure" means the amount paid by a qualified taxpayer to purchase a service that is deductible for purposes of determining net income pursuant to Section 162 of the Internal Revenue Code and for which gross receipts from performance of that service are subject to the gross receipts tax and are not eligible for a deduction or exemption from the gross receipts tax, but does not include expenditures for:

                     (a) commercial linen supply services;

                     (b) entertainment or recreational services;

                     (c) intrastate telephone and telegraph services;

                     (d) janitorial or cleaning services;

                     (e) landscaping services;

                     (f) repair and maintenance services;

                     (g) construction services;

                     (h) research and development services;

                     (i) sewer and solid waste disposal services; and

                     (j) services, the purchase price of which is the basis for any other New Mexico tax credit claimed and allowed either prior or subsequent to the business services tax credit; and

                (2) "qualified taxpayer" means a person liable for payment of any tax or a person to whom an assessment has been made if the assessment remains unabated or the amount of the assessment has not been paid, but does not include:

                     (a) a federal, state, tribal or other governmental unit or subdivision or an agency, department, institution or instrumentality of a federal, state, tribal or other governmental unit or subdivision;

                     (b) a taxpayer that is a nonprofit entity and for which receipts are exempt from the gross receipts tax pursuant to Sections 7-9-16 and 7-9-29 NMSA 1978; or

                     (c) a taxpayer for which receipts are exempt from the gross receipts tax pursuant to Section 7-9-24 NMSA 1978."

     Section 3. EFFECTIVE DATE.--The effective date of the provisions of this act is July 1, 2007.

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