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AN ACT

RELATING TO TAXATION; PROVIDING FOR A STATE INCOME TAX CREDIT

EQUAL TO A CERTAIN PERCENTAGE OF A FEDERAL INCOME TAX CREDIT

FOR EARNED INCOME; CREATING THE WORKING FAMILIES TAX CREDIT;

INCREASING THE MINIMUM ASSESSMENT AMOUNT; INCREASING THE CAP

ON A PENALTY IMPOSED FOR FAILURE TO PAY A TAX OR TO FILE A

RETURN; CHANGING THE RATE OF INTEREST PAID ON AN UNDERPAYMENT

OR OVERPAYMENT OF A TAX; LIMITING THE RIGHT TO INTEREST ON

REFUNDS OF CERTAIN TAXES TO REFUNDS THAT ARE MADE MORE THAN

ONE HUNDRED TWENTY DAYS AFTER THE CLAIM FOR REFUND IS MADE;

ELIMINATING THE PENALTY FOR INCORRECT REPORTING OF THE FOOD OR

HEALTH CARE PRACTITIONER SERVICES DEDUCTION; PROVIDING A

CREDIT FOR CERTAIN PENALTIES; IMPOSING A PENALTY FOR FAILURE

TO FILE INFORMATION RETURNS PURSUANT TO THE GASOLINE TAX ACT

OR SPECIAL FUELS SUPPLIER TAX ACT; EXPANDING THE INCOME TAX

EXEMPTION FOR LOW- AND MIDDLE-INCOME TAXPAYERS; INCREASING THE

MAXIMUM INCOME AT WHICH THE EXEMPTION CAN BE CLAIMED; CREATING

AN INCOME TAX CREDIT FOR ADOPTION OF SPECIAL NEEDS CHILDREN;

PROVIDING A STATE INCOME TAX EXEMPTION FOR SALARIES PAID BY

THE UNITED STATES FOR ACTIVE DUTY SERVICE IN THE ARMED FORCES

OF THE UNITED STATES; PERMITTING A DEDUCTION FROM GROSS

RECEIPTS FOR SALES OF CONSTRUCTION MATERIAL AND METALLIFEROUS

MINERAL ORE TO CERTAIN TAX-EXEMPT ORGANIZATIONS THAT ARE

ORGANIZED FOR THE PURPOSE OF PROVIDING HOME OWNERSHIP

OPPORTUNITIES TO LOW-INCOME FAMILIES; PROVIDING AN EXEMPTION

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FROM GROSS RECEIPTS TAXES FOR THE GROSS RECEIPTS OF SALES OF

GOODS BY A DISABLED STREET VENDOR; RECONCILING MULTIPLE

AMENDMENTS TO THE SAME SECTION OF LAW IN LAWS 2003; REPEALING

AND ENACTING SECTIONS OF THE NMSA 1978.

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

"Section 1. Section 7-1-17 NMSA 1978 (being Laws 1965,

Chapter 248, Section 20, as amended) is amended to read:

"7-1-17. ASSESSMENT OF TAX--PRESUMPTION OF

CORRECTNESS.--

A. If the secretary or the secretary's delegate

determines that a taxpayer is liable for taxes in excess of

twenty-five dollars ($25.00) that are due and that have not

been previously assessed to the taxpayer, the secretary or the

secretary's delegate shall promptly assess the amount thereof

to the taxpayer.

B. Assessments of tax are effective:

(1) when a return of a taxpayer is received

by the department showing a liability for taxes;

(2) when a document denominated "notice of

assessment of taxes", issued in the name of the secretary, is

mailed or delivered in person to the taxpayer against whom the

liability for tax is asserted, stating the nature and amount

of the taxes assertedly owed by the taxpayer to the state,

demanding of the taxpayer the immediate payment of the taxes

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and briefly informing the taxpayer of the remedies available

to the taxpayer; or

(3) when an effective jeopardy assessment is

made as provided in the Tax Administration Act.

C. Any assessment of taxes or demand for payment

made by the department is presumed to be correct.

D. When taxes have been assessed to any taxpayer

and remain unpaid, the secretary or the secretary's delegate

may demand payment at any time except as provided otherwise by

Section 7-1-19 NMSA 1978."

Section 2. Section 7-1-67 NMSA 1978 (being Laws 1965,

Chapter 248, Section 68, as amended) is amended to read:

"7-1-67. INTEREST ON DEFICIENCIES.--

A. If a tax imposed is not paid on or before the

day on which it becomes due, interest shall be paid to the

state on that amount from the first day following the day on

which the tax becomes due, without regard to any extension of

time or installment agreement, until it is paid, except that:

(1) for income tax imposed on a member of the

armed services of the United States serving in a combat zone

under orders of the president of the United States, interest

shall accrue only for the period beginning the day after any

applicable extended due date if the tax is not paid;

(2) if the amount of interest due at the time

payment is made is less than one dollar ($1.00), then no

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interest shall be due;

(3) if demand is made for payment of a tax,

including accrued interest, and if the tax is paid within ten

days after the date of the demand, no interest on the amount

paid shall be imposed for the period after the date of the

demand;

(4) if a managed audit is completed by the

taxpayer on or before the date required, as provided in the

agreement for the managed audit, and payment of any tax found

to be due is made in full within thirty days of the date the

secretary has mailed or delivered an assessment for the tax to

the taxpayer, no interest shall be due on the assessed tax;

(5) when, as the result of an audit or a

managed audit, an overpayment of a tax is credited against an

underpayment of tax pursuant to Section 7-1-29 NMSA 1978,

interest shall accrue from the date the tax was due until the

tax is deemed paid;

(6) if the department does not issue an

assessment for the tax program and period within the time

provided in Subsection D of Section 7-1-11.2 NMSA 1978,

interest shall be paid from the first day following the day on

which the tax becomes due until the tax is paid, excluding the

period between either:

(a) the one hundred eightieth day after

giving a notice of outstanding records or books of account and

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the date of the assessment of the tax; or

(b) the ninetieth day after the

expiration of the additional time requested by the taxpayer to

comply, if such request was granted, and the date of the

assessment of the tax; and

(7) if the taxpayer was not provided with

proper notices as required in Section 7-1-11.2 NMSA 1978,

interest shall be paid from the first day following the day on

which the tax becomes due until the tax is paid, excluding the

period between one hundred eighty days prior to the date of

assessment and the date of assessment.

B. Interest due to the state under Subsection A or

D of this section shall be at the rate established for

individuals pursuant to Section 6621 of the Internal Revenue

Code, computed on a daily basis; provided that if a different

rate is specified by a compact or other interstate agreement

to which New Mexico is a party, that rate shall be applied to

amounts due under the compact or other agreement.

C. Nothing in this section shall be construed to

impose interest on interest or interest on the amount of any

penalty.

D. If any tax required to be paid in accordance

with Section 7-1-13.1 NMSA 1978 is not paid in the manner

required by that section, interest shall be paid to the state

on the amount required to be paid in accordance with Section

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7-1-13.1 NMSA 1978. If interest is due under this subsection

and is also due under Subsection A of this section, interest

shall be due and collected only pursuant to Subsection A of

this section."

Section 3. Section 7-1-68 NMSA 1978 (being Laws 1965,

Chapter 248, Section 69, as amended by Laws 2003, Chapter 2,

Section 1 and by Laws 2003, Chapter 439, Section 6) is amended

to read:

"7-1-68. INTEREST ON OVERPAYMENTS.--

A. As provided in this section, interest shall be

allowed and paid on the amount of tax overpaid by a person

that is subsequently refunded or credited to that person.

B. Interest on overpayments of tax shall accrue

and be paid at the rate established for individuals pursuant

to Section 6621 of the Internal Revenue Code, computed on a

daily basis; provided that if a different rate is specified by

a compact or other interstate agreement to which New Mexico is

a party, that rate shall apply to amounts due under the

compact or other agreement.

C. Unless otherwise provided by this section,

interest on an overpayment not arising from an assessment by

the department shall be paid from the date of the claim for

refund until a date preceding by not more than thirty days the

date of the credit or refund to any person; interest on an

overpayment arising from an assessment by the department shall

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be paid from the date of overpayment until a date preceding by

not more than thirty days the date of the credit or refund to

any person.

D. No interest shall be allowed or paid with

respect to an amount credited or refunded if:

(1) the amount of interest due is less than

one dollar ($1.00);

(2) the credit or refund is made within:

(a) fifty-five days of the date of the

claim for refund of income tax, pursuant to either the Income

Tax Act or the Corporate Income and Franchise Tax Act for the

tax year immediately preceding the tax year in which the claim

is made;

(b) seventy-five days of the date of

the claim for refund of gasoline tax to users of gasoline off

the highways; or

(c) one hundred twenty days of the date

of the claim for refund of tax imposed pursuant to the

Resources Excise Tax Act, the Severance Tax Act, the Oil and

Gas Severance Tax Act, the Oil and Gas Conservation Tax Act,

the Oil and Gas Emergency School Tax Act, the Oil and Gas Ad

Valorem Production Tax Act, the Natural Gas Processors Tax Act

or the Oil and Gas Production Equipment Ad Valorem Tax Act;

(3) the credit or refund is made within one

hundred twenty days of the date of the claim for refund of

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income tax, pursuant to the Income Tax Act or the Corporate

Income and Franchise Tax Act, for any tax year more than one

year prior to the year in which the claim is made;

(4) Sections 6611(f) and 6611(g) of the

Internal Revenue Code, as those sections may be amended or

renumbered, prohibit payment of interest for federal income

tax purposes;

(5) the credit or refund is made within sixty

days of the date of the claim for refund of any tax other than

income tax;

(6) the credit results from overpayments

found in an audit of multiple reporting periods and applied to

underpayments found in that audit or refunded as a net

overpayment to the taxpayer pursuant to Section 7-1-29 NMSA

1978;

(7) the department applies the credit or

refund to an intercept program, to the taxpayer's estimated

payment prior to the due date for the estimated payment or to

offset prior liabilities of the taxpayer pursuant to

Subsection E of Section 7-1-29 NMSA 1978; or

(8) the credit or refund results from

overpayments the department finds pursuant to Subsection F of

Section 7-1-29 NMSA 1978 that exceed the refund claimed by the

taxpayer on the return.

E. Nothing in this section shall be construed to

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require the payment of interest upon interest."

Section 4. Section 7-1-69 NMSA 1978 (being Laws 1965,

Chapter 248, Section 70, as amended) is amended to read:

"7-1-69. CIVIL PENALTY FOR FAILURE TO PAY TAX OR FILE A

RETURN.--

A. Except as provided in Subsection C of this

section, in the case of failure due to negligence or disregard

of department rules and regulations, but without intent to

evade or defeat a tax, to pay when due the amount of tax

required to be paid, to pay in accordance with the provisions

of Section 7-1-13.1 NMSA 1978 when required to do so or to

file by the date required a return regardless of whether a tax

is due, there shall be added to the amount assessed a penalty

in an amount equal to the greater of:

(1) two percent per month or any fraction of

a month from the date the tax was due multiplied by the amount

of tax due but not paid, not to exceed twenty percent of the

tax due but not paid;

(2) two percent per month or any fraction of

a month from the date the return was required to be filed

multiplied by the tax liability established in the late

return, not to exceed twenty percent of the tax liability

established in the late return; or

(3) a minimum of five dollars ($5.00), but

the five-dollar ($5.00) minimum penalty shall not apply to

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taxes levied under the Income Tax Act or taxes administered by

the department pursuant to Subsection B of Section 7-1-2 NMSA

1978.

B. No penalty shall be assessed against a taxpayer

if the failure to pay an amount of tax when due results from a

mistake of law made in good faith and on reasonable grounds.

C. If a different penalty is specified in a

compact or other interstate agreement to which New Mexico is a

party, the penalty provided in the compact or other interstate

agreement shall be applied to amounts due under the compact or

other interstate agreement at the rate and in the manner

prescribed by the compact or other interstate agreement.

D. In the case of failure, with willful intent to

evade or defeat a tax, to pay when due the amount of tax

required to be paid, there shall be added to the amount fifty

percent of the tax or a minimum of twenty-five dollars

($25.00), whichever is greater, as penalty.

E. If demand is made for payment of a tax,

including penalty imposed pursuant to this section, and if the

tax is paid within ten days after the date of such demand, no

penalty shall be imposed for the period after the date of the

demand with respect to the amount paid.

F. If a taxpayer makes electronic payment of a tax

but the payment does not include all of the information

required by the department pursuant to the provisions of

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Section 7-1-13.1 NMSA 1978 and if the department does not

receive the required information within five business days

from the later of the date a request by the department for

that information is received by the taxpayer or the due date,

the taxpayer shall be subject to a penalty of two percent per

month or any fraction of a month from the fifth day following

the date the request is received. If a penalty is imposed

under Subsection A of this section with respect to the same

transaction for the same period, no penalty shall be imposed

under this subsection.

G. No penalty shall be imposed on:

(1) tax due in excess of tax paid in

accordance with an approved estimated basis pursuant to

Section 7-1-10 NMSA 1978;

(2) tax due as the result of a managed audit;

or

(3) tax that is deemed paid by crediting

overpayments found in an audit or managed audit of multiple

periods pursuant to Section 7-1-29 NMSA 1978."

Section 5. Section 7-1-69.1 NMSA 1978 (being Laws 2005,

Chapter 109, Section 1) is amended to read:

"7-1-69.1. CIVIL PENALTY FOR FAILURE TO FILE AN

INFORMATION RETURN.--A taxpayer, wholesaler, retailer or rack

operator who fails to file an information return on time

pursuant to the Gasoline Tax Act or the Special Fuels Supplier

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Tax Act shall pay a penalty of fifty dollars ($50.00) for each

late report. This penalty shall be in addition to other

applicable penalties."

Section 6. A new section of Chapter 7 NMSA 1978 is

enacted to read:

"CREDIT FOR PENALTY PURSUANT TO SECTION 7-1-71.2 NMSA

1978.--

A. A taxpayer who paid a penalty pursuant to the

provisions of Section 7-1-71.2 NMSA 1978 in effect prior to

July 1, 2007 may claim a credit for the amount of the penalty.

B. To claim the credit provided in Subsection A of

this section, the taxpayer shall apply to the taxation and

revenue department prior to July 1, 2010, on forms and in the

manner prescribed by the department, and shall supply

documentation as required by the department.

C. The amount of credit provided in Subsection A

of this section may be claimed against the taxpayer's gross

receipts tax, compensating tax and withholding tax due in a

reporting period. Any amount of available credit that exceeds

the taxpayer's gross receipts tax, compensating tax and

withholding tax due for a reporting period may be claimed in

subsequent reporting periods, for a period of three years."

Section 7. Section 7-2-2 NMSA 1978 (being Laws 1986,

Chapter 20, Section 26, as amended by Laws 2003, Chapter 13,

Section 1 and by Laws 2003, Chapter 275, Section 1) is amended

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to read:

"7-2-2. DEFINITIONS.--For the purpose of the Income Tax

Act and unless the context requires otherwise:

A. "adjusted gross income" means adjusted gross

income as defined in Section 62 of the Internal Revenue Code,

as that section may be amended or renumbered;

B. "base income":

(1) means, for estates and trusts, that part

of the estate's or trust's income defined as taxable income

and upon which the federal income tax is calculated in the

Internal Revenue Code for income tax purposes plus, for

taxable years beginning on or after January 1, 1991, the

amount of the net operating loss deduction allowed by Section

172(a) of the Internal Revenue Code, as that section may be

amended or renumbered, and taken by the taxpayer for that

year;

(2) means, for taxpayers other than estates

or trusts, that part of the taxpayer's income defined as

adjusted gross income plus, for taxable years beginning on or

after January 1, 1991, the amount of the net operating loss

deduction allowed by Section 172(a) of the Internal Revenue

Code, as that section may be amended or renumbered, and taken

by the taxpayer for that year;

(3) includes, for all taxpayers, any other

income of the taxpayer not included in adjusted gross income

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but upon which a federal tax is calculated pursuant to the

Internal Revenue Code for income tax purposes, except amounts

for which a calculation of tax is made pursuant to Section 55

of the Internal Revenue Code, as that section may be amended

or renumbered; "base income" also includes interest received

on a state or local bond; and

(4) includes, for all taxpayers, an amount

deducted pursuant to Section 7-2-32 NMSA 1978 in a prior

taxable year if:

(a) such amount is transferred to

another qualified tuition program, as defined in Section 529

of the Internal Revenue Code, not authorized in the Education

Trust Act; or

(b) a distribution or refund is made

for any reason other than: 1) to pay for qualified higher

education expenses, as defined pursuant to Section 529 of the

Internal Revenue Code; or 2) upon the beneficiary's death,

disability or receipt of a scholarship;

C. "compensation" means wages, salaries,

commissions and any other form of remuneration paid to

employees for personal services;

D. "department" means the taxation and revenue

department, the secretary or any employee of the department

exercising authority lawfully delegated to that employee by

the secretary;

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E. "fiduciary" means a guardian, trustee,

executor, administrator, committee, conservator, receiver,

individual or corporation acting in any fiduciary capacity;

F. "filing status" means "married filing joint

returns", "married filing separate returns", "head of

household", "surviving spouse" and "single", as those terms

are generally defined for federal tax purposes;

G. "fiscal year" means any accounting period of

twelve months ending on the last day of any month other than

December;

H. "head of household" means "head of household"

as generally defined for federal income tax purposes;

I. "individual" means a natural person, an estate,

a trust or a fiduciary acting for a natural person, trust or

estate;

J. "Internal Revenue Code" means the United States

Internal Revenue Code of 1986, as amended;

K. "lump-sum amount" means for the purpose of

determining liability for federal income tax, an amount that

was not included in adjusted gross income but upon which the

five-year-averaging or the ten-year-averaging method of tax

computation provided in Section 402 of the Internal Revenue

Code, as that section may be amended or renumbered, was

applied;

L. "modified gross income" means all income of the

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taxpayer and, if any, the taxpayer's spouse and dependents,

undiminished by losses and from whatever source, including:

(1) compensation;

(2) net profit from business;

(3) gains from dealings in property;

(4) interest;

(5) net rents;

(6) royalties;

(7) dividends;

(8) alimony and separate maintenance

payments;

(9) annuities;

(10) income from life insurance and endowment

contracts;

(11) pensions;

(12) discharge of indebtedness;

(13) distributive share of partnership

income;

(14) income in respect of a decedent;

(15) income from an interest in an estate or

a trust;

(16) social security benefits;

(17) unemployment compensation benefits;

(18) workers' compensation benefits;

(19) public assistance and welfare benefits;

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(20) cost-of-living allowances; and

(21) gifts;

M. "modified gross income" excludes:

(1) payments for hospital, dental, medical or

drug expenses to or on behalf of the taxpayer;

(2) the value of room and board provided by

federal, state or local governments or by private individuals

or agencies based upon financial need and not as a form of

compensation;

(3) payments pursuant to a federal, state or

local government program directly or indirectly to a third

party on behalf of the taxpayer when identified to a

particular use or invoice by the payer; or

(4) payments for credits and rebates pursuant

to the Income Tax Act and made for a credit pursuant to

Section 7-3-9 NMSA 1978;

N. "net income" means, for estates and trusts,

base income adjusted to exclude amounts that the state is

prohibited from taxing because of the laws or constitution of

this state or the United States and means, for taxpayers other

than estates or trusts, base income adjusted to exclude:

(1) an amount equal to the standard deduction

allowed the taxpayer for the taxpayer's taxable year by

Section 63 of the Internal Revenue Code, as that section may

be amended or renumbered;

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(2) an amount equal to the itemized

deductions defined in Section 63 of the Internal Revenue Code,

as that section may be amended or renumbered, allowed the

taxpayer for the taxpayer's taxable year less the amount

excluded pursuant to Paragraph (1) of this subsection;

(3) an amount equal to the product of the

exemption amount allowed for the taxpayer's taxable year by

Section 151 of the Internal Revenue Code, as that section may

be amended or renumbered, multiplied by the number of personal

exemptions allowed for federal income tax purposes;

(4) income from obligations of the United

States of America less expenses incurred to earn that income;

(5) other amounts that the state is

prohibited from taxing because of the laws or constitution of

this state or the United States;

(6) for taxable years that began prior to

January 1, 1991, an amount equal to the sum of:

(a) net operating loss carryback

deductions to that year from taxable years beginning prior to

January 1, 1991 claimed and allowed, as provided by the

Internal Revenue Code; and

(b) net operating loss carryover

deductions to that year claimed and allowed; and

(7) for taxable years beginning on or after

January 1, 1991, an amount equal to the sum of any net

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operating loss carryover deductions to that year claimed and

allowed, provided that the amount of any net operating loss

carryover from a taxable year beginning on or after January 1,

1991 may be excluded only as follows:

(a) in the case of a timely filed

return, in the taxable year immediately following the taxable

year for which the return is filed; or

(b) in the case of amended returns or

original returns not timely filed, in the first taxable year

beginning after the date on which the return or amended return

establishing the net operating loss is filed; and

(c) in either case, if the net

operating loss carryover exceeds the amount of net income

exclusive of the net operating loss carryover for the taxable

year to which the exclusion first applies, in the next four

succeeding taxable years in turn until the net operating loss

carryover is exhausted; in no event shall a net operating loss

carryover be excluded in any taxable year after the fourth

taxable year beginning after the taxable year to which the

exclusion first applies;

O. "net operating loss" means any net operating

loss, as defined by Section 172(c) of the Internal Revenue

Code, as that section may be amended or renumbered, for a

taxable year as further increased by the income, if any, from

obligations of the United States for that year less related

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expenses;

P. "net operating loss carryover" means the

amount, or any portion of the amount, of a net operating loss

for any taxable year that, pursuant to Paragraph (6) or (7) of

Subsection N of this section, may be excluded from base

income;

Q. "nonresident" means every individual not a

resident of this state;

R. "person" means any individual, estate, trust,

receiver, cooperative association, club, corporation, company,

firm, partnership, limited liability company, joint venture,

syndicate or other association; "person" also means, to the

extent permitted by law, any federal, state or other

governmental unit or subdivision or agency, department or

instrumentality thereof;

S. "resident" means an individual who is domiciled

in this state during any part of the taxable year or an

individual who is physically present in this state for one

hundred eighty-five days or more during the taxable year; but

any individual, other than someone who was physically present

in the state for one hundred eighty-five days or more during

the taxable year, who, on or before the last day of the

taxable year, changed the individual's place of abode to a

place without this state with the bona fide intention of

continuing actually to abide permanently without this state is

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not a resident for the purposes of the Income Tax Act for

periods after that change of abode;

T. "secretary" means the secretary of taxation and

revenue or the secretary's delegate;

U. "state" means any state of the United States,

the District of Columbia, the commonwealth of Puerto Rico, any

territory or possession of the United States or any political

subdivision of a foreign country;

V. "state or local bond" means a bond issued by a

state other than New Mexico or by a local government other

than one of New Mexico's political subdivisions, the interest

from which is excluded from income for federal income tax

purposes under Section 103 of the Internal Revenue Code, as

that section may be amended or renumbered;

W. "surviving spouse" means "surviving spouse" as

generally defined for federal income tax purposes;

X. "taxable income" means net income less any

lump-sum amount;

Y. "taxable year" means the calendar year or

fiscal year upon the basis of which the net income is computed

under the Income Tax Act and includes, in the case of the

return made for a fractional part of a year under the

provisions of the Income Tax Act, the period for which the

return is made; and

Z. "taxpayer" means any individual subject to the

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tax imposed by the Income Tax Act."

Section 8. Section 7-2-5.8 NMSA 1978 (being Laws 2005,

Chapter 104, Section 5) is amended to read:

"7-2-5.8. EXEMPTION FOR LOW- AND MIDDLE-INCOME

TAXPAYERS.--

A. An individual may claim an exemption in an

amount specified in Subsections B through D of this section

not to exceed an amount equal to the number of federal

exemptions multiplied by two thousand five hundred dollars

($2,500) of income includable, except for this exemption, in

net income.

B. For a married individual filing a separate

return with adjusted gross income up to twenty-seven thousand

five hundred dollars ($27,500):

(1) if the adjusted gross income is not over

fifteen thousand dollars ($15,000), the amount of the

exemption pursuant to this section shall be two thousand five

hundred dollars ($2,500) for each federal exemption; and

(2) if the adjusted gross income is over

fifteen thousand dollars ($15,000) but not over twenty-seven

thousand five hundred dollars ($27,500), the amount of the

exemption pursuant to this section for each federal exemption

shall be calculated as follows:

(a) two thousand five hundred dollars

($2,500); less

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(b) twenty percent of the amount

obtained by subtracting fifteen thousand dollars ($15,000)

from the adjusted gross income.

C. For single individuals with adjusted gross

income up to thirty-six thousand six hundred sixty-seven

dollars ($36,667):

(1) if the adjusted gross income is not over

twenty thousand dollars ($20,000), the amount of the exemption

pursuant to this section shall be two thousand five hundred

dollars ($2,500) for each federal exemption; and

(2) if the adjusted gross income is over

twenty thousand dollars ($20,000) but not over thirty-six

thousand six hundred sixty-seven dollars ($36,667), the amount

of the exemption pursuant to this section for each federal

exemption shall be calculated as follows:

(a) two thousand five hundred dollars

($2,500); less

(b) fifteen percent of the amount

obtained by subtracting twenty thousand dollars ($20,000) from

the adjusted gross income.

D. For married individuals filing joint returns,

surviving spouses or for heads of households with adjusted

gross income up to fifty-five thousand dollars ($55,000):

(1) if the adjusted gross income is not over

thirty thousand dollars ($30,000), the amount of the exemption

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pursuant to this section shall be two thousand five hundred

dollars ($2,500) for each federal exemption; and

(2) if the adjusted gross income is over

thirty thousand dollars ($30,000) but not over fifty-five

thousand dollars ($55,000), the amount of the exemption

pursuant to this section for each federal exemption shall be

calculated as follows:

(a) two thousand five hundred dollars

($2,500); less

(b) ten percent of the amount obtained

by subtracting thirty thousand dollars ($30,000) from the

adjusted gross income."

Section 9. A new section of the Income Tax Act is

enacted to read:

"WORKING FAMILIES TAX CREDIT.--

A. A resident who files an individual New Mexico

income tax return may claim a credit in an amount equal to

eight percent of the federal income tax credit for which that

individual is eligible for the same taxable year pursuant to

Section 32 of the Internal Revenue Code. The credit provided

in this section may be referred to as the "working families

tax credit".

B. The working families tax credit may be deducted

from the income tax liability of an individual who claims the

credit and qualifies for the credit pursuant to this section.

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If the credit exceeds the individual's income tax liability

for the taxable year, the excess shall be refunded to the

individual."

Section 10. A new section of the Income Tax Act is

enacted to read:

"CREDIT--SPECIAL NEEDS ADOPTED CHILD TAX CREDIT--

CREATED--QUALIFICATIONS--DURATION OF CREDIT.--

A. A taxpayer who files an individual New Mexico

income tax return, who is not a dependent of another

individual and who adopts a special needs child on or after

January 1, 2007 or has adopted a special needs child prior to

January 1, 2007, may claim a credit against the taxpayer's tax

liability imposed pursuant to the Income Tax Act. The credit

authorized pursuant to this section may be referred to as the

"special needs adopted child tax credit".

B. A taxpayer may claim and the department may

allow a special needs adopted child tax credit in the amount

of one thousand dollars ($1,000) to be claimed against the

taxpayer's tax liability for the taxable year imposed pursuant

to the Income Tax Act.

C. A taxpayer may claim a special needs adopted

child tax credit for each year that the child may be claimed

as a dependent for federal taxation purposes by the taxpayer.

D. If the amount of the special needs adopted

child tax credit due to the taxpayer exceeds the taxpayer's

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individual income tax liability, the excess shall be refunded.

E. 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 special needs

adopted child tax credit provided in this section that would

have been allowed on a joint return.

F. As used in this section, "special needs adopted

child" means an individual who may be over eighteen years of

age and who is certified by the children, youth and families

department or a licensed child placement agency as meeting the

definition of a "difficult to place child" pursuant to the

Adoption Act; provided, however, if the classification as a

"difficult to place child" is based on a physical or mental

impairment or an emotional disturbance the physical or mental

impairment or emotional disturbance shall be at least

moderately disabling."

Section 11. A new section of the Income Tax Act is

enacted to read:

"EXEMPTION--ARMED FORCES SALARIES.--A salary paid by the

United States to a taxpayer for active duty service in the

armed forces of the United States is exempt from state income

taxation."

Section 12. Section 7-9-60 NMSA 1978 (being Laws 1970,

Chapter 12, Section 4, as amended) is amended to read:

"7-9-60. DEDUCTION--GROSS RECEIPTS TAX--GOVERNMENTAL

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GROSS RECEIPTS TAX--SALES TO CERTAIN ORGANIZATIONS.--

A. Except as provided otherwise in Subsection B of

this section, receipts from selling tangible personal property

to 501(c)(3) organizations may be deducted from gross receipts

or from governmental gross receipts if the sale is made to an

organization that delivers a nontaxable transaction

certificate to the seller. The buyer delivering the

nontaxable transaction certificate shall employ the tangible

personal property in the conduct of functions described in

Section 501(c)(3) and shall not employ the tangible personal

property in the conduct of an unrelated trade or business as

defined in Section 513 of the United States Internal Revenue

Code of 1986, as amended or renumbered.

B. The deduction provided by this section does not

apply to receipts from selling construction material or from

selling metalliferous mineral ore; except that receipts from

selling construction material or from selling metalliferous

mineral ore to a 501(c)(3) organization that is organized for

the purpose of providing homeownership opportunities to low-

income families may be deducted from gross receipts. Receipts

may be deducted under this subsection only if the buyer

delivers a nontaxable transaction certificate to the seller.

The buyer shall use the property in the conduct of functions

described in Section 501(c)(3) of the Internal Revenue Code of

1986, as amended, and shall not employ the tangible personal

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property in the conduct of an unrelated trade or business as

defined in Section 513 of that code.

C. For the purposes of this section, "501(c)(3)

organization" means an organization that has been granted

exemption from the federal income tax by the United States

commissioner of internal revenue as an organization described

in Section 501(c)(3) of the United States Internal Revenue

Code of 1986, as amended or renumbered."

Section 13. A new section of the Gross Receipts and

Compensating Tax Act is enacted to read:

"EXEMPTION--RECEIPTS FROM SALES BY DISABLED STREET

VENDORS.--

A. Exempt from payment of the gross receipts tax

are receipts from the sale of goods by a disabled street

vendor.

B. As used in this section:

(1) "disabled" means to be blind or

permanently disabled with medical improvement not expected

pursuant to 42 USCA 421 for purposes of the federal Social

Security Act or to have a permanent total disability pursuant

to the Workers' Compensation Act; and

(2) "street vendor" means a person licensed

by a local government to sell items of tangible personal

property by newly setting up a sales site daily or selling the

items from a moveable cart, tray, blanket or other device."

Section 14. REPEAL.--

A. Section 7-2-5.4 NMSA 1978 (being Laws 1988,

Chapter 59, Section 1, as amended) is repealed. This repeal

is applicable to tax years beginning on or after January 1,

2007.

B. Section 7-1-71.2 NMSA 1978 (being Laws 2004,

Chapter 116, Section 3) is repealed effective July 1, 2007.

Section 15. APPLICABILITY.--The provisions of Sections

7 through 11 of this act apply to taxable years beginning on

or after January 1, 2007.

Section 16. EFFECTIVE DATE.--

A. The effective date of Sections 1 through 5 of

this act is January 1, 2008.

B. The effective date of Sections 6, 12 and 13 of

this act is July 1, 2007.

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