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AN ACT

RELATING TO TAXATION; PROVIDING FOR THE USE OF OTHER

JUSTIFIABLE FACTORS, INCLUDING ECONOMIC AND FUNCTIONAL

OBSOLESCENCE, TO VALUE PROPERTY USED IN THE PROCESSING,

GATHERING, TRANSMISSION OR DISTRIBUTION OF OIL, GAS, CARBON

DIOXIDE OR LIQUID HYDROCARBONS.

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

Section 1. Section 7-36-27 NMSA 1978 (being Laws 1975,

Chapter 165, Section 8, as amended) is amended to read:

"7-36-27. SPECIAL METHOD OF VALUATION--PIPELINES,

TANKS, SALES METERS AND PLANTS USED IN THE PROCESSING,

GATHERING, TRANSMISSION, STORAGE, MEASUREMENT OR DISTRIBUTION

OF OIL, NATURAL GAS, CARBON DIOXIDE OR LIQUID HYDROCARBONS.--

A. All pipelines, tanks, sales meters and plants

used in the processing, gathering, transmission, storage,

measurement or distribution of oil, natural gas, carbon

dioxide or liquid hydrocarbons subject to valuation for

property taxation purposes shall be valued in accordance with

the provisions of this section.

B. As used in this section:

(1) "construction work in progress" means

the total of the balances of work orders for pipelines,

plants, large industrial sales meters and tanks, in the

process of construction on the last day of the preceding

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calendar year, exclusive of land and land rights and

equipment, machinery or devices that are used or are

available for use to construct pipelines, plants, large

industrial sales meters and tanks but that are not

incorporated into the pipelines, plants, large industrial

sales meters or tanks;

(2) "depreciation" means straight line

depreciation over the useful life of the item of property;

(3) "direct customer distribution pipeline"

means a low or intermediate pressure distribution system

pipeline of four inches or smaller diameter situated in urban

areas;

(4) "economic obsolescence" means, with

respect to valuation for property taxation purposes, loss in

value of a property caused by unfavorable economic influences

or factors outside of the property; "economic obsolescence"

is a loss in value in addition to a loss in value

attributable to physical depreciation;

(5) "functional obsolescence" means, with

respect to valuation for property taxation purposes, loss in

value of a property caused by functional inadequacies or

deficiencies caused by factors within the property;

"functional obsolescence" is a loss in value in addition to a

loss in value attributable to physical depreciation;

(6) "large industrial sales meter" means a

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sales meter having an installed tangible property cost in

excess of two thousand five hundred dollars ($2,500);

(7) "other justifiable factors" includes,

but is not limited to, functional obsolescence and economic

obsolescence;

(8) "pipeline" means all pipe, appurtenances

and devices used in systems for gathering, transmission or

distribution, but excludes sales meters, a pipeline operated

exclusively for and constituting a part of a plant and a

direct customer distribution pipeline;

(9) "plant" means any refinery, gasoline

plant, extraction plant, purification plant, compressor or

pumping station or similar plant, including all structures,

equipment, pipes and other related facilities, excluding

residential housing, office buildings and warehouses;

(10) "sales meter" means the meter,

regulator and all appurtenances and devices used for

measuring sales to customers and includes the service pipe to

the customer's property line from the point of connection

with the pipeline;

(11) "schedule value" means a fixed value of

an individual property unit within a mass of similar or like

units established by determining the total tangible property

cost of a substantial sample of such property and deducting

therefrom an average related accumulated provision for

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depreciation and allocating a proportionate part of the

remainder to individual taxable property units;

(12) "tangible property cost" means the

actual cost of acquisition or construction of property,

excluding construction work in progress, including additions,

retirements, adjustments and transfers, but without deduction

of related accumulated provision for depreciation,

amortization or other purposes and excluding any amount

attributable to oil or gas reserves dedicated to such item of

property; and

(13) "tank" means any storage tank or

container, other than a natural reservoir, for storage that

is not a component part of a plant.

C. Sales meters, other than large industrial sales

meters, shall be valued as follows:

(1) the department may periodically

determine the average tangible property cost of a substantial

sample of sales meters in general use in the state;

(2) such average tangible property cost

shall then be reduced by the average related accumulated

provision for depreciation applicable to the sample of sales

meters; and

(3) from the determinations pursuant to

Paragraphs (1) and (2) of this subsection, a schedule of

value for sales meters for property taxation purposes shall

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be determined and set forth in a rule adopted by the

department.

D. Pipelines, direct customer distribution

pipelines, large industrial sales meters, tanks and plants

shall be valued as follows:

(1) the valuation authority shall first

establish the tangible property cost of each item of

property;

(2) from such tangible property cost shall

be deducted the related accumulated provision for

depreciation and any other justifiable factors that further

affect the tangible property value of each item of property;

and

(3) notwithstanding the determination of

value for property taxation purposes in Paragraphs (1) and

(2) of this subsection, the value for property taxation

purposes of each item of property valued under this

subsection shall not be less than twenty percent of the

tangible property cost of such item of property.

E. Construction work in progress shall be valued

at fifty percent of the amount expended and entered upon the

accounting records of the taxpayer as of December 31 of the

preceding year as construction work in progress.

F. Each item of property having a taxable situs in

the state and valued under this section shall have its net

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taxable value allocated to the governmental units in which

the property is located.

G. A reduction in value asserted by a taxpayer as

attributable to economic obsolescence or functional

obsolescence shall contain an obsolescence factor along with

a brief statement of the facts that support the reduction,

together with supporting documentation. The documentation

may include items such as monthly throughput volumes from the

prior year; comparisons to a documented industry standard;

comparisons to a close competitor; and an engineer's or

appraiser's valuation. The department may adopt rules that

include other types of objective evidence of functional

obsolescence or economic obsolescence.

H. If the department determines that a taxpayer

has not established, based on the brief statement of facts

and the supporting documentation provided, that the reduction

for functional obsolescence or economic obsolescence is in

accordance with the law or rules adopted by the department,

the department shall notify the taxpayer of the department's

determination in writing setting forth the reasons for its

determination and specifying the supporting information that

the department requires. The department shall provide the

notice by April 1 or thirty days after the return is filed

but no later than April 15 of the tax year. If the taxpayer

does not file the report by March 15 of the property tax

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year, the department shall not be required to furnish a

timely notice of deficiency by April 15 of the property tax

year. In the case of properties regulated by the federal

energy regulatory commission, the notice of deficiency shall

be provided to the taxpayer within fifteen days after the

filing of the report and the taxpayer shall then have ten

days within which to correct the deficiency.

I. The department shall adopt rules to implement

the provisions of this section."

Section 2. Section 7-38-8 NMSA 1978 (being Laws 1973,

Chapter 258, Section 48, as amended) is amended to read:

"7-38-8. REPORTING OF PROPERTY FOR VALUATION--PENALTIES

FOR FAILURE TO REPORT.--

A. All property subject to valuation for property

taxation purposes by the department shall be reported

annually to the department. The report required by this

subsection shall be made by the owner of the property or such

other person as may be authorized by rules of the department.

The report shall be in a form and contain the information

required by rules of the department. It shall be made not

later than the last day of February in the tax year in which

the property is subject to valuation. Claims of economic

obsolescence or functional obsolescence on properties not

regulated by the federal government shall be made at the time

the annual report is filed; however, the department shall

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accept supplements to the annual report containing claims of

economic obsolescence or functional obsolescence on

properties regulated by the federal energy regulatory

commission or its successor agency at the time the annual

commission report becomes available, but no later than April

15 of the tax year or at a later time allowed by an extension

granted by the department. In the case of the failure or

refusal to file the report required under this subsection,

the department shall determine the value of the property

subject to valuation from the best information available.

B. Except as provided in Subsection D of this

section, all property subject to valuation for property

taxation purposes by the county assessor shall be reported as

follows:

(1) property valued in the 1974 tax year by

the county assessor need not be reported for any subsequent

tax year unless required to be reported under Paragraph (3)

of this subsection;

(2) property not valued in the 1974 tax year

by the county assessor but that becomes subject to valuation

by the county assessor in any subsequent tax year shall be

reported to the county assessor not later than the last day

of February of the tax year in which it becomes subject to

valuation, but such property need not be reported for any

year subsequent to the year in which initially reported

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unless required to be reported under Paragraph (3) of this

subsection;

(3) property once valued by a county

assessor in a tax year, but which is not valued for a year

subsequent to the year of initial valuation because it is not

subject to valuation for that subsequent year by the county

assessor, shall be reported to the county assessor not later

than the last day of February in a tax year in which it again

becomes subject to valuation by the county assessor; and

(4) reports required under Paragraphs (2)

and (3) of this subsection shall be in a form and contain the

information required by rules of the department.

C. Not later than the last day of February of each

tax year, every owner of real property who made, or caused to

be made, in the preceding calendar year improvements costing

more than ten thousand dollars ($10,000) to that real

property shall report to the county assessor the property

improved, the improvements made, the cost of the improvements

and such other information as the department may require.

D. Manufactured homes, livestock and land used for

agricultural purposes shall be reported for valuation for

property taxation purposes to the county assessor at the

times and in the manner prescribed under Sections 7-36-26,

7-36-21 and 7-36-20 NMSA 1978 and rules promulgated by the

department.

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E. Property subject to valuation by the county

assessor for property taxation purposes and improvements to

such property that are required to be reported under

Subsection C of this section shall be reported to the county

assessor of the county in which the property is required to

be valued under Section 7-36-14 NMSA 1978. Reports shall be

made either by the owner of the property, the owner's

authorized agent or any person having control or management

of the property and shall be in a form and contain the

information required by rules of the department.

F. Reports required by this section shall be made

by the declarant under oath, and the secretary, employees of

the department, the assessor and the assessor's employees are

empowered to administer oaths for this purpose.

G. A person who intentionally refuses to make a

report required under the provisions of Subsection A, B or C

of this section or who knowingly makes a false statement in a

report required under the provisions of Subsection A, B or C

of this section is guilty of a misdemeanor and upon

conviction shall be punished by the imposition of a fine of

not more than one thousand dollars ($1,000).

H. A person who fails to make a report required

under the provisions of Subsection A or B of this section is

liable for a civil penalty in an amount equal to five percent

of the property taxes ultimately determined to be due on the

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property for the tax year or years for which the person

failed to make the required report.

I. A person who intentionally refuses to make a

report required under the provisions of Subsection A or B of

this section with the intent to evade any tax or who fails to

make a report required under the provisions of Subsection A

or B of this section with the intent to evade any tax is

liable for a civil penalty in an amount equal to twenty-five

percent of the property taxes ultimately determined to be due

on the property for the tax year or years for which the

person refused or failed to make the required report.

J. A person who is required to make a report under

the provisions of Subsection C of this section and who fails

to do so is personally liable for a civil penalty in an

amount equal to the greater of twenty-five dollars ($25.00)

or twenty-five percent of the difference between the property

taxes ultimately determined to be due and the property taxes

originally paid for the tax year or years for which the

person failed to make the required report. This penalty

shall not be considered a delinquent property tax, and the

provisions of the Property Tax Code for the enforcement and

collection of delinquent property taxes through the sale of

the property do not apply. However, the county treasurer may

use all other methods provided by law to collect the property

tax or penalty due. Notwithstanding any other provision of

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the Property Tax Code, amounts collected pursuant to the

penalty provided by this subsection shall be distributed

among jurisdictions imposing tax on the property in the same

proportion as the amount of tax ultimately determined to be

due for the jurisdiction bears to the total due for all such

jurisdictions.

K. The civil penalties authorized under

Subsections H and I of this section shall be imposed and

collected at the time and in the manner that the tax is

imposed and collected. In order to assist in the imposition

and collection of the penalties, the persons having

responsibility for determining the value of the property

shall make an entry in the valuation records indicating the

liability for any penalties due under this section.

L. For the purposes of this section:

(1) "improvement" means the construction of

any new structure permanently affixed to the land or the

repair, rehabilitation or alteration of an existing structure

permanently affixed to the land that, for property used for

any commercial purpose, is required or allowed to be

capitalized under the Internal Revenue Code and, for other

properties, any similar construction, repair, rehabilitation

or alteration; and

(2) "owner of real property" includes every

owner of improvements who does not own the land upon which

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the improvements are made."

Section 3. APPLICABILITY.--The provisions of this act

apply to property tax years beginning on or after January 1,

2008.

Section 4. EFFECTIVE DATE.--The effective date of the

provisions of this act is July 1, 2007.