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AN ACT

RELATING TO TAXATION; AMENDING PROVISIONS OF THE RENEWABLE

ENERGY PRODUCTION TAX CREDIT IN THE CORPORATE INCOME AND

FRANCHISE TAX ACT; PROVIDING FOR A RENEWABLE ENERGY

PRODUCTION TAX CREDIT IN THE INCOME TAX ACT; PROVIDING A

SUSTAINABLE BUILDING TAX CREDIT IN THE INCOME TAX ACT AND THE

CORPORATE INCOME AND FRANCHISE TAX ACT; PROVIDING A CREDIT IN

THE INCOME TAX ACT AND THE CORPORATE INCOME AND FRANCHISE TAX

ACT FOR AGRICULTURAL WATER CONSERVATION EXPENSES; PROVIDING

TAX INCENTIVES FOR PRODUCTION AND SALE OF BIODIESEL FUEL;

PROVIDING A GROSS RECEIPTS TAX DEDUCTION FOR RECEIPTS FROM

THE SALE AND INSTALLATION OF CERTAIN SOLAR ENERGY SYSTEMS;

ENACTING THE ALTERNATIVE ENERGY PRODUCT MANUFACTURERS TAX

CREDIT ACT; RECONCILING MULTIPLE AMENDMENTS TO THE SAME

SECTION OF LAW IN LAWS 2005 BY REPEALING LAWS 2005, CHAPTER

104, SECTION 7; AMENDING, REPEALING AND ENACTING SECTIONS OF

THE NMSA 1978.

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

Section 1. Section 7-2A-19 NMSA 1978 (being Laws 2002,

Chapter 59, Section 1, as amended by Laws 2005, Chapter 104,

Section 7 and by Laws 2005, Chapter 181, Section 1) is

amended to read:

"7-2A-19. RENEWABLE ENERGY PRODUCTION TAX CREDIT--

LIMITATIONS--DEFINITIONS--CLAIMING THE CREDIT.--

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A. The tax credit provided in this section may be

referred to as the "renewable energy production tax credit".

The tax credit provided in this section may not be claimed

with respect to the same electricity production for which the

renewable energy production tax credit provided in the Income

Tax Act has been claimed.

B. A person is eligible for the renewable energy

production tax credit if the person:

(1) holds title to a qualified energy

generator that first produced electricity on or before

January 1, 2018; or

(2) leases property upon which a qualified

energy generator operates from a county or municipality under

authority of an industrial revenue bond and if the qualified

energy generator first produced electricity on or before

January 1, 2018.

C. The amount of the tax credit shall equal one

cent ($.01) per kilowatt-hour of the first four hundred

thousand megawatt-hours of electricity produced by the

qualified energy generator in the taxable year using a

wind-or biomass-derived qualified energy resource, provided

that the total amount of tax credits claimed by all taxpayers

for a single qualified energy generator in a taxable year

using a wind- or biomass-derived qualified energy resource

shall not exceed one cent ($.01) per kilowatt-hour of the

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first four hundred thousand megawatt-hours of electricity

produced by the qualified energy generator.

D. The amount of the tax credit for electricity

produced by a qualified energy generator in the taxable year

using a solar-light-derived or solar-heat-derived qualified

energy resource shall be at the amounts specified in

Paragraphs (1) through (10) of this subsection; provided that

the total amount of tax credits claimed for a taxable year by

all taxpayers for a single qualified energy generator using a

solar-light-derived or solar-heat-derived qualified energy

resource shall be limited to the first two hundred thousand

megawatt-hours of electricity produced by the qualified

energy generator in the taxable year:

(1) one and one-half cents ($.015) per

kilowatt-hour in the first taxable year in which the

qualified energy generator produces electricity using a

solar-light-derived or solar-heat-derived qualified energy

resource;

(2) two cents ($.02) per kilowatt-hour in

the second taxable year in which the qualified energy

generator produces electricity using a solar-light-derived or

solar-heat-derived qualified energy resource;

(3) two and one-half cents ($.025) per

kilowatt-hour in the third taxable year in which the

qualified energy generator produces electricity using a

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solar-light-derived or solar-heat-derived qualified energy

resource;

(4) three cents ($.03) per kilowatt-hour in

the fourth taxable year in which the qualified energy

generator produces electricity using a solar-light-derived or

solar-heat-derived qualified energy resource;

(5) three and one-half cents ($.035) per

kilowatt-hour in the fifth taxable year in which the

qualified energy generator produces electricity using a

solar-light-derived or solar-heat-derived qualified energy

resource;

(6) four cents ($.04) per kilowatt-hour in

the sixth taxable year in which the qualified energy

generator produces electricity using a solar-light-derived or

solar-heat-derived qualified energy resource;

(7) three and one-half cents ($.035) per

kilowatt-hour in the seventh taxable year in which the

qualified energy generator produces electricity using a

solar-light-derived or solar-heat-derived qualified energy

resource;

(8) three cents ($.03) per kilowatt-hour in

the eighth taxable year in which the qualified energy

generator produces electricity using a solar-light-derived or

solar-heat-derived qualified energy resource;

(9) two and one-half cents ($.025) per

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kilowatt-hour in the ninth taxable year in which the

qualified energy generator produces electricity using a

solar-light-derived or solar-heat-derived qualified energy

resource; and

(10) two cents ($.02) per kilowatt-hour in

the tenth taxable year in which the qualified energy

generator produces electricity using a solar-light-derived or

solar-heat-derived qualified energy resource.

E. A taxpayer eligible for a renewable energy

production tax credit pursuant to Subsection B of this

section shall be eligible for the renewable energy production

tax credit for ten consecutive years, beginning on the date

the qualified energy generator begins producing electricity.

F. As used in this section:

(1) "biomass" means organic material that is

available on a renewable or recurring basis, including:

(a) forest-related materials, including

mill residues, logging residues, forest thinnings, slash,

brush, low-commercial value materials or undesirable species,

salt cedar and other phreatophyte or woody vegetation removed

from river basins or watersheds and woody material harvested

for the purpose of forest fire fuel reduction or forest

health and watershed improvement;

(b) agricultural-related materials,

including orchard trees, vineyard, grain or crop residues,

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including straws and stover, aquatic plants and agricultural

processed co-products and waste products, including fats,

oils, greases, whey and lactose;

slaughterhouse and other processing waste;

(d) solid woody waste materials,

including landscape or right-of-way tree trimmings, rangeland

maintenance residues, waste pallets, crates and

manufacturing, construction and demolition wood wastes,

excluding pressure-treated, chemically treated or painted

wood wastes and wood contaminated with plastic;

(e) crops and trees planted for the

purpose of being used to produce energy;

(f) landfill gas, wastewater treatment

gas and biosolids, including organic waste byproducts

generated during the wastewater treatment process; and

(g) segregated municipal solid waste,

excluding tires and medical and hazardous waste;

(2) "qualified energy generator" means a

facility with at least one megawatt generating capacity

located in New Mexico that produces electricity using a

qualified energy resource and that sells that electricity to

an unrelated person; and

(3) "qualified energy resource" means a

resource that generates electrical energy by means of a

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fluidized bed technology or similar low-emissions technology

or a zero-emissions generation technology that has

substantial long-term production potential and that uses only

the following energy sources:

(a) solar light;

(b) solar heat;

(d) biomass.

G. A person that holds title to a facility

generating electricity from a qualified energy resource or a

person that leases such a facility from a county or

municipality pursuant to an industrial revenue bond may

request certification of eligibility for the renewable energy

production tax credit from the energy, minerals and natural

resources department, which shall determine if the facility

is a qualified energy generator. The energy, minerals and

natural resources department may certify the eligibility of

an energy generator only if the total amount of electricity

that may be produced annually by all qualified energy

generators that are certified pursuant to this section and

pursuant to the Income Tax Act will not exceed a total of two

million megawatt-hours plus an additional five hundred

thousand megawatt-hours produced by qualified energy

generators using a solar-light-derived or solar-heat-derived

qualified energy resource. Applications shall be considered

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in the order received. The energy, minerals and natural

resources department may estimate the annual power-generating

potential of a generating facility for the purposes of this

section. The energy, minerals and natural resources

department shall issue a certificate to the applicant stating

whether the facility is an eligible qualified energy

generator and the estimated annual production potential of

the generating facility, which shall be the limit of that

facility's energy production eligible for the tax credit for

the taxable year. The energy, minerals and natural resources

department may issue rules governing the procedure for

administering the provisions of this subsection and shall

report annually to the appropriate interim legislative

committee information that will allow the legislative

committee to analyze the effectiveness of the renewable

energy production tax credit, including the identity of

qualified energy generators, the energy production means

used, the amount of energy produced by those qualified energy

generators and whether any applications could not be approved

due to program limits.

H. A taxpayer may be allocated all or a portion of

the right to claim a renewable energy production tax credit

without regard to proportional ownership interest if:

(1) the taxpayer owns an interest in a

business entity that is taxed for federal income tax purposes

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as a partnership;

(2) the business entity:

(a) would qualify for the renewable

energy production tax credit pursuant to Paragraph (1) or (2)

of Subsection B of this section;

(b) owns an interest in a business

entity that is also taxed for federal income tax purposes as

a partnership and that would qualify for the renewable energy

production tax credit pursuant to Paragraph (1) or (2) of

Subsection B of this section; or

intermediate business entities that are each taxed for

federal income tax purposes as a partnership, an interest in

the business entity described in Subparagraph (b) of this

paragraph;

(3) the taxpayer and all other taxpayers

allocated a right to claim the renewable energy production

tax credit pursuant to this subsection own collectively at

least a five percent interest in a qualified energy

generator;

(4) the business entity provides notice of

the allocation and the taxpayer's interest to the energy,

minerals and natural resources department on forms prescribed

by that department; and

(5) the energy, minerals and natural

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resources department certifies the allocation in writing to

the taxpayer.

I. Upon receipt of notice of an allocation of the

right to claim all or a portion of the renewable energy

production tax credit, the energy, minerals and natural

resources department shall promptly certify the allocation in

writing to the recipient of the allocation.

J. A taxpayer may claim the renewable energy

production tax credit by submitting to the taxation and

revenue department the certificate issued by the energy,

minerals and natural resources department, pursuant to

Subsection G or H of this section, documentation showing the

taxpayer's interest in the facility, documentation of the

amount of electricity produced by the facility in the taxable

year and any other information the taxation and revenue

department may require to determine the amount of the tax

credit due the taxpayer.

K. If the requirements of this section have been

complied with, the department shall approve the renewable

energy production tax credit. The credit may be deducted

from a taxpayer's New Mexico corporate income tax liability

for the taxable year for which the credit is claimed. If the

amount of tax credit exceeds the taxpayer's corporate income

tax liability for the taxable year:

(1) the excess may be carried forward for a

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period of five taxable years; or

(2) if the tax credit was issued with

respect to a qualified energy generator that first produced

electricity using a qualified energy resource on or after

October 1, 2007, the excess shall be refunded to the

taxpayer.

L. Once a taxpayer has been granted a renewable

energy production tax credit for a given facility, that

taxpayer shall be allowed to retain the facility's original

date of application for tax credits for that facility until

either the facility goes out of production for more than six

consecutive months in a year or until the facility's ten-year

eligibility has expired."

Section 2. A new section of the Income Tax Act is

enacted to read:

"RENEWABLE ENERGY PRODUCTION TAX CREDIT.--

A. The tax credit provided in this section may be

referred to as the "renewable energy production tax credit".

The tax credit provided in this section may not be claimed

with respect to the same electricity production for which a

tax credit pursuant to Section 7-2A-19 has been claimed.

B. A taxpayer who files an individual New Mexico

income tax return and who is not a dependent of another

taxpayer is eligible for the renewable energy production tax

credit if the taxpayer:

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(1) holds title to a qualified energy

generator that first produced electricity on or before

January 1, 2018; or

(2) leases property upon which a qualified

energy generator operates from a county or municipality under

authority of an industrial revenue bond and if the qualified

energy generator first produced electricity on or before

January 1, 2018.

C. The amount of the tax credit shall equal one

cent ($.01) per kilowatt-hour of the first four hundred

thousand megawatt-hours of electricity produced by the

qualified energy generator in the taxable year using a wind-

or biomass-derived qualified energy resource, provided that

the total amount of tax credits claimed by all taxpayers for a

single qualified energy generator in a taxable year using a

wind- or biomass-derived qualified energy resource shall not

exceed one cent ($.01) per kilowatt-hour of the first four

hundred thousand megawatt-hours of electricity produced by the

qualified energy generator.

D. The amount of the tax credit for electricity

produced by a qualified energy generator in the taxable year

using a solar-light-derived or solar-heat-derived qualified

energy resource shall be at the amounts specified in

Paragraphs (1) through (10) of this subsection; provided that

the total amount of tax credits claimed for a taxable year by

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all taxpayers for a single qualified energy generator using a

solar-light-derived or solar-heat-derived qualified energy

resource shall be limited to the first two hundred thousand

megawatt-hours of electricity produced by the qualified energy

generator in the taxable year:

(1) one and one-half cents ($.015) per

kilowatt-hour in the first taxable year in which the qualified

energy generator produces electricity using a

solar-light-derived or solar-heat-derived qualified energy

resource;

(2) two cents ($.02) per kilowatt-hour in

the second taxable year in which the qualified energy

generator produces electricity using a solar-light-derived or

solar-heat-derived qualified energy resource;

(3) two and one-half cents ($.025) per

kilowatt-hour in the third taxable year in which the qualified

energy generator produces electricity using a solar-light-derived

or solar-heat-derived qualified energy resource;

(4) three cents ($.03) per kilowatt-hour in

the fourth taxable year in which the qualified energy

generator produces electricity using a solar-light-derived or

solar-heat-derived qualified energy resource;

(5) three and one-half cents ($.035) per

kilowatt-hour in the fifth taxable year in which the qualified

energy generator produces electricity using a

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solar-light-derived or solar-heat-derived qualified energy

resource;

(6) four cents ($.04) per kilowatt-hour in

the sixth taxable year in which the qualified energy generator

produces electricity using a solar-light-derived or

solar-heat-derived qualified energy resource;

(7) three and one-half cents ($.035) per

kilowatt-hour in the seventh taxable year in which the

qualified energy generator produces electricity using a

solar-light-derived or solar-heat-derived qualified energy

resource;

(8) three cents ($.03) per kilowatt-hour in

the eighth taxable year in which the qualified energy

generator produces electricity using a solar-light-derived or

solar-heat-derived qualified energy resource;

(9) two and one-half cents ($.025) per

kilowatt-hour in the ninth taxable year in which the qualified

energy generator produces electricity using a

solar-light-derived or solar-heat-derived qualified energy

resource; and

(10) two cents ($.02) per kilowatt-hour in

the tenth taxable year in which the qualified energy generator

produces electricity using a solar-light-derived or

solar-heat-derived qualified energy resource.

E. A taxpayer eligible for a renewable energy

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production tax credit pursuant to Subsection B of this section

shall be eligible for the renewable energy production tax

credit for ten consecutive years, beginning on the date the

qualified energy generator begins producing electricity.

F. As used in this section:

(1) "biomass" means organic material that is

available on a renewable or recurring basis, including:

(a) forest-related materials, including

mill residues, logging residues, forest thinnings, slash,

brush, low-commercial-value materials or undesirable species,

salt cedar and other phreatophyte or woody vegetation removed

from river basins or watersheds and woody material harvested

for the purpose of forest fire fuel reduction or forest health

and watershed improvement;

(b) agricultural-related materials,

including orchard trees, vineyard, grain or crop residues,

including straws and stover, aquatic plants and agricultural

processed co-products and waste products, including fats,

oils, greases, whey and lactose;

slaughterhouse and other processing waste;

(d) solid woody waste materials,

including landscape or right-of-way tree trimmings, rangeland

maintenance residues, waste pallets, crates and manufacturing,

construction and demolition wood wastes, excluding

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pressure-treated, chemically treated or painted wood wastes

and wood contaminated with plastic;

(e) crops and trees planted for the

purpose of being used to produce energy;

(f) landfill gas, wastewater treatment

gas and biosolids, including organic waste byproducts

generated during the wastewater treatment process; and

(g) segregated municipal solid waste,

excluding tires and medical and hazardous waste;

(2) "qualified energy generator" means a

facility with at least one megawatt generating capacity

located in New Mexico that produces electricity using a

qualified energy resource and that sells that electricity to

an unrelated person; and

(3) "qualified energy resource" means a

resource that generates electrical energy by means of a

fluidized bed technology or similar low-emissions technology

or a zero-emissions generation technology that has substantial

long-term production potential and that uses only the

following energy sources:

(a) solar light;

(b) solar heat;

(d) biomass.

G. A person that holds title to a facility

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generating electricity from a qualified energy resource or a

person that leases such a facility from a county or

municipality pursuant to an industrial revenue bond may

request certification of eligibility for the renewable energy

production tax credit from the energy, minerals and natural

resources department, which shall determine if the facility is

a qualified energy generator. The energy, minerals and

natural resources department may certify the eligibility of an

energy generator only if the total amount of electricity that

may be produced annually by all qualified energy generators

that are certified pursuant to this section and pursuant to

Section 7-2A-19 NMSA 1978 will not exceed a total of two

million megawatt-hours plus an additional five hundred

thousand megawatt-hours produced by qualified energy

generators using a solar-light-derived or solar-heat-derived

qualified energy resource. Applications shall be considered

in the order received. The energy, minerals and natural

resources department may estimate the annual

power-generating potential of a generating facility for the

purposes of this section. The energy, minerals and natural

resources department shall issue a certificate to the

applicant stating whether the facility is an eligible

qualified energy generator and the estimated annual production

potential of the generating facility, which shall be the limit

of that facility's energy production eligible for the tax

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credit for the taxable year. The energy, minerals and natural

resources department may issue rules governing the procedure

for administering the provisions of this subsection and shall

report annually to the appropriate interim legislative

committee information that will allow the legislative

committee to analyze the effectiveness of the renewable energy

production tax credit, including the identity of qualified

energy generators, the energy production means used, the

amount of energy produced by those qualified energy generators

and whether any applications could not be approved due to

program limits.

H. A taxpayer may be allocated all or a portion of

the right to claim a renewable energy production tax credit

without regard to proportional ownership interest if:

(1) the taxpayer owns an interest in a

business entity that is taxed for federal income tax purposes

as a partnership;

(2) the business entity:

(a) would qualify for the renewable

energy production tax credit pursuant to Paragraph (1) or (2)

of Subsection B of this section;

(b) owns an interest in a business

entity that is also taxed for federal income tax purposes as a

partnership and that would qualify for the renewable energy

production tax credit pursuant to Paragraph (1) or (2) of

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Subsection B of this section; or

intermediate business entities that are each taxed for federal

income tax purposes as a partnership, an interest in the

business entity described in Subparagraph (b) of this

paragraph;

(3) the taxpayer and all other taxpayers

allocated a right to claim the renewable energy production tax

credit pursuant to this subsection own collectively at least a

five percent interest in a qualified energy generator;

(4) the business entity provides notice of

the allocation and the taxpayer's interest to the energy,

minerals and natural resources department on forms prescribed

by that department; and

(5) the energy, minerals and natural

resources department certifies the allocation in writing to

the taxpayer.

I. Upon receipt of notice of an allocation of the

right to claim all or a portion of the renewable energy

production tax credit, the energy, minerals and natural

resources department shall promptly certify the allocation in

writing to the recipient of the allocation.

J. 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 credit that would

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have been allowed on a joint return.

K. A taxpayer may claim the renewable energy

production tax credit by submitting to the taxation and

revenue department the certificate issued by the energy,

minerals and natural resources department, pursuant to

Subsection G or H of this section, documentation showing the

taxpayer's interest in the facility, documentation of the

amount of electricity produced by the facility in the taxable

year and any other information the taxation and revenue

department may require to determine the amount of the tax

credit due the taxpayer.

L. If the requirements of this section have been

complied with, the department shall approve the renewable

energy production tax credit. The credit may be deducted from

a taxpayer's New Mexico income tax liability for the taxable

year for which the credit is claimed. If the amount of tax

credit exceeds the taxpayer's income tax liability for the

taxable year:

(1) the excess may be carried forward for a

period of five taxable years; or

(2) if the tax credit was issued with

respect to a qualified energy generator that first produced

electricity using a qualified energy resource on or after

October 1, 2007, the excess shall be refunded to the taxpayer.

M. Once a taxpayer has been granted a renewable

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energy production tax credit for a given facility, that

taxpayer shall be allowed to retain the facility's original

date of application for tax credits for that facility until

either the facility goes out of production for more than six

consecutive months in a year or until the facility's ten-year

eligibility has expired."

Section 3. A new section of the Income Tax Act is

enacted to read:

"SUSTAINABLE BUILDING TAX CREDIT.--

A. The tax credit provided by this section may be

referred to as the "sustainable building tax credit". The

sustainable building tax credit shall be available for the

construction in New Mexico of a sustainable building or the

renovation of an existing building in New Mexico into a

sustainable building. The tax credit provided in this section

may not be claimed with respect to the same sustainable

building for which the sustainable building tax credit

provided in the Corporate Income and Franchise Tax Act has

been claimed.

B. A taxpayer who files an income tax return is

eligible to apply for a sustainable building tax credit if the

taxpayer is:

(1) the owner of the building at the time

the certification level for the building in the LEED green

building rating system or the build green New Mexico rating

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system is awarded; or

(2) the subsequent purchaser of a

sustainable building with respect to which no tax credit has

been previously claimed, if the certification level for the

building in the LEED green building rating system or the build

green New Mexico rating system is awarded on or after January

1, 2007.

C. The amount of the sustainable building tax

credit that may be claimed with respect to a sustainable

commercial building shall be calculated based on the

certification level the building has achieved in the LEED

green building rating system and the amount of qualified

occupied square footage in the building, as indicated on the

following chart:

LEED Rating Level

Qualified

Tax Credit per

Occupied

Square Foot

Square Footage

LEED-NC Silver

First 10,000

$3.50

Next 40,000

$1.75

Over 50,000

up to 500,000

$ .70

LEED-NC Gold

First 10,000

$4.75

Next 40,000

$2.00

Over 50,000

up to 500,000

$1.00

LEED-NC Platinum

First 10,000

$6.25

Next 40,000

$3.25

Over 50,000

up to 500,000

$2.00

LEED-EB or CS Silver

First 10,000

$2.50

Next 40,000

$1.25

Over 50,000

up to 500,000

$ .50

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LEED-EB or CS Gold

First 10,000

$3.35

Next 40,000

$1.40

Over 50,000

up to 500,000

$ .70

LEED-EB or CS

Platinum

First 10,000

$4.40

Next 40,000

$2.30

Over 50,000

up to 500,000

$1.40

LEED-CI Silver

First 10,000

$1.40

Next 40,000

$ .70

Over 50,000

up to 500,000

$ .30

LEED-CI Gold

First 10,000

$1.90

Next 40,000

$ .80

Over 50,000

up to 500,000

$ .40

LEED-CI Platinum

First 10,000

$2.50

Next 40,000

$1.30

Over 50,000

up to 500,000

$ .80.

D. The amount of the sustainable building tax

credit that may be claimed with respect to a sustainable

residential building shall be calculated based on the

certification level the building has achieved in the LEED

green building rating system or the build green New Mexico

rating system and the amount of qualified occupied square

footage, as indicated on the following chart:

Rating System/Level

Qualified

Tax Credit

Occupied

per Square

Square

Foot

Footage

Build Green NM Gold

First 2,000

$4.50

Next 1,000

$2.00

LEED-H Silver

First 2,000

$5.00

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Next 1,000

$2.50

LEED-H Gold

First 2,000

$6.85

Next 1,000

$3.40

LEED-H Platinum

First 2,000

$9.00

Next 1,000

$4.45

EPA ENERGY STAR

Manufactured Housing

Up to 3,000

$3.00.

E. A taxpayer may apply for certification of

eligibility for the sustainable building tax credit from the

energy, minerals and natural resources department after the

construction or renovation of the sustainable building is

complete. Applications shall be considered in the order

received. If the energy, minerals and natural resources

department determines that the taxpayer meets the requirements

of Subsection B of this section and that the building with

respect to which the tax credit application is made meets the

requirements of this section as a sustainable residential

building or a sustainable commercial building, it may issue a

certificate of eligibility to the taxpayer, subject to the

limitation in Subsection F of this section. The certificate

shall include the rating system certification level awarded to

the building, the amount of qualified occupied square footage

in the building and a calculation of the maximum amount of

sustainable building tax credit for which the taxpayer would

be eligible. The energy, minerals and natural resources

department may issue rules governing the procedure for

administering the provisions of this subsection.

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F. The energy, minerals and natural resources

department may issue a certificate of eligibility only if the

total amount of sustainable building tax credits represented

by certificates of eligibility issued by the energy, minerals

and natural resources department pursuant to this section and

pursuant to the Corporate Income and Franchise Tax Act shall

not exceed in any calendar year an aggregate amount of five

million dollars ($5,000,000) with respect to sustainable

commercial buildings and an aggregate amount of five million

dollars ($5,000,000) with respect to sustainable residential

buildings; provided that no more than one million two hundred

fifty thousand dollars ($1,250,000) of the aggregate amount

with respect to sustainable residential buildings shall be for

manufactured housing.

G. Installation of a solar thermal system or a

photovoltaic system eligible for the solar market development

tax credit pursuant to Section 7-2-18.14 NMSA 1978 may not be

used as a component of qualification for the rating system

certification level used in determining eligibility for the

sustainable building tax credit, unless a solar market

development tax credit pursuant to Section 7-2-18.14 NMSA 1978

has not been claimed with respect to that system and the

taxpayer certifies that such a tax credit will not be claimed

with respect to that system.

H. To be eligible for the sustainable building tax

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credit, the taxpayer must provide to the taxation and revenue

department a certificate of eligibility issued by the energy,

minerals and natural resources department pursuant to the

requirements of Subsection E of this section and any other

information the taxation and revenue department may require to

determine the amount of the tax credit due the taxpayer.

I. If the requirements of this section have been

complied with, the department shall issue to the applicant a

document granting a sustainable building tax credit. The

document shall be numbered for identification and declare its

date of issuance and the amount of the tax credit allowed

pursuant to this section. The document may be sold, exchanged

or otherwise transferred. The parties to such a transaction

shall notify the department of the sale, exchange or transfer

within ten days of the sale, exchange or transfer.

J. Except as provided in Subsection K of this

section, the sustainable building tax credit represented by

the document issued pursuant to Subsection I of this section

shall be applied against the taxpayer's income tax liability

for the taxable year in which the credit is approved and the

three subsequent taxable years, in increments of twenty-five

percent of the total credit amount in each of the four taxable

years. If the amount of the credit available in a taxable

year exceeds the taxpayer's income tax liability for that

taxable year, the excess may be carried forward for up to

pg_0027

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seven years.

K. If the total amount of a sustainable building

tax credit approved by the department is less than twenty-five

thousand dollars ($25,000), the entire amount of the credit

may be applied against the taxpayer's income tax liability for

the taxable year in which the credit is approved. If the

amount of the credit exceeds the taxpayer's income tax

liability for that taxable year, the excess may be carried

forward for up to seven years.

L. A taxpayer who otherwise qualifies and claims a

sustainable building tax credit with respect to a sustainable

building owned by a partnership or other business association

of which the taxpayer is a member may claim a credit only in

proportion to that taxpayer's interest in the partnership or

association. The total credit claimed in the aggregate by all

members of the partnership or association with respect to the

sustainable building shall not exceed the amount of the credit

that could have been claimed by a sole owner of the property.

M. 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 credit that would

have been allowed on a joint return.

N. For the purposes of this section:

(1) "build green New Mexico rating system"

means the certification standards adopted by the homebuilders

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association of central New Mexico;

(2) "LEED-CI" means the LEED rating system

for commercial interiors;

(3) "LEED-CS" means the LEED rating system

for the core and shell of buildings;

(4) "LEED-EB" means the LEED rating system

for existing buildings;

(5) "LEED gold" means the rating in

compliance with, or exceeding, the second highest rating

awarded by the LEED certification process;

(6) "LEED" means the most current leadership

in energy and environmental design green building rating

system guidelines developed and adopted by the United States

green building council;

(7) "LEED-H" means the LEED rating system

for homes;

(8) "LEED-NC" means the LEED rating system

for new buildings and major renovations;

(9) "LEED platinum" means the rating in

compliance with, or exceeding, the highest rating awarded by

the LEED certification process;

(10) "LEED silver" means the rating in

compliance with, or exceeding, the third highest rating

awarded by the LEED certification process;

(11) "qualified occupied square footage"

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means the occupied spaces of the building as determined by:

(a) the United States green building

council for those buildings obtaining LEED certification;

(b) the administrators of the build

green New Mexico rating system for those homes obtaining build

green New Mexico certification; and

protection agency for ENERGY STAR-certified manufactured

homes;

(12) "sustainable building" means either a

sustainable commercial building or a sustainable residential

building;

(13) "sustainable commercial building" means

a building that has been registered and certified under the

LEED-NC, LEED-EB, LEED-CS or LEED-CI rating system and that:

(a) is certified by the United States

green building council at LEED-Silver or higher;

(b) achieves any prerequisite for and

at least one point related to commissioning under LEED "energy

and atmosphere", if included in the applicable rating system;

and

follows: 1) through 2011, a fifty percent energy reduction

will be required based on the national average for that

building type as published by the United States department of

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energy; and beginning January 1, 2012, a sixty percent energy

reduction will be required based on the national average for

that building type as published by the United States

department of energy; and 2) is substantiated by the United

States environmental protection agency target finder energy

performance results form, dated no sooner than the schematic

design phase of development; and

(14) "sustainable residential building"

means:

(a) a building used as a single-family

residence as registered and certified under the build green

New Mexico or LEED-H rating systems that: 1) is certified by

the United States green building council as LEED-H silver or

higher or by build green New Mexico as gold or higher; and 2)

has achieved a home energy rating system index of sixty or

lower as developed by the residential energy services network;

(b) a building used as multi-family

dwelling units, as registered and certified under the LEED-H

rating system that: 1) is certified by the United States

green building council as LEED-H silver or higher or by build

green New Mexico as gold or higher; and 2) has achieved a home

energy rating system index of sixty or lower as developed by

the residential energy services network; or

the United States department of housing and urban development

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that is ENERGY STAR-qualified by the United States

environmental protection agency."

Section 4. A new section of the Corporate Income and

Franchise Tax Act is enacted to read:

"SUSTAINABLE BUILDING TAX CREDIT.--

A. The tax credit provided by this section may be

referred to as the "sustainable building tax credit". The

sustainable building tax credit shall be available for the

construction in New Mexico of a sustainable building or the

renovation of an existing building in New Mexico into a

sustainable building. The tax credit provided in this section

may not be claimed with respect to the same sustainable

building for which the sustainable building tax credit

provided in the Income Tax Act has been claimed.

B. A taxpayer that files a corporate income tax

return is eligible to apply for a sustainable building tax

credit if the taxpayer is:

(1) the owner of the building at the time

the certification level for the building in the LEED green

building rating system or the build green New Mexico rating

system is awarded; or

(2) the subsequent purchaser of a

sustainable building with respect to which no tax credit has

been previously claimed, if the certification level for the

building in the LEED green building rating system or the build

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green New Mexico rating system is awarded on or after

January 1, 2007.

C. The amount of the sustainable building tax

credit that may be claimed with respect to a sustainable

commercial building shall be calculated based on the

certification level the building has achieved in the LEED

green building rating system and the amount of qualified

occupied square footage in the building, as indicated on the

following chart:

LEED Rating Level

Qualified

Tax Credit per

Occupied

Square Foot

Square Footage

LEED-NC Silver

First 10,000

$3.50

Next 40,000

$1.75

Over 50,000

up to 500,000

$.70

LEED-NC Gold

First 10,000

$4.75

Next 40,000

$2.00

Over 50,000

up to 500,000

$1.00

LEED-NC Platinum

First 10,000

$6.25

Next 40,000

$3.25

Over 50,000

up to 500,000

$2.00

LEED-EB or CS Silver First 10,000

$2.50

Next 40,000

$1.25

Over 50,000

up to 500,000

$ .50

LEED-EB or CS Gold First 10,000

$3.35

Next 40,000

$1.40

Over 50,000

up to 500,000

$ .70

LEED-EB or CS

Platinum

First 10,000

$4.40

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Next 40,000

$2.30

Over 50,000

up to 500,000

$1.40

LEED-CI Silver

First 10,000

$1.40

Next 40,000

$ .70

Over 50,000

up to 500,000

$ .30

LEED-CI Gold

First 10,000

$1.90

Next 40,000

$ .80

Over 50,000

up to 500,000

$.40

LEED-CI Platinum

First 10,000

$2.50

Next 40,000

$1.30

Over 50,000

up to 500,000

$.80.

D. The amount of the sustainable building tax

credit that may be claimed with respect to a sustainable

residential building shall be calculated based on the

certification level the building has achieved in the LEED

green building rating system or the build green New Mexico

rating system and the amount of qualified occupied square

footage, as indicated on the following chart:

Rating System/Level

Qualified

Tax Credit

Occupied

per Square

Square

Foot

Footage

Build Green NM Gold

First 2,000

$4.50

Next 1,000

$2.00

LEED-H Silver

First 2,000

$5.00

Next 1,000

$2.50

LEED-H Gold

First 2,000

$6.85

Next 1,000

$3.40

LEED-H Platinum

First 2,000

$9.00

Next 1,000

$4.45

pg_0034

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EPA ENERGY STAR

Manufactured Housing

Up to 3,000

$3.00.

E. A taxpayer may apply for certification of

eligibility for the sustainable building tax credit from the

energy, minerals and natural resources department after the

construction or renovation of the sustainable building is

complete. Applications shall be considered in the order

received. If the energy, minerals and natural resources

department determines that the taxpayer meets the requirements

of Subsection B of this section and that the building with

respect to which the tax credit application is made meets the

requirements of this section as a sustainable residential

building or a sustainable commercial building, it may issue a

certificate of eligibility to the taxpayer, subject to the

limitation in Subsection F of this section. The certificate

shall include the rating system certification level awarded to

the building, the amount of qualified occupied square footage

in the building and a calculation of the maximum amount of

sustainable building tax credit for which the taxpayer would

be eligible. The energy, minerals and natural resources

department may issue rules governing the procedure for

administering the provisions of this subsection.

F. The energy, minerals and natural resources

department may issue a certificate of eligibility only if the

total amount of sustainable building tax credits represented

pg_0035

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by certificates of eligibility issued by the energy, minerals

and natural resources department pursuant to this section and

pursuant to the Income Tax Act shall not exceed in any

calendar year an aggregate amount of five million dollars

($5,000,000) with respect to sustainable commercial buildings

and an aggregate amount of five million dollars ($5,000,000)

with respect to sustainable residential buildings; provided

that no more than one million two hundred fifty thousand

dollars ($1,250,000) of the aggregate amount with respect to

sustainable residential buildings shall be for manufactured

housing.

G. Installation of a solar thermal system or a

photovoltaic system eligible for the solar market development

tax credit pursuant to Section 7-2-18.14 NMSA 1978 may not be

used as a component of qualification for the rating system

certification level used in determining eligibility for the

sustainable building tax credit, unless a solar market

development tax credit pursuant to Section 7-2-18.14 NMSA 1978

has not been claimed with respect to that system and the

taxpayer certifies that such a tax credit will not be claimed

with respect to that system.

H. To be eligible for the sustainable building tax

credit, the taxpayer must provide to the taxation and revenue

department a certificate of eligibility issued by the energy,

minerals and natural resources department pursuant to the

pg_0036

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requirements of Subsection E of this section and any other

information the taxation and revenue department may require to

determine the amount of the tax credit due the taxpayer.

I. If the requirements of this section have been

complied with, the department shall issue to the applicant a

document granting a sustainable building tax credit. The

document shall be numbered for identification and declare its

date of issuance and the amount of the tax credit allowed

pursuant to this section. The document may be sold, exchanged

or otherwise transferred. The parties to such a transaction

shall notify the department of the sale, exchange or transfer

within ten days of the sale, exchange or transfer.

J. Except as provided in Subsection K of this

section, the sustainable building tax credit represented by

the document issued pursuant to Subsection I of this section

shall be applied against the taxpayer's corporate income tax

liability for the taxable year in which the credit is approved

and the three subsequent taxable years, in increments of

twenty-five percent of the total credit amount in each of the

four taxable years. If the amount of the credit available in

a taxable year exceeds the taxpayer's corporate income tax

liability for that taxable year, the excess may be carried

forward for up to seven years.

K. If the total amount of a sustainable building

tax credit approved by the department is less than twenty-five

pg_0037

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Page 37

thousand dollars ($25,000), the entire amount of the credit

may be applied against the taxpayer's corporate income tax

liability for the taxable year in which the credit is

approved. If the amount of the credit exceeds the taxpayer's

corporate income tax liability for that taxable year, the

excess may be carried forward for up to seven years.

L. A taxpayer that otherwise qualifies and claims

a sustainable building tax credit with respect to a

sustainable building owned by a partnership or other business

association of which the taxpayer is a member may claim a

credit only in proportion to that taxpayer's interest in the

partnership or association. The total credit claimed in the

aggregate by all members of the partnership or association

with respect to the sustainable building shall not exceed the

amount of the credit that could have been claimed by a sole

owner of the property.

M. For the purposes of this section:

(1) "build green New Mexico rating system"

means the certification standards adopted by the homebuilders

association of central New Mexico;

(2) "LEED-CI" means the LEED rating system

for commercial interiors;

(3) "LEED-CS" means the LEED rating system

for the core and shell of buildings;

(4) "LEED-EB" means the LEED rating system

pg_0038

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Page 38

for existing buildings;

(5) "LEED gold" means the rating in

compliance with, or exceeding, the second highest rating

awarded by the LEED certification process;

(6) "LEED" means the most current leadership

in energy and environmental design green building rating

system guidelines developed and adopted by the United States

green building council;

(7) "LEED-H" means the LEED rating system

for homes;

(8) "LEED-NC" means the LEED rating system

for new buildings and major renovations;

(9) "LEED platinum" means the rating in

compliance with, or exceeding, the highest rating awarded by

the LEED certification process;

(10) "LEED silver" means the rating in

compliance with, or exceeding, the third highest rating

awarded by the LEED certification process;

(11) "qualified occupied square footage"

means the occupied spaces of the building as determined by:

(a) the United States green building

council for those buildings obtaining LEED certification;

(b) the administrators of the build

green New Mexico rating system for those homes obtaining build

green New Mexico certification; and

pg_0039

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Page 39

protection agency for ENERGY STAR-certified manufactured

homes;

(12) "sustainable building" means either a

sustainable commercial building or a sustainable residential

building;

(13) "sustainable commercial building" means

a building that has been registered and certified under the

LEED-NC, LEED-EB, LEED-CS or LEED-CI rating system and that:

(a) is certified by the United States

green building council at LEED-Silver or higher;

(b) achieves any prerequisite for and

at least one point related to commissioning under LEED "energy

and atmosphere", if included in the applicable rating system;

and

follows: 1) through 2011, a fifty percent energy reduction

will be required based on the national average for that

building type as published by the United States department of

energy; and beginning January 1, 2012, a sixty percent energy

reduction will be required based on the national average for

that building type as published by the United States

department of energy; and 2) is substantiated by the United

States environmental protection agency target finder energy

performance results form, dated no sooner than the schematic

pg_0040

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Page 40

design phase of development; and

(14) "sustainable residential building"

means:

(a) a building used as a single-family

residence as registered and certified under the build green

New Mexico or LEED-H rating systems that: 1) is certified by

the United States green building council as LEED-H silver or

higher or by build green New Mexico as gold or higher; and 2)

has achieved a home energy rating system index of sixty or

lower as developed by the residential energy services network;

(b) a building used as multi-family

dwelling units, as registered and certified under the LEED-H

rating system that: 1) is certified by the United States

green building council as LEED-H silver or higher or by build

green New Mexico as gold or higher; and 2) has achieved a home

energy rating system index of sixty or lower as developed by

the residential energy services network; or

the United States department of housing and urban development

that is ENERGY STAR-qualified by the United States

environmental protection agency."

Section 5. A new section of the Income Tax Act is

enacted to read:

"TAX CREDIT--AGRICULTURAL WATER CONSERVATION EXPENSES.--

A. A taxpayer may claim a credit against the

pg_0041

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taxpayer's income tax liability for expenses incurred by the

taxpayer for eligible improvements in irrigation systems or

water management methods. The credit may be claimed for the

taxable year in which the expenses are incurred if the

taxpayer:

(1) in that year, owned or leased a water

right appurtenant to the land on which an eligible improvement

was made;

(2) files an individual New Mexico income

tax return for that year;

(3) in that year, is not a dependent of

another individual; and

(4) does not take a tax credit for the same

expense on any corporate tax return filed by the taxpayer.

B. The credit provided in this section shall be in

the following amounts, not to exceed a maximum annual credit

of ten thousand dollars ($10,000):

(1) for expenses incurred from January 1,

2008 until December 31, 2008, an amount equal to thirty-five

percent of the incurred expenses; and

(2) for expenses incurred on or after

January 1, 2009, an amount equal to fifty percent of the

incurred expenses.

C. As used in this section, "eligible improvement

in irrigation systems or water management methods" means an

pg_0042

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improvement that is:

(1) made on or after January 1, 2008;

(2) consistent and complies with a water

conservation plan approved by the local soil and water

conservation district in which the improvement is located; and

(3) primarily designed to substantially

conserve water on land in New Mexico that is owned or leased

by the taxpayer and used by the taxpayer or the taxpayer's

lessee to:

(a) produce agricultural products;

(b) harvest or grow trees; or

D. Taxpayers who are considered for federal income

tax purposes as co-owners of the land on which an eligible

improvement in irrigation systems or water management methods

is made may claim the pro rata share of the credit allowed

pursuant to this section based on the co-owner's ownership

interest. The total of the credits allowed all the taxpayers

considered co-owners may not exceed the amount that would have

been allowed a sole owner of the land.

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 credit that would

have been allowed on a joint return.

F. If the allowable tax credit in a taxable year

pg_0043

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Page 43

exceeds the income taxes otherwise due from a taxpayer

pursuant to the Income Tax Act, or if there are no income

taxes due from the taxpayer, the taxpayer may carry forward

the amount of the credit not used in that year to offset the

taxpayer's liability for income taxes pursuant to the Income

Tax Act for not more than five consecutive taxable years.

G. The New Mexico department of agriculture, with

the advice of the soil and water conservation commission, and

with information provided by the state engineer, shall

promulgate rules to implement this section, and those rules

shall include detailed guidelines to assist the department in

determining whether improvements in irrigation systems or

water management methods qualify for the credit available

under this section.

H. A taxpayer claiming the credit shall provide

documentary evidence of the amount of water conserved during

the period for which the credit is claimed if requested by the

department.

I. Water conserved due to improvements in

irrigation systems or water management methods and for which a

credit is claimed shall not be subject to abandonment or

forfeiture, nor shall the conserved water be put to

consumptive beneficial use.

J. As used in this section, "taxpayer" may include

a partnership, limited liability corporation or other form of

pg_0044

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Page 44

pass-through entity, which may pass the credit provided in

this section through to its owners in proportion to their

share of ownership."

Section 6. A new section of the Corporate Income and

Franchise Tax Act is enacted to read:

"TAX CREDIT--AGRICULTURAL WATER CONSERVATION EXPENSES.--

A. A taxpayer may claim a credit against the

taxpayer's corporate income tax liability for expenses

incurred by the taxpayer for eligible improvements in

irrigation systems or water management methods. The credit

may be claimed for the taxable year in which the expenses are

incurred if the taxpayer:

(1) in that year, owned or leased a water

right appurtenant to the land on which an eligible improvement

was made; and

(2) files a New Mexico corporate income tax

return for that year.

B. The credit provided in this section shall be in

the following amounts, not to exceed a maximum annual credit

of ten thousand dollars ($10,000):

(1) for expenses incurred from January 1,

2008 until December 31, 2008, an amount equal to thirty-five

percent of the incurred expenses; and

(2) for expenses incurred on or after

January 1, 2009, an amount equal to fifty percent of the

pg_0045

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Page 45

incurred expenses.

C. As used in this section, "eligible improvement

in irrigation systems or water management methods" means an

improvement that is:

(1) made on or after January 1, 2008;

(2) consistent and complies with a water

conservation plan approved by the local soil and water

conservation district in which the improvement is located; and

(3) primarily designed to substantially

conserve water on land in New Mexico that is owned or leased

by the taxpayer and used by the taxpayer or the taxpayer's

lessee to:

(a) produce agricultural products;

(b) harvest or grow trees; or

D. Taxpayers that are considered for federal

income tax purposes as co-owners of the land, or co-owners of

a pass-through entity that owns the land, on which an eligible

improvement in irrigation systems or water management methods

is made may claim the pro rata share of the credit allowed

pursuant to this section based on the co-owner's ownership

interest. The total of the credits allowed all the taxpayers

considered co-owners may not exceed the amount that would have

been allowed a sole owner of the land.

E. If the allowable tax credit in a taxable year

pg_0046

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exceeds the corporate income taxes otherwise due from a

taxpayer pursuant to the Corporate Income and Franchise Tax

Act, or if there are no taxes due pursuant to the Corporate

Income and Franchise Tax Act, the taxpayer may carry forward

the amount of the credit not used in that year to offset the

taxpayer's liability for corporate income taxes pursuant to

the Corporate Income and Franchise Tax Act for not more than

five consecutive tax years.

F. The New Mexico department of agriculture, with

the advice of the soil and water conservation commission and

with information provided by the state engineer, shall

promulgate rules to implement this section, including detailed

guidelines to assist the department in determining whether

improvements in irrigation systems or water management methods

qualify for the credit available under this section.

G. A taxpayer claiming the credit shall provide

documentary evidence of the amount of water conserved during

the period for which the credit is claimed if requested by the

department.

H. Water conserved due to improvements in

irrigation systems or water management methods and for which a

credit is claimed shall not be subject to abandonment or

forfeiture, nor shall the conserved water be put to

consumptive beneficial use.

I. As used in this section, "taxpayer" may include

pg_0047

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a partnership, limited liability corporation or other form of

pass-through entity, which may pass the credit provided in

this section through to its owners in proportion to their

share of ownership."

Section 7. A new section of the Income Tax Act is

enacted to read:

"CREDIT--BLENDED BIODIESEL FUEL.--

A. A taxpayer who is liable for payment of the

special fuel excise tax pursuant to Subsections A through D of

Section 7-16A-2.1 NMSA 1978 and who files a New Mexico income

tax return is eligible to claim a credit against income tax

liability for each gallon of blended biodiesel fuel on which

that person paid the special fuel excise tax in the taxable

year, or would have paid the special fuel excise tax in the

taxable year but for the deductions allowed pursuant to

Subsections B through F of Section 7-16A-10 NMSA 1978 or the

treaty exemption for north Atlantic treaty organization use.

The credit shall be in the following amounts for the following

periods:

(1) from January 1, 2007 until December 31,

2010, at a rate of three cents ($.03) per gallon;

(2) from January 1, 2011 until December 31,

2011, at a rate of two cents ($.02) per gallon; and

(3) from January 1, 2012 until December 31,

2012, at a rate of one cent ($.01) per gallon.

pg_0048

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B. The tax credit provided by this section may not

be claimed with respect to the same blended biodiesel fuel for

which a credit has been claimed pursuant to the Corporate

Income and Franchise Tax Act or for which a credit or refund

has been claimed pursuant to Section 7-16A-13 NMSA 1978.

C. A taxpayer who otherwise qualifies for and

claims a credit pursuant to this section for blended biodiesel

fuel on which special fuel excise tax has been paid by a

partnership or other business association of which the

taxpayer is a member may claim a credit only in proportion to

the taxpayer's interest in the partnership or business

association. The total credit claimed in the aggregate by all

members of the partnership or business association shall not

exceed the amount of credit allowed pursuant to Subsection A

of this section.

D. 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 credit that would

have been allowed on a joint return.

E. The tax credit provided by this section may

only be applied against the income tax liability of the person

who paid the special fuel excise tax on the blended biodiesel

fuel with respect to which the credit is provided, or who

would have paid the special fuel excise tax but for the

deductions allowed pursuant to Subsections B through F of

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Section 7-16A-10 NMSA 1978 or the treaty exemption for north

Atlantic treaty organization use. If the credit exceeds the

person's income tax liability for the taxable year in which

the credit is granted, the credit may be carried forward for

five years.

F. A taxpayer claiming a credit pursuant to this

section shall provide documentation of eligibility in form and

content as determined by the department.

G. For the purposes of this section:

(1) "biodiesel" means renewable,

biodegradable, monoalkyl ester combustible liquid fuel that is

derived from agricultural plant oils or animal fats and that

meets American society for testing and materials D 6751

standard specification for biodiesel B100 blend stock for

distillate fuels;

(2) "blended biodiesel fuel" means a diesel

fuel that contains at least two percent biodiesel; and

(3) "diesel fuel" means any diesel-engine

fuel used for the generation of power to propel a motor

vehicle."

Section 8. A new section of the Corporate Income and

Franchise Tax Act is enacted to read:

"CREDIT--BLENDED BIODIESEL FUEL.--

A. A taxpayer that is liable for payment of the

special fuel excise tax pursuant to Subsections A through D of

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Section 7-16A-2.1 NMSA 1978 and that files a New Mexico

corporate income tax return is eligible to claim a credit

against corporate income tax liability for each gallon of

blended biodiesel fuel on which that person paid the special

fuel excise tax in the taxable year or who would have paid the

special fuel excise tax in the taxable year but for the

deductions allowed pursuant to Subsections B through F of

Section 7-16A-10 NMSA 1978 or the treaty exemption for north

Atlantic treaty organization use. The credit shall be in the

following amounts for the following periods:

(1) from January 1, 2007 until December 31,

2010, at a rate of three cents ($.03) per gallon;

(2) from January 1, 2011 until December 31,

2011, at a rate of two cents ($.02) per gallon; and

(3) from January 1, 2012 until December 31,

2012, at a rate of one cent ($.01) per gallon.

B. The tax credit provided by this section may not

be claimed with respect to the same blended biodiesel fuel for

which a credit has been claimed pursuant to the Income Tax Act

or for which a credit or refund has been claimed pursuant to

Section 7-16A-13 NMSA 1978.

C. A taxpayer that otherwise qualifies for and

claims a credit pursuant to this section for blended biodiesel

fuel on which special fuel excise tax has been paid by a

partnership or other business association of which the

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taxpayer is a member may claim a credit only in proportion to

the taxpayer's interest in the partnership or business

association. The total credit claimed in the aggregate by all

members of the partnership or business association shall not

exceed the amount of credit allowed pursuant to Subsection A

of this section.

D. The tax credit provided by this section may

only be applied against the corporate income tax liability of

the person that paid the special fuel excise tax on the

blended biodiesel fuel with respect to which the credit is

provided or that would have paid the special fuel excise tax

but for the deductions allowed pursuant to Subsections B

through F of Section 7-16A-10 NMSA 1978 or the treaty

exemption for north Atlantic treaty organization use. If the

credit exceeds the person's corporate income tax liability for

the taxable year in which the credit is granted, the credit

may be carried forward for five years.

E. A taxpayer claiming a credit pursuant to this

section shall provide documentation of eligibility in form and

content as determined by the department.

F. For the purposes of this section:

(1) "biodiesel" means renewable,

biodegradable, monoalkyl ester combustible liquid fuel that is

derived from agricultural plant oils or animal fats and that

meets American society for testing and materials D 6751

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standard specification for biodiesel B100 blend stock for

distillate fuels;

(2) "blended biodiesel fuel" means a diesel

fuel that contains at least two percent biodiesel; and

(3) "diesel fuel" means any diesel-engine

fuel used for the generation of power to propel a motor

vehicle."

Section 9. A new section of the Gross Receipts and

Compensating Tax Act is enacted to read:

"GROSS RECEIPTS TAX--COMPENSATING TAX--BIODIESEL

BLENDING FACILITY TAX CREDIT.--

A. A taxpayer who is a rack operator as defined in

the Special Fuels Supplier Tax Act and who installs biodiesel

blending equipment in property owned by the taxpayer for the

purpose of establishing or expanding a facility to produce

blended biodiesel fuel is eligible to claim a credit against

gross receipts tax or compensating tax. The credit shall be

an amount equal to thirty percent of the purchase cost of the

equipment plus thirty percent of the cost of installing that

equipment. The credit provided by this section may be

referred to as the "biodiesel blending facility tax credit".

B. The biodiesel blending facility tax credit

shall not exceed fifty thousand dollars ($50,000) with respect

to equipment installed at any one facility.

C. Upon application from a taxpayer wishing to

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claim the biodiesel blending facility tax credit, the energy,

minerals and natural resources department shall determine if

the equipment for which the tax credit will be claimed meets

the requirements of this section and if purchase and

installation costs reported by the taxpayer are legitimate.

Upon these determinations being made in favor of the taxpayer,

the energy, minerals and natural resources department shall

issue a dated certificate of eligibility containing this

information and an estimate of the amount of the biodiesel

blending facility tax credit for which the taxpayer is

eligible.

D. To claim the biodiesel blending facility tax

credit, the taxpayer shall provide to the taxation and revenue

department the certificate of eligibility from the energy,

minerals and natural resources department. Upon receipt of

the certificate, the taxation and revenue department shall

approve the claim for the credit if the total cumulative

amount of approved claims for the credit for all taxpayers for

the calendar year does not exceed one million dollars

($1,000,000). The department shall maintain a record of the

cumulative amount of claims for the credit that have been

approved and when it determines that this cumulative amount

has reached one million dollars ($1,000,000), it shall cease

approving any additional claims for the biodiesel blending

facility tax credit.

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E. If a taxpayer who has received the biodiesel

blending facility tax credit ceases biodiesel blending without

completing at least one hundred eighty days of availability of

the facility within the first three hundred sixty-five days

after the issuance of the certificate of eligibility from the

energy, minerals and natural resources department, any amount

of approved credit not applied against the taxpayer's gross

receipts tax or compensating tax liability shall be

extinguished. The taxpayer must amend the taxpayer's return,

self-assess the tax owed and return any biodiesel blending

facility tax credit received within four hundred twenty-five

days of the date of issuance of the certificate of

eligibility.

F. The tax credit provided by this section may

only be applied against the taxpayer's gross receipts tax

liability or compensating tax liability. If the credit

exceeds the taxpayer's tax liability in the reporting period

for which it is granted, the credit may be carried forward for

four years from the date of the certificate of eligibility.

G. For the purposes of this section:

(1) "biodiesel" means renewable,

biodegradable, monoalkyl ester combustible liquid fuel that is

derived from agricultural plant oils or animal fats and that

meets American society for testing and materials D 6751

standard specification for biodiesel B100 blend stock for

pg_0055

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distillate fuels;

(2) "biodiesel blending equipment" means

equipment necessary for the process of blending biodiesel with

diesel fuel to produce blended biodiesel fuel;

(3) "blended biodiesel fuel" means a diesel

fuel that contains at least two percent biodiesel; and

(4) "diesel fuel" means any diesel-engine

fuel used for the generation of power to propel a motor

vehicle."

Section 10. A new section of the Gross Receipts and

Compensating Tax Act is enacted to read:

"DEDUCTION--GROSS RECEIPTS--SOLAR ENERGY SYSTEMS.--

A. Receipts from the sale and installation of

solar energy systems may be deducted from gross receipts.

B. As used in this section, "solar energy system"

means an installation that is used to provide space heat, hot

water or electricity to the property in which it is installed

and is:

(1) an installation that utilizes solar

panels that are not also windows, including the solar panels

and all equipment necessary for the installation and operation

of the solar panels;

(2) a dark-colored water tank exposed to

sunlight, including all equipment necessary for the

installation and operation of the water tank as a part of the

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overall water system of the property; or

(3) a non-vented trombe wall, including all

equipment necessary for the installation and operation of the

trombe wall."

Section 11. SHORT TITLE.--Sections 11 through 18 of

this act may be cited as the "Alternative Energy Product

Manufacturers Tax Credit Act".

Section 12. DEFINITIONS.--As used in the Alternative

Energy Product Manufacturers Tax Credit Act:

A. "alternative energy product" means an

alternative energy vehicle, fuel cell system, renewable energy

system or any component of an alternative energy vehicle, fuel

cell system or renewable energy system or components for

integrated gasification combined cycle coal facilities and

equipment related to the sequestration of carbon from

integrated gasification combined cycle plants;

B. "alternative energy vehicle" means a motor

vehicle manufactured by an original equipment manufacturer

that fully warrants and certifies that the motor vehicle meets

the federal motor vehicle safety standards and is designed to

be propelled in whole or in part by electricity; "alternative

energy vehicle" includes a gasoline-electric hybrid motor

vehicle exempt from the motor vehicle excise tax pursuant to

Subsection F of Section 7-14-6 NMSA 1978;

C. "component" means a part, assembly of parts,

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material, ingredient or supply that is incorporated directly

into an end product;

D. "department" means the taxation and revenue

department, the secretary of taxation and revenue or an

employee of the department exercising authority lawfully

delegated to that employee by the secretary;

E. "fuel cell system" means a system that converts

hydrogen, natural gas or waste gas to electricity without

combustion, including:

(1) a fuel cell or a system used to generate

or reform hydrogen for use in a fuel cell; or

(2) a system used to generate or reform

hydrogen for use in a fuel cell, including:

(a) electrolyzers that use renewable

energy; and

(b) reformers that use natural gas as

the feedstock;

F. "manufacturing" means combining or processing

components or materials to increase their value for sale in

the ordinary course of business, but does not include

construction, farming, power generation or processing natural

resources;

G. "manufacturing equipment" means an essential

machine, mechanism or tool or a component of an essential

machine, mechanism or tool used directly and exclusively in a

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taxpayer's manufacturing operation and that is subject to

depreciation pursuant to the Internal Revenue Code of 1986 by

the taxpayer carrying on the manufacturing; provided that

"manufacturing equipment" does not include a vehicle that

leaves the site of a manufacturing operation for the purpose

of transporting persons or property, including property for

which the taxpayer claims a credit pursuant to Section 7-9-79

NMSA 1978;

H. "manufacturing operation" means a plant

employing personnel to perform production tasks, in

conjunction with manufacturing equipment not previously

existing at the site, to produce alternative energy products;

I. "modified combined tax liability" means the

total liability for the reporting period for the gross

receipts tax imposed by Section 7-9-4 NMSA 1978 together with

any tax collected at the same time and in the same manner as

that gross receipts tax, such as the compensating tax, the

withholding tax, the interstate telecommunications gross

receipts tax, the surcharge imposed by Section 63-9D-5 NMSA

1978 and the surcharge imposed by Section 63-9F-11 NMSA 1978,

minus the amount of any credit other than the alternative

energy product manufacturers tax credit applied against any or

all of those taxes or surcharges; provided that "modified

combined tax liability" excludes all amounts collected with

respect to local option gross receipts taxes;

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J. "pass-through entity" means a business

association other than:

(1) a sole proprietorship;

(2) an estate or trust;

(3) a corporation, limited liability

company, partnership or other entity that is 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 partner's income is

derived solely from interest, dividends and sales of

securities;

K. "qualified expenditure" means an expenditure

for the purchase of manufacturing equipment made after July 1,

2006 by a taxpayer approved by the department;

L. "renewable energy" means energy from solar

heat, solar light, wind, geothermal energy, landfill gas or

biomass either singly or in combination that produces low or

zero emissions and has substantial long-term production

potential;

M. "renewable energy system" means a system using

only renewable energy to produce hydrogen or to generate

electricity, including related cogeneration systems that

create mechanical energy or that produce heat or steam for

space or water heating and agricultural or small industrial

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processes and includes a:

(1) photovoltaic energy system;

(2) solar-thermal energy system;

(3) biomass energy system;

(4) wind energy system;

(5) hydrogen production system; or

(6) battery cell energy system; and

N. "taxpayer" means a person, including a

shareholder, member, partner or other owner of a pass-through

entity, who is liable for payment of a tax or to whom an

assessment has been made, if the assessment remains unabated

or the amount thereof has not been paid.

Section 13. ADMINISTRATION.--The department shall

administer the Alternative Energy Product Manufacturers Tax

Credit Act pursuant to the Tax Administration Act.

Section 14. ALTERNATIVE ENERGY PRODUCT MANUFACTURERS

TAX CREDIT.--

A. A tax credit to be known as the "alternative

energy product manufacturers tax credit" may be claimed by a

taxpayer in an amount:

(1) for which the taxpayer has been granted

approval by the department pursuant to the Alternative Energy

Product Manufacturers Tax Credit Act; and

(2) not to exceed five percent of the

taxpayer's qualified expenditures.

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B. The alternative energy product manufacturers

tax credit may only be deducted from the taxpayer's modified

combined tax liability. Any portion of the alternative energy

product manufacturers tax credit that remains unused at the

end of the taxpayer's reporting period may be carried forward

for five years.

Section 15. ELIGIBILITY REQUIREMENTS--EMPLOYMENT.--To

be eligible to claim a credit pursuant to the Alternative

Energy Product Manufacturers Tax Credit Act, the taxpayer

shall employ a number of full-time employees equal to one

full-time employee in addition to the number of full-time

employees employed one year prior to the day on which the

taxpayer applies for the credit for every:

A. five hundred thousand dollars ($500,000), or a

portion of that amount, of qualified expenditures claimed by

the taxpayer in a taxable year in the same claim, up to a

value of thirty million dollars ($30,000,000); and

B. one million dollars ($1,000,000), or a portion

of that amount, in value of qualified expenditures over thirty

million dollars ($30,000,000) claimed by the taxpayer in a

taxable year in the same claim.

Section 16. APPROVAL OF CREDIT--ISSUANCE AND DENIAL--

APPLICATION--DEADLINES.--

A. The department shall issue or deny approval for

an alternative energy product manufacturers tax credit in

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response to a taxpayer's application for approval for the

credit. The department shall issue approval for a credit

claimed by a taxpayer who satisfies the requirements of the

Alternative Energy Product Manufacturers Tax Credit Act.

B. The department may require a taxpayer who

claims an alternative energy product manufacturers tax credit

to produce evidence of the taxpayer's compliance with the

Alternative Energy Product Manufacturers Tax Credit Act.

C. A taxpayer may apply for approval of an

alternative energy product manufacturers tax credit on or

before the last day of the year following the end of the

calendar year in which the qualified expenditure is made. The

department shall not issue approval for the alternative energy

product manufacturers tax credit if the taxpayer applies for

approval after the last day of the year following the end of

the calendar year in which the qualified expenditure is made.

Section 17. RECAPTURE.--If the taxpayer or a successor

in the business of the taxpayer ceases operations at a

facility in New Mexico for at least one hundred eighty

consecutive days within a two-year period after the taxpayer

has claimed an alternative energy product manufacturers tax

credit, the department shall not grant additional alternative

energy product manufacturers tax credits with respect to that

facility. Any amount of the approved credit with respect to

that facility that is not claimed against the taxpayer's

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modified combined tax liability shall be extinguished, and

within thirty days after the one hundred eightieth day of

cessation of operations, the taxpayer shall pay the modified

income tax liability against which an approved credit was

taken. For the purposes of this section, a taxpayer shall not

be deemed to have ceased operations during reasonable periods

for maintenance or retooling, for the repair or replacement of

facilities damaged or destroyed or during labor disputes.

Section 18. CREDIT CLAIM FORMS.--The department shall

provide credit claim forms and instructions. A credit claim

form shall accompany any return in which the taxpayer claims a

credit, and the claim shall specify the amount of credit

intended to apply to each return.

Section 19. REPEAL.--Laws 2005, Chapter 104, Section 7

is repealed.

Section 20. DELAYED REPEAL.--Sections 5 and 6 of this

act are repealed effective January 1, 2013.

Section 21. APPLICABILITY.--

A. The provisions of Sections 1 and 2 of this act

apply to taxable years beginning on or after January 1, 2008.

B. The provisions of Sections 3 and 4 of this act

apply to taxable years beginning on or after January 1, 2007

through December 31, 2013.

C. The provisions of Sections 5 and 6 of this act

apply to taxable years beginning on or after January 1, 2008

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and ending on or before December 31, 2012.

Section 22. CONTINUED APPLICABILITY OF TAX CREDIT.--The

balance of a tax credit granted before December 31, 2012 to a

taxpayer pursuant to Section 5 or 6 of this act may be applied

after that date in the manner provided for in Section 5 or 6

of this act against the taxpayer's personal or corporate

income tax liability, as applicable as if the provisions of

Sections 5 and 6 of this act were still in effect.

Section 23. EFFECTIVE DATE.--The effective date of the

provisions of Sections 9 through 18 of this act is July 1,

2007.