House Bill text for HB0155

HOUSE BILL 155

49th legislature - STATE OF NEW MEXICO - second session, 2010

INTRODUCED BY

Edward C. Sandoval

AN ACT

RELATING TO TAXATION; SIMPLIFYING AND UPDATING THE INCOME TAX ACT; MAKING CONFORMING CHANGES TO THE UNIFORM DIVISION OF INCOME FOR TAX PURPOSES ACT; AMENDING, REPEALING AND ENACTING SECTIONS OF THE NMSA 1978.

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

Section 1. A new section of the Tax Administration Act is enacted to read:

"[NEW MATERIAL] INDEXING AMOUNTS FOR INFLATION.--The dollar value of an amount used to specify a tax, a credit, a rebate or any other provision that is indexed for inflation pursuant to this section shall be adjusted each calendar year subsequent to the base year according to the following rules:

A. to determine the dollar value of an amount for a calendar year, the dollar value of the amount in the base year shall be multiplied by the inflation adjustment factor determined pursuant to Subsection B of this section and then rounded according to the rules in Subsection D of this section;

B. the inflation adjustment factor for a calendar year is the larger of one or the quotient of a fraction:

(1) the numerator of which is the sum of the monthly consumer price index values for the twelve months ending in August of the preceding calendar year; and

(2) the denominator of which is the sum of the monthly consumer price index values for the twelve months ending in August of the year preceding the base year;

C. as used in this section, the "consumer price index" is the last consumer price index published by the United States department of labor for all urban consumers, for all items and for the current series; and

D. the amount determined under Subsection A of this section, before rounding, shall be rounded according to the following rules:

(1) if the amount is no more than five hundred dollars ($500), to the nearest one dollar ($1.00);

(2) if the amount is more than five hundred dollars ($500) but no more than five thousand dollars ($5,000), to the nearest five dollars ($5.00);

(3) if the amount is more than five thousand dollars ($5,000) but no more than fifty thousand dollars ($50,000), to the nearest fifty dollars ($50.00); and

(4) if the amount is more than fifty thousand dollars ($50,000), to the nearest five hundred dollars ($500)."

Section 2. Section 7-2-2 NMSA 1978 (being Laws 1986, Chapter 20, Section 26, as amended) is amended to read:

"7-2-2. DEFINITIONS.--For the purpose of the Income Tax Act and unless the context requires otherwise:

A. "adjusted gross income" means adjusted gross income as defined in Section 62 of the Internal Revenue Code [as that section may be amended or renumbered];

B. "base income":

(1) means, for estates and trusts, that part of the estate's or trust's income defined as taxable income and upon which the federal income tax is calculated in the Internal Revenue Code for income tax purposes [plus, for taxable years beginning on or after January 1, 1991, the amount of the net operating loss deduction allowed by Section 172(a) of the Internal Revenue Code, as that section may be amended or renumbered, and taken by the taxpayer for that year]; and

(2) means, for taxpayers other than estates or trusts, that part of the taxpayer's income defined as adjusted gross income [plus, for taxable years beginning on or after January 1, 1991, the amount of the net operating loss deduction allowed by Section 172(a) of the Internal Revenue Code, as that section may be amended or renumbered, and taken by the taxpayer for that year;

(3) includes, for all taxpayers, any other income of the taxpayer not included in adjusted gross income but upon which a federal tax is calculated pursuant to the Internal Revenue Code for income tax purposes, except amounts for which a calculation of tax is made pursuant to Section 55 of the Internal Revenue Code, as that section may be amended or renumbered; "base income" also includes interest received on a state or local bond; and

(4) includes, for all taxpayers, an amount deducted pursuant to Section 7-2-32 NMSA 1978 in a prior taxable year if:

(a) such amount is transferred to another qualified tuition program, as defined in Section 529 of the Internal Revenue Code, not authorized in the Education Trust Act; or

(b) a distribution or refund is made for any reason other than: 1) to pay for qualified higher education expenses, as defined pursuant to Section 529 of the Internal Revenue Code; or 2) upon the beneficiary's death, disability or receipt of a scholarship];

C. "compensation" means wages, salaries, commissions and any other form of remuneration paid to employees for personal services;

D. "department" means the taxation and revenue department, the secretary or any employee of the department exercising authority lawfully delegated to that employee by the secretary;

E. "dependent" means "dependent" as defined by Section 152 of the Internal Revenue Code;

[E.] F. "fiduciary" means a guardian, trustee, executor, administrator, committee, conservator, receiver, individual or corporation acting in any fiduciary capacity;

[F.] G. "filing status" means ["married filing joint returns", "married filing separate returns", "head of household", "surviving spouse" and "single", as those terms are generally defined for federal tax purposes] the taxpayer's marital and family status, which may be one of the following:

(1) "married individuals filing joint returns" or "married filing jointly" means married individuals eligible to file a federal income tax return jointly with the taxpayer's spouse pursuant to Section 6013 of the Internal Revenue Code;

(2) "married individuals filing separate returns" or "married filing separately" means a married taxpayer not filing a federal income tax return jointly with the taxpayer's spouse;

(3) "head of household" means "head of household" as that term is defined by Section 2(b) of the Internal Revenue Code;

(4) "surviving spouse" means "surviving spouse" as that term is defined by Section 2(a) of the Internal Revenue Code; and

(5) "single" means an unmarried individual not a head of household or surviving spouse;

H. "first year resident" means an individual who moved to New Mexico during the taxable year for which the taxpayer is filing a return with the intent to make New Mexico the individual's permanent residence;

[G.] I. "fiscal year" means any accounting period of twelve months ending on the last day of any month other than December;

[H. "head of household" means "head of household" as generally defined for federal income tax purposes;

I.] J. "individual" means a natural person, an estate, a trust or a fiduciary acting for a natural person, trust or estate;

[J.] K. "Internal Revenue Code" means the United States Internal Revenue Code of 1986, as that code may be amended or as its sections may be renumbered;

[K. "lump-sum amount" means for the purpose of determining liability for federal income tax, an amount that was not included in adjusted gross income but upon which the five-year-averaging or the ten-year-averaging method of tax computation provided in Section 402 of the Internal Revenue Code, as that section may be amended or renumbered, was applied;]

L. "itemized deduction" means the amount allowed the taxpayer for the taxpayer's taxable year pursuant to Section 63(d) of the Internal Revenue Code, reduced by the amount determined pursuant to Section 68 of the Internal Revenue Code and further reduced by the amount determined pursuant to Subsection J of Section 7-2-18.10 NMSA 1978;

[L.] M. "modified gross income" means [all income of the taxpayer and, if any, the taxpayer's spouse and dependents, undiminished by losses and from whatever source, including:

(1) compensation;

(2) net profit from business;

(3) gains from dealings in property;

(4) interest;

(5) net rents;

(6) royalties;

(7) dividends;

(8) alimony and separate maintenance payments;

(9) annuities;

(10) income from life insurance and endowment contracts;

(11) pensions;

(12) discharge of indebtedness;

(13) distributive share of partnership income;

(14) income in respect of a decedent;

(15) income from an interest in an estate or a trust;

(16) social security benefits;

(17) unemployment compensation benefits;

(18) workers' compensation benefits;

(19) public assistance and welfare benefits;

(20) cost-of-living allowances; and

(21) gifts;

M. "modified gross income" excludes:

(1) payments for hospital, dental, medical or drug expenses to or on behalf of the taxpayer;

(2) the value of room and board provided by federal, state or local governments or by private individuals or agencies based upon financial need and not as a form of compensation;

(3) payments pursuant to a federal, state or local government program directly or indirectly to a third party on behalf of the taxpayer when identified to a particular use or invoice by the payer; or

(4) payments for credits and rebates pursuant to the Income Tax Act and made for a credit pursuant to Section 7-3-9 NMSA 1978;

N. "net income" means, for estates and trusts, base income adjusted to exclude amounts that the state is prohibited from taxing because of the laws or constitution of this state or the United States and means, for taxpayers other than estates or trusts, base income adjusted to exclude:

(1) an amount equal to the standard deduction allowed the taxpayer for the taxpayer's taxable year by Section 63 of the Internal Revenue Code, as that section may be amended or renumbered;

(2) an amount equal to the itemized deductions defined in Section 63 of the Internal Revenue Code, as that section may be amended or renumbered, allowed the taxpayer for the taxpayer's taxable year less the amount excluded pursuant to Paragraph (1) of this subsection;

(3) an amount equal to the product of the exemption amount allowed for the taxpayer's taxable year by Section 151 of the Internal Revenue Code, as that section may be amended or renumbered, multiplied by the number of personal exemptions allowed for federal income tax purposes;

(4) income from obligations of the United States of America less expenses incurred to earn that income;

(5) other amounts that the state is prohibited from taxing because of the laws or constitution of this state or the United States;

(6) for taxable years that began prior to January 1, 1991, an amount equal to the sum of:

(a) net operating loss carryback deductions to that year from taxable years beginning prior to January 1, 1991 claimed and allowed, as provided by the Internal Revenue Code; and

(b) net operating loss carryover deductions to that year claimed and allowed; and

(7) for taxable years beginning on or after January 1, 1991, an amount equal to the sum of any net operating loss carryover deductions to that year claimed and allowed, provided that the amount of any net operating loss carryover from a taxable year beginning on or after January 1, 1991 may be excluded only as follows:

(a) in the case of a timely filed return, in the taxable year immediately following the taxable year for which the return is filed; or

(b) in the case of amended returns or original returns not timely filed, in the first taxable year beginning after the date on which the return or amended return establishing the net operating loss is filed; and

(c) in either case, if the net operating loss carryover exceeds the amount of net income exclusive of the net operating loss carryover for the taxable year to which the exclusion first applies, in the next four succeeding taxable years in turn until the net operating loss carryover is exhausted; in no event shall a net operating loss carryover be excluded in any taxable year after the fourth taxable year beginning after the taxable year to which the exclusion first applies] the taxpayer's base income, the taxpayer's additions to base income set forth in Section 7-2-3.1 NMSA 1978 and the amount of social security benefits received during the taxable year that are not included in the taxpayer's base income pursuant to Section 86 of the Internal Revenue Code;

[O.] N. "net operating loss" means any net operating loss, as defined by Section 172(c) of the Internal Revenue Code [as that section may be amended or renumbered] for a taxable year as further increased by the income, if any, from obligations of the United States for that year less related expenses;

[P.] O. "net operating loss carryover" means the amount, or any portion of the amount, of a net operating loss for any taxable year that, pursuant to [Paragraph (6) or (7) of Subsection N of this section] Subsection D of Section 7-2-4 NMSA 1978, may be excluded from base income;

[Q.] P. "nonresident" means every individual not a resident of [this state] New Mexico;

[R.] Q. "person" means any individual, estate, trust, receiver, cooperative association, club, corporation, company, firm, partnership, limited liability company, joint venture, syndicate or other association; "person" also means, to the extent permitted by law, any federal, state or other governmental unit or subdivision or agency, department or instrumentality thereof;

R. "personal exemption" means a taxpayer, a spouse or a dependent that qualifies the taxpayer for a deduction for personal exemptions pursuant to Section 151 of the Internal Revenue Code;

S. "resident" means an individual who is domiciled in [this state] New Mexico during any part of the taxable year or an individual who is physically present in [this state] New Mexico for one hundred eighty-five days or more during the taxable year; but any individual, other than someone who was physically present in [the state] New Mexico for one hundred eighty-five days or more during the taxable year, who, on or before the last day of the taxable year, changed the individual's place of abode to a place [without this state] outside of New Mexico with the bona fide intention of continuing actually to abide permanently [without this state] outside of New Mexico is not a resident for the purposes of the Income Tax Act for periods after that change of abode;

T. "secretary" means the secretary of taxation and revenue or the secretary's delegate;

U. "state" means any state of the United States, the District of Columbia, the commonwealth of Puerto Rico, any territory or possession of the United States or any political subdivision of a foreign country;

V. "state or local bond" means a bond issued by a state other than New Mexico or by a local government other than one of New Mexico's political subdivisions, the interest from which is excluded from income for federal income tax purposes under Section 103 of the Internal Revenue Code; [as that section may be amended or renumbered;

W. "surviving spouse" means "surviving spouse" as generally defined for federal income tax purposes;]

W. "tax table income" means base income plus the additions to base income set forth in Section 7-2-3.1 NMSA 1978 less the exemptions set forth in Sections 7-2-4, 7-2-5.2, 7-2-5.5, 7-2-5.6, 7-2-5.7, 7-2-5.9, 7-2-5.10 and 7-2-5.11 NMSA 1978 and less the deductions set forth in Sections 7-2-32, 7-2-34, 7-2-35, 7-2-36 and 7-2-37 NMSA 1978;

X. "taxable income" means [net income less any lump-sum amount] tax table income less the deductions set forth in Sections 7-2-38, 7-2-39 and 7-2-40 NMSA 1978;

Y. "taxable year" means the calendar year or fiscal year upon the basis of which the net income is computed under the Income Tax Act and includes, in the case of the return made for a fractional part of a year under the provisions of the Income Tax Act, the period for which the return is made; and

Z. "taxpayer" means any individual subject to the tax imposed or eligible for a rebate or credit authorized by the Income Tax Act."

Section 3. Section 7-2-3 NMSA 1978 (being Laws 1965, Chapter 202, Section 3, as amended) is amended to read:

"7-2-3. IMPOSITION AND LEVY OF TAX.--A tax is imposed at the rates specified in [the Income Tax Act] Section 7-2-7 NMSA 1978 upon the [net] taxable income of every resident individual and upon the [net] taxable income of every nonresident individual employed or engaged in the transaction of business in, into or from [this state] New Mexico or deriving any income from any property or employment within [this state] New Mexico."

Section 4. A new section of the Income Tax Act, Section 7-2-3.1 NMSA 1978, is enacted to read:

"7-2-3.1. [NEW MATERIAL] ADDITIONS TO BASE INCOME.--In determining tax table income, the following amounts shall be added to the taxpayer's base income:

A. for taxable years beginning on or after January 1, 1991, the amount of the net operating loss deduction allowed by Section 172(a) of the Internal Revenue Code and taken by the taxpayer for that year;

B. any other income of the taxpayer not included in base income but upon which a federal tax is calculated pursuant to the Internal Revenue Code for income tax purposes, except amounts for which a calculation of tax is made pursuant to Section 55 of the Internal Revenue Code;

C. interest received on a state or local bond;

D. an amount deducted pursuant to Section 7-2-32 NMSA 1978 in a prior taxable year if:

(1) the amount is transferred to another qualified tuition program, as defined in Section 529 of the Internal Revenue Code, not authorized in the Education Trust Act; or

(2) a distribution or refund is made for any reason other than:

(a) to pay for qualified higher education expenses, as defined pursuant to Section 529 of the Internal Revenue Code; or

(b) upon the beneficiary's death, disability or receipt of a scholarship; and

E. for a taxpayer other than an estate or trust who is not a dependent of another taxpayer, who itemized deductions for federal income tax purposes for the taxable year and the taxpayer's itemized deductions do not exceed the deduction allowed the taxpayer in Section 7-2-38 NMSA 1978, an amount equal to the excess of the deduction allowed the taxpayer by Section 7-2-38 NMSA 1978 and the taxpayer's itemized deductions."

Section 5. Section 7-2-4 NMSA 1978 (being Laws 1965, Chapter 202, Section 4, as amended) is amended to read:

"7-2-4. EXEMPTIONS.--No income tax shall be imposed upon:

A. the income of a trust organized or created in the United States and forming part of a stock bonus, pension or profit-sharing plan of an employer for the exclusive benefit of [his] the employer's employees or their beneficiaries, which trust is exempt from taxation under the provisions of the Internal Revenue Code; [or]

B. the income of religious, educational, benevolent or other organizations not organized for profit [which] that are exempt from income taxation under the Internal Revenue Code except to the extent that such income is subject to federal income taxation as "unrelated business income" under the Internal Revenue Code;

C. the income of a taxpayer from:

(1) obligations of the United States less expenses incurred to earn that income; or

(2) amounts that New Mexico is prohibited from taxing because of the laws or constitution of New Mexico or the United States constitution; or

D. for taxable years beginning on or after January 1, 1991, an amount equal to the sum of the net operating loss carryover exemptions to the taxable year that are claimed and allowed; provided, however:

(1) that the exemption is only applied:

(a) in the case of a timely filed return, in the taxable year immediately following the taxable year for which the return is filed; or

(2) if the net operating loss carryover exceeds the amount of taxable income exclusive of the net operating loss carryover for the taxable year to which the exemption first applies, the exemption shall be applied in the next four succeeding taxable years in turn until the net operating loss carryover is exhausted; in no event shall a net operating loss carryover be exempted in any taxable year after the fourth taxable year beginning after the taxable year to which the exemption first applies."

Section 6. Section 7-2-5.2 NMSA 1978 (being Laws 1985, Chapter 114, Section 1, as amended) is amended to read:

"7-2-5.2. EXEMPTION--INCOME OF PERSONS SIXTY-FIVE AND OLDER OR BLIND.--

A. Any individual sixty-five years of age or older or who, for federal income tax purposes, is blind may claim an exemption in an amount specified in Subsections [A] B through [C] D of this section not to exceed eight thousand dollars ($8,000) of income includable except for this exemption in [net] tax table income. [Individuals having income both within and without this state shall apportion this exemption in accordance with regulations of the secretary.

A.] B. For married individuals filing separate returns, for any taxable year beginning on or after January 1, 1987:

The maximum amount of

If adjusted exemption allowable under

gross income is: this section shall be:

Not over $15,000 $8,000

Over $15,000 but not over $16,500 $7,000

Over $16,500 but not over $18,000 $6,000

Over $18,000 but not over $19,500 $5,000

Over $19,500 but not over $21,000 $4,000

Over $21,000 but not over $22,500 $3,000

Over $22,500 but not over $24,000 $2,000

Over $24,000 but not over $25,500 $1,000

Over $25,500 0.

[B.] C. For heads of household, surviving spouses and married individuals filing joint returns, for any taxable year beginning on or after January 1, 1987:

The maximum amount of

If adjusted exemption allowable under

gross income is: this section shall be:

Not over $30,000 $8,000

Over $30,000 but not over $33,000 $7,000

Over $33,000 but not over $36,000 $6,000

Over $36,000 but not over $39,000 $5,000

Over $39,000 but not over $42,000 $4,000

Over $42,000 but not over $45,000 $3,000

Over $45,000 but not over $48,000 $2,000

Over $48,000 but not over $51,000 $1,000

Over $51,000 0.

[C.] D. For single individuals, for any taxable year beginning on or after January 1, 1987:

The maximum amount of

If adjusted exemption allowable under

gross income is: this section shall be:

Not over $18,000 $8,000

Over $18,000 but not over $19,500 $7,000

Over $19,500 but not over $21,000 $6,000

Over $21,000 but not over $22,500 $5,000

Over $22,500 but not over $24,000 $4,000

Over $24,000 but not over $25,500 $3,000

Over $25,500 but not over $27,000 $2,000

Over $27,000 but not over $28,500 $1,000

Over $28,500 0."

Section 7. Section 7-2-5.5 NMSA 1978 (being Laws 1995, Chapter 42, Section 1) is amended to read:

"7-2-5.5. EXEMPTION--EARNINGS BY INDIANS, THEIR INDIAN SPOUSES AND INDIAN DEPENDENTS ON INDIAN LANDS.--An individual may claim an exemption of income includable in tax table income, except for this exemption, in an amount equal to the income earned by a member of a New Mexico federally recognized Indian nation, tribe [band] or pueblo, [his] the member's spouse or dependent, who is a member of a New Mexico federally recognized Indian nation, tribe [band] or pueblo, [is exempt from state income tax] if the income is earned from work performed within and the member, spouse or dependent lives within the boundaries of the Indian member's or the spouse's reservation or pueblo grant or within the boundaries of lands held in trust by the United States for the benefit of the member or spouse or [his] the member's or spouse's nation, tribe [band] or pueblo, subject to restriction against alienation imposed by the United States."

Section 8. Section 7-2-5.6 NMSA 1978 (being Laws 1995, Chapter 93, Section 8) is amended to read:

"7-2-5.6. EXEMPTION--MEDICAL CARE SAVINGS ACCOUNTS.--Except as provided in Section [6 of this act] 59A-23D-6 NMSA 1978, an individual may claim an exemption of income includable in tax table income, except for this exemption, in an amount equal to employer and employee contributions to medical care savings accounts established pursuant to the Medical Care Savings Account Act, the interest earned on those accounts and money reimbursed to an employee for eligible medical expenses from those accounts or money advanced to the employee by the employer for eligible medical expenses pursuant to that act [are exempt from taxation]."

Section 9. Section 7-2-5.7 NMSA 1978 (being Laws 2002, Chapter 58, Section 1) is amended to read:

"7-2-5.7. EXEMPTION--INCOME OF INDIVIDUALS ONE HUNDRED YEARS OF AGE OR OLDER.--[The income of] An individual who is a natural person, who is one hundred years of age or older and who is not a dependent of another individual [is exempt from state income tax] may claim an exemption of all income includable in tax table income except for this exemption."

Section 10. Section 7-2-5.9 NMSA 1978 (being Laws 2005, Chapter 104, Section 6) is amended to read:

"7-2-5.9. EXEMPTION--UNREIMBURSED OR UNCOMPENSATED MEDICAL CARE EXPENSES OF INDIVIDUALS SIXTY-FIVE YEARS OF AGE OR OLDER.--

A. Any individual sixty-five years of age or older may claim an additional exemption from income includable in tax table income, except for this exemption, [in net income] in an amount equal to three thousand dollars ($3,000) for medical care expenses paid by the individual for that individual or for the individual's spouse or dependent during the taxable year if those medical care expenses exceed twenty-eight thousand dollars ($28,000) and if the medical care expenses are not reimbursed or compensated for by insurance or otherwise.

B. As used in this section:

[(1) "dependent" means "dependent" as defined in Section 152 of the Internal Revenue Code;

(2)] (1) "health care facility" means a hospital, outpatient facility, diagnostic and treatment center, rehabilitation center, freestanding hospice or other similar facility at which medical care is provided;

[(3)] (2) "medical care" means the diagnosis, cure, mitigation, treatment or prevention of disease or for the purpose of affecting any structure or function of the body;

[(4)] (3) "medical care expenses" means amounts paid for:

(a) the diagnosis, cure, mitigation, treatment or prevention of disease or for the purpose of affecting any structure or function of the body if provided by a physician or in a health care facility;

(b) prescribed drugs or insulin;

(d) insurance covering medical care, including amounts paid as premiums under Part B of Title 18 of the Social Security Act or for a qualified long-term care insurance contract defined in Section 7702B(b) of the Internal Revenue Code, if the insurance or other amount is paid from income included in the taxpayer's adjusted gross income for the taxable year;

(e) specialized treatment or the use of special therapeutic devices if the treatment or device is prescribed by a physician and the patient can show that the expense was incurred primarily for the prevention or alleviation of a physical or mental defect or illness; and

(f) care in an institution other than a hospital, such as a sanitarium or rest home, if the principal reason for the presence of the person in the institution is to receive the medical care available; provided that if the meals and lodging are furnished as a necessary part of such care, the cost of the meals and lodging are "medical care expenses";

[(5)] (4) "physician" means a medical doctor, osteopathic physician, dentist, podiatrist, chiropractic physician or psychologist licensed or certified to practice in New Mexico; and

[(6)] (5) "prescribed drug" means a drug or biological that requires a prescription of a physician for its use by an individual."

Section 11. Section 7-2-5.10 NMSA 1978 (being Laws 2006, Chapter 50, Section 1) is amended to read:

"7-2-5.10. EXEMPTION--NEW MEXICO NATIONAL GUARD MEMBER PREMIUMS PAID FOR GROUP LIFE INSURANCE.--An individual who receives reimbursement from the service members' life insurance reimbursement fund may claim an exemption in the amount of that reimbursement, from income includable in tax table income, except for this exemption [in net income]."

Section 12. Section 7-2-5.11 NMSA 1978 (being Laws 2007, Chapter 45, Section 11) is amended to read:

"7-2-5.11. EXEMPTION--ARMED FORCES SALARIES.--An individual may claim an exemption of income includable in tax table income, except for this exemption, in an amount equal to a salary paid by the United States to a taxpayer for active duty service in the armed forces of the United States [is exempt from state income taxation]."

Section 13. Section 7-2-7 NMSA 1978 (being Laws 2005, Chapter 104, Section 4) is amended to read:

"7-2-7. INDIVIDUAL INCOME TAX RATES.--The tax imposed by Section 7-2-3 NMSA 1978 shall be at the following rates for any taxable year beginning on or after January 1, [2008] 2010:

A. For married individuals filing separate returns:

If the taxable income is: The tax shall be:

Not over $4,000 1.7% of taxable income

Over $ 4,000 but not over $ 8,000 $ 68.00 plus 3.2% of excess over $ 4,000

Over $ 8,000 but not over $ 12,000 $ 196 plus 4.7% of excess over $ 8,000

Over $ 12,000 $ 384 plus 4.9% of excess over $ 12,000.

B. For heads of household, surviving spouses and married individuals filing joint returns:

If the taxable income is: The tax shall be:

Not over $8,000 1.7% of taxable income

Over $ 8,000 but not over $ 16,000 $ 136 plus 3.2% of excess over $ 8,000

Over $ 16,000 but not over $ 24,000 $ 392 plus 4.7% of excess over $ 16,000

Over $ 24,000 $ 768 plus 4.9% of excess over $ 24,000.

C. For single individuals and for estates and trusts:

If the taxable income is: The tax shall be:

Not over $5,500 1.7% of taxable income

Over $ 5,500 but not over $ 11,000 $ 93.50 plus 3.2% of excess over $ 5,500

Over $ 11,000 but not over $ 16,000 $ 269.50 plus 4.7% of excess over $ 11,000

Over $ 16,000 $ 504.50 plus 4.9% of excess over $ 16,000.

[D. The tax on the sum of any lump-sum amounts included in net income is an amount equal to five multiplied by the difference between:

(1) the amount of tax due on the taxpayer's taxable income; and

(2) the amount of tax that would be due on an amount equal to the taxpayer's taxable income and twenty percent of the taxpayer's lump-sum amounts included in net income.]

D. For 2011 and subsequent years, the taxable income amounts in the tables in Subsections A through C of this section shall be indexed for inflation under the provisions of the Tax Administration Act using 2010 as the base year, except that the inflation adjustment factor shall be reduced, but not below one, by the product of one-hundredth (0.01) multiplied by the number of years since the base year, and the tax amounts at each taxable income level in each table shall be recomputed using the percentages in the table."

Section 14. Section 7-2-7.1 NMSA 1978 (being Laws 1980, Chapter 102, Section 1, as amended) is amended to read:

"7-2-7.1. TAX TABLES.--In lieu of the [tax rate computations] computation of taxable income and the computation of tax required in Section 7-2-7 NMSA 1978, the secretary may adopt regulations requiring taxpayers to pay taxes in accordance with tax [rate] tables. The tax tables may be established either by regulation or by instruction, but shall be computed substantially on the basis of taxable income and the rates prescribed in Section 7-2-7 NMSA 1978. The secretary may, by regulation or instruction, exclude from the application of this section taxpayers having [net] tax table incomes in excess of an amount to be determined by the secretary and may exclude taxpayers in any [net-income] tax table income class having more personal exemptions than the number of personal exemptions specified by the secretary for that category."

Section 15. Section 7-2-9 NMSA 1978 (being Laws 1965, Chapter 202, Section 7, as amended) is amended to read:

"7-2-9. TAX COMPUTATION--ALTERNATIVE METHOD.--

A. For those taxpayers who do not compute an amount upon which the federal income tax is calculated or who do not compute their federal income tax payable for the taxable year, the secretary shall prescribe such regulations or instructions as the secretary may deem necessary to enable them to compute their state income tax due.

B. For those taxpayers who file a return for a fractional part of a year, certain exemptions, deductions, credits and rebates and income tax shall be computed as follows:

(1) the exemption otherwise allowed in Section 7-2-5.2 NMSA 1978 shall be computed by multiplying adjusted gross income by the annualizing factor, finding the corresponding exemption amount for the taxpayer's filing status and then multiplying that exemption amount by the fractional year factor;

(2) the income tax otherwise determined pursuant to Section 7-2-7 NMSA 1978 shall be computed by multiplying taxable income by the annualizing factor, finding the corresponding tax amount for the taxpayer's filing status and then multiplying that tax amount by the fractional year factor;

(3) the income tax otherwise determined using the tables authorized by Section 7-2-7.1 NMSA 1978 shall be computed by multiplying tax table income by the annualizing factor, finding the corresponding tax amount for the taxpayer's filing status and then multiplying that tax amount by the fractional year factor;

(4) the tax rebate otherwise allowed in Section 7-2-14 NMSA 1978 shall be computed by multiplying modified gross income by the annualizing factor, finding the corresponding rebate amount and then multiplying that rebate amount by the fractional year factor;

(5) the tax rebates otherwise allowed pursuant to Sections 7-2-14.3 and 7-2-18 NMSA 1978 shall be computed by multiplying modified gross income by the annualizing factor, determining the corresponding rebate amount and then multiplying that rebate amount by the fractional year factor;

(6) the tax credit otherwise allowed pursuant to Section 7-2-18.1 NMSA 1978 shall be computed by multiplying modified gross income by the annualizing factor, determining the corresponding credit amount and then multiplying that credit amount by the fractional year factor;

(7) the deduction otherwise allowed pursuant to Section 7-2-35 NMSA 1978 shall be computed by multiplying adjusted gross income by the annualizing factor, determining the corresponding deduction amount for the taxpayer's filing status and then multiplying that deduction amount by the fractional year factor;

(8) the deductions otherwise allowed pursuant to Sections 7-2-38 and 7-2-39 NMSA 1978 shall be computed by multiplying the deduction amounts by the fractional year factor; and

(9) the deduction otherwise allowed pursuant to Section 7-2-40 NMSA 1978 shall be computed by multiplying tax table income by the annualizing factor, determining the corresponding deduction amount for the taxpayer's filing status and then multiplying this deduction amount by the fractional year factor.

C. As used in this section:

(1) "annualizing factor" means the quotient of a fraction, the numerator of which is three hundred sixty-five and the denominator of which is the number of days in the taxpayer's taxable year; and

(2) "fractional year factor" means the quotient of a fraction, the numerator of which is the number of days in the taxpayer's taxable year and the denominator of which is three hundred sixty-five."

Section 16. Section 7-2-11 NMSA 1978 (being Laws 1965, Chapter 202, Section 9, as amended) is amended to read:

"7-2-11. TAX CREDIT--INCOME ALLOCATION AND APPORTIONMENT.--

A. [Net] Taxable income of any individual having income that is taxable both within and without [this state] New Mexico shall be apportioned and allocated as follows:

(1) during the first taxable year in which an individual incurs tax liability as a resident, only income earned on or after the date the individual became a resident and, in addition, income earned in New Mexico while a nonresident of New Mexico shall be allocated to New Mexico;

(2) except as provided otherwise in Paragraph (1) of this subsection, income other than compensation or gambling winnings shall be allocated and apportioned as provided in the Uniform Division of Income for Tax Purposes Act, but if the income is not allocated or apportioned by that act, then it may be allocated or apportioned in accordance with instructions, rulings or regulations of the secretary;

(3) except as provided otherwise in Paragraph (1) of this subsection, compensation and gambling winnings of a resident taxpayer shall be allocated to [this state] New Mexico;

(4) compensation of a nonresident taxpayer shall be allocated to [this state] New Mexico to the extent that such compensation is for activities, labor or personal services within [this state] New Mexico; provided:

(a) if the activities, labor or services are performed in [this state] New Mexico for fifteen or fewer days during the taxpayer's taxable year, the compensation may be allocated to the taxpayer's state of residence; and

(b) if the compensation is for activities, labor or services performed for a business in the manufacturing industry in New Mexico that is located within twenty miles of an international border, that has a minimum of five full-time employees who are New Mexico residents, is not receiving development training funds under Section 21-19-7 NMSA 1978 and that meets the qualifications of one of Items 1) through 4) of this subparagraph, the compensation may be allocated to the taxpayer's state of residence: 1) the business had no payroll in New Mexico during the previous calendar year; 2) the business had a payroll in New Mexico for less than the entire previous calendar year, and the first payroll of the new calendar year includes payments to New Mexico residents exceeding the highest monthly payroll for such residents in the previous calendar year; 3) the business had a payroll in New Mexico for the entire previous calendar year, and the first payroll of the new calendar year includes payments to New Mexico residents exceeding by at least ten percent both the payroll for all employees in January 2001 and the payroll for New Mexico residents twelve months prior to the commencement of the new calendar year; or 4) the business had a payroll in New Mexico for the entire previous calendar year, but had no payroll in New Mexico within one year prior to January 1, 2001, and the first payroll of the new calendar year includes payments to New Mexico residents exceeding by at least ten percent the payroll for such residents twelve months earlier;

(5) gambling winnings of a nonresident shall be allocated to [this state] New Mexico if the gambling winnings arose from a source within [this state] New Mexico; and

(6) other deductions and exemptions allowable in computing [net] taxable income and not specifically allocated in the Uniform Division of Income for Tax Purposes Act shall be equitably allocated or apportioned in accordance with instructions, rulings or regulations of the secretary.

B. For the purposes of this section, "non-New Mexico percentage" means the [percentage determined] quotient obtained by dividing the difference between the taxpayer's [net] taxable income and the sum of the amounts allocated or apportioned to New Mexico by that [net] taxable income; provided that, if the quotient is greater than one, the quotient shall be deemed to be one, and if the quotient is less than zero, the quotient shall be deemed to be zero.

C. A taxpayer may claim a credit in an amount equal to the amount of tax determined to be due under Section 7-2-7 or 7-2-7.1 NMSA 1978 multiplied by the non-New Mexico percentage."

Section 17. Section 7-2-12 NMSA 1978 (being Laws 1965, Chapter 202, Section 10, as amended) is amended to read:

"7-2-12. TAXPAYER RETURNS--PAYMENT OF TAX.--

A. Every resident of [this state] New Mexico and every individual deriving income from any business transaction, property or employment within [this state] New Mexico and not exempt from tax under the Income Tax Act who is required by the laws of the United States to file a federal income tax return shall file a complete tax return with the department in form and content as prescribed by the secretary. [Except as provided in Subsection B of this section]

B. The taxpayer shall use the same taxable year for the New Mexico income tax return as the taxpayer used for federal income tax purposes, the calendar year if the taxpayer was not required to file a federal income tax return covering any period in the calendar year, or the remainder of the calendar year if the taxpayer filed a federal income tax return ending in a month other than December and was not required to file a federal income tax return for the remainder of the calendar year.

C. The taxpayer shall use the same filing status on the New Mexico income tax return as the taxpayer used for federal income tax purposes or the same filing status as would have been used for federal income tax purposes if the taxpayer had been required to file a federal income tax return.

D. The return required and the tax imposed on individuals [under] pursuant to the provisions of the Income Tax Act are due and payment is required on or before the fifteenth day of the fourth month following the end of the taxable year; [B.] provided that when the department approves electronic media for use by a taxpayer whose taxable year is a calendar year, the taxpayer who uses electronic media for both filing and payment must submit the required return and the tax imposed on individuals under the Income Tax Act on or before the thirtieth day of the fourth month following the end of the taxable year."

Section 18. Section 7-2-12.1 NMSA 1978 (being Laws 1990, Chapter 23, Section 1) is amended to read:

"7-2-12.1. LIMITATION ON CLAIMING OF CREDITS AND TAX REBATES.--

A. Except as provided otherwise in this section, a credit or tax rebate provided in the Income Tax Act that is claimed shall be disallowed if the claim for the credit or tax rebate was first made after the end of the third calendar year following the calendar year in which the return upon which the credit or tax rebate was first claimable was initially due.

B. Subsection A of this section does not apply to [(1)] the credit authorized by Section 7-2-13 NMSA 1978 for income taxes paid another state [or

(2) the credit authorized by Section 7-2-19 NMSA 1978 for income taxes paid another state]."

Section 19. Section 7-2-13 NMSA 1978 (being Laws 1965, Chapter 202, Section 11, as amended) is amended to read:

"7-2-13. CREDIT FOR TAXES PAID OTHER STATES BY RESIDENT INDIVIDUALS.--When a resident individual is liable to another state for tax upon income derived from sources outside [this state] New Mexico but also included in [net] taxable income under the Income Tax Act as income allocated or apportioned to New Mexico pursuant to Section 7-2-11 NMSA 1978, the individual, upon filing with the secretary satisfactory evidence of the payment of the tax to the other state, shall receive a credit against the tax due [this state] New Mexico in the amount of the tax paid the other state with respect to income that is required to be either allocated or apportioned to New Mexico. However, in no case shall the credit exceed five and one-half percent of income that is required to be either allocated or apportioned to New Mexico on which the tax payable to the other state was determined. The credit provided by this section does not apply to or include income taxes paid to any municipality, county or other political subdivision of a state."

Section 20. Section 7-2-14 NMSA 1978 (being Laws 1972, Chapter 20, Section 2, as amended) is amended to read:

"7-2-14. LOW-INCOME COMPREHENSIVE TAX REBATE.--

A. Except as otherwise provided in Subsection B of this section, [any] a taxpayer who is a resident of New Mexico who files an individual New Mexico income tax return and who is not a trust, estate or dependent of another [individual] taxpayer may claim a tax rebate for a portion of state and local taxes to which the [resident] taxpayer has been subject during the taxable year for which the return is filed. The tax rebate may be claimed even though the resident has no income taxable under the Income Tax Act. 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 tax rebate that would have been allowed on a joint return.

B. No claim for the tax rebate provided in this section shall be filed by a resident who was an inmate of a public institution for more than six months during the taxable year for which the tax rebate could be claimed or who was not physically present in New Mexico for at least six months during the taxable year for which the tax rebate could be claimed.

C. For the purposes of this section, the [total] number of personal exemptions [for which a tax rebate may be claimed or allowed is determined by adding the number of federal exemptions allowable for federal income tax purposes for each individual included in the return who is domiciled in New Mexico plus two additional exemptions for each individual domiciled in New Mexico included in the return who is sixty-five years of age or older plus one additional exemption for each individual domiciled in New Mexico included in the return who, for federal income tax purposes, is blind plus one exemption for each minor child or stepchild of the resident who would be a dependent for federal income tax purposes if the public assistance contributing to the support of the child or stepchild was considered to have been contributed by the resident] shall be increased:

(1) by two if the taxpayer is sixty-five years of age or older;

(2) by two if the spouse of the taxpayer filing a joint return is sixty-five years of age or older;

(3) by one if, for federal income tax purposes, the taxpayer is blind; and

(4) by one if, for federal income tax purposes, the spouse of the taxpayer filing a joint return is blind.

D. The tax rebate provided for in this section may be claimed in the amount shown in the following table:

Modified gross And the total number

income is: of personal exemptions is:

But Not 6 or

Over Over 1 2 3 4 5 More

$ 0 [$ 500 $ 120 $ 160 $ 200 $ 240 $ 280 $ 320

500 1,000 135 195 250 310 350 415

1,000 1,500 135 195 250 310 350 435

1,500 2,000 135 195 250 310 350 450

2,000 2,500 135 195 250 310 350 450

2,500 3,000 135 195 250 310 350 450

3,000 3,500 135 195 250 310 350 450

3,500 4,000 135 195 250 310 355 450

4,000] 4,500 135 195 250 310 355 450

4,500 5,000 125 190 240 305 355 450

5,000 5,500 115 175 230 295 355 430

5,500 6,000 105 155 210 260 315 410

6,000 7,000 90 130 170 220 275 370

7,000 8,000 80 115 145 180 225 295

8,000 9,000 70 105 135 170 195 240

9,000 10,000 65 95 115 145 175 205

10,000 11,000 60 80 100 130 155 185

11,000 12,000 55 70 90 110 135 160

12,000 13,000 50 65 85 100 115 140

13,000 14,000 50 65 85 100 115 140

14,000 15,000 45 60 75 90 105 120

15,000 16,000 40 55 70 85 95 110

16,000 17,000 35 50 65 80 85 105

17,000 18,000 30 45 60 70 80 95

18,000 19,000 25 35 50 60 70 80

19,000 20,000 20 30 40 50 60 65

20,000 21,000 15 25 30 40 50 55

21,000 22,000 10 20 25 35 40 45.

E. If a taxpayer's modified gross income is zero, the taxpayer may claim a credit in the amount shown in the first row of the table appropriate for the taxpayer's number of personal exemptions.

F. The tax [rebates] rebate provided for in this section may be deducted from the taxpayer's New Mexico income tax liability for the taxable year. If the tax [rebates exceed] rebate exceeds the taxpayer's income tax liability, the excess shall be refunded to the taxpayer.

[G. For purposes of this section, "dependent" means "dependent" as defined by Section 152 of the Internal Revenue Code of 1986, as that section may be amended or renumbered, but also includes any minor child or stepchild of the resident who would be a dependent for federal income tax purposes if the public assistance contributing to the support of the child or stepchild was considered to have been contributed by the resident.]

G. For 2011 and subsequent years, the modified gross income and rebate amounts shown in the table in Subsection D of this section shall be indexed for inflation pursuant to the provisions of the Tax Administration Act using 2010 as the base year, except that the inflation adjustment factor shall be reduced, but not below one, by the product of one-hundredth (0.01) multiplied by the number of years since the base year."

Section 21. Section 7-2-32 NMSA 1978 (being Laws 1997, Chapter 259, Section 8) is amended to read:

"7-2-32. DEDUCTION--PAYMENTS INTO EDUCATION TRUST FUND.-- In determining tax table income, a taxpayer may claim a deduction [from net income] in an amount equal to the payments made by the taxpayer into the education trust fund pursuant to a college investment agreement or prepaid tuition contract under the Education Trust Act in the taxable year for which the deduction is being claimed. The amount of payments made on behalf of any one beneficiary that may be deducted shall not exceed in the aggregate the cost of attendance at the applicable institution of higher education, as determined by the education trust board. A husband and wife who file separate returns for the taxable year in which they could have filed a joint return may each claim only one-half of the deduction that would have been allowed on the joint return. [Individuals having income both within and without this state shall apportion this deduction in accordance with regulations of the secretary.]"

Section 22. Section 7-2-34 NMSA 1978 (being Laws 1999, Chapter 205, Section 1, as amended) is amended to read:

"7-2-34. DEDUCTION--NET CAPITAL GAIN INCOME.--

A. Except as provided in Subsection C of this section, in determining tax table income, a taxpayer may claim a deduction [from net income] in an amount equal to the greater of:

(1) the taxpayer's net capital gain income for the taxable year for which the deduction is being claimed, but not to exceed one thousand dollars ($1,000); or

(2) [the following percentage] fifty percent of the taxpayer's net capital gain income for the taxable year for which the deduction is being claimed

[(a) for a taxable year beginning in 2003, ten percent;

(b) for a taxable year beginning in 2004, twenty percent;

(d) for a taxable year beginning in 2006, forty percent; and

(e) for taxable years beginning on or after January 1, 2007, fifty percent].

B. 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 deduction provided by this section that would have been allowed on the joint return.

C. A taxpayer may not claim the deduction provided in Subsection A of this section if the taxpayer has claimed the credit provided in Section 7-2D-8.1 NMSA 1978.

D. As used in this section, "net capital gain" means "net capital gain" as defined in Section 1222 (11) of the Internal Revenue Code."

Section 23. Section 7-2-35 NMSA 1978 (being Laws 2000 (2nd S.S.), Chapter 7, Section 1) is amended to read:

"7-2-35. DEDUCTION--UNREIMBURSED OR UNCOMPENSATED MEDICAL CARE EXPENSES.--

A. In determining tax table income, a taxpayer may claim a deduction from net income in an amount determined pursuant to Subsection B of this section for medical care expenses paid during the taxable year for medical care of the taxpayer, the taxpayer's spouse or a dependent if the expenses are not reimbursed or compensated for by insurance or otherwise and have not been included in the taxpayer's itemized deductions, as defined in Section 63 of the Internal Revenue Code, for the taxable year.

B. The deduction provided in Subsection A of this section may be claimed in an amount equal to the following percentage of medical care expenses paid during the taxable year based on the taxpayer's filing status and adjusted gross income as follows:

(1) for surviving spouses and married individuals filing joint returns:

If adjusted gross income is: The following percent of medical care expenses paid may be deducted:

Not over $30,000 25 percent

More than $30,000 but not more than $70,000 15 percent

Over $70,000 10 percent;

(2) for single individuals and married individuals filing separate returns:

If adjusted gross income is: The following percent of medical care expenses paid may be deducted:

Not over $15,000 25 percent

More than $15,000 but not more than $35,000 15 percent

Over $35,000 10 percent; and

(3) for heads of household:

If adjusted gross income is: The following percent of medical care expenses paid may be deducted:

Not over $20,000 25 percent

More than $20,000 but not more than $50,000 15 percent

Over $50,000 10 percent.

C. As used in this section:

[(1) "dependent" means dependent as defined in Section 152 of the Internal Revenue Code;

(2)] (1) "health care facility" means a hospital, outpatient facility, diagnostic and treatment center, rehabilitation center, [free-standing] freestanding hospice or other similar facility at which medical care is provided;

[(3)] (2) "medical care" means the diagnosis, cure, mitigation, treatment or prevention of disease or for the purpose of affecting any structure or function of the body;

[(4)] (3) "medical care expenses" means amounts paid for:

(a) the diagnosis, cure, mitigation, treatment or prevention of disease or for the purpose of affecting any structure or function of the body, excluding cosmetic surgery, if provided by a physician or in a health care facility;

(b) prescribed drugs or insulin;

(d) insurance covering medical care, including amounts paid as premiums under Part B of Title [XVIII] 18 of the Social Security Act or for a qualified long-term care insurance contract defined in Section 7702B(b) of the Internal Revenue Code, if the insurance or other amount is paid from income included in the taxpayer's adjusted gross income for the taxable year;

(e) nursing services, regardless of where the services are rendered, if provided by a practical nurse or a professional nurse licensed to practice in [the state] New Mexico pursuant to the Nursing Practice Act;

(f) specialized treatment or the use of special therapeutic devices if the treatment or device is prescribed by a physician and the patient can show that the expense was incurred primarily for the prevention or alleviation of a physical or mental defect or illness; and

(g) care in an institution other than a hospital, such as a sanitarium or rest home, if the principal reason for the presence of the person in the institution is to receive the medical care available; provided that if the meals and lodging are furnished as a necessary part of such care, the cost of the meals and lodging are "medical care expenses";

[(5)] (4) "physician" means a medical doctor, osteopathic physician, dentist, podiatrist, chiropractic physician or psychologist licensed or certified to practice in New Mexico; and

[(6)] (5) "prescribed drug" means a drug or biological that requires a prescription of a physician for its use by an individual."

Section 24. Section 7-2-36 NMSA 1978 (being Laws 2005, Chapter 113, Section 1) is amended to read:

"7-2-36. DEDUCTION--EXPENSES RELATED TO ORGAN DONATION.--

A. In determining tax table income, a taxpayer may claim a deduction [from net income] in an amount not to exceed ten thousand dollars ($10,000) of organ donation-related expenses, including lost wages, lodging expenses and travel expenses, incurred during the taxable year by the taxpayer or the taxpayer's dependent as a result of the taxpayer's or dependent's donation of a human organ to another person for transfer of that human organ to the body of another person.

C. [For the purposes of] As used in this section,

[(1) "dependent" means "dependent" as defined by Section 152 of the Internal Revenue Code, as that section may be amended or renumbered; and

(2)] "human organ" means all or part of a heart, liver, pancreas, kidney, intestine, lung or bone marrow."

Section 25. A new section of the Income Tax Act, Section

7-2-37 NMSA 1978, is enacted to read:

"7-2-37. [NEW MATERIAL] DEDUCTION--ITEMIZED OR SPECIAL STANDARD DEDUCTIONS.--In determining taxable income:

A. a taxpayer other than an estate or trust who is not a dependent of another taxpayer, who itemized deductions for federal income tax purposes for the taxable year and whose itemized deductions exceed the deduction allowed the taxpayer in Section 7-2-38 NMSA 1978 may claim a deduction in an amount equal to the excess of the taxpayer's itemized deductions and the deduction allowed the taxpayer in Section 7-2-38 NMSA 1978;

B. a taxpayer other than an estate or trust who is not a dependent of another taxpayer and who did not itemize deductions for federal income tax purposes for the taxable year may claim a deduction in an amount equal to the amount allowed the taxpayer for the taxpayer's taxable year under Section 63(c)(3) of the Internal Revenue Code; and

C. a taxpayer other than an estate or trust who is a dependent of another taxpayer for the taxable year may claim a deduction in an amount equal to the amount allowed the taxpayer for the taxpayer's taxable year for standard or itemized deductions under Section 63 of the Internal Revenue Code."

Section 26. A new section of the Income Tax Act, Section 7-2-38 NMSA 1978, is enacted to read:

"7-2-38. [NEW MATERIAL] DEDUCTION--STANDARD DEDUCTION.--

A. In determining taxable income, a taxpayer other than an estate or trust who is not a dependent of another taxpayer for the taxable year may claim a deduction in an amount corresponding to the taxpayer's filing status as shown in the following table:

Filing Status Deduction

Married individuals filing separate returns $5,700

Married individuals filing joint returns and

Surviving spouses $11,400

Heads of household $8,300

Single individuals $5,700.

B. For 2011 and subsequent years, the amounts shown in the table in Subsection A of this section shall be indexed for inflation pursuant to the provisions of the Tax Administration Act using 2010 as the base year, except that the inflation adjustment factor shall be reduced, but not below one, by the product of one-hundredth (0.01) multiplied by the number of years since the base year."

Section 27. A new section of the Income Tax Act, Section 7-2-39 NMSA 1978, is enacted to read:

"7-2-39. [NEW MATERIAL] DEDUCTION--PERSONAL EXEMPTION AMOUNT.--

A. In determining taxable income, a taxpayer other than an estate or trust who is not a dependent of another taxpayer for the taxable year may claim a deduction in an amount equal to the product of the per exemption amount in Subsection C of this section multiplied by the number of personal exemptions allowed the taxpayer for the taxpayer's taxable year for federal income tax purposes, reduced by the amount determined pursuant to Subsection B of this section.

B. The deduction computed under Subsection A of this section shall be reduced, but not below zero, by ten percent of the excess, if any, of adjusted gross income over the following threshold amounts:

(1) for single individuals and married individuals filing separate returns, ninety thousand dollars ($90,000);

(2) for married individuals filing joint returns and surviving spouses, one hundred eighty thousand dollars ($180,000); and

(3) for heads of households, one hundred thirty-five thousand dollars ($135,000).

C. The per exemption amount is three thousand six hundred fifty dollars ($3,650).

D. For 2011 and subsequent years, the threshold amounts in Subsection B of this section and the per exemption amount in Subsection C of this section shall be indexed for inflation pursuant to the provisions of the Tax Administration Act using 2010 as the base year, except that the inflation adjustment factor shall be reduced, but not below one, by the product of one-hundredth (0.01) multiplied by the number of years since the base year."

Section 28. A new section of the Income Tax Act, Section 7-2-40 NMSA 1978, is enacted to read:

"7-2-40. [NEW MATERIAL] DEDUCTION--ADDITIONAL PERSONAL EXEMPTION AMOUNT FOR LOW- AND MIDDLE-INCOME TAXPAYERS.--

A. In determining taxable income, a taxpayer other than an estate or trust who is not a dependent of another taxpayer for the taxable year may claim a deduction in an amount equal to the product of the amount for each personal exemption specified in Subsections B through D of this section and the number of personal exemptions allowed the taxpayer for the taxpayer's taxable year for federal income tax purposes.

B. For a married individual filing a separate return with tax table income up to twenty-seven thousand five hundred dollars ($27,500):

(1) if the tax table income is not over fifteen thousand dollars ($15,000), the amount of the deduction pursuant to this section shall be two thousand five hundred dollars ($2,500) for each personal exemption; and

(2) if the tax table income is over fifteen thousand dollars ($15,000) but not over twenty-seven thousand five hundred dollars ($27,500), the amount of the deduction pursuant to this section for each personal exemption shall be calculated by subtracting from two thousand five hundred dollars ($2,500) an amount equal to twenty percent of the amount obtained by subtracting fifteen thousand dollars ($15,000) from the tax table income.

C. For single individuals with tax table income up to thirty-six thousand six hundred sixty-seven dollars ($36,667):

(1) if the tax table income is not over twenty thousand dollars ($20,000), the amount of the deduction pursuant to this section shall be two thousand five hundred dollars ($2,500) for each personal exemption; and

(2) if the tax table income is over twenty thousand dollars ($20,000) but not over thirty-six thousand six hundred sixty-seven dollars ($36,667), the amount of the deduction pursuant to this section for each personal exemption shall be calculated by subtracting from two thousand five hundred dollars ($2,500) an amount equal to fifteen percent of the amount obtained by subtracting twenty thousand dollars ($20,000) from the tax table income.

D. For married individuals filing joint returns, surviving spouses or for heads of households with tax table income up to fifty-five thousand dollars ($55,000):

(1) if the tax table income is not over thirty thousand dollars ($30,000), the amount of the deduction pursuant to this section shall be two thousand five hundred dollars ($2,500) for each personal exemption; and

(2) if the tax table income is over thirty thousand dollars ($30,000) but not over fifty-five thousand dollars ($55,000), the amount of the deduction pursuant to this section for each personal exemption shall be calculated by subtracting from two thousand five hundred dollars ($2,500) an amount equal to ten percent of the amount obtained by subtracting thirty thousand dollars ($30,000) from the tax table income.

E. For 2011 and subsequent years, all of the dollar amounts specified in Subsections B through D of this section shall be indexed for inflation pursuant to the provisions of the Tax Administration Act using 2010 as the base year, except that the inflation adjustment factor shall be reduced, but not below one, by the product of one-hundredth (0.01) multiplied by the number of years since the base year."

Section 29. Section 7-4-3 NMSA 1978 (being Laws 1965, Chapter 203, Section 3, as amended) is amended to read:

"7-4-3. ALLOCATION AND APPORTIONMENT OF INCOME IN GENERAL.--Except as otherwise provided by law, any taxpayer having income [which] that is taxable both within and without this state, other than the rendering of purely personal services by an individual, shall allocate and apportion [his] the taxpayer's net income for the Corporate Income and Franchise Tax Act or taxable income for the Income Tax Act as provided in the Uniform Division of Income for Tax Purposes Act."

Section 30. REPEAL.--Section 7-2-5.8 NMSA 1978 (being Laws 2005, Chapter 104, Section 5, as amended) is repealed.

Section 31. APPLICABILITY.--The provisions of this act are applicable to tax years beginning on or after January 1, 2010.

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