SENATE BILL 90

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

INTRODUCED BY

Peter Wirth and Ray Begaye

AN ACT

RELATING TO TAXATION; DISTRIBUTING A PORTION OF THE CORPORATE INCOME TAX REVENUE TO THE PUBLIC SCHOOL FUND; AMENDING THE CORPORATE INCOME AND FRANCHISE TAX ACT; REQUIRING COMBINED REPORTING FOR CERTAIN UNITARY CORPORATIONS; REPEALING A SECTION OF THE NMSA 1978 PERTAINING TO CONSOLIDATED RETURNS.

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

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

     "[NEW MATERIAL] DISTRIBUTION--PUBLIC SCHOOL FUND.--A distribution pursuant to Section 7-1-6.1 NMSA 1978 shall be made to the public school fund in an amount equal to twenty-five percent of the net receipts attributable to the corporate income tax for taxable years beginning on or after January 1, 2011."

     Section 2. Section 7-2A-8.3 NMSA 1978 (being Laws 1983, Chapter 213, Section 12, as amended by Laws 1993, Chapter 307, Section 4 and also by Laws 1993, Chapter 309, Section 2) is amended to read:

     "7-2A-8.3. COMBINED RETURNS.--

          A. A unitary corporation that is subject to taxation under the Corporate Income and Franchise Tax Act [and that has not previously filed a combined return pursuant to this section or a consolidated return pursuant to Section 7-2A-8.4 NMSA 1978 may elect to] shall file a combined return with other unitary corporations as though the entire combined net income were that of one corporation. The return filed under this method of reporting shall include the net income of all the unitary corporations. Transactions among the unitary corporations may be eliminated by applying the appropriate rules for reporting income for a consolidated federal income tax return. [Any corporation that has filed an income tax return with New Mexico pursuant to Section 7-2A-8.4 NMSA 1978 shall not file pursuant to this section unless the secretary gives prior permission to file on a combined return basis.]

          B. Once corporations have reported net income through a combined return for any taxable year, they shall file combined returns for subsequent taxable years, so long as they remain unitary corporations, [unless the corporations elect to file pursuant to Section 7-2A-8.4 NMSA 1978 or] unless the secretary grants prior permission for one or more of the corporations to file individually.

          [C. For taxable years beginning on or after January 1, 1993, no unitary corporation once included in a combined return may elect, or be granted permission by the secretary, for any subsequent taxable year to separately account pursuant to Paragraph (4) of Subsection A of Section 7-2A-8 NMSA 1978.]

          C. A unitary corporation whose principal business activity is manufacturing and that has not previously filed a combined or consolidated New Mexico corporate income tax return may elect to file a corporate income tax return as a separate corporate entity. For the purposes of this subsection, "manufacturing" means combining or processing components or materials to increase their value for sale in the ordinary course of business, but does not include:

                (1) construction;

                (2) farming;

                (3) power generation, except for electricity generation at a facility other than one for which both location approval and a certificate of convenience and necessity are required prior to commencing construction or operation of the facility, pursuant to the Public Utility Act; or

                (4) processing natural resources, including hydrocarbons."

     Section 3. REPEAL.--Section 7-2A-8.4 NMSA 1978 (being Laws 1983, Chapter 213, Section 13, as amended by Laws 1993, Chapter 307, Section 5 and by Laws 1993, Chapter 309, Section 3) is repealed.

     Section 4. APPLICABILITY.--The provisions of this act apply to taxable years beginning on or after January 1, 2011.

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