SENATE BILL 443
50th legislature - STATE OF NEW MEXICO - first session, 2011
INTRODUCED BY
John M. Sapien and Ben Lujan
AN ACT
RELATING TO TAXATION; PROVIDING AN ELECTION FOR A SINGLE WEIGHTED SALES FACTOR FOR CERTAIN TAXPAYERS THAT INVEST IN MANUFACTURING ACTIVITY IN NEW MEXICO.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF NEW MEXICO:
SECTION 1. Section 7-4-10 NMSA 1978 (being Laws 1993, Chapter 153, Section 1, as amended) is amended to read:
"7-4-10. APPORTIONMENT OF BUSINESS INCOME.--
A. Except as provided in Subsection B or C of this section, all business income shall be apportioned to this state by multiplying the income by a fraction, the numerator of which is the property factor plus the payroll factor plus the sales factor and the denominator of which is three.
B. For taxable years beginning prior to January 1, 2020, a taxpayer whose principal business activity is manufacturing may elect to have business income apportioned to this state by multiplying the income by a fraction, the numerator of which is the property factor plus the payroll factor plus twice the sales factor and the denominator of which is four. To elect the method of apportionment provided by this subsection, the taxpayer shall notify the department of the election, in writing, no later than the date on which the taxpayer files the return for the first taxable year to which the election will apply. The election will apply to that taxable year and to each taxable year thereafter until the taxpayer notifies the department, in writing, that the election is terminated, except that the taxpayer shall not terminate the election until the method of apportioning business income provided by this subsection has been used by the taxpayer for at least three consecutive taxable years, including a total of at least thirty-six calendar months. Notwithstanding any provisions of this subsection to the contrary, the taxpayer shall use the method of apportionment provided by Subsection A of this section for the taxable year unless:
(1) the taxpayer's corporate income tax liability for the taxable year, computed by the same method of apportionment used in the preceding taxable year, exceeds the corporate income tax liability for the taxpayer's immediately preceding taxable year; or
(2) the sum of the taxpayer's payroll factor and property factor for the taxable year exceeds the sum of the taxpayer's payroll factor and property factor for the taxpayer's base year. For purposes of this paragraph, "base year" means the taxpayer's first taxable year beginning on or after January 1, 1991.
C. A taxpayer whose principal business activity is manufacturing may elect to have business income apportioned to this state beginning in the taxable year following the year in which investments are made as described in this subsection by multiplying the income by a fraction, the numerator of which is the total sales of the taxpayer in New Mexico during the taxable year and the denominator of which is the total sales of the taxpayer from any location within or outside of the state during the taxable year if:
(1) the taxpayer has invested in New Mexico in a taxable year beginning on or after January 1, 2012 but not after December 31, 2020, at least one billion dollars ($1,000,000,000) in capital equipment and facility construction or renovation;
(2) the taxpayer has invested in New Mexico in a taxable year beginning on or after January 1, 2012 but not after December 31, 2020, at least five hundred million dollars ($500,000,000) in capital equipment and facility construction or renovation; or
(3) the taxpayer has invested in New Mexico in a taxable year beginning on or after January 1, 2012 but not after December 31, 2020, at least two hundred fifty million dollars ($250,000,000) in capital equipment and facility construction or renovation.
D. A taxpayer electing to have business income apportioned pursuant to Subsection C of this section may continue that election for a period not to exceed:
(1) eight consecutive taxable years from the taxable year an election pursuant to Paragraph (1) of Subsection C of this section is first claimed and approved;
(2) four consecutive taxable years from the taxable year an election pursuant to Paragraph (2) of Subsection C of this section is first claimed and approved; or
(3) two consecutive taxable years from the taxable year an election pursuant to Paragraph (3) of Subsection C of this section is first claimed and approved.
E. A taxpayer electing to have business income apportioned pursuant to Subsection C of this section shall not in the same taxable years for the same capital equipment claim a credit pursuant to the Investment Credit Act.
[C.] F. For purposes of this section:
(1) "capital equipment" means equipment that is a depreciable asset pursuant to Section 179 of the Internal Revenue Code;
(2) "facility construction or renovation" means construction of a new facility specifically to house a manufacturing business activity or expansion or significant remodeling of an existing facility for manufacturing; and
(3) "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)] (a) construction;
[(2)] (b) farming;
[(3)] (c) 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)] (d) processing natural resources, including hydrocarbons."
SECTION 2. APPLICABILITY.--The provisions of Section 1 of this act apply to taxable years beginning on or after January 1, 2012.
SECTION 3. EFFECTIVE DATE.--The effective date of the provisions of this act is January 1, 2012.
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