SENATE BILL 455

50th legislature - STATE OF NEW MEXICO - first session, 2011

INTRODUCED BY

Timothy Z. Jennings

AN ACT

RELATING TO TAXATION; PROVIDING FOR MUNICIPALITIES OR COUNTIES WITH POPULATIONS GREATER THAN THIRTY THOUSAND TO SHARE IN THE COSTS OF THE FILM PRODUCTION TAX CREDIT; AUTHORIZING REDUCTIONS IN CERTAIN DISTRIBUTIONS TO THOSE MUNICIPALITIES AND COUNTIES; LIMITING THE ANNUAL AGGREGATE FILM PRODUCTION TAX CREDIT.

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] FOOD AND MEDICAL HOLD-HARMLESS PAYMENT OFFSET FOR FILM PRODUCTION TAX CREDIT EXPENSES--MUNICIPALITIES AND COUNTIES.--

          A. The department shall offset an amount from the distributions made pursuant to Sections 7-1-6.46 and 7-1-6.47 NMSA 1978 that are made as hold-harmless payments to certain municipalities or counties for the benefit derived by those municipalities or counties from the increased economic activity due to the expenditures made by film production companies and identified as direct production expenditures and postproduction expenditures pursuant to Sections 7-2F-1 and 7-2F-2 NMSA 1978 for purposes of the film production tax credit.

          B. The aggregate amount to be distributed pursuant to Sections 7-1-6.46 and 7-1-6.47 NMSA 1978 to the municipalities or counties shall be offset monthly by three and one-third percent of the total annual amount of the film production tax credits allowed in the fiscal year immediately prior to the current fiscal year.

          C. Distributions pursuant to Sections 7-1-6.46 and 7-1.6.47 NMSA 1978 shall be made in the net amount of gross receipts tax and local option gross receipts tax revenue due to each municipality or county after deduction of the offset made pursuant to this section in proportion to the municipality's or county's share of the aggregate net amount due to the municipalities or counties that have distribution offsets.

          D. As used in this section:

                (1) "current fiscal year" means the fiscal year in which the offset is being made;

                (2) "film production company" means a person that produces one or more films or any part of a film;

                (3) "hold-harmless payment" means the distributions made pursuant to Sections 7-1-6.46 and 7-1-6.47 NMSA 1978 that are in lieu of the gross receipts taxes and local gross receipts taxes that a municipality or county would have received but for the food and medical tax deductions authorized pursuant to Sections 7-9-92 and 7-9-93 NMSA 1978;

                (4) "municipality or county" means a municipality or county that has a population greater than thirty thousand according to the most recent federal decennial census; and

                (5) "offset" means a deduction in an amount equivalent to forty percent of the film production tax credit allowed by the department to municipalities and counties in the prior fiscal year and deducted from the gross receipts distributions made monthly to municipalities or counties as hold-harmless payments."

     SECTION 2. Section 7-1-6.46 NMSA 1978 (being Laws 2004, Chapter 116, Section 1, as amended) is amended to read:

     "7-1-6.46. DISTRIBUTION TO MUNICIPALITIES--OFFSET FOR FOOD DEDUCTION AND HEALTH CARE PRACTITIONER SERVICES DEDUCTION.--

          A. A distribution pursuant to Section 7-1-6.1 NMSA 1978 shall be made to a municipality in an amount, subject to any increase or decrease made pursuant to Section 7-1-6.15 NMSA 1978 and subject to any deduction made to offset the tax expenditure from the film production tax credit pursuant to Section 1 of this 2011 act, equal to the sum of:

                (1) for a municipality having a population of less than ten thousand according to the most recent federal decennial census and having per capita taxable gross receipts for the previous calendar year that are less than the average per capita taxable gross receipts for all municipalities for that same calendar year: 

                     (a) the total deductions claimed pursuant to Section 7-9-92 NMSA 1978 for the month by taxpayers from business locations attributable to the municipality multiplied by the sum of the combined rate of all municipal local option gross receipts taxes in effect in the municipality for the month plus one and two hundred twenty-five thousandths percent; and

                     (b) the total deductions claimed pursuant to Section 7-9-93 NMSA 1978 for the month by taxpayers from business locations attributable to the municipality multiplied by the sum of the combined rate of all municipal local option gross receipts taxes in effect in the municipality for the month plus one and two hundred twenty-five thousandths percent; or

                (2) for a municipality not described in Paragraph (1) of this subsection:

                    (a) the total deductions claimed pursuant to Section 7-9-92 NMSA 1978 for the month by taxpayers from business locations attributable to the municipality multiplied by the sum of the combined rate of all municipal local option gross receipts taxes in effect in the municipality on January 1, 2007 or January 1, 2011, whichever is less, plus one and two hundred twenty-five thousandths percent; and

                     (b) the total deductions claimed pursuant to Section 7-9-93 NMSA 1978 for the month by taxpayers from business locations attributable to the municipality multiplied by the sum of the combined rate of all municipal local option gross receipts taxes in effect in the municipality on January 1, 2007 or January 1, 2011, whichever is less, plus one and two hundred twenty-five thousandths percent.

           B. The distribution pursuant to Subsection A of this section is in lieu of revenue that would have been received by the municipality but for the deductions provided by Sections 7-9-92 and 7-9-93 NMSA 1978. The distribution shall be considered gross receipts tax revenue and shall be used by the municipality in the same manner as gross receipts tax revenue, including payment of gross receipts tax revenue bonds.

          C. For the purposes of this section, "business locations attributable to the municipality" means business locations:

(1) within the municipality;

                (2) on land owned by the state, commonly known as the "state fairgrounds", within the exterior boundaries of the municipality;

                (3) outside the boundaries of the municipality on land owned by the municipality; and

                (4) on an Indian reservation or pueblo grant in an area that is contiguous to the municipality and in which the municipality performs services pursuant to a contract between the municipality and the Indian tribe or Indian pueblo if:

                     (a) the contract describes an area in which the municipality is required to perform services and requires the municipality to perform services that are substantially the same as the services the municipality performs for itself; and

                     (b) the governing body of the municipality has submitted a copy of the contract to the secretary.

          D. A distribution [pursuant to this section] of the net amount due after deductions made in Subsection A of this section may be adjusted for a distribution made to a tax increment development district with respect to a portion of a gross receipts tax increment dedicated by a municipality pursuant to the Tax Increment for Development Act."

     SECTION 3. Section 7-1-6.47 NMSA 1978 (being Laws 2004, Chapter 116, Section 2, as amended) is amended to read:

     "7-1-6.47. DISTRIBUTION TO COUNTIES--OFFSET FOR FOOD DEDUCTION AND HEALTH CARE PRACTITIONER SERVICES DEDUCTION.--

          A. A distribution pursuant to Section 7-1-6.1 NMSA 1978 shall be made to a county in an amount, subject to any increase or decrease made pursuant to Section 7-1-6.15 NMSA 1978 and subject to any deduction made to offset the tax expenditure from the film production tax credit pursuant to Section 1 of this 2011 act, equal to the sum of:

                (1) for a county having a population of less than forty-eight thousand according to the most recent federal decennial census:

                     (a) the total deductions claimed pursuant to Section 7-9-92 NMSA 1978 for the month by taxpayers from business locations within a municipality in the county multiplied by the combined rate of all county local option gross receipts taxes in effect for the month that are imposed throughout the county;

                     (b) the total deductions claimed pursuant to Section 7-9-92 NMSA 1978 for the month by taxpayers from business locations in the county but not within a municipality multiplied by the combined rate of all county local option gross receipts taxes in effect for the month that are imposed in the county area not within a municipality;

                     (c) the total deductions claimed pursuant to Section 7-9-93 NMSA 1978 for the month by taxpayers from business locations within a municipality in the county multiplied by the combined rate of all county local option gross receipts taxes in effect for the month that are imposed throughout the county; and

                     (d) the total deductions claimed pursuant to Section 7-9-93 NMSA 1978 for the month by taxpayers from business locations in the county but not within a municipality multiplied by the combined rate of all county local option gross receipts taxes in effect for the month that are imposed in the county area not within a municipality; or

                (2) for a county not described in Paragraph (1) of this subsection:

                     (a) the total deductions claimed pursuant to Section 7-9-92 NMSA 1978 for the month by taxpayers from business locations within a municipality in the county multiplied by the combined rate of all county local option gross receipts taxes in effect on January 1, 2007 or January 1, 2011, whichever is less, that are imposed throughout the county;

                     (b) the total deductions claimed pursuant to Section 7-9-92 NMSA 1978 for the month by taxpayers from business locations in the county but not within a municipality multiplied by the combined rate of all county local option gross receipts taxes in effect on January 1, 2007 or January 1, 2011, whichever is less, that are imposed in the county area not within a municipality;

                     (c) the total deductions claimed pursuant to Section 7-9-93 NMSA 1978 for the month by taxpayers from business locations within a municipality in the county multiplied by the combined rate of all county local option gross receipts taxes in effect on January 1, 2007 or January 1, 2011, whichever is less, that are imposed throughout the county; and

                     (d) the total deductions claimed pursuant to Section 7-9-93 NMSA 1978 for the month by taxpayers from business locations in the county but not within a municipality multiplied by the combined rate of all county local option gross receipts taxes in effect on January 1, 2007 or January 1, 2011, whichever is less, that are imposed in the county area not within a municipality.

          B. The distribution pursuant to Subsection A of this section is in lieu of revenue that would have been received by the county but for the deductions provided by Sections 7-9-92 and 7-9-93 NMSA 1978. The distribution shall be considered gross receipts tax revenue and shall be used by the county in the same manner as gross receipts tax revenue, including payment of gross receipts tax revenue bonds.

          C. A distribution [pursuant to this section] of the net amount due after deductions made pursuant to Subsection A of this section may be adjusted for a distribution made to a tax increment development district with respect to a portion of a gross receipts tax increment dedicated by a county pursuant to the Tax Increment for Development Act."

     SECTION 4. Section 7-2F-1 NMSA 1978 (being Laws 2002, Chapter 36, Section 1, as amended) is amended to read:

     "7-2F-1. FILM PRODUCTION TAX CREDIT.--

          A. The tax credit created by this section may be referred to as the "film production tax credit". An eligible film production company may apply for, and subject to the limitation in Subsection C of this section, the taxation and revenue department may allow, a tax credit in an amount equal to the percentage specified in Subsection B of this section of:

                (1) direct production expenditures made in New Mexico that: 

                     (a) are directly attributable to the production in New Mexico of a film or commercial audiovisual product;

                     (b) are subject to taxation by the state of New Mexico; and 

                     (c) exclude direct production expenditures for which another taxpayer claims the film production tax credit; and

                (2) postproduction expenditures made in New Mexico that: 

                     (a) are directly attributable to the production of a commercial film or audiovisual product;

                     (b) are for services performed in New Mexico;

                     (c) are subject to taxation by the state of New Mexico; and

                     (d) exclude postproduction expenditures for which another taxpayer claims the film production tax credit.

          B. Except as provided in Subsections [C] D and [J] K of this section, the percentage to be applied in calculating the amount of the film production tax credit is twenty-five percent. Municipalities or counties with populations, according to the most recent federal decennial census, of greater than thirty thousand shall in the aggregate contribute proportionally an amount equal to forty percent of the amount of the film production tax credits allowed in each fiscal year. The state shall contribute the remaining sixty percent of the film production tax credits allowed in each fiscal year. The municipal and county portion of the film production tax credits shall be deducted from distributions made pursuant to Sections 7-1-6.46 and 7-1-6.47 NMSA 1978.

          C. The maximum amount of the film production tax credit allowable with respect to the aggregate of all film or commercial audiovisual products is seventy-five million dollars ($75,000,000) with respect to direct production expenditures and postproduction expenditures made on or after July 1, 2011.

          [C.] D. With respect to expenditures attributable to a production for which the film production company receives a tax credit pursuant to the federal new markets tax credit program, the percentage to be applied in calculating the film production tax credit is twenty percent.

          [D.] E. The film production tax credit shall not be claimed with respect to direct production expenditures or postproduction expenditures for which the film production company has delivered a nontaxable transaction certificate pursuant to Section 7-9-86 NMSA 1978.

          [E.] F. A long-form narrative film production for which the film production tax credit is claimed pursuant to Paragraph (1) of Subsection A of this section shall contain an acknowledgment that the production was filmed in New Mexico.

          [F.] G. To be eligible for the film production tax credit, a film production company shall submit to the New Mexico film division of the economic development department information required by the division to demonstrate conformity with the requirements of this section and shall agree in writing:

                (1) to pay all obligations the film production company has incurred in New Mexico;

                (2) to publish, at completion of principal photography, a notice at least once a week for three consecutive weeks in local newspapers in regions where filming has taken place to notify the public of the need to file creditor claims against the film production company by a specified date;

                (3) that outstanding obligations are not waived should a creditor fail to file by the specified date; and

                (4) to delay filing of a claim for the film production tax credit until the New Mexico film division delivers written notification to the taxation and revenue department that the film production company has fulfilled all requirements for the credit. 

          [G.] H. The New Mexico film division shall determine the eligibility of the company and shall report this information to the taxation and revenue department in a manner and at times the economic development department and the taxation and revenue department shall agree upon.

          [H.] I. To receive a film production tax credit, a film production company shall apply to the taxation and revenue department on forms and in the manner the department may prescribe. The application shall include a certification of the amount of direct production expenditures or postproduction expenditures made in New Mexico with respect to the film production for which the film production company is seeking the film production tax credit. If the requirements of this section have been complied with, the taxation and revenue department shall approve the film production tax credit and issue a document granting the tax credit.

          [I.] J. The film production company may apply all or a portion of the film production tax credit granted against personal income tax liability or corporate income tax liability. If the amount of the film production tax credit claimed exceeds the film production company's tax liability for the taxable year in which the credit is being claimed, the excess shall be refunded.

          [J.] K. As applied to direct production expenditures for the services of performing artists, the film production tax credit authorized by this section shall not exceed five million dollars ($5,000,000) for services rendered by all performing artists in a production for which the film production tax credit is claimed.

          L. A film production company that submits a claim for a film production tax credit that is unable to receive the tax credit because the claims for the year exceed the limitation in Subsection C of this section shall be placed for the subsequent taxable year in a queue of film production tax credit claimants that were unable to receive tax credits due in the year in which they applied for the credit in the order of the date on which the credit was authorized for payment."

     SECTION 5. APPLICABILITY.--

          A. The offset to distributions from application of the provisions of this act regarding the film production tax credit applies to distributions of net amounts equal to gross receipts taxes and local option gross receipts taxes that would have been attributable to sales of food or medical services on or after July 1, 2011 but for the deductions authorized in Sections 7-9-92 and 7-9-93 NMSA 1978.

          B. The provisions of Section 4 of this act apply to taxable years beginning on or after July 1, 2011.

     SECTION 6. EFFECTIVE DATE.--The effective date of the provisions of this act is July 1, 2011.

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