SB0293

SENATE BILL 293

51st legislature - STATE OF NEW MEXICO - first session, 2013

INTRODUCED BY

Michael Padilla

AN ACT

RELATING TO TAXATION; PROVIDING A CORPORATE INCOME TAX CREDIT FOR NEW BUSINESSES; PROVIDING LIMITS AND QUALIFICATIONS; PROVIDING FOR POST-PERFORMANCE ASSESSMENT OF PERFORMANCE OF THE QUALIFYING ACTIVITIES REQUIRED FOR APPROVAL OF THE TAX CREDIT.

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

SECTION 1. A new section of the Corporate Income and Franchise Tax Act is enacted to read:

"[NEW MATERIAL] NEW COMMERCIAL ACTIVITY CORPORATE INCOME TAX CREDIT.--

A. A taxpayer that files a New Mexico corporate income tax return for a taxable year beginning on or after January 1, 2014 but before January 1, 2021 that is a new business that creates economic-based jobs in New Mexico may claim, and the department may allow, a tax credit against the taxpayer's corporate income tax liability of thirty-five percent of the excess above taxes paid to New Mexico in the base year pursuant to the Corporate Income and Franchise Tax Act and the Gross Receipts and Compensating Tax Act. The credit provided in this section may be referred to as the "new commercial activity corporate income tax credit". The department shall allow a new commercial activity corporate income tax credit for a taxpayer that is issued a certificate of eligibility by the economic development department.

B. The purposes of the new commercial activity corporate income tax credit are to:

(1) encourage corporations to start up in or relocate to New Mexico and invest significant amounts of capital in the state to start up or relocate;

(2) increase the number of economic-based jobs available to New Mexico residents in New Mexico; and

(3) generate new state revenue from construction, employment and business activity developed in New Mexico.

C. The new commercial activity corporate income tax credit may be claimed for seven consecutive years beginning with the first taxable year in which the taxpayer is eligible to claim the credit.

D. A taxpayer may claim and be allowed by the department a maximum aggregate amount of new commercial activity corporate income tax credits for the seven-year period for which the taxpayer is able to claim new commercial activity corporate income tax credits not to exceed thirty-five percent of the increase in state revenue above the first base year for which the taxpayer has claimed a new commercial activity corporate income tax credit.

E. Prior to January 1, 2014, the taxation and revenue department and the economic development department shall each adopt rules to implement the provisions of this section for which each department is responsible.

F. For all applications for new commercial activity corporate income tax credits received by the department on or after January 1, 2013, a taxpayer shall not be eligible for a credit pursuant to this section if the economic-based job the new business creates was:

(1) created within one hundred eighty days of a business merger, acquisition, association, affiliation, disposition or other change in organization or management affecting the new business; and

(2) performed by:

(a) the person who performed the job, or its functional equivalent, prior to the business merger, acquisition, association, affiliation, disposition or other change in organization or management; or

(b) another person replacing the person who performed the job, or its functional equivalent, prior to the business merger, acquisition, association, affiliation, disposition or other change in organization or management.

G. For all applications for new commercial activity corporate income tax credits received by the department on or after January 1, 2013, a taxpayer shall not be eligible for a credit pursuant to this section if the economic-based job created is due to a new business entering into a contract or becoming a subcontractor to a contract with a governmental entity that replaces one or more entities performing functionally equivalent services for the governmental entity unless the job is a new economic-based job that was not being performed by an employee of the replaced entity.

H. A corporation claiming a new commercial activity corporate income tax credit shall apply to the economic development department for a certificate of eligibility that states that the taxpayer qualifies for a new commercial activity corporate income tax credit on a form and in a manner authorized by the economic development department.

I. A certificate of eligibility is valid for only the taxpayer that is found eligible by the economic development department to receive a new commercial activity corporate income tax credit and may not be transferred to another taxpayer.

J. The economic development department shall provide a certificate of eligibility to each taxpayer that has applied for and been found to qualify to receive a new commercial activity corporate income tax credit. The economic development department shall maintain records of the certificates of eligibility issued pursuant to this section.

K. To be eligible to receive a new commercial activity corporate income tax credit, a taxpayer shall provide the economic development department with:

(1) evidence of expenditures to establish a new business located in New Mexico;

(2) evidence that the business created at least one hundred economic-based jobs in the base year;

(3) evidence of one full year of operation in New Mexico, including evidence of paying at least one hundred eligible employees within the taxable year for which the credit is to be claimed;

(4) evidence of payment of taxes by the business to the state of New Mexico in the taxable year pursuant to the Corporate Income and Franchise Tax Act and the Gross Receipts and Compensating Tax Act;

(5) evidence that the business is located and operational in New Mexico at the time the credit is claimed; and

(6) statements signed by the taxpayer authorizing the economic development department and the taxation and revenue department to reveal to the legislature and its agencies information from the taxpayer's tax returns needed to evaluate the effectiveness of the new commercial activity corporate income tax credit in fulfilling its purposes.

L. To claim the new commercial activity corporate income tax credit, a taxpayer shall submit with the taxpayer's New Mexico corporate income tax return a certificate of eligibility issued pursuant to this section, individually identifiable and displaying the date on which the certificate of eligibility is issued. The certificate of eligibility shall state the:

(1) details that make the taxpayer eligible to receive the new commercial activity corporate income tax credit;

(2) number of eligible employees employed by the taxpayer in the base year;

(3) total wages paid by the taxpayer in the base year to employees of the new business for which the credit is being claimed; and

(4) amount of the taxpayer's investment to create or relocate the taxpayer's business.

M. The department shall provide a credit claim form on which a taxpayer may claim a new commercial activity corporate income tax credit. A credit claim form shall accompany a return filed pursuant to the Corporate Income and Franchise Tax Act in which the taxpayer is applying for a new commercial activity corporate income tax credit. The department shall determine the amount of new commercial activity corporate income tax credit that is allowed the taxpayer for the taxable year by determining the amount of taxes paid by the taxpayer in the base year pursuant to the Corporate Income and Franchise Tax Act and the Gross Receipts and Compensating Tax Act.

N. The amount of the new commercial activity corporate income tax credit shall be determined by subtracting the tax liability of the taxpayer paid for the base year from the tax liability of the taxpayer for the taxable year for which the taxpayer is claiming the new commercial activity corporate income tax credit and multiplying the difference by thirty-five percent. If the difference is zero or a negative number, then the tax credit for that year shall be zero.

O. Any amount of the new commercial activity corporate income tax credit that the taxpayer is approved to claim that exceeds the tax liability of the taxpayer for the taxable year, up to the maximum allowable aggregate credit, shall be refunded to the taxpayer.

P. A taxpayer claiming the new commercial activity corporate income tax credit pursuant to this section is ineligible for a high-wage jobs tax credit or a rural job tax credit.

Q. The department shall compile an annual report that includes the following information regarding the last fiscal year:

(1) the number of taxpayers approved by the department to receive a new commercial activity corporate income tax credit;

(2) the aggregate amount of new commercial activity corporate income tax credits allowed in the fiscal year;

(3) the number of economic-based jobs created in the fiscal year by taxpayers claiming the new commercial activity corporate income tax credit;

(4) the increase in wages paid by taxpayers claiming the new commercial activity corporate income tax credit in the fiscal year; and

(5) any other information that the department, the legislative finance committee or the revenue stabilization and tax policy committee deems necessary to evaluate the effectiveness of the new commercial activity corporate income tax credit in fulfilling the purposes of this section. Beginning in 2016, the department shall present to the revenue stabilization and tax policy committee an analysis of whether the new commercial activity corporate income tax credit is fulfilling the purposes for which it was created. Recommendations for amending or repealing the new commercial activity corporate income tax based on the analysis shall be included in the report.

R. As used in this section:

(1) "average wage" means the annual average wage amount by county as stated on the web site of the bureau of business and economic research at the university of New Mexico as the average annual covered wages by major sector and county found in the economic data tables for the most recent year published for the county in which a taxpayer has established a new business;

(2) "base year" means the calendar year immediately prior to the fiscal year in which the new commercial activity corporate income tax credit is being claimed;

(3) "benefits" means all remuneration for work performed that is provided to an employee in whole or in part by the employer, other than wages, including insurance programs; health care; medical, dental and vision plans; life insurance; employer contributions to pensions, such as a 401(k); and employer-provided services, such as child care, offered by an employer to the employee. "Benefits" does not include the employer's share of payroll taxes, social security or medicare contributions, federal or state unemployment insurance contributions or workers' compensation insurance;

(4) "business" means a for-profit corporation that is required to pay corporate and franchise taxes pursuant to the Corporate Income and Franchise Tax Act;

(5) "corporate tax liability" means a taxpayer's corporate income tax liability pursuant to the Corporate Income and Franchise Tax Act;

(6) "economic-based job" means a job created by a new business on or after July 1, 2013 that is occupied for at least forty-eight consecutive weeks of a qualifying period by an eligible employee;

(7) "eligible employee" means an individual who is a resident of New Mexico for purposes of the Income Tax Act, is employed by the taxpayer claiming a new commercial activity corporate income tax credit and is paid a wage in the qualifying period that is at least one hundred percent of the average wage in the county in which the employee is employed. "Eligible employee" does not include an individual who:

(a) bears any of the relationships described in Paragraphs (1) through (8) of 26 U.S.C. Section 152(a) to: 1) the employer; 2) if the employer is a corporation, to an individual who owns, directly or indirectly, more than fifty percent in value of the outstanding stock of the corporation; or 3) if the employer is an entity other than a corporation, to an individual who owns, directly or indirectly, more than fifty percent of the capital and profits interest in the entity;

(b) if the employer is an estate or trust, is a grantor, beneficiary or fiduciary of the estate or trust or is an individual who bears any of the relationships described in Paragraphs (1) through (8) of 26 U.S.C. Section 152(a) to a grantor, beneficiary or fiduciary of the estate or trust;

(c) is a dependent, as that term is described in 26 U.S.C. Section 152(a)(9), of: 1) the employer; 2) if the taxpayer is a corporation, of an individual who owns, directly or indirectly, more than fifty percent in value of the outstanding stock of the corporation; 3) if the employer is an entity other than a corporation, of an individual who owns, directly or indirectly, more than fifty percent of the capital and profits interest in the entity; or 4) if the employer is an estate or trust, of a grantor, beneficiary or fiduciary of the estate or trust; or

(d) is working or has worked as an employee or as an independent contractor for an entity that directly or indirectly owns stock in a corporation of the eligible employer or other interest of the eligible employer that represents fifty percent or more of the total voting power of that entity or has a value equal to fifty percent or more of the capital and profits interest in the entity;

(8) "new business" means a corporation:

(a) that operates a business in New Mexico that owns or leases real property as a physical address for the business in New Mexico and employs personnel at that physical address;

(b) that is required to pay tax pursuant to the Corporate Income and Franchise Tax Act and the Gross Receipts and Compensating Tax Act;

(d) in which the taxpayer has invested over twenty-five million dollars ($25,000,000);

(9) "qualifying period" means the period of twelve months beginning on the day an eligible employee begins working in an economic-based job; and

(10) "wages" means all remuneration in cash and the cash value of remuneration paid in any other form for services performed by an employee for an employer; "wages" includes the value of benefits."

SECTION 2. EFFECTIVE DATE.--The effective date of the provisions of this act is July 1, 2013.

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