SENATE CORPORATIONS AND TRANSPORTATION COMMITTEE SUBSTITUTE FOR

SENATE BILL 16

51st legislature - STATE OF NEW MEXICO - second session, 2014

AN ACT

RELATING TO TAXATION; CREATING THE WATER HARVESTING INCOME TAX CREDIT.

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

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

     "[NEW MATERIAL] WATER HARVESTING INCOME TAX CREDIT.--

          A. A taxpayer who is not a dependent of another individual and who purchases and installs a certified water harvesting system after January 1, 2014 and before December 31, 2024 in a residence or business in New Mexico owned by that taxpayer may apply for a tax credit against the taxpayer's tax liability imposed pursuant to the Income Tax Act in an amount up to twenty percent of the purchase and installation costs of the system. The tax credit provided by this section may be referred to as the "water harvesting income tax credit".

          B. The purpose of the water harvesting income tax credit is to provide an incentive for homeowners and businesses to use harvested water for future use.

          C. The water harvesting income tax credit shall not exceed five thousand dollars ($5,000). The department shall allow a water harvesting income tax credit only for a water harvesting system certified by the regulation and licensing department.

          D. The department may allow a maximum annual aggregate of two million dollars ($2,000,000) in water harvesting income tax credits per year. Applications for the credit shall be considered in the order received by the department.

          E. A taxpayer may claim a water harvesting income tax credit in the taxable year in which the taxpayer purchases and installs a water harvesting system. To receive a water harvesting income tax credit, a taxpayer shall apply to the department on forms and in the manner prescribed by the department. The application shall include a certification made pursuant to Subsection J of this section.

          F. If the requirements of this section have been complied with, the department shall issue to the applicant a document granting the tax credit allowed pursuant to this section. The document shall be numbered for identification and shall declare its date of issuance and the amount of the tax credit allowed pursuant to this section. The document may be submitted by the applicant with that taxpayer's income tax return or may be sold, exchanged or otherwise transferred to another taxpayer. The parties to such a transaction shall notify the department of the sale, exchange or transfer within ten days of the sale, exchange or transfer.

          G. That portion of a water harvesting income tax credit that exceeds a taxpayer's tax liability in the taxable year in which the credit is claimed may be carried forward for a maximum of ten consecutive taxable years.

          H. Married individuals filing separate returns for a taxable year for which they could have filed a joint return may each claim only one-half of the water harvesting income tax credit that would have been claimed on a joint return.

          I. A taxpayer may be allocated the right to claim a water harvesting income tax credit in proportion to the taxpayer's ownership interest if the taxpayer owns an interest in a business entity that is taxed for federal income tax purposes as a partnership and that business entity has met all of the requirements to be eligible for the credit. The total credit claimed by all members of the partnership or limited liability company shall not exceed the allowable credit

pursuant to Subsection C of this section.

          J. Prior to July 1, 2014, the regulation and licensing department, in consultation with the state engineer, shall adopt rules establishing procedures to provide certification of water harvesting systems for purposes of obtaining a water harvesting income tax credit. The rules shall address technical specifications and requirements relating to safety, code and standards compliance, minimum and maximum system sizes, system applications and lists of eligible components. The regulation and licensing department may modify the specifications and requirements as necessary to maintain a high level of system quality and performance.

          K. A taxpayer allowed a water harvesting income tax credit pursuant to this section shall report the amount of the credit to the department in a manner required by the department.

          L. The department shall compile an annual report on the water harvesting income tax credit pursuant to this section that shall include the number of taxpayers approved by the department to receive the credit, the aggregate amount of credits approved and any other information necessary to evaluate the effectiveness of the credit. Beginning in 2019 and five years thereafter that the credit is in effect, the department shall compile and present the annual reports to the revenue stabilization and tax policy committee and the legislative finance committee with an analysis of the effectiveness and cost of the credit and whether the credit is performing the purpose for which it was created.

          M. As used in this section, "water harvesting system" is a system that is designed to provide for the collection of rainwater or snowmelt from the rooftop of a building and is capable of storing the rainwater or snowmelt for future use."

     SECTION 2. APPLICABILITY.--The provisions of this act apply to taxable years beginning on or after January 1, 2014.

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