HOUSE BILL 339

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

INTRODUCED BY

George Dodge, Jr.

AN ACT

RELATING TO TAXATION; CLARIFYING THE STATUS OF CERTAIN TAX REVENUES HELD BY THE STATE; REVISING PROCEDURES FOR ADJUSTING DISTRIBUTIONS AND TRANSFERS TO LOCAL GOVERNMENTS; PROVIDING PROCEDURES FOR MUNICIPALITIES AND COUNTIES TO DISPUTE REDUCTIONS IN DISTRIBUTIONS; AMENDING AND ENACTING SECTIONS OF THE NMSA 1978.

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

     SECTION 1. Section 7-1-6.1 NMSA 1978 (being Laws 1983, Chapter 211, Section 6, as amended) is amended to read:

     "7-1-6.1. IDENTIFICATION OF MONEY IN TAX ADMINISTRATION SUSPENSE FUND--DISTRIBUTION.--

          A. After the necessary disbursements have been made from the tax administration suspense fund, the money remaining, except for [remittances received within the previous sixty days that are unidentified as to source or disposition] amounts described in Subsection B of this section, in the suspense fund as of the last day of the month shall be identified by tax source and distributed or transferred in accordance with the applicable provisions of the Tax Administration Act. After the necessary distributions and transfers, any balance shall be distributed to the general fund.

          B. The following amounts are to be retained in the tax administration suspense fund at the end of each month:

                (1) remittances received within the previous two months that are unidentified as to source or disposition;

                (2) amounts of county business retention gross receipts tax that are pending annual transfer pursuant to Section 7-1-6.60 NMSA 1978; and

                (3) amounts withheld pursuant to Section 7-1-6.15 NMSA 1978.

          C. For purposes of this section and every section of law that makes a distribution or transfer pursuant to this section, a payment over by the state of receipts from a tax or fee imposed by a political subdivision or the government of an Indian nation, tribe or pueblo, another state or the United States to the entity that imposed the tax or fee is a transfer and not an appropriation."

     SECTION 2. Section 7-1-6.12 NMSA 1978 (being Laws 1983, Chapter 211, Section 17, as amended) is amended to read:

     "7-1-6.12. TRANSFER--REVENUES FROM MUNICIPAL LOCAL OPTION GROSS RECEIPTS TAXES.--

          A. A transfer pursuant to Section 7-1-6.1 NMSA 1978 shall be made to each municipality for which the department is collecting a local option gross receipts tax imposed by that municipality in an amount [subject to any increase or decrease made pursuant to Section 7-1-6.15 NMSA 1978, equal to the net receipts attributable to the local option gross receipts tax imposed by that municipality, less any deduction for administrative cost determined and made by the department pursuant to the provisions of the act authorizing imposition by that municipality of the local option gross receipts tax and any additional administrative fee withheld pursuant to Subsection C of Section 7-1-6.41 NMSA 1978.

          B.] equal to the net receipts attributable to the local option gross receipts tax imposed by that municipality:

                (1) plus any increase made pursuant to Section 7-1-6.15 NMSA 1978 and any other amounts specified by law; and

                (2) less any decrease made pursuant to Section 7-1-6.15 NMSA 1978, any applicable deduction for administrative cost pursuant to Subsection B of this section and any other amounts specified by law.

          B. The deduction for administrative cost applicable to a transfer of municipal local option gross receipts tax shall equal a rate of three percent multiplied by that portion of the net receipts subject to deduction for administrative cost.

          C. A transfer pursuant to 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 7-1-6.13 NMSA 1978 (being Laws 1983, Chapter 211, Section 18, as amended) is amended to read:

     "7-1-6.13. TRANSFER--REVENUES FROM COUNTY LOCAL OPTION GROSS RECEIPTS TAXES.--

          A. Except as provided in [Subsections B and C of this section] Section 7-1-6.60 NMSA 1978, a transfer pursuant to Section 7-1-6.1 NMSA 1978 shall be made to each county for which the department is collecting a local option gross receipts tax imposed by that county in an amount [subject to any increase or decrease made pursuant to Section 7-1-6.15 NMSA 1978] equal to the net receipts attributable to the local option gross receipts tax imposed by that county: [less any deduction for administrative cost determined and made by the department pursuant to the provisions of the act authorizing imposition by that county of the local option gross receipts tax and any additional administrative fee withheld pursuant to Subsection C of Section 7-1-6.41 NMSA 1978.

                B.] (1) plus any increase made pursuant to Section 7-1-6.15 NMSA 1978 and any other amounts specified by law; and

                (2) less any decrease made pursuant to Section 7-1-6.15 NMSA 1978, any applicable deduction for administrative cost pursuant to Subsection B of this section and any other amounts specified by law.

          B. The deduction for administrative cost applicable to a transfer of county local option gross receipts tax shall equal a rate of three percent multiplied by that portion of the net receipts subject to deduction for administrative cost.

          C. A transfer 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.

          [C. Through June 30, 2009, a distribution pursuant to Section 7-1-6.1 NMSA 1978 shall be made to the sole community provider fund from revenue attributable to the county gross receipts tax imposed by a county pursuant to Section

7-20E-9 NMSA 1978, subject to the approval of the board of county commissioners of that county. The distribution shall be in an amount equal to one-twelfth of the county's annual approved contribution for support of sole community provider payments. Revenue in excess of the amount required for the contribution shall be transferred to the county pursuant to the provisions of Subsection A of this section.]"

     SECTION 4. Section 7-1-6.15 NMSA 1978 (being Laws 1983, Chapter 211, Section 20, as amended) is amended to read:

     "7-1-6.15. ADJUSTMENTS OF DISTRIBUTIONS OR TRANSFERS TO MUNICIPALITIES OR COUNTIES.--

          A. The provisions of this section apply to:

                (1) any distribution to a municipality [of gross receipts taxes] pursuant to Section 7-1-6.4, [NMSA 1978 or of interstate telecommunications gross receipts tax pursuant to Section] 7-1-6.36 or 7-1-6.46 NMSA 1978;

                (2) any transfer to a municipality with respect to any local option gross receipts tax imposed by that municipality;

                (3) any transfer to a county with respect to any local option gross receipts tax imposed by that county;

                (4) any distribution to a county pursuant to Section 7-1-6.16 or 7-1-6.47 NMSA 1978;

                (5) any distribution to a municipality or a county of gasoline taxes pursuant to Section 7-1-6.9 NMSA 1978;

                (6) any transfer to a county with respect to any tax imposed in accordance with the Local Liquor Excise Tax Act;

                (7) any distribution to a municipality or a county of cigarette taxes pursuant to Sections 7-1-6.11,

7-12-15 and 7-12-16 NMSA 1978;

                (8) any distribution to a county from the county government road fund pursuant to Section 7-1-6.26 NMSA 1978;

                (9) any distribution to a municipality of gasoline taxes pursuant to Section 7-1-6.27 NMSA 1978; and

                (10) any distribution to a municipality of compensating taxes pursuant to Section 7-1-6.55 NMSA 1978.

          [B. If the secretary determines that any prior distribution or transfer to a political subdivision was erroneous, the secretary shall increase or decrease the next distribution or transfer amount for that political subdivision after the determination, except as provided in Subsection C, D or E of this section, by the amount necessary to correct the error. Subject to the provisions of Subsection E of this section, the secretary shall notify the political subdivision of the amount of each increase or decrease.

          C. No decrease shall be made to current or future distributions or transfers to a political subdivision for any excess distribution or transfer made to that political subdivision more than one year prior to the calendar year in which the determination of the secretary was made.

          D. The secretary, in lieu of recovery from the next distribution or transfer amount, may recover an excess distribution or transfer of one hundred dollars ($100) or more to the political subdivision in installments from current and future distributions or transfers to that political subdivision pursuant to an agreement with the officials of the political subdivision whenever the amount of the distribution or transfer decrease for the political subdivision exceeds ten percent of the average distribution or transfer amount for that political subdivision for the twelve months preceding the month in which the secretary's determination is made; provided that for the purposes of this subsection, the "average distribution or transfer amount" shall be the arithmetic mean of the distribution or transfer amounts within the twelve months immediately preceding the month in which the determination is made.

          E. Except for the provisions of this section, if the amount by which a distribution or transfer would be adjusted pursuant to Subsection B of this section is one hundred dollars ($100) or less, no adjustment or notice need be made.

          F.] B. Except as otherwise provided in this section, the secretary has the authority and duty with respect to the distributions and transfers enumerated in Subsection A of this section to adjust the amount of a distribution or transfer to a municipality or county when information received, whether the information derives from amended returns, approved claims for refund, payments of department-issued assessments, processing of audit adjustments, detection of department error or other source, clearly indicates that such an adjustment is appropriate. No increase or decrease to the current month distribution or transfer amount shall be made with respect to an overpayment or underpayment of tax prior to the beginning of the calendar year prior to the year of the current month.

          C. The amount of a distribution or transfer for a current month shall not include a decrease determined that month to be a qualifying amount. The department shall determine whether a decrease is a qualifying amount. Prior to taking action to collect that qualifying amount in subsequent months, the department shall:

                (1) reduce the qualifying amount by the sum of any component negative amounts related to periods more than one year prior to the calendar year in which the determination was made plus any positive component amounts related to any periods not more than one year prior to the calendar year in which the determination was made; and

                (2) notify the affected municipality or county of the reduced qualifying amount that the department intends to collect beginning with the distributions or transfers to that municipality or county for months beginning in the second month following the month in which notice is given. If practicable, the notice shall be made concurrently with the current month's distribution or transfer to that municipality or county.

          D. Within sixty days from the date notice is given, or if notice is not provided, from the date of first application of a qualifying amount, the municipality or county must either agree to collection of the reduced qualifying amount by entering into a repayment agreement or protest pursuant to Section 7-1-24.2 NMSA 1978. In either case, a municipality or county shall be provided adequate opportunity to review department records concerning the application or proposed application. If a protest is entered, collection of the reduced qualifying amount shall be deferred or, if already collected, returned forthwith until the protest is resolved, but if any portion of the reduced qualifying amount is admitted to be due, that portion may be collected beginning with the next distribution or transfer. If the municipality or county fails to act within the sixty days, the municipality or county will be deemed to have entered into a twenty-four-month repayment agreement.

          E. The secretary is authorized to decrease a distribution to a municipality or county upon being directed to do so by the secretary of finance and administration pursuant to the State Aid Intercept Act or to redirect a distribution to the New Mexico finance authority pursuant to an ordinance or a resolution passed by the county or municipality and a written agreement of the municipality or county and the New Mexico finance authority. Upon direction to decrease a distribution or notice to redirect a distribution to a municipality or county, the secretary shall decrease or redirect the next designated distribution, and succeeding distributions as necessary, by the amount of the state distributions intercept authorized by the secretary of finance and administration pursuant to the State Aid Intercept Act or by the amount of the state distribution intercept authorized pursuant to an ordinance or a resolution passed by the county or municipality and a written agreement with the New Mexico finance authority. The secretary shall transfer the state distributions intercept amount to the municipal or county treasurer or other person designated by the secretary of finance and administration or to the New Mexico finance authority pursuant to written agreement to pay the debt service to avoid default on qualified local revenue bonds or meet other local revenue bond, loan or other debt obligations of the municipality or county to the New Mexico finance authority. A decrease to or redirection of a distribution pursuant to this subsection takes precedence over any collection of a decrease pursuant to Subsections B through D of this section, which may be made only from the net amount of the distribution remaining after application of the decrease or redirection pursuant to this subsection.

          [G.] F. Upon the direction of the secretary of finance and administration pursuant to Section 9-6-5.2 NMSA 1978, the secretary shall temporarily withhold the balance of a distribution to a municipality or county, net of any decrease or redirected amount pursuant to Subsection E of this section and any repayment amount pursuant to Subsection D of this section, that has failed to submit an audit report required by the Audit Act or a financial report required by Subsection F of Section 6-6-2 NMSA 1978. The amount to be withheld, the source of the withheld distribution and the number of months that the distribution is to be withheld shall be as directed by the secretary of finance and administration. A distribution withheld pursuant to this subsection shall remain in the tax administration suspense fund until distributed to the municipality or county and shall not be distributed to the general fund.

          G. As used in this section:

                (1) "average distribution or transfer amount" means the arithmetic mean of the amounts of a distribution or transfer to a municipality or county for the twelve consecutive months immediately preceding the current month or, if a distribution or transfer has been made for fewer than twelve months, the mean for the number of months that distribution or transfer has been made; provided that:

                     (a) if the rate for a state or locally imposed tax changes during the twelve-month period, actual revenues for a month with a tax rate differing from the month immediately preceding the current month shall be standardized by multiplying those revenues by the ratio of the tax rate for the month preceding the current month to the subject month's tax rate; and

                     (b) if the applicable percentage of the distribution pursuant to Section 7-1-6.46 or 7-1-6.47 NMSA 1978 changes during the twelve-month period, actual distribution amounts for months prior to the change shall be multiplied by the ratio of the percentage in place after the change to the percentage in place prior to the change; and

                (2) "qualifying amount" means the combined negative amounts relating to prior periods for a single taxpayer that, absent the provisions of this section, would be included in the computation of the aggregate distribution or transfer amount for a particular political subdivision for the current month if the combined amounts exceed both one hundred dollars ($100) and twenty-five percent of the average distribution or transfer amount for that political subdivision."

     SECTION 5. Section 7-1-8.9 NMSA 1978 (being Laws 2009, Chapter 243, Section 11) is amended to read:

     "7-1-8.9. INFORMATION THAT MAY BE REVEALED TO LOCAL GOVERNMENTS AND THEIR AGENCIES.--

          A. An employee of the department may reveal to:

                [A.] (1) the officials or employees of a municipality of this state authorized in a written request by the municipality for a period specified in the request within the twelve months preceding the request:

                     [(1)] (a) the names, taxpayer identification numbers, [and] addresses and taxable gross receipts of registered gross receipts taxpayers reporting gross receipts for that municipality under the Gross Receipts and Compensating Tax Act or a local option gross receipts tax imposed by that municipality. The department may also reveal the information described in this [paragraph] subparagraph quarterly or upon such other periodic basis as the secretary and the municipality may agree in writing; and

                     [(2)] (b) information indicating whether persons shown on a list of businesses located within that municipality furnished by the municipality have reported gross receipts to the department but have not reported gross receipts for that municipality under the Gross Receipts and Compensating Tax Act or a local option gross receipts tax imposed by that municipality;

                [B.] (2) the officials or employees of a county of this state authorized in a written request by the county for a period specified in the request within the twelve months preceding the request:

                     [(1)] (a) the names, taxpayer identification numbers, [and] addresses and taxable gross receipts of registered gross receipts taxpayers reporting gross receipts either for that county in the case of a local option gross receipts tax imposed on a countywide basis or only for the areas of that county outside of any incorporated municipalities within that county in the case of a county local option gross receipts tax imposed only in areas of the county outside of any incorporated municipalities. The department may also reveal the information described in this [paragraph] subparagraph quarterly or upon such other periodic basis as the secretary and the county may agree in writing;

                     [(2)] (b) in the case of a local option gross receipts tax imposed by a county on a countywide basis, information indicating whether persons shown on a list of businesses located within the county furnished by the county have reported gross receipts to the department but have not reported gross receipts for that county under the Gross Receipts and Compensating Tax Act or a local option gross receipts tax imposed by that county on a countywide basis; and

                     [(3)] (c) in the case of a local option gross receipts tax imposed by a county only on persons engaging in business in that area of the county outside of incorporated municipalities, information indicating whether persons on a list of businesses located in that county outside of the incorporated municipalities but within that county furnished by the county have reported gross receipts to the department but have not reported gross receipts for that county outside of the incorporated municipalities within that county under the Gross Receipts and Compensating Tax Act or a local option gross receipts tax imposed by the county only on persons engaging in business in that county outside of the incorporated municipalities; and

                [C.] (3) officials or employees of a municipality or county of this state, authorized in a written request of the municipality or county, for purposes of inspection, the records of the department pertaining to an increase or decrease to the net receipts forming the basis for a distribution or transfer made pursuant to Section 7-1-6.15 NMSA 1978; the proposed application pursuant to Section 7-1-6.15 NMSA 1978 or transfer due the municipality or county; or a distribution of gross receipts tax or a transfer of an imposed local option gross receipts tax equaling zero or a negative amount for the purpose of reviewing the basis for the increase or decrease, application or zero or negative amount.

          B. Information received by a county or municipal official or employee pursuant to Subsection A of this section is return or return information revealed pursuant to a written agreement between the department and the county or municipality and is subject to the provisions of Section 7-1-8 NMSA 1978. Any written agreement pursuant to this section may restrict receipt of the information to one or more officials or employees of the municipality or county. The department may require that the municipal or county official or employee satisfactorily complete appropriate training. The authorized officials or employees may only reveal the information provided in this subsection to another authorized official or employee, to an employee of the department, or a district court, an appellate court or a federal court in a proceeding relating to a disputed distribution and in which both the state and the municipality or county are parties."

     SECTION 6. Section 7-1-24.1 NMSA 1978 (being Laws 2013, Chapter 27, Section 7) is amended to read:

     "7-1-24.1. DISPUTING LIABILITIES--CONDUCT OF HEARINGS--HEARING OFFICER.--

          A. Upon timely receipt of a protest filed pursuant to Section 7-1-24 or 7-1-24.2 NMSA 1978, the department or a hearing officer shall set a date for a hearing within ninety days.

          B. A hearing officer shall be designated by the secretary to conduct the hearing. A [taxpayer] protestant may appear at a hearing on the [taxpayer's] protestant's own behalf or may be represented by a bona fide employee, an attorney, a certified public accountant, a registered public accountant or, with respect only to tax imposed pursuant to the Income Tax Act, a person who is an enrolled agent for federal income tax purposes. If the department and the [taxpayer] protestant agree, the hearing may be conducted via videoconference. A hearing shall not be open to the public except upon request of the [taxpayer] protestant. A hearing officer may postpone or continue a hearing at the hearing officer's discretion.

          C. A hearing officer shall not engage or participate as an employee of the department in the enforcement or formulation of general tax policy, other than to conduct hearings. A [taxpayer] protestant may request that the secretary determine whether a hearing officer engaged or participated in the enforcement or formulation of general tax policy and whether that engagement or participation affects the hearing officer's impartiality in a particular matter. The secretary may designate another hearing officer for the matter to avoid actual or apparent prejudice.

          D. A hearing officer shall not engage in ex-parte communications concerning the substantive issues of any matter that has been protested while that matter is still pending. If the secretary determines that a hearing officer has engaged in prohibited ex-parte communications, the secretary shall designate another hearing officer for that matter.

          E. The rules of evidence shall not apply in a hearing. The hearing officer may require reasonable substantiation of statements or records tendered, the accuracy or truth of which is in reasonable doubt, to rule on the admissibility of evidence. A [taxpayer] protestant may request a written ruling on a contested question of evidence in a matter in which the [taxpayer] protestant has filed a written protest and for which that protest is pending.

          F. In hearings before a hearing officer, the Rules of Civil Procedure for the District Courts shall not apply. The hearing officer shall conduct a hearing to allow the ample and fair presentation of both complaints and defenses. The hearing officer shall hear arguments, permit discovery, entertain and dispose of motions, require written expositions of the case as the circumstances justify and render a decision in accordance with the law and the evidence presented and admitted. A [taxpayer] protestant may request a written ruling on any contested question of procedure in a matter in which the [taxpayer] protestant has filed a written protest and for which that protest is pending.

          G. In the case of a hearing of any protest, the hearing officer shall make and preserve a complete record of the proceedings. At the beginning of the hearing, the hearing officer shall inform the [taxpayer] protestant of the [taxpayer's] protestant's right to representation. The hearing officer, within thirty days of the conclusion of the hearing, shall inform the protestant in writing of the decision and of the protestant's right to, and the requirements for perfection of, an appeal from the decision to the court of appeals and of the consequences of a failure to appeal. The written decision shall embody an order granting or denying the relief requested or granting or denying a part of the relief requested as appropriate.

          H. A [taxpayer] protestant with two or more protests containing related issues may request that the protests be combined and heard jointly. The hearing officer shall grant the request to combine protests unless it would create an unreasonable burden on the department."

     SECTION 7. A new Section 7-1-24.2 NMSA 1978 is enacted to read:

     "7-1-24.2. [NEW MATERIAL] DISPUTING APPLICATION OF QUALIFYING AMOUNT--MUNICIPALITIES AND COUNTIES.--

          A. A municipality or county may dispute an application or proposed application of a qualifying amount to any distribution or transfer to the municipality or county pursuant to Section 7-1-6.15 NMSA 1978. The municipality or county shall be provided adequate opportunity to review department records concerning the application or proposed application.

          B. The municipality or county may dispute an application or proposed application of a qualifying amount by electing either to file an action in district court or to file with the secretary a written protest, but not both. The pursuit of one of the remedies constitutes an unconditional waiver to pursue the other.

          C. Every protest pursuant to this section shall identify the municipality or county, the total amount of the qualifying amount involved, if known, and the month in which the qualifying amount was applied or is proposed to be applied to a distribution or transfer and state the grounds for the protest and the affirmative relief requested. The statement of grounds for protest shall specify individual grounds upon which the protest is based and a summary statement of the evidence, if any, expected to be produced supporting each ground asserted or to demonstrate that the action underlying the qualifying amount was erroneous; provided that the municipality or county may supplement the statement at any time prior to ten days before any hearing conducted on the protest pursuant to Section 7-1-24.1 NMSA 1978 or, if a scheduling order has been issued, in accordance with the scheduling order. The secretary, to expedite resolution, shall provide for informal conferences and exchanges of information with the municipality or county before setting a hearing of the protest.

          D. Any protest by a municipality or county pursuant to this section shall be filed within the sixty-day period provided by Subsection D of Section 7-1-6.15 NMSA 1978. If a protest is not filed within the time required, the secretary may apply a proposed application to the next distribution or transfer or, if the qualifying amount at issue had been applied to a distribution or transfer, the application shall stand.

          E. Nothing in this section shall be construed to authorize any criminal proceedings hereunder or to authorize an administrative protest of a subpoena or summons."

     SECTION 8. EFFECTIVE DATE.--The effective date of the provisions of this act is July 1, 2014.

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