SENATE BILL 323
51st legislature - STATE OF NEW MEXICO - second session, 2014
INTRODUCED BY
Pete Campos
AN ACT
RELATING TO TAXATION; CREATING THE SMALL BUSINESS INVESTMENT 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] SMALL BUSINESS INVESTMENT INCOME TAX CREDIT.--
A. A taxpayer who files a New Mexico income tax return, is not a dependent of another taxpayer, is an accredited investor and makes a qualified investment may claim a credit in an amount not to exceed twenty-five percent of not more than two hundred fifty thousand dollars ($250,000) of the qualified investment against the taxpayer's tax liability imposed pursuant to the Income Tax Act. The tax credit provided in this section shall be known as the "small business investment income tax credit".
B. The purpose of the small business investment income tax credit is to stimulate investment in small and emerging businesses in New Mexico.
C. A taxpayer may claim the small business investment income tax credit for not more than five qualified investments in a taxable year; provided that each investment is in a different qualified business. A taxpayer may claim the small business investment income tax credit for qualified investments made in the same qualified business or successor of that business for not more than three taxable years.
D. A taxpayer may claim the small business investment income tax credit no later than one year following the end of the calendar year in which the qualified investment was made; provided that a claim for the credit may not be made or allowed with respect to any investment made after December 31, 2021.
E. A taxpayer may not claim a small business investment income tax credit with respect to a reporting period if the taxpayer claims, with respect to that same reporting period, a credit pursuant to Section 7-2-18.17 NMSA 1978, the Investment Credit Act, the Technology Jobs Tax Credit Act or the Research and Development Small Business Tax Credit Act.
F. A taxpayer shall apply for certification of eligibility for the small business investment income tax credit from the economic development department. Completed applications shall be considered in the order received. If the economic development department determines that the taxpayer is an accredited investor and the investment is a qualified investment, it shall issue a certificate of eligibility to the taxpayer, subject to the limitation in Subsection G of this section. The certificate shall be dated and shall include a calculation of the amount of the small business investment income tax credit for which the taxpayer is eligible. The economic development department may issue rules governing the procedure for administering the provisions of this subsection.
G. The economic development department may issue a certificate of eligibility pursuant to Subsection F of this section only if the total amount of small business investment income tax credits represented by certificates of eligibility issued by the economic development department in any calendar year will not exceed two million dollars ($2,000,000). If the applications for certificates of eligibility for small business investment income tax credits represent an aggregate amount exceeding two million dollars ($2,000,000) for any calendar year, certificates shall be issued in the order that the completed applications were received. The excess applications that would have been certified, but for the limit imposed by this subsection, shall be certified, subject to the same limit, in subsequent calendar years.
H. To claim the small business investment income tax credit, the taxpayer must provide to the taxation and revenue department a certificate of eligibility issued by the economic development department pursuant to Subsection F of this section and any other information the taxation and revenue department may require to determine the amount of the tax credit due the taxpayer. If the requirements of this section have been complied with, the taxation and revenue department shall approve the claim for the credit.
I. That portion of a small business investment 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 five consecutive taxable years.
J. 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 small business investment income tax credit that would have been claimed on a joint return.
K. A taxpayer may be allocated the right to claim a small business investment 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 A of this section.
L. The economic development department shall report annually to the revenue stabilization and tax policy committee and the legislative finance committee on the utilization and effectiveness of the small business investment income tax credit. The report shall include, at a minimum, the number of accredited investors to whom certificates of eligibility were issued by the department in the previous year, the names of those investors, the amount of small business investment income tax credit for which each investor was certified eligible and the number and names of the businesses that the department has determined are qualified businesses for purposes of an investment by an accredited investor. The report shall also include an evaluation of the success of the small business investment income tax credit as an incubator of new businesses in New Mexico and of the continued viability and operation in New Mexico of businesses in which investments eligible for the small business investment income tax credit have been made.
M. As used in this section:
(1) "accredited investor" means a person who is an accredited investor within the meaning of Rule 501 issued by the federal securities and exchange commission pursuant to the federal Securities Act of 1933, as amended;
(2) "business" means a corporation, general partnership, limited partnership, limited liability company or other similar entity, but excludes an entity that is a government or a nonprofit organization designated as such by the federal government or any state;
(3) "equity" means common or preferred stock of a corporation, a partnership interest in a limited partnership or a membership interest in a limited liability company, including debt subject to an option in favor of the creditor to convert the debt into common or preferred stock, a partnership interest or a membership interest;
(4) "qualified business" means a business that:
(a) maintains its principal place of business and employs a majority of its full-time employees, if any, in New Mexico and a majority of its tangible assets, if any, in New Mexico;
(b) is not primarily engaged in or is not primarily organized as any of the following types of businesses: credit or finance services, including banks, savings and loan associations, credit unions, small loan companies or title loan companies; financial brokering or investment; professional services, including accounting, legal services, engineering and any other service the practice of which requires a license; insurance; real estate; construction or construction contracting; consulting or brokering; mining; wholesale or retail trade; providing utility service, including water, sewerage, electricity, natural gas, propane or butane; publishing, including publishing newspapers or other periodicals; broadcasting; or providing internet operating services;
(c) has not issued securities registered pursuant to Section 6 of the federal Securities Act of 1933, as amended; has not issued securities traded on a national securities exchange; is not subject to reporting requirements of the federal Securities Exchange Act of 1934, as amended; and is not registered pursuant to the federal Investment Company Act of 1940, as amended, at the time of the investment;
(d) has one hundred or fewer employees calculated on a full-time-equivalent basis at the time of the investment; and
(e) has not had gross revenues in excess of five million dollars ($5,000,000) in any fiscal year ending on or before the date of the investment; and
(5) "qualified investment" means a cash investment in a qualified business for equity, but does not include an investment by a taxpayer if the taxpayer, a member of the taxpayer's immediate family or an entity affiliated with the taxpayer receives compensation from the qualified business in exchange for services provided to the qualified business within one year of investment in the qualified business."
SECTION 2. APPLICABILITY.--The provisions of this act apply to taxable years beginning on or after January 1, 2014.
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