SB0477

SENATE BILL 477

52nd legislature - STATE OF NEW MEXICO - first session, 2015

INTRODUCED BY

Pete Campos

AN ACT

RELATING TO TAXATION; CREATING TAX CREDITS FOR INVESTMENTS IN FRONTIER COMMUNITIES.

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

SECTION 1. Section 7-1-8.8 NMSA 1978 (being Laws 2009, Chapter 243, Section 10) is amended to read:

"7-1-8.8. INFORMATION THAT MAY BE REVEALED TO OTHER STATE AGENCIES AND LEGISLATIVE COMMITTEES.--An employee of the department may reveal to:

A. a committee of the legislature for a valid legislative purpose, return information concerning any tax or fee imposed pursuant to the Cigarette Tax Act;

B. the revenue stabilization and tax policy committee and the legislative finance committee, return information necessary, not including a taxpayer's name, address or government-issued identification number, to facilitate the compilation of a report to that committee on the effectiveness of a tax credit or deduction that is required pursuant to law;

C. the economic development department, return information necessary, not including a taxpayer's name, address or government-issued identification number, to facilitate the compilation of the report required by Sections 2 and 3 of this 2015 act;

[B.] D. the attorney general, return information acquired pursuant to the Cigarette Tax Act for purposes of Section 6-4-13 NMSA 1978 and the master settlement agreement defined in Section 6-4-12 NMSA 1978;

[C.] E. the commissioner of public lands, return information for use in auditing that pertains to rentals, royalties, fees and other payments due the state under land sale, land lease or other land use contracts;

[D.] F. the secretary of human services or the secretary's delegate, under a written agreement with the department, the last known address with date of all names certified to the department as being absent parents of children receiving public financial assistance, but only for the purpose of enforcing the support liability of the absent parents by the child support enforcement division or any successor organizational unit;

[E.] G. the department of information technology, by electronic media, a database updated quarterly that contains the names, addresses, county of address and taxpayer identification numbers of New Mexico personal income tax filers, but only for the purpose of producing the random jury list for the selection of petit or grand jurors for the state courts pursuant to Section 38-5-3 NMSA 1978;

[F.] H. the state courts, the random jury lists produced by the department of information technology under Subsection [E] G of this section;

[G.] I. the director of the New Mexico department of agriculture or the director's authorized representative, upon request of the director or representative, the names and addresses of all gasoline or special fuel distributors, wholesalers and retailers;

[H.] J. the public regulation commission, return information with respect to the Corporate Income and Franchise Tax Act required to enable the commission to carry out its duties;

[I.] K. the state racing commission, return information with respect to the state, municipal and county gross receipts taxes paid by racetracks;

[J.] L. the gaming control board, tax returns of license applicants and their affiliates as provided in Subsection E of Section 60-2E-14 NMSA 1978;

[K.] M. the director of the workers' compensation administration or to the director's representatives authorized for this purpose, return information to facilitate the identification of taxpayers that are delinquent or noncompliant in payment of fees required by Section 52-1-9.1 or 52-5-19 NMSA 1978; and

[L.] N. the secretary of workforce solutions or the secretary's delegate, return information for use in enforcement of unemployment insurance collections pursuant to the terms of a written reciprocal agreement entered into by the department with the secretary of workforce solutions for exchange of information."

SECTION 2. A new section of the Income Tax Act is enacted to read:

"[NEW MATERIAL] FRONTIER COMMUNITY INVESTMENT INCOME TAX CREDIT.--

A. A taxpayer who files a New Mexico income tax return, is not a dependent of another taxpayer and is a qualified business that makes a qualified investment may claim a credit in an amount not to exceed twenty-five percent of not more than one hundred thousand dollars ($100,000) of the qualified investment. The tax credit provided in this section may be referred to as the "frontier community investment income tax credit".

B. The purposes of the frontier community investment income tax credit are to:

(1) encourage residents of frontier communities to invest in their communities; and

(2) create new jobs and provide needed services for frontier communities.

C. A taxpayer may claim the frontier community investment income tax credit for not more than two qualified investments in a taxable year; provided that each investment is in a different qualified business and the taxpayer hires at least three eligible employees for each qualified business. A taxpayer may claim the frontier community 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. The frontier community investment income tax credit shall not exceed twenty-five thousand dollars ($25,000) for each qualified investment by the taxpayer.

D. A taxpayer may claim the frontier community 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 shall not be allowed with respect to any investment made after December 31, 2024.

E. A taxpayer shall apply for certification of eligibility for the frontier community investment income tax credit to the economic development department. Applications shall be considered in the order received. If the economic development department determines that the taxpayer is a qualified business that has made a qualified investment, it shall issue a certificate of eligibility to the taxpayer, subject to the limitation in Subsection F of this section. The certificate shall be dated and shall include a calculation of the amount of the frontier community 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.

F. The economic development department may issue a certificate of eligibility pursuant to Subsection E of this section only if the total amount of frontier community investment income tax credits represented by certificates of eligibility issued by the economic development department in any calendar year will not exceed seven hundred fifty thousand dollars ($750,000). If the applications for certificates of eligibility for frontier community investment income tax credits represent an aggregate amount exceeding seven hundred fifty thousand dollars ($750,000) for any calendar year, certificates shall be issued in the order that the 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.

G. To claim the frontier community investment income tax credit, the taxpayer shall provide to the taxation and revenue department a certificate of eligibility issued by the economic development department pursuant to Subsection E of this section and any other information that 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.

H. A taxpayer who otherwise qualifies for and claims a frontier community investment income tax credit pursuant to this section for a qualified investment made by a partnership or other business association of which the taxpayer is a member may claim a tax credit only in proportion to the taxpayer's interest in the partnership or business association. The total tax credit claimed in the aggregate by all members of the partnership or business association in a taxable year with respect to a qualified investment shall not exceed twenty-five thousand dollars ($25,000).

I. Married individuals who file separate returns for a taxable year in which they could have filed a joint return may each claim one-half of the credit that would have been allowed on a joint return.

J. The frontier community investment income tax credit may only be deducted from the taxpayer's income tax liability. Any portion of the tax credit provided by this section that remains unused at the end of the taxpayer's taxable year may be carried forward for three consecutive years.

K. The economic development department shall compile an annual report on the frontier community investment income tax credit that shall include the number of taxpayers approved by the department to receive the tax credit, the aggregate amount of tax credits approved, the number of eligible employees hired by taxpayers receiving the tax credit and any other information necessary to evaluate the effectiveness of the tax credit. Beginning in 2020 and every five years thereafter, the economic development 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 tax credit and whether the tax credit is performing the purposes for which it was created.

L. If the taxpayer or a successor in business of the taxpayer ceases operations in a frontier community for at least one hundred eighty consecutive days within a two-year period after the taxpayer has claimed a frontier community investment income tax credit, the department shall grant no further frontier community investment income tax credits to the taxpayer with respect to the qualified business that has ceased operations. In addition, any amount of the tax credit not claimed against the taxpayer's income tax shall be extinguished, and within thirty days after the one hundred eightieth day of the cessation of operations, the taxpayer shall pay the amount of any income tax against which an approved tax credit was taken. For purposes of this section, a taxpayer shall not be deemed to have ceased operations during reasonable periods for maintenance or retooling or for the repair or replacement of facilities damaged or destroyed or during the continuance of labor disputes.

M. As used in this section:

(1) "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;

(2) "eligible employee" means a resident of New Mexico who is employed in a frontier community, but 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 the employer or, 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, 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 the employer or, 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 or, 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, 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 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;

(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) "frontier community" means an area designated by the economic development department as a frontier community on the basis of its economic and rural characteristics;

(5) "new full-time job" means a job created by a business on or after July 1, 2015 but before December 31, 2016 for which work has been performed for at least thirty-two hours per week for forty-eight weeks, but does not include a job:

(a) for which the functional equivalent is eliminated by the business within one year prior to that job's creation; or

(b) created due to a business merger or acquisition or other change in business organization or a taxpayer 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 was not being performed by an employee of the replaced entity; and performed by: 1) the person who performed the job or its functional equivalent prior to the business merger or acquisition or other change in business organization; or 2) a person replacing the person who performed the job or its functional equivalent prior to a business merger or acquisition or other change in business organization;

(6) "qualified business" means a business that:

(a) maintains its principal place of business in New Mexico;

(b) has created at least three new full-time jobs; and

(c) 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

(7) "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 3. A new section of the Corporate Income and Franchise Tax Act is enacted to read:

"[NEW MATERIAL] FRONTIER COMMUNITY INVESTMENT CORPORATE INCOME TAX CREDIT.--

A. A taxpayer that is a qualified business and makes a qualified investment may claim a credit in an amount not to exceed twenty-five percent of not more than one hundred thousand dollars ($100,000) of the qualified investment. The tax credit provided in this section may be referred to as the "frontier community investment corporate income tax credit".

B. The purposes of the frontier community investment corporate income tax credit are to:

(1) encourage residents of frontier communities to invest in their communities; and

(2) create new jobs and provide needed services for frontier communities.

C. A taxpayer may claim the frontier community investment corporate income tax credit for not more than two qualified investments in a taxable year; provided that each investment is in a different qualified business and the taxpayer hires at least three eligible employees for each qualified business. A taxpayer may claim the frontier community investment corporate income tax credit for qualified investments made in the same qualified business or successor of that business for not more than three taxable years. The frontier community investment corporate income tax credit shall not exceed twenty-five thousand dollars ($25,000) for each qualified investment by the taxpayer.

D. A taxpayer may claim the frontier community investment corporate 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 shall not be made or allowed with respect to any investment made after December 31, 2024.

E. A taxpayer shall apply for certification of eligibility for the frontier community investment corporate income tax credit from the economic development department. Applications shall be considered in the order received. If the economic development department determines that the taxpayer is a qualified business that has made a qualified investment, it shall issue a certificate of eligibility to the taxpayer, subject to the limitation in Subsection F of this section. The certificate shall be dated and shall include a calculation of the amount of the frontier community investment corporate 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.

F. The economic development department may issue a certificate of eligibility pursuant to Subsection E of this section only if the total amount of frontier community investment corporate income tax credits represented by certificates of eligibility issued by the economic development department in any calendar year will not exceed seven hundred fifty thousand dollars ($750,000). If the applications for certificates of eligibility for frontier community investment corporate income tax credits represent an aggregate amount exceeding seven hundred fifty thousand dollars ($750,000) for any calendar year, certificates shall be issued in the order that the 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.

G. To claim the frontier community investment corporate income tax credit, the taxpayer shall provide to the taxation and revenue department a certificate of eligibility issued by the economic development department pursuant to Subsection E of this section and any other information that 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.

H. The frontier community investment corporate income tax credit may only be deducted from the taxpayer's corporate income tax liability. Any portion of the tax credit provided by this section that remains unused at the end of the taxpayer's taxable year may be carried forward for three consecutive years.

I. The economic development department shall compile an annual report on the frontier community investment corporate income tax credit that shall include the number of taxpayers approved by the department to receive the tax credit, the aggregate amount of tax credits approved, the number of eligible employees hired by taxpayers receiving the tax credit and any other information necessary to evaluate the effectiveness of the tax credit. Beginning in 2020 and every five years thereafter, the economic development 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 tax credit and whether the tax credit is performing the purposes for which it was created.

J. If the taxpayer or a successor in business of the taxpayer ceases operations in a frontier community for at least one hundred eighty consecutive days within a two-year period after the taxpayer has claimed a frontier community investment corporate income tax credit, the department shall grant no further frontier community investment corporate income tax credits to the taxpayer with respect to the qualified business that has ceased operations. In addition, any amount of the tax credit not claimed against the taxpayer's corporate income tax shall be extinguished, and within thirty days after the one hundred eightieth day of the cessation of operations, the taxpayer shall pay the amount of any corporate income tax against which an approved tax credit was taken. For purposes of this section, a taxpayer shall not be deemed to have ceased operations during reasonable periods for maintenance or retooling or for the repair or replacement of facilities damaged or destroyed or during the continuance of labor disputes.

K. As used in this section: