HB0276

HOUSE BILL 276

52nd legislature - STATE OF NEW MEXICO - second session, 2016

INTRODUCED BY

Monica Youngblood

AN ACT

RELATING TO TAXATION; MODIFYING THE PROVISIONS OF THE QUALIFIED BUSINESS FACILITY REHABILITATION INCOME TAX CREDIT; EXPANDING THE CREDIT TO INCLUDE NEW BUILDING CONSTRUCTION; CREATING THE QUALIFIED BUSINESS FACILITY CONSTRUCTION AND REHABILITATION CORPORATE INCOME TAX CREDIT; REPEALING AND REENACTING A SECTION OF THE NMSA 1978.

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

SECTION 1. Section 7-2-18.4 NMSA 1978 (being Laws 1994, Chapter 115, Section 1) is repealed and a new Section 7-2-18.4 NMSA 1978 is enacted to read:

"7-2-18.4. [NEW MATERIAL] QUALIFIED BUSINESS FACILITY CONSTRUCTION AND REHABILITATION INCOME TAX CREDIT.--

A. For taxable years beginning after December 31, 2015 and ending before January 1, 2025, a taxpayer who is not a dependent of another taxpayer, who owns a qualified business facility, who incurs costs to construct, restore, rehabilitate or renovate a qualified business facility and who meets the other requirements of this section may receive a nontransferable credit against the taxpayer's tax liability imposed by the Income Tax Act in an amount equal to the following, but subject to the limits in Subsection C of this section:

(1) twenty-five percent of the construction costs incurred after December 31, 2015 and before January 1, 2025 to construct a new qualified business facility; or

(2) fifty percent of the construction costs incurred after December 31, 2015 and before January 1, 2025 to restore, rehabilitate or renovate an existing qualified business facility.

B. The tax credit provided by this section may be referred to as the "qualified business facility construction and rehabilitation income tax credit". The purpose of the qualified business facility construction and rehabilitation income tax credit is to revitalize economically depressed areas in New Mexico.

C. A qualified business facility construction and rehabilitation income tax credit shall not exceed the following amounts:

(1) fifty thousand dollars ($50,000) per newly constructed qualified business facility; or

(2) one hundred thousand dollars ($100,000) per qualified business facility in the case of restoration, rehabilitation or renovation.

D. A taxpayer may claim a qualified business facility construction and rehabilitation income tax credit only in the taxable year in which the taxpayer receives a certificate of occupancy following the taxpayer's restoration, rehabilitation, renovation or new construction project.

E. To receive the qualified business facility construction and rehabilitation income tax credit, a taxpayer shall apply and report the amount of the credit to the department on forms and in the manner prescribed by the department.

F. That portion of a qualified business facility construction and rehabilitation income tax credit that exceeds a taxpayer's tax liability in the taxable year in which the credit is claimed shall not be refunded or transferred, but may be carried forward for up to four consecutive taxable years.

G. A taxpayer claiming the qualified business facility construction and rehabilitation income tax credit may not claim any other New Mexico tax credit for having incurred the costs that make the taxpayer eligible for the qualified business facility construction and rehabilitation income tax credit.

H. Married individuals filing separate returns for a taxable year for which they could have filed a joint return may each claim no more than one-half of the qualified business facility construction and rehabilitation income tax credit that could have been claimed on a joint return.

I. A taxpayer who owns an interest in a business entity that is taxed for federal income tax purposes as a partnership and that is eligible for the qualified business facility construction and rehabilitation income tax credit may claim the credit in proportion to the taxpayer's ownership interest in the business entity. The total credit claimed by all members of the business entity shall not exceed the amount allowed by this section.

J. The department shall compile an annual report on the qualified business facility construction and rehabilitation income tax credit that includes the number of taxpayers approved by the department to receive the credit, the aggregate amount of credits claimed and any other information necessary to evaluate the effectiveness of the credit. Beginning in 2019 and every two years thereafter that the credit is in effect, the department shall compile and present the report 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 purpose for which it was created.

K. As used in this section:

(1) "construction costs" means costs incurred to construct, restore, rehabilitate or renovate a qualified business facility. "Construction costs" excludes expenses incurred:

(a) for an off-site improvement dedicated to a public entity;

(b) to purchase or install machinery or equipment that will be used to conduct a trade or business in the qualified business facility;

(c) to purchase or install tangible personal property that does not become affixed to the qualified business facility, such as furniture and other equipment; and

(d) to make tenant improvements;

(2) "economic development zone" means an area that, in accordance with rules it promulgates, and in consultation with the taxation and revenue department and other affected agencies, the economic development department has designated and continues to recognize as an economic development zone to alleviate economic development concerns;

(3) "off-site improvement" means an access road, sidewalk, curb, sewer or utility line off the land being developed;

(4) "qualified business facility" means a commercial building in an area designated as a New Mexico enterprise zone in accordance with the Enterprise Zone Act or in an economic development zone that:

(a) if newly constructed, is suitable for occupancy by a trade or business and, within ninety days after the taxpayer receives a certificate of occupancy following the construction project, a trade or business occupies at least fifty percent of the building; or

(b) if restored, rehabilitated or renovated: 1) was vacant during the twenty-four months before the start of the restoration, rehabilitation or renovation project; and 2) is suitable for occupancy by a trade or business and, within ninety days after the taxpayer receives a certificate of occupancy following the project, a trade or business occupies at least fifty percent of the building;

(5) "restoration, rehabilitation or renovation":

(a) means the construction services necessary to ensure that a preexisting building: 1) complies with all applicable zoning codes; 2) complies with all applicable building codes, including those pertaining to the modernization of the building's electrical, plumbing and telecommunications systems; and 3) is safe for occupancy and meets the operating needs of a trade or business; and

(b) includes the expansion of or an addition to a building if the expansion or addition complies with all applicable zoning and building codes and does not increase the usable square footage of the preexisting building by more than ten percent; and

(6) "tenant improvement" means an improvement to a structure or land by a tenant at the tenant's expense that becomes a part of the property and cannot be removed upon departure by the tenant without the owner's consent."

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

"[NEW MATERIAL] QUALIFIED BUSINESS FACILITY CONSTRUCTION AND REHABILITATION CORPORATE INCOME TAX CREDIT.--

A. For taxable years beginning after December 31, 2015 and ending before January 1, 2025, a taxpayer that files a New Mexico corporate income tax return and that owns a qualified business facility, that incurs costs to construct, restore, rehabilitate or renovate a qualified business facility and that meets the other requirements of this section may receive a nontransferable credit against the taxpayer's tax liability imposed by the Corporate Income and Franchise Tax Act in an amount equal to the following, but subject to the limits in Subsection C of this section:

(1) twenty-five percent of the construction costs incurred after December 31, 2015 and before January 1, 2025 to construct a new qualified business facility; or

(2) fifty percent of the construction costs incurred after December 31, 2015 and before January 1, 2025 to restore, rehabilitate or renovate an existing qualified business facility.

B. The tax credit provided by this section may be referred to as the "qualified business facility construction and rehabilitation corporate income tax credit". The purpose of the qualified business facility construction and rehabilitation corporate income tax credit is to revitalize economically depressed areas in New Mexico.

C. A qualified business facility construction and rehabilitation corporate income tax credit shall not exceed the following amounts:

(1) fifty thousand dollars ($50,000) per newly constructed qualified business facility; or

(2) one hundred thousand dollars ($100,000) per qualified business facility in the case of restoration, rehabilitation or renovation.

D. A taxpayer may claim a qualified business facility construction and rehabilitation corporate income tax credit only in the taxable year in which the taxpayer receives a certificate of occupancy following the taxpayer's restoration, rehabilitation, renovation or new construction project.

E. To receive the qualified business facility construction and rehabilitation corporate income tax credit, a taxpayer shall apply and report the amount of the credit to the department on forms and in the manner prescribed by the department.

F. That portion of a qualified business facility construction and rehabilitation corporate income tax credit that exceeds a taxpayer's tax liability in the taxable year in which the credit is claimed shall not be refunded or transferred, but may be carried forward for up to four consecutive taxable years.

G. A taxpayer claiming the qualified business facility construction and rehabilitation corporate income tax credit may not claim any other New Mexico tax credit for having incurred the costs that make the taxpayer eligible for the qualified business facility construction and rehabilitation corporate income tax credit.

H. The department shall compile an annual report on the qualified business facility construction and rehabilitation corporate income tax credit that includes the number of taxpayers approved by the department to receive the credit, the aggregate amount of credits claimed and any other information necessary to evaluate the effectiveness of the credit. Beginning in 2019 and every two years thereafter that the credit is in effect, the department shall compile and present the report 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 purpose for which it was created.

I. As used in this section: