HOUSE TAXATION AND REVENUE COMMITTEE SUBSTITUTE FOR

HOUSE BILL 291

55th legislature - STATE OF NEW MEXICO - first session, 2021

 

 

 

 

 

 

 

AN ACT

RELATING TO TAXATION; ADDING NEW BRACKETS TO THE INCOME TAX; INCREASING AND INDEXING THE LOW-INCOME COMPREHENSIVE TAX REBATE; INCREASING THE AMOUNT OF THE WORKING FAMILIES TAX CREDIT; EXPANDING THE CREDIT TO CERTAIN RESIDENTS WHO ARE INELIGIBLE FOR THE FEDERAL EARNED INCOME TAX CREDIT ON WHICH THE WORKING FAMILIES TAX CREDIT IS BASED; LIMITING THE CAPITAL GAINS DEDUCTION FROM NET INCOME FOR CERTAIN TAXPAYERS; PROVIDING A THREE PERCENT LIMITATION ON INCREASES IN VALUATION OF RESIDENTIAL PROPERTY TO PROPERTY THAT IS OCCUPIED BY THE OWNER AS THE OWNER'S PRINCIPAL PLACE OF RESIDENCE; PROVIDING A TEN PERCENT LIMITATION ON INCREASES IN VALUATION OF RESIDENTIAL PROPERTY THAT IS NOT OCCUPIED BY THE OWNER AS THE OWNER'S PRINCIPAL PLACE OF RESIDENCE.

 

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

     SECTION 1. Section 7-2-7 NMSA 1978 (being Laws 2005, Chapter 104, Section 4, as amended) is amended to read:

     "7-2-7. INDIVIDUAL INCOME TAX RATES.--The tax imposed by Section 7-2-3 NMSA 1978 shall be at the following rates for any taxable year beginning on or after January 1, [2021] 2022:

          A. For married individuals filing separate returns:

If the taxable income is:             The tax shall be:

Not over $4,000                       1.7% of taxable income

Over $4,000 but not over $8,000       $68.00 plus 3.2% of excess over $4,000

Over $8,000 but not over $12,000      $196 plus 4.7% of excess over $8,000

Over $12,000 but not over             $384 plus 4.9% of excess

[$157,500] $100,000                   over $12,000

Over $100,000 but not over $157,500   $4,696 plus 5.5% of excess over $100,000

Over $157,500 but not over $207,500   [$7,513.50] $7,858.50 plus 5.9% of excess over $157,500

Over $207,500 but not over $311,000   $10,808.50 plus 6.2% of

                                      excess over $207,500

Over $311,000                         $17,225.50 plus 6.5% of excess over $311,000.

          B. For heads of household, surviving spouses and married individuals filing joint returns:

If the taxable income is:             The tax shall be:

Not over $8,000                       1.7% of taxable income

Over $8,000 but not over $16,000      $136 plus 3.2% of excess over $8,000

Over $16,000 but not over $24,000     $392 plus 4.7% of excess over $16,000

Over $24,000 but not over             $768 plus 4.9% of excess

[$315,000] $200,000                   over $24,000

Over $200,000 but not over $315,000   $9,392 plus 5.5% of excess over $200,000

Over $315,000 but not over $415,000   [$15,027] $15,717 plus 5.9% of excess over $315,000

Over $415,000 but not over $622,000   $21,617 plus 6.2% of

                                      excess over $415,000

Over $622,000                         $34,451 plus 6.5% of excess over $622,000.

          C. For single individuals and for estates and trusts:

If the taxable income is:             The tax shall be:

Not over $5,500                       1.7% of taxable income

Over $5,500 but not over $11,000      $93.50 plus 3.2% of excess over $5,500

Over $11,000 but not over $16,000     $269.50 plus 4.7% of excess over $11,000

Over $16,000 but not over             $504.50 plus 4.9% of

[$210,000] $135,000                   excess over $16,000

Over $135,000 but not over $210,000   $6,335.50 plus 5.5% of excess over $135,000

Over $210,000 but not over $280,000   [$10,010.50] $10,460.50 plus 5.9% of excess over $210,000

Over $280,000 but not over $415,000   $14,950.50 plus 6.2% of

                                      excess over $280,000

Over $415,000                         $22,960.50 plus 6.5% of excess over $415,000.

          D. The tax on the sum of any lump-sum amounts included in net income is an amount equal to five multiplied by the difference between:

                (1) the amount of tax due on the taxpayer's taxable income; and

                (2) the amount of tax that would be due on an amount equal to the taxpayer's taxable income and twenty percent of the taxpayer's lump-sum amounts included in net income."

     SECTION 2. Section 7-2-14 NMSA 1978 (being Laws 1972, Chapter 20, Section 2, as amended) is amended to read:

     "7-2-14. LOW-INCOME COMPREHENSIVE TAX REBATE.--

          A. Except as otherwise provided in Subsection B of this section, any resident who files an individual New Mexico income tax return and who is not a dependent of another individual may claim a tax rebate for a portion of state and local taxes to which the resident has been subject during the taxable year for which the return is filed. The tax rebate may be claimed even though the resident has no income taxable under the Income Tax Act. [A husband and wife] Married individuals who file separate returns for a taxable year in which they could have filed a joint return may each claim only one-half of the tax rebate that would have been allowed on a joint return.

          B. No claim for the tax rebate provided in this section shall be filed by a resident who was an inmate of a public institution for more than six months during the taxable year for which the tax rebate could be claimed or who was not physically present in New Mexico for at least six months during the taxable year for which the tax rebate could be claimed.

          C. For the purposes of this section, the total number of exemptions for which a tax rebate may be claimed or allowed is determined by adding the number of federal exemptions allowable for federal income tax purposes for each individual included in the return who is domiciled in New Mexico plus two additional exemptions for each individual domiciled in New Mexico included in the return who is sixty-five years of age or older plus one additional exemption for each individual domiciled in New Mexico included in the return who, for federal income tax purposes, is blind plus one exemption for each minor child or stepchild of the resident who would be a dependent for federal income tax purposes if the public assistance contributing to the support of the child or stepchild was considered to have been contributed by the resident.

          D. Except as provided in Subsection F of this section, the tax rebate provided for in this section may be claimed in the amount shown in the following table:

Modified gross       And the total number

income is:           of exemptions is:

          But Not 6 or

Over Over 1 2 3 4 5 More

 [$ 0  $ 500 $ 120   $ 160   $ 200  $ 240  $ 280 $ 320

   500   1,000   135     195     250    310    350   415

 1,000   1,500   135     195     250    310    350   435

 1,500   2,000   135     195     250    310    350   450

 2,000   2,500   135     195     250    310    350   450

 2,500   3,000   135     195     250    310    350   450

 3,000   3,500   135     195     250    310    350   450

 3,500   4,000   135     195     250    310    355   450

 4,000   4,500   135     195     250    310    355   450

 4,500   5,000   125     190     240    305    355   450

 5,000   5,500   115     175     230    295    355   430

 5,500   6,000   105     155     210    260    315   410

 6,000   7,000    90     130     170    220    275   370

 7,000   8,000    80     115     145    180    225   295

 8,000   9,000    70     105     135    170    195   240

 9,000  10,000    65      95     115    145    175   205

10,000  11,000    60      80     100    130    155   185

11,000  12,000    55      70      90    110    135   160

12,000  13,000    50      65      85    100    115   140

13,000  14,000    50      65      85    100    115   140

14,000  15,000    45      60      75     90    105   120

15,000  16,000    40      55      70     85     95   110

16,000  17,000    35      50      65     80     85   105

17,000  18,000    30      45      60     70     80    95

18,000  19,000    25      35      50     60     70    80

19,000  20,000    20      30      40     50     60    65

20,000  21,000    15      25      30     40     50    55

21,000  22,000    10      20      25     35     40   45]

   $ 0 $ 1,000 $ 195   $ 260   $ 325  $ 390  $ 455 $ 520

 1,000   1,500   220     315     405    505    570   675

 1,500   2,500   220     315     405    505    570   705

 2,500   7,500   220     315     405    505    570   730

 7,500   8,000   205     310     390    495    575   730

 8,000   9,000   185     285     375    480    575   700

 9,000  10,000   170     250     340    425    510   665

10,000  11,500   145     210     275    360    445   600

11,500  13,000   130     185     235    295    365   480

13,000  14,500   115     170     220    275    315   390

14,500  16,500   105     155     185    235    285   335

16,500  18,000   100     130     165    210    250   300

18,000  19,500    90     115     145    180    220   260

19,500  21,000    80     105     140    165    185   230

21,000  23,000    80     105     140    165    185   230

23,000  24,500    75     100     120    145    170   195

24,500  26,000    65      90     115    140    155   180

26,000  27,500    55      80     105    130    140   170

27,500  29,500    50      75     100    115    130   155

29,500  31,000    40      55      80    100    115   130

31,000  32,500    35      50      65     80    100   105

32,500  34,000    25      40      50     65     80    90

34,000  36,000    15      35      40     55     65    75.

          E. If a taxpayer's modified gross income is zero, the taxpayer may claim a credit in the amount shown in the first row of the table appropriate for the taxpayer's number of exemptions as adjusted by the provisions of Subsection F of this section.

          F. For the 2022 taxable year and each subsequent taxable year, the amount of rebate shown in the table in Subsection D of this section shall be adjusted to account for inflation. The department shall make the adjustment by multiplying each amount of rebate by a fraction, the numerator of which is the consumer price index ending during the prior taxable year and the denominator of which is the consumer price index ending in tax year 2021. The result of the multiplication shall be rounded down to the nearest one dollar ($1.00), except that if the result would be an amount less than the corresponding amount for the preceding taxable year, then no adjustment shall be made.

          [F.] G. The tax rebates provided for in this section may be deducted from the taxpayer's New Mexico income tax liability for the taxable year. If the tax rebates exceed the taxpayer's income tax liability, the excess shall be refunded to the taxpayer.

          [G.] H. For purposes of this section:

                (1) "consumer price index" means the consumer price index for all urban consumers published by the United States department of labor for the month ending September 30; and

                (2) "dependent" means "dependent" as defined by Section 152 of the Internal Revenue Code of 1986, as that section may be amended or renumbered, but also includes any minor child or stepchild of the resident who would be a dependent for federal income tax purposes if the public assistance contributing to the support of the child or stepchild was considered to have been contributed by the resident."

     SECTION 3. Section 7-2-18.15 NMSA 1978 (being Laws 2007, Chapter 45, Section 9, as amended) is amended to read:

     "7-2-18.15. WORKING FAMILIES TAX CREDIT.--

          A. A taxpayer who is a resident and who files an individual New Mexico income tax return may claim a credit in an amount equal to [seventeen] twenty percent of the federal earned income tax credit for which that [individual] taxpayer is eligible for the same taxable year [pursuant to Section 32 of the Internal Revenue Code] or would have been eligible but for the identification number requirement pursuant to 26 U.S.C. 32(m), as that section may be amended or renumbered.

          B. A taxpayer who is a resident and who files an individual New Mexico tax return may claim a credit in an amount equal to twenty percent of the federal earned income tax credit for which that taxpayer would have been eligible for the same taxable year but for the age requirement pursuant to 26 U.S.C. 32(c)(1)(A)(ii)(II), as that section may be amended or renumbered; provided that the taxpayer is at least eighteen years of age but has not reached the age of twenty-five.

          C. The credit provided in this section may be referred to as the "working families tax credit".

          [B.] D. The working families tax credit may be deducted from the income tax liability of an individual who claims the credit and qualifies for the credit pursuant to this section. If the credit exceeds the individual's income tax liability for the taxable year, the excess shall be refunded to the individual.

          E. As used in this section, "federal earned income tax credit" means the tax credit allowed pursuant to 26 U.S.C. 32, as that section may be amended or renumbered."

     SECTION 4. Section 7-2-34 NMSA 1978 (being Laws 1999, Chapter 205, Section 1, as amended) is amended to read:

     "7-2-34. DEDUCTION--NET CAPITAL GAIN INCOME.--

          A. Except as provided in [Subsection C] Subsections B and D of this section, a taxpayer may claim a deduction from net income in an amount equal to the taxpayer's net capital gain income for the taxable year for which the deduction is being claimed, but not to exceed one thousand dollars ($1,000).

          B. Except as provided in Subsection D of this section, a taxpayer may claim a deduction from net income attributable to the sale of a New Mexico business in an amount equal to the greater of:

                (1) the taxpayer's net capital gain income for the taxable year for which the deduction is being claimed, but not to exceed one thousand dollars ($1,000); or

                (2) forty percent of the taxpayer's net capital gain income for the taxable year for which the deduction is being claimed; provided that:

                     (a) the net capital gain from the sale does not exceed one million dollars ($1,000,000);

                     (b) the business was the principal business of the taxpayer; and

                     (c) the taxpayer was involved in the operation of the small business on a regular, continuous and substantial basis.

          [B.] C. Married individuals who file separate returns for a taxable year in which they could have filed a joint return may each claim only one-half of the deduction provided by this section that would have been allowed on the joint return.

          [C.] D. A taxpayer may not claim the deduction provided in [Subsection A of] this section if the taxpayer has claimed the credit provided in Section 7-2D-8.1 NMSA 1978.

          [D.] E. As used in this section:

                (1) "net capital gain" means "net capital gain" as defined in Section 1222 (11) of the Internal Revenue Code; and

                (2) "New Mexico business" means a business that is owned as follows:

                     (a) for a sole proprietorship, one hundred percent of the tangible assets of the business are owned or leased by a New Mexico resident;

                     (b) for a corporation or limited liability company, a business with its principal office and a majority of its full-time-equivalent employees located in New Mexico; and

                     (c) for a limited partnership, a business with its principal place of business and one hundred percent of its tangible assets located in New Mexico."

     SECTION 5. Section 7-36-21.2 NMSA 1978 (being Laws 2000, Chapter 10, Section 2, as amended) is amended to read:

     "7-36-21.2. LIMITATION ON INCREASES IN VALUATION OF RESIDENTIAL PROPERTY.--

          A. Except as provided in Subsections B through D of this section, residential property shall be valued at its current and correct value in accordance with the provisions of the Property Tax Code. [provided that]

          B. For the 2001 [and subsequent] through 2023 tax years, the value of a property in any tax year shall not exceed the higher of one hundred three percent of the value in the tax year prior to the tax year in which the property is being valued or one hundred six and one-tenth percent of the value in the tax year two years prior to the tax year in which the property is being valued. [This limitation]

          C. For the 2024 and subsequent tax years, the value of a residential property that is occupied by the owner as the owner's principal place of residence in any tax year shall not exceed the higher of one hundred three percent of the value in the tax year prior to the tax year in which the property is being valued or one hundred six and one-tenth percent of the value in the tax year two years prior to the tax year in which the property is being valued.

          D. For the 2024 and subsequent tax years, the value of a residential property that is not occupied by the owner as the owner's principal place of residence in any tax year shall not exceed the higher of one hundred ten percent of the value in the tax year prior to the tax year in which the property is being valued or one hundred twenty-one percent of the value in the tax year two years prior to the tax year in which the property is being valued.

          E. The limitations on increases in value [does] pursuant to Subsections B through D of this section shall not apply to:

                (1) a residential property in the first tax year that it is valued for property taxation purposes;

                (2) any physical improvements, except for solar energy system installations, made to the property during the year immediately prior to the tax year or omitted in a prior tax year; or

                (3) valuation of a residential property in any tax year in which:

                     (a) a change of ownership of the property occurred in the year immediately prior to the tax year for which the value of the property for property taxation purposes is being determined; or

                     (b) the use or zoning of the property has changed in the year prior to the tax year.

          [B.] F. If a change of ownership of residential property occurred in the year immediately prior to the tax year for which the value of the property for property taxation purposes is being determined, the value of the property shall be its current and correct value as determined pursuant to the general valuation provisions of the Property Tax Code.

          [C.] G. To assure that the values of residential property for property taxation purposes are at current and correct values in all counties prior to application of the limitation in Subsection [A] B of this section, the department shall determine for the 2000 tax year the sales ratio pursuant to Section 7-36-18 NMSA 1978 or, if a sales ratio cannot be determined pursuant to that section, conduct a sales-ratio analysis using both independent appraisals by the department and sales. If the sales ratio for a county for the 2000 tax year is less than eighty-five, as measured by the median ratio of value for property taxation purposes to sales price or independent appraisal by the department, the county shall not be subject to the limitations of Subsection [A] B of this section and shall conduct a reassessment of residential property in the county so that, by the 2003 tax year, the sales ratio is at least eighty-five. After such reassessment, the limitation on increases in valuation in this section shall apply in those counties in the earlier of the 2004 tax year or the first tax year following the tax year that the county has a sales ratio of eighty-five or higher, as measured by the median ratio of value for property taxation purposes to sales value or independent appraisal by the department. Thereafter, the limitation on increases in valuation of residential property for property taxation purposes in this section shall apply to subsequent tax years in all counties.

          [D.] H. The provisions of this section do not apply to residential property for any tax year in which the property is subject to the valuation limitation in Section 7-36-21.3 NMSA 1978.

          [E.] I. As used in this section:

                (1) "change of ownership" means a transfer to a transferee by a transferor of all or any part of the transferor's legal or equitable ownership interest in residential property except for a transfer:

                     [(1)] (a) to a trustee for the beneficial use of the spouse of the transferor or the surviving spouse of a deceased transferor;

                     [(2)] (b) to the spouse of the transferor that takes effect upon the death of the transferor;

                     [(3)] (c) that creates, transfers or terminates, solely between spouses, any co-owner's interest;

                     [(4)] (d) to a child of the transferor, who occupies the property as that person's principal residence at the time of transfer; provided that the first subsequent tax year in which that person does not qualify for the head of household exemption on that property, a change of ownership shall be deemed to have occurred;

                     [(5)] (e) that confirms or corrects a previous transfer made by a document that was recorded in the real estate records of the county in which the real property is located;

                     [(6)] (f) for the purpose of quieting the title to real property or resolving a disputed location of a real property boundary;

                     [(7)] (g) to a revocable trust by the transferor with the transferor, the transferor's spouse or a child of the transferor as beneficiary; or

                     [(8)] (h) from a revocable trust described in [Paragraph (7) of this subsection] Subparagraph (g) of this paragraph back to the settlor or trustor or to the beneficiaries of the trust; and

          [F. As used in this section]

                (2) "solar energy system installation" means an installation that is used to provide space heat, hot water or electricity to the property in which it is installed and is:

                     [(1)] (a) an installation that uses solar panels that are not also windows;

                     [(2)] (b) a dark-colored water tank exposed to sunlight; or

                     [(3)] (c) a non-vented trombe wall."

     SECTION 6. APPLICABILITY.--

          A. The provisions of Sections 2 and 3 of this act apply to taxable years beginning on or after January 1, 2021.

          B. The provisions of Section 4 of this act apply to taxable years beginning on or after January 1, 2022.

     SECTION 7. EFFECTIVE DATE.--The effective date of the provisions of Section 1 of this act is January 1, 2022.

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