HOUSE BILL 207
55th legislature - STATE OF NEW MEXICO - second session, 2022
INTRODUCED BY
Jason C. Harper and James R.J. Strickler
AN ACT
RELATING TO TAXATION; PROVIDING A GROSS RECEIPTS TAX DEDUCTION FOR CERTAIN BUSINESS-TO-BUSINESS SERVICES.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF NEW MEXICO:
SECTION 1. A new section of the Gross Receipts and Compensating Tax Act is enacted to read:
"[NEW MATERIAL] DEDUCTION--GROSS RECEIPTS--CERTAIN BUSINESS-TO-BUSINESS SERVICES.--
A. Receipts from the sale of accounting services, engineering services, financial management services, information technology services, human resources services, legal services and temporary services may be deducted from gross receipts if:
(1) the sale is made to a sole proprietorship, a limited liability company, a partnership or a corporation;
(2) the sale is made to an entity with a New Mexico tax identification number or an equivalent tax identification number from another state; or
(3) the purchaser presents to the seller a nontaxable transaction certificate or alternative evidence entitling a person to a deduction pursuant to Section 7-9-43 NMSA 1978.
B. A taxpayer allowed a deduction pursuant to this section shall report the amount of the deduction separately in a manner required by the department.
C. As used in this section:
(1) "accounting services" means the systematic and comprehensive recording of financial transactions pertaining to a business entity and the process of summarizing, analyzing and reporting these transactions to oversight agencies or tax collection entities, including certified public auditing, attest services and preparing financial statements, bookkeeping, tax return preparation, advice and consulting and, where applicable, representing taxpayers before tax collection agencies. "Accounting services" does not include, except as provided with respect to financial management services, investment advice, wealth management advice or consulting or any tax return preparation, advice, counseling or representation for individuals, regardless of whether those individuals are owners of pass-through entities, such as partnerships, limited liability companies or S-corporations;
(2) "engineering services" means consultation, the production of a creative work, investigation, evaluation, planning and design, the performance of studies and reviewing planning documents when performed by, or under the supervision of, a licensed engineer, including the design, development and testing of mechanical, electrical, hydraulic, chemical, pneumatic or thermal machinery or equipment, industrial or commercial work systems or processes and military equipment. "Engineering services" does not include medical or medical laboratory services, any engineering performed in connection with a construction service or the design and installation of computer or computer network infrastructure;
(3) "financial management services" means managing and directing the investments of, or providing investment advisory services to, a hedge fund, mutual fund or non-captive real estate investment trust;
(4) "hedge fund" means a private investment fund or pool, the assets of which are managed by a professional management firm that:
(a) trades or invests, through public market or private transactions, in securities, commodities, currencies, derivatives or similar classes of financial assets; or
(b) that is not an investment company under 15 USC 80a-3(c)(1) or 15 USC 80a-3(c)(7);
(5) "human resources services" means managing and overseeing the recruitment, management or termination of a business's employees, including employee recruitment; managing employee relations; maintaining employment files; setting personnel policies; managing and administering employee payroll, benefits and compensation, including employee withholding; overseeing employee discipline and termination; and ensuring compliance with labor and antidiscrimination laws. "Human resources services" does not include training or providing required certification to a business's employees or employee efficiency consulting;
(6) "information technology services" means separately stated services for installing and maintaining a business's computers and computer network, including performing computer network design; installing, repairing, maintaining or restoring computer networks, hardware or software; and performing custom software programming or making custom modifications to existing software programming. "Information technology services" does not include:
(a) software maintenance and update agreements, unless made in conjunction with custom programming;
(b) computers, servers, chilling equipment and pre-programmed software;
(c) data processing services or the processing or storage of information to compile and produce records of transactions for retrieval or use, including data entry, data retrieval, data searches and information compilation; or
(d) access to telecommunications or internet;
(7) "legal services" means services performed by a licensed attorney or under the supervision of a licensed attorney for a client, regardless of the attorney's form of business entity or whether the services are prepaid, including legal representation before courts or administrative agencies; drafting legal documents, such as contracts or patent applications; legal research; advising and counseling; arbitration; mediation; and notary public and other ancillary legal services performed for a client in conjunction with and under the supervision of a licensed attorney. "Legal services" does not include lobbying or government relations services, title insurance agent services, licensing or selling legal software or legal document templates, insurance investigation services or any legal representation involving financial crimes or tax evasion in New Mexico;
(8) "mutual fund" means an entity registered pursuant to the federal Investment Company Act of 1940;
(9) "real estate investment trust" means an entity described in Section 856(a) of the Internal Revenue Code of 1986, as that section may be amended or renumbered, the investments of which are limited to interest in mortgages on real property and shares of or transferable certificates of beneficial interest in an entity described in Section 856(a); provided that a real estate investment trust does not include a captive real estate investment trust as defined in the Corporate Income and Franchise Tax Act; and
(10) "temporary services" means an employment situation in which an employee is expected to remain in a position for a specified period of time. "Temporary services" includes services performed by a skilled or unskilled person replacing or supporting client company staff for business purposes. "Temporary services" does not include services performed by a temporary service provider that is not licensed as such by the state or subcontracted services."
SECTION 2. EFFECTIVE DATE.--The effective date of the provisions of this act is July 1, 2022.
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