0001|                            HOUSE BILL 652
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0002|     43rd legislature - STATE OF NEW MEXICO - first session, 1997
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0003|                            INTRODUCED BY
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0004|                          WILLIAM E. PORTER
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0005|     
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0006|                                   
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0007|     
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0008|                                   
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0009|     
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0010|                                AN ACT
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0011|     RELATING TO HIGHER EDUCATION; PROVIDING FOR A TUITION
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0012|     PREPAYMENT PLAN; ENACTING THE NEW MEXICO EDUCATION TRUST ACT;
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0013|     AMENDING AND ENACTING SECTIONS OF THE NMSA 1978; MAKING AN
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0014|     APPROPRIATION.
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0015|     
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0016|     BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF NEW MEXICO:
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0017|          Section 1.  [<u>NEW MATERIAL</u>]  SHORT TITLE.--Sections 1
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0018|     through 8 of this act may be cited as the "New Mexico Education
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0019|     Trust Act".
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0020|          Section 2.  [<u>NEW MATERIAL</u>]  DEFINITIONS.--As used in the
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0021|     New Mexico Education Trust Act:
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0022|               A.  "advance payment contract" means the contract
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0023|     entered into by the program administrator and a purchaser to
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0024|     provide for the post-secondary education of a beneficiary;  
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0025|               B.  "beneficiary" means the individual designated
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0001|     within the advance payment contract to receive tuition at an
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0002|     institution of higher education; 
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0003|               C.  "board" means the New Mexico education trust
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0004|     board; 
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0005|               D.  "fund" means the New Mexico education trust
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0006|     fund;
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0007|               E.  "institution of higher education" means the
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0008|     university of New Mexico, New Mexico state university, New
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0009|     Mexico highlands university, western New Mexico university,
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0010|     eastern New Mexico university or New Mexico institute of mining
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0011|     and technology;
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0012|               F.  "purchaser" means the individual obligated to
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0013|     make an advance payment of tuition costs on behalf of a
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0014|     beneficiary pursuant to an advance payment contract;
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0015|               G.  "selected institution of higher education" means
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0016|     the institution of higher education the beneficiary actually
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0017|     attends; and
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0018|               H.  "tuition costs" means the amount assessed upon
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0019|     full-time students, as that term is defined in Subsection B of
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0020|     Section 21-1-4 NMSA 1978, at an institution of higher
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0021|     education, including mandatory fees imposed upon full-time
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0022|     students as a condition of enrollment.
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0023|          Section 3.  [<u>NEW MATERIAL</u>]  BOARD CREATED.--
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0024|               A.  There is created the "New Mexico education trust

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0025|     board".  The board shall be composed of nine members, eight of
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0001|     whom shall be appointed by and serve at the pleasure of the
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0002|     governor.  The state treasurer shall be the ninth member of the
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0003|     board, and he shall serve as its chairman.
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0004|               B.  Initially, two members of the board shall be
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0005|     appointed for two years, three members shall be appointed for
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0006|     three years and three members shall be appointed for four
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0007|     years.  Thereafter, all members shall serve four-year terms.
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0008|               C.  Members of the board shall be subject to the
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0009|     provisions of the Per Diem and Mileage Act and shall receive no
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0010|     other compensation, perquisite or allowance for their service
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0011|     on the board.
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0012|          Section 4.  [<u>NEW MATERIAL</u>]  BOARD POWERS AND DUTIES.--
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0013|     The board shall:
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0014|               A.  employ a program administrator to oversee and
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0015|     manage the New Mexico education trust;
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0016|               B.  develop and offer several tuition prepayment
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0017|     plans designed to permit a purchaser to secure advance payment
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0018|     of tuition costs for a beneficiary;
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0019|               C.  oversee the implementation of the New Mexico
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0020|     education trust; and
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0021|               D.  promulgate all rules and regulations necessary
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0022|     to implement the provisions of the New Mexico Education Trust
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0023|     Act.
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0024|          Section 5. [<u>NEW MATERIAL</u>] ADVANCE PAYMENT OF TUITION 
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0025|     COSTS--CONTRACT WITH PROGRAM ADMINISTRATOR--PAYMENT OPTIONS--
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0001|     PAYMENT AMOUNT--NONTRANSFERABILITY.--
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0002|               A.  In accordance with the rules and regulations
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0003|     adopted by the board, the program administrator shall enter
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0004|     into an advance payment contract with a purchaser for the
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0005|     advance payment of tuition costs on behalf of a beneficiary for
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0006|     attendance at an institution of higher education, without
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0007|     further tuition costs to the beneficiary, subject to
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0008|     determination of residency status by the appropriate
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0009|     institution of higher education.
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0010|               B.  Based on the type of prepayment plan selected,
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0011|     the program administrator shall determine the total cost of the
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0012|     advance payment contract.  The total cost of the contract shall
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0013|     be based on the average resident or nonresident tuition costs
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0014|     at the institution of higher education at the time the contract
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0015|     is entered into.  Upon complete payment of the contract, the
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0016|     beneficiary shall be entitled to attend the institution of
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0017|     higher education at no additional tuition costs to the
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0018|     beneficiary.
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0019|               C.  Benefits provided under a contract may commence
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0020|     within a period less than seventeen years but not less than
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0021|     seven years following the date of the first payment made under
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0022|     the advance payment contract.
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0023|               D.  Purchasers shall select one of the payment plan
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0024|     options offered by the board.  The advance payment contract
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0025|     price shall not exceed the average cost of eight academic
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0001|     semesters of resident or nonresident tuition at the institution
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0002|     of higher education.
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0003|               E.  The program administrator shall make necessary
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0004|     arrangements with the appropriate institutions of higher
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0005|     education to fulfill his obligations under an advance payment
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0006|     contract.  An institution of higher education shall admit the
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0007|     beneficiary of a contract if he otherwise qualifies for
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0008|     admission.  Neither this section nor any advance payment
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0009|     contract entered into pursuant to the New Mexico Education
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0010|     Trust Act shall guarantee that the beneficiary shall:
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0011|                    (1)  be admitted to the appropriate institution
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0012|     of higher education;
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0013|                    (2)  if admitted, be determined a resident for
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0014|     tuition costs purposes by the appropriate institution of higher
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0015|     education;
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0016|                    (3)  be allowed to continue attendance at the
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0017|     selected institution of higher education following admission;
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0018|     or
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0019|                    (4)  graduate from the selected institution of
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0020|     higher education.
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0021|               F.  An advance payment contract shall not be sold or
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0022|     otherwise transferred by the beneficiary.  An advance payment
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0023|     contract shall not be sold by the purchaser; however, subject
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0024|     to rules and regulations adopted pursuant to the New Mexico
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0025|     Education Trust Act, the purchaser may substitute another
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0001|     individual for the beneficiary originally named in the
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0002|     contract.
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0003|               G.  The board shall prescribe the form of the
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0004|     advance payment contract.
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0005|               H.  The purchaser may deduct from his net income the
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0006|     amount of any payment made pursuant to the advance payment
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0007|     contract when calculating his net income in accordance with the
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0008|     Income Tax Act in the taxable year in which any payment is
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0009|     made.  If the purchaser terminates the advance payment contract
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0010|     pursuant to the New Mexico Education Trust Act, the purchaser
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0011|     shall include the amount refunded in his net income when
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0012|     calculating his net income in accordance with the Income Tax
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0013|     Act in the taxable year in which the refund is made.
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0014|          Section 6.  [<u>NEW MATERIAL</u>]  DISPOSITION AND INVESTMENT
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0015|     OF ADVANCE PAYMENTS--PAYMENTS TO INSTITUTIONS OF HIGHER
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0016|     EDUCATION--CREATING A FUND--ADMINISTRATIVE COSTS.--
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0017|               A.  The "New Mexico education trust fund" is created
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0018|     in the state treasury.  The program administrator shall deposit
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0019|     into the fund advance tuition costs payments received.  All
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0020|     money deposited into the fund is appropriated to the board. 
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0021|     Money in the fund shall not revert to the general fund at the
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0022|     end of the fiscal year.  The program administrator shall
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0023|     account for each payment required from a purchaser on behalf of
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0024|     a beneficiary pursuant to an advance payment contract.  All
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0025|     money deposited in the fund shall be invested by the state
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0001|     treasurer in the manner provided for investment of other state
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0002|     funds.  The state treasurer, the program administrator and the
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0003|     board shall review investments made pursuant to this subsection
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0004|     quarterly and shall report annually to the legislature on the
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0005|     financial condition of the fund and the investment portfolio.
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0006|               B.  Expenditures from the fund shall be for payments
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0007|     to institutions of higher education on behalf of beneficiaries
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0008|     pursuant to the advance payment contract, payments of refunds
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0009|     and direct payment of benefits in accordance with the New
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0010|     Mexico Education Trust Act, and for costs of administering that
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0011|     act.  Administration fees shall be specified in the advanced
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0012|     payment contract and shall not exceed two percent of investment
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0013|     earnings accruing to the fund.
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0014|               C.  The program administrator shall establish a
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0015|     schedule for payment to the selected institution of higher
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0016|     education of the tuition costs on behalf of beneficiaries. 
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0017|     Payment pursuant to this subsection shall not begin until the
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0018|     beneficiary applies to and is accepted by the institution of
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0019|     higher education.  Upon completion or termination of an advance
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0020|     payment contract, the balance of the principal and investment
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0021|     earnings accruing under the provisions of the contract shall be
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0022|     credited to the fund.
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0023|          Section 7.  [<u>NEW MATERIAL</u>]  REFUND OF ADVANCE PAYMENT--
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0024|     CONDITIONS--DIRECT PAYMENT OF BENEFITS.--
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0025|               A.  The advance payment contract may be terminated
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0001|     or modified:
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0002|                    (1)  by the purchaser at any time; or
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0003|                    (2)  if the beneficiary dies, is not admitted
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0004|     to the institution of higher education following proper
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0005|     application, elects not to attend the institution of higher
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0006|     education or, if attending, elects to discontinue higher
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0007|     education or, for any other circumstance approved by the
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0008|     program administrator, does not exercise his rights under the
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0009|     advance payment contract.
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0010|               B.  If the advance payment contract is terminated or
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0011|     modified pursuant to Subsection A of this section, the program
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0012|     administrator shall refund to the purchaser, to any person
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0013|     designated by the purchaser pursuant to the contract or to the
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0014|     legal representative of the purchaser an amount equal to all
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0015|     the principal plus four percent interest.  The balance of the
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0016|     contract price less the administrative fee shall go to the
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0017|     institution of higher education named in the contract or to the
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0018|     selected institution of higher education to be used solely for
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0019|     scholarships.
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0020|               C.  A purchaser or other qualified person may
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0021|     request a refund in accordance with this section at any time. 
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0022|     The amount of refund payable under this subsection shall be
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0023|     proportionately reduced for each academic semester the
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0024|     beneficiary attends the selected institution of higher
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0025|     education.
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0001|               D.  If the beneficiary qualifies for benefit
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0002|     entitlement under provisions of an advance payment contract, is
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0003|     admitted to an institution of higher education and receives
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0004|     additional financial or other assistance for tuition costs, the
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0005|     parties to the contract may provide for the direct payment of
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0006|     tuition costs to the beneficiary.  The manner and amount of
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0007|     direct payment under this subsection shall be determined in
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0008|     accordance with rules and regulations adopted by the board.
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0009|          Section 8.  [<u>NEW MATERIAL</u>]  RULES AND REGULATIONS.--
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0010|               A.  The board is authorized to adopt all rules and
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0011|     regulations necessary to implement the provisions of the New
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0012|     Mexico Education Trust Act.
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0013|               B.  Rules and regulations adopted shall include
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0014|     policies and procedures governing the:
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0015|                    (1)  payment plan options available to the
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0016|     purchaser, which options shall include provisions for monthly
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0017|     installments and lump-sum payments made at any time during the
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0018|     advance payment contract period; 
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0019|                    (2)  receipt of payments from purchasers on
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0020|     behalf of beneficiaries;
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0021|                    (3)  accounting and reporting to purchasers of
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0022|     payments deposited and invested in accordance with the New
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0023|     Mexico Education Trust Act;
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0024|                    (4)  period of time during which the
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0025|     beneficiary may receive benefits under an advance payment
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0001|     contract;
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0002|                    (5)  terms and conditions under which an
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0003|     advance payment contract may be terminated or modified, refunds
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0004|     may be granted and direct payment of benefits may be made;
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0005|                    (6)  provision of advance payment contract
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0006|     benefits at institutions of higher education; 
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0007|                    (7)  payment to selected institutions of higher
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0008|     education on behalf of beneficiaries;
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0009|                    (8)  imposition of fees to cover costs incurred
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0010|     for the administration of the New Mexico Education Trust Act;
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0011|     and
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0012|                    (9)  other terms, conditions and provisions
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0013|     necessary for the implementation of the New Mexico Education
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0014|     Trust Act.
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0015|          Section 9.  Section 7-2-2 NMSA 1978 (being Laws 1986,
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0016|     Chapter 20, Section 26, as amended) is amended to read:
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0017|          "7-2-2.  DEFINITIONS.--For the purpose of the Income Tax
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0018|     Act and unless the context requires otherwise:
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0019|               A.  "adjusted gross income" means adjusted gross
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0020|     income as defined in Section 62 of the Internal Revenue Code,
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0021|     as that section may be amended or renumbered;
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0022|               B.  "base income":
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0023|                    (1)  means, for estates and trusts, that part
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0024|     of the estate's or trust's income defined as taxable income and
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0025|     upon which the federal income tax is calculated in the Internal
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0001|     Revenue Code for income tax purposes plus, for taxable years
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0002|     beginning on or after January 1, 1991, the amount of the net
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0003|     operating loss deduction allowed by Section 172(a) of the
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0004|     Internal Revenue Code, as that section may be amended or
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0005|     renumbered, and taken by the taxpayer for that year;
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0006|                    (2)  means, for taxpayers other than estates or
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0007|     trusts, that part of the taxpayer's income defined as adjusted
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0008|     gross income plus, for taxable years beginning on or after
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0009|     January 1, 1991, the amount of the net operating loss deduction
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0010|     allowed by Section 172(a) of the Internal Revenue Code, as that
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0011|     section may be amended or renumbered, and taken by the taxpayer
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0012|     for that year; and
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0013|                    (3)  includes, for all taxpayers, any other
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0014|     income of the taxpayer not included in adjusted gross income
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0015|     but upon which a federal tax is calculated pursuant to the
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0016|     Internal Revenue Code for income tax purposes, except amounts
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0017|     for which a calculation of tax is made pursuant to Section 55
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0018|     of the Internal Revenue Code, as that section may be amended or
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0019|     renumbered; "base income" also includes interest received on a
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0020|     state or local bond;
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0021|               C.  "compensation" means wages, salaries,
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0022|     commissions and any other form of remuneration paid to
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0023|     employees for personal services;
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0024|               D.  "department" means the taxation and revenue
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0025|     department, the secretary of taxation and revenue or any
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0001|     employee of the department exercising authority lawfully
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0002|     delegated to that employee by the secretary;
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0003|               E.  "fiduciary" means a guardian, trustee, executor,
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0004|     administrator, committee, conservator, receiver, individual or
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0005|     corporation acting in any fiduciary capacity;
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0006|               F.  "filing status" means "married filing joint
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0007|     returns", "married filing separate returns", "head of
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0008|     household", "surviving spouse" and "single", as those terms are
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0009|     generally defined for federal tax purposes;
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0010|               G.  "fiscal year" means any accounting period of
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0011|     twelve months ending on the last day of any month other than
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0012|     December;
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0013|               H.  "head of household" means "head of household" as
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0014|     generally defined for federal income tax purposes;
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0015|               I.  "individual" means a natural person, an estate,
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0016|     a trust or a fiduciary acting for a natural person, trust or
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0017|     estate;
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0018|               J.  "Internal Revenue Code" means the United States
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0019|     Internal Revenue Code of 1986, as amended;
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0020|               K.  "lump-sum amount" means an amount that, for the
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0021|     purpose of determining liability for federal income tax, was
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0022|     not included in adjusted gross income but upon which the five-
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0023|     year-averaging or the ten-year-averaging method of tax
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0024|     computation provided in Section 402 of the Internal Revenue
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0025|     Code, as that section may be amended or renumbered, was
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0001|     applied;
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0002|               L.  "modified gross income" means all income of the
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0003|     taxpayer and, if any, the taxpayer's spouse and dependents,
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0004|     undiminished by losses and from whatever source derived,
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0005|     including:
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0006|                    (1)  compensation;
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0007|                    (2)  net profit derived from business;
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0008|                    (3)  gains derived from dealings in property;
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0009|                    (4)  interest;
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0010|                    (5)  net rents;
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0011|                    (6)  royalties;
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0012|                    (7)  dividends;
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0013|                    (8)  alimony and separate maintenance payments;
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0014|                    (9)  annuities;
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0015|                    (10)  income from life insurance and endowment
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0016|     contracts;
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0017|                    (11)  pensions;
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0018|                    (12)  discharge of indebtedness;
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0019|                    (13)  distributive share of partnership income;
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0020|                    (14)  income in respect of a decedent;
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0021|                    (15)  income from an interest in an estate or
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0022|     trust;
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0023|                    (16)  social security benefits;
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0024|                    (17)  unemployment compensation benefits;
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0025|                    (18)  workers' compensation benefits;
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0001|                    (19)  public assistance and welfare benefits;
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0002|                    (20)  cost-of-living allowances; and
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0003|                    (21)  gifts;
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0004|               M.  "modified gross income" does not include:
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0005|                    (1)  payments for hospital, dental, medical or
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0006|     drug expenses whether made to or on behalf of the taxpayer;
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0007|                    (2)  the value of room and board provided by
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0008|     federal, state or local governments or by private individuals
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0009|     or agencies based upon financial need and not as a form of
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0010|     compensation;
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0011|                    (3)  payments made pursuant to a federal, state
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0012|     or local government program directly or indirectly to a third
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0013|     party on behalf of the taxpayer when identified to a particular
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0014|     use or invoice by the payer; or
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0015|                    (4)  payments made pursuant to Sections
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0016|     7-2-14, <s>[7-2-14.1]</s> 7-2-18, 7-2-18.1 and 7-3-9 NMSA 1978;
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0017|               N.  "net income" means, for estates and trusts, base
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0018|     income adjusted to exclude amounts that the state is prohibited
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0019|     from taxing because of the laws or constitution of this state
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0020|     or the United States and means, for taxpayers other than
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0021|     estates or trusts, base income adjusted to exclude:
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0022|                    (1)  an amount equal to the standard deduction
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0023|     allowed the taxpayer for the taxpayer's taxable year by Section
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0024|     63 of the Internal Revenue Code, as that section may be amended
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0025|     or renumbered;
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0001|                    (2)  an amount equal to the itemized
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0002|     deductions, as defined in Section 63 of the Internal Revenue
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0003|     Code, as that section may be amended or renumbered, allowed the
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0004|     taxpayer for the taxpayer's taxable year less the amount
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0005|     excluded pursuant to Paragraph (1) of this subsection;
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0006|                    (3)  an amount equal to the product of the
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0007|     exemption amount allowed for the taxpayer's taxable year by
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0008|     Section 151 of the Internal Revenue Code, as that section may
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0009|     be amended or renumbered, multiplied by the number of personal
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0010|     exemptions allowed for federal income tax purposes; 
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0011|                    (4)  income from obligations of the United
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0012|     States of America less expenses incurred to earn that income;
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0013|                    (5)  other amounts that the state is prohibited
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0014|     from taxing because of the laws or constitution of this state
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0015|     or the United States;
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0016|                    (6)  for taxable years that began prior to
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0017|     January 1, 1991, an amount equal to the sum of:
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0018|                         (a)  net operating loss carryback
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0019|     deductions to that year from taxable years beginning prior to
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0020|     January 1, 1991 claimed and allowed, as provided by the
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0021|     Internal Revenue Code; and
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0022|                         (b)  net operating loss carryover
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0023|     deductions to that year claimed and allowed; <s>[and]</s>
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0024|                    (7)  for taxable years beginning on or after
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0025|     January 1, 1991, an amount equal to the sum of any net
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0001|     operating loss carryover deductions to that year claimed and
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0002|     allowed, provided that the amount of any net operating loss
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0003|     carryover from a taxable year beginning on or after January 1,
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0004|     1991 may be excluded only as follows:
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0005|                         (a)  in the case of a timely filed
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0006|     return, in the taxable year immediately following the taxable
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0007|     year for which the return is filed; or
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0008|                         (b)  in the case of amended returns or
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0009|     original returns not timely filed, in the first taxable year
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0010|     beginning after the date on which the return or amended return
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0011|     establishing the net operating loss is filed; and
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0012|                         (c)  in either case, if the net operating
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0013|     loss carryover exceeds the amount of net income exclusive of
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0014|     the net operating loss carryover for the taxable year to which
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0015|     the exclusion first applies, in the next four succeeding
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0016|     taxable years in turn until the net operating loss carryover is
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0017|     exhausted; in no event shall a net operating loss carryover be
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0018|     excluded in any taxable year after the fourth taxable year
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0019|     beginning after the taxable year to which the exclusion first
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0020|     applies; <u>and</u>
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0021|                    <u>(8)  an amount equal to the total payments
</u>    |
<u></u>0022| <u>    made by the purchaser pursuant to the New Mexico Education
</u>    |
<u></u>0023| <u>    Trust Act;</u>
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0024|               O.  "net operating loss" means any net operating
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0025|     loss, as defined by Section 172(c) of the Internal Revenue
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0001|     Code, as that section may be amended or renumbered, for a
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0002|     taxable year as further increased by the income, if any, from
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0003|     obligations of the United States for that year less related
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0004|     expenses;
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0005|               P.  "net operating loss carryover" means the amount,
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0006|     or any portion of the amount, of a net operating loss for any
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0007|     taxable year that, pursuant to Paragraph (6) or (7) of
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0008|     Subsection N of this section, may be excluded from base income;
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0009|               Q.  "nonresident" means every individual not a
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0010|     resident of this state;
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0011|               R.  "person" means any individual, estate, trust,
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0012|     receiver, cooperative association, club, corporation, company,
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0013|     firm, partnership, limited liability company, joint venture,
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0014|     syndicate or other association; "person" also means, to the
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0015|     extent permitted by law, any federal, state or other
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0016|     governmental unit or subdivision or agency, department or
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0017|     instrumentality thereof;
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0018|               S.  "resident" means an individual who is domiciled
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0019|     in this state during any part of the taxable year; but any
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0020|     individual who, on or before the last day of the taxable year,
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0021|     changed his place of abode to a place without this state with
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0022|     the bona fide intention of continuing actually to abide
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0023|     permanently without this state is not a resident for the
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0024|     purposes of the Income Tax Act;
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0025|               T.  "secretary" means the secretary of taxation and
    |
0001|     revenue or the secretary's delegate;
    |
0002|               U.  "state" means any state of the United States,
    |
0003|     the District of Columbia, the commonwealth of Puerto Rico, any
    |
0004|     territory or possession of the United States or any political
    |
0005|     subdivision of a foreign country;
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0006|               V.  "state or local bond" means a bond issued by a
    |
0007|     state other than New Mexico or by a local government other than
    |
0008|     one of New Mexico's political subdivisions, the interest from
    |
0009|     which is excluded from income for federal income tax purposes
    |
0010|     under Section 103 of the Internal Revenue Code, as that section
    |
0011|     may be amended or renumbered;
    |
0012|               W.  "surviving spouse" means "surviving spouse" as
    |
0013|     generally defined for federal income tax purposes;
    |
0014|               X.  "taxable income" means net income less any lump-
    |
0015|     sum amount;
    |
0016|               Y.  "taxable year" means the calendar year or fiscal
    |
0017|     year upon the basis of which the net income is computed under
    |
0018|     the Income Tax Act and includes, in the case of the return made
    |
0019|     for a fractional part of a year under the provisions of the
    |
0020|     Income Tax Act, the period for which the return is made; and
    |
0021|               Z.  "taxpayer" means any individual subject to the
    |
0022|     tax imposed by the Income Tax Act."
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0023|                                  
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