NEW MEXICO’S BUSINESS LAWYERS ®

Legislative Update: 2020 Post-Session Update

February 27, 2020

The 30-day New Mexico legislative session, which convened January 21, 2020, closed at noon on February 20. Only some of the bills that passed both chambers will be signed by the Governor and be enacted into law. Legislation not acted on by the Governor will be pocket vetoed on March 11. The effective date of legislation that is not a general appropriations bill, a bill with an emergency clause, or any other specified effective date will take effect on May 20, 2020.

 

SECTIONS

  • Business and Corporate
  • Cannabis
  • Economic Development
  • Employment and Labor
  • Healthcare
  • Taxation
  • Other/Miscellaneous

CONTRIBUTING LAWYERS

Business and Corporate

Business and Corporate Bills:

PASSED

Designation as Benefit Corporation – HB118 – Governor Signed on March 6, 2020

HB118 would enact a new section of law titled the Benefit Corporation Act, which would allow corporations to consider the public good in making decisions. The bill would immunize directors and officers from liability for making decisions that do not solely benefit the shareholders of the corporation. The House Judiciary Committee amendment to the bill deleted the paragraph making subsection F, which affords immunity to benefit corporations from money damage liability for failure to pursue a public benefit, inapplicable to personal injury claims. The bill passed unanimously in the House and by a majority vote in the Senate. It was signed by the Governor on March 6, 2020.

DID NOT PASS

Escrow Company Surety Bonds – SB259 – Did Not Pass

SB259 would have substituted a fidelity bond requirement for the existing surety bond requirement that applies to escrow companies licensed and operating pursuant to the Escrow Company Act. The bill did not progress after having been referred to three Senate committees.

Tax Incentive Bills:

PASSED

Solar Market Development Income Tax Credit – SB29 – Governor Signed on March 3, 2020

SB29 would establish the New Solar Market Development Income Tax Credit which would be available to a taxpayer who installs a solar thermal or photovoltaic system in a residence, business, or agricultural enterprise owned by that taxpayer. The personal income tax credit is 10% of the cost of equipment and installation for systems installed after March 1, 2020 and prior to January 1, 2028 and is limited to $6,000 per taxpayer per taxable year. To qualify the credit, a taxpayer must submit an application for certification of eligibility to the energy, minerals and natural resources department.  The aggregate amount of credits for any calendar year is capped at $8,000,000.  Applications are considered in the order received.  SB29 was signed by the Governor on March 3, 2020.

DID NOT PASS

Expand Rural Health Care Practitioner Credit – HB74 – Did Not Pass

HB74 would have made it possible for all eligible practitioners to receive the $5,000 annual Rural Health Care Practitioner Tax Credit. Currently, some practitioners are eligible only for the $3,000 annual credit. After the House Health and Human Services Committee recommended that the bill pass, there was no further movement on HB74.

Liquor License Bills:

DID NOT PASS

Nontransferable Liquor Dispenser License / Liquor Dispenser Licenses / Local Liquor Dispenser’s License – HB182 / HB235 / HB332 – Did Not Pass

HB182, HB235 and HB332 sought to raise or eliminate the current quota levels on dispenser licenses, although through slightly different approaches. HB182 would have made it possible for persons in more rural areas of the State to obtain dispenser’s licenses. HB235 would have increased the number of new dispenser licenses issued by the State. HB332 sought to allow government bodies of local option districts to issue more dispenser’s licenses each year. HB182, HB235, and HB332 failed to make any progression.

Cannabis

PASSED

“Qualified Patient” in Lynn and Erin Compassionate Use Act – SB139 – Governor Signed on February 20, 2020

SB139 limits the definition of “qualified patient” under the Lynn and Erin Compassionate Use Act (the “LECUA”). In 2019, Senate Bill 406 amended the LECUA but created an ambiguity regarding the meaning of “qualified patient” that allowed non-New Mexico resident to obtain medical cannabis cards. Senate Bill 139 requires a “qualified patient” to be a New Mexico resident.

Under LECUA, non-residents may still participate in New Mexico’s medical cannabis program so long as they are “reciprocal participants.” A reciprocal participant is an individual who holds proof that he or she is authorized to participate in another state’s medical cannabis program.

As for out-of-state residents who currently have New Mexico medical cannabis cards and are not “reciprocal participants,” these individuals will not be allowed to renew their medical cannabis cards upon expiration.

Senate Bill 139 passed both the House of Representatives and Senate, and on February 20, 2020, Governor Grisham signed Senate Bill 139 into law. Because it contains an emergency clause, Senate Bill 139 became effective immediately when Governor Grisham signed it on February 20, 2020.

DID NOT PASS

There were a variety of Cannabis bills introduced during the 2020 legislative session. These included:

  • The Cannabis Regulation Act – HB160 / SB115 – Tabled by Senate Judiciary Committee; Expected to be Re-Introduced Next Session
  • Water Rights for Cannabis Production – HB169 – Did Not Pass
  • Cannabis Research Act – HB334 – Did Not Pass
  • Tribe and Pueblo Medical Marijuana Agreements – SB271 – Did Not Pass

Ultimately none of the Cannabis bills passed, but some or all of them will almost certainly be re-introduced in some form in the next legislative session as legalizing cannabis is a top priority for Governor Michelle Lujan Grisham’s administration. If you wish to read more detail about any of these bills, please see our 2020 Mid-Session Update.

Economic Development

PASSED

Electric Generating Facility Econ Districts – HB8 – Governor Signed on March 9, 2020

HB8 authorizes counties to create an electric generating facility economic district. Districts must include a currently operating coal-fired electric generating facility owned by a non-investor-owned electric utility. Districts may borrow money, issue bonds, own land, and impose a gross receipts tax increment. The bill does not describe the purpose of a district or the goals one would be created to achieve, however. HB8 was signed by the Governor on March 9, 2020.

Amending the Industrial Revenue Bond Act – HB50 – Governor Signed on March 3, 2020

HB50 amends the Industrial Revenue Bond Act and County Industrial Revenue Bond Act to make electric transmission facilities eligible projects so long as the school district in which the project is located will receive the same amount, or greater, of annual in-lieu tax payments as would have been received in property taxes for the fully developed project had the project not been acquired. The bill requires the state to receive 5% of payments in lieu of tax to counties, municipalities, and other local entities that tax the property. HB50 was signed by the Governor on March 3, 2020.

Transfer Angel Investment Credit Review – HB158 – Governor Signed on March 4, 2020

HB158 transfers the review, approval, and reporting related to the Angel Investment Tax Credit from the Economic Development Department to the Taxation and Revenue Department. HB158 passed both chambers unanimously, and the Governor signed the bill on March 4, 2020.

Local and Regional Economic Development Support – SB118 – Governor Signed on March 6, 2020

SB118 amends the Local Economic Development Act (“LEDA”) to create a Local and Regional Economic Development Support Fund, into which funds will be appropriated for LEDA projects. The bill changes the definition of “economic base job” to that used in the Tax Increment for Development Act. The bill also allows funds to be expended through LEDA on retail projects in communities with populations less than 15,000, up from the current 10,000, but requires the Economic Development Department to determine that the project does not compete with existing retail businesses. The Governor signed SB118 on March 6, 2020.

Investment in New Mexico Funds and Businesses – SB136 – Governor Signed on March 6, 2020

SB136 increases the cap on investments from the Severance Tax Permanent Fund in New Mexico private equity and business from the existing 9% to 11%.  The bill also clarifies that the existing allowable 2% small business investment corporation allocation is wholly separate from the existing authorization for private equity funds. SB136 passed both chambers with broad support. The Governor signed SB 136 on March 6, 2020.

DID NOT PASS

Reporting Requirements for LEDA Recipients – SB52 – Floor Substitute Passed Senate Unanimously; Died in House Committee

SB52 would have appropriated $188,000 to the Legislative Finance Committee from the general fund to help the Committee evaluate economic development incentives, including tax expenditures. The Senate adopted a floor substitute that added reporting requirements for LEDA recipients, required the continued publishing of the annual tax expenditure report, and allowed certain staff economists access to particular confidential taxpayer and business information. The bill was unanimously passed in the Senate. It subsequently did not move beyond the House Appropriations & Finance Committee.

Employment and Labor

PASSED

Prohibit NDA for Sexual Harassment Cases – HB21 / SB64 – Passed Both Chambers; SB64 Signed by Governor on March 4, 2020

HB21 would prohibit both private and public employers from requiring an employee to sign a nondisclosure provision in a settlement agreement relating to sexual harassment or sexual assault claims in the workplace.  The bill would not affect confidentiality provisions related to monetary amounts of the settlement or if the employee requests a nondisclosure provision to prevent disclosure of facts of the claim.  Likewise, the law would permit disclosure where the information is required for a judicial, administrative, or other governmental proceeding subject to a subpoena. The bill would apply to settlement agreements entered into on or after May 20, 2020. The bill makes the law applicable only to private employers; however, SB64, which passed both the House and the Senate, would extend the law to be applicable to state employees. HB21 and SB64 passed both chambers. The Governor signed SB64 on March 4, 2020.  

Pregnant Worker Accommodation – HB25 – Governor Signed on March 6, 2020

HB25 adds as a protected class pregnancy, childbirth, or any condition related to pregnancy or childbirth to the New Mexico Human Rights Act. As with other protected classes, the bill would make it unlawful for an employer to use such condition as a basis for discriminatory practice. The bill would require employers to make reasonable accommodations for employees for needs related to pregnancy, childbirth, or any condition related to pregnancy or childbirth. Further, employers would be prohibited from requiring an employee to take paid or unpaid leave if another reasonable accommodation is available. The bill defines “reasonable accommodation” and “undue hardship.” HB 25 was passed unanimously in both the House and the Senate. The Governor signed HB25 on March 6, 2020.

New Mexico Work and Save Act – HB44 – Governor Signed on February 26, 2020

HB44 would essentially create a marketplace for retirement plans, allowing private sector and nonprofit employees to participate in state-sponsored individual retirement accounts.  Employees would be able to contribute through automatic payroll deductions. Participation by employers is not mandatory, and employers would not need to pay fees or provide matching contributions to employees. The Governor signed HB44 on February 26, 2020.

Public Sector Collective Bargaining Changes – HB364 – Governor Signed on March 5, 2020

HB364 proposes to change local labor boards by making them subject to scrutiny by the Public Employees Labor Relations Board. The bill also changes the scope and level of bargaining for unions and employers. Amendments to the bill outline specific employer duties related to union representatives, for example, requiring employers to give union representatives the ability to meet with employees during work hours. HB364 would additionally change the Public Employee Bargaining Act to conform to the Supreme Court’s ruling in Janus v. AFSCME, 138 S. Ct. 2448, 201 L. Ed. 2d 924 (2018) which prohibited “fair share” union fees on the basis of workers’ free speech rights. HB364 passed in both the House and the Senate on bipartisan votes and signed by the Governor on March 5, 2020. Public sector employers will likely need to review their collective bargaining agreements to ensure compliance before July 1, 2020 when the bill goes becomes effective.  

Changes to Educational Retirement – SB111 – Governor Signed on March 2, 2020

SB111 proposes to amend the Educational Retirement Act as it relates to provisions for retired members of the Educational Retirement Board to return to employment. The bill would allow for retired members to return to work without losing their pension within 90 days of date of retirement if the retired member earns less than $15,000.00 per year and there was no agreement prior to retirement to return to work. SB111 was signed by the Governor on March 2, 2020.

 

DID NOT PASS

Increase Minimum Wage – HB82 – Did Not Pass

HB82 proposed raising New Mexico’s minimum wage to $9.00 an hour this year, then to $10.50 an hour in 2021, $12.00 an hour in 2022, and $15.00 an hour by 2024. Beginning January 1, 2025, the minimum wage would have increased by a percentage equal to the percentage increase in the cost of living. The bill proposed to remove the reduced minimum wage exception for employees who receive more than $30.00 a month in tips. HB82 did not progress out of the House Rules and Order of Business Committee.

HEALTHCARE

PASSED

Pharmaceutical Service Reimbursement Parity – HB42 – Governor Signed on March 6, 2020

HB42 would require all insurance programs to reimburse certified pharmacists clinicians and pharmacists certified to prescribe medications for providing medical services, at the same level as other covered providers such as physicians or physician assistants.  Currently, pharmacists with prescriptive authority are able to provide, and get reimbursed by Medicaid for, naloxone kits (to treat overdoses) and immunizations, but other services they are certified to perform are not currently reimbursed by Medicaid. HB42 passed both the House and the Senate and was signed by the Governor on March 6, 2020.

Coverage for Health Artery Calcium Scan – HB126 – Governor Signed on March 9, 2020

HB126 would require all types of health insurance plans sold in New Mexico to cover coronary artery calcium scans for patients between the ages of 45 and 65 who have immediate risk of coronary artery disease. Patients would be eligible for repeat scanning every 10 years as long as their calcium scan score remains zero. If passed and signed, this bill could give providers more options for preventative monitoring of patients who are at risk of coronary artery disease or of suffering heart attacks. Before it was passed, the bill was amended to remove individual, small group health plans, and small group HMOs from the bill’s requirements. HB126 was signed by the Governor on March 9, 2020.

Wholesale Prescription Drug Importation Act – SB1 – Governor Signed on March 4, 2020

SB1 would enact the “Wholesale Prescription Drug Importation Act.” The Wholesale Prescription Drug Importation Act would set up a program whereby the state would import prescription medications from Canada (and perhaps other countries) through a wholesaler or wholesalers for resale to New Mexico consumers. Such a program depends on federal implementation of a law passed by Congress in 2003 to allow drug importation from Canada. Implementation of the plan would require approval by the secretary of the federal Department of Health and Human Services. The bill originally had an appropriation of $350,000 which was removed before the bill passed. SB1, which passed unanimously in both chambers, was signed by the Governor on March 4, 2020.

DID NOT PASS

UNM Med Students in Underserved Areas – HB159 / SB58 – Did Not Pass

The bills would have appropriated certain funding to the University of New Mexico for a program to prepare medical students to practice medicine in underserved areas. Neither bill passed.

Taxation

PASSED

Tax Changes – HB326 – Governor Signed on March 9, 2020

In 2019 the Legislature enacted sweeping changes to the New Mexico tax code through HB6.  Due to the broad scope of changes enacted by HB6 in 2019, the Legislature delayed the effective date of most of the changes to allow time for technical corrections in the 2020 Legislative Session. HB326 makes these anticipated corrections to those portions of the tax code requiring the same. However, all changes made to the tax code by HB6 in 2019, including the market-based sourcing rules, will go into effect on their respective effective dates, unless specifically modified by HB326 or another law enacted by the Legislature. HB326 passed both the House and the Senate on unanimous votes and was signed by the Governor on March 9, 2020.

HB326 will make the following changes to the tax code:

  • Reporting Business Location for Gross Receipts and Compensating Tax Purposes

HB326 makes changes to how taxpayers report their business location for purposes of gross receipts tax and compensating tax as follows:

  • Sale or license of tangible personal property is reported to either (a) the location of the seller if the property is received by the purchaser at a New Mexico location of the seller, (b) the location the property is to be delivered, if not received at a seller’s New Mexico location, (c) if neither of the first two apply, then the location of the purchaser, or (d) if the location of the purchaser is unknown, then to the location where the property was shipped or transmitted. The prior version of the law which would have gone into effect on July 1, 2021 stated that such receipts were to be reported to the place of delivery to the customer.
  • Sales from leasing tangible personal property, including leasing vehicles, are reported to the location of primary use of the property as indicated on the address provided by the lessee. The prior version of the law which would have gone into effect on July 1, 2021 stated that receipts from leasing vehicles were to be reported to the place of first use.
  • Sales, leases, or licenses of franchises are to be reported at the location where the franchise is used. The prior version of the law which would have gone into effect on July 1, 2021 had no specific provision relating to franchises.
  • Receipts from the transportation of persons or property in, into or from New Mexico, are to be reported at the location where the person or property enters the vehicle.
  • Professional services are still to be reported at the location of the performer of the service or seller of the product of the service. HB326 provides a definition of professional services, as a service, other than an in-person service, that requires either an advanced degree from an accredited post-secondary educational institution or a license from the state to perform. An “in-person service” is also defined as a service physically provided in person by the service provider, where the customer or the customer’s real or tangible personal property upon which the service is performed is in the same location as the service provider at the time the service is performed.
  • All other services are to be reported at the location where the product of the service is delivered.

If the bill is signed, or otherwise not vetoed by the Governor, these location reporting changes will be effective July 1, 2021.

  • Gross Receipts Tax Credit for Compensating Tax Paid by Purchaser

Permits the Taxation and Revenue Department to credit a taxpayer who, as a result of an audit or a managed audit, owes gross receipts tax, an amount equal to the compensating tax paid by a purchaser if the taxpayer can demonstrate that the purchaser timely paid the compensating tax on the same property or services subjected to the gross receipts tax. If the bill is signed, or otherwise not vetoed by the Governor, his credit will be available effective July 1, 2021.

  • Corporate Income Tax – Apportionment of Business Income

Allows a modified apportionment formula for persons operating computer data processing facilities. If the bill is signed, or otherwise not vetoed by the Governor, this modified formula will apply to taxable years beginning July 1, 2020.

  • Local Option Gross Receipts and Compensating Taxes

Changes the minimum increment for local option gross receipts taxes that municipalities and counties may impose from one eighth of one percent to one hundredth of one percent. If the bill is signed, or otherwise not vetoed by the Governor, this change will take effect July 1, 2021.

  • Repeal of World Wide Web Sales Gross Receipts Deduction

Repeals the deduction provided by Section 7-9-57.1, which allowed taxpayers to deduct from their gross receipts any receipts derived from the sale of a service or property made through a World Wide Web site to a person with a billing address outside New Mexico. This repeal is due to the market based sourcing changes made by HB6 in 2019 in response to the United States Supreme Court’s decision in South Dakota v. Wayfair. If the bill is signed, or otherwise not vetoed by the Governor, the repeal of this deduction would be effective July 1, 2020.

  • Repeal of Gross Receipts Tax Credit for Certain Sales of Services for Resale

Repeals the tax credit provided by Section 7-9-96, which provided a tax credit for sales of services for resale where the resale of the service is not taxable. If the bill is signed, or otherwise not vetoed by the Governor, the repeal of this deduction would be effective July 1, 2020.

  • Manufacturing Definition for Apportionment Purposes

Amends the definition of “Manufacturing” found in the Uniform Division of Income for Tax Purposes Act (UDITPA) to exclude, beginning on January 1, 2024, electric power generation for which both location approval and a certificate of convenience and necessity are required prior to commencing construction or operation of the facility pursuant to the Public Utility Act. This change clarifies that, beginning on January 1, 2024, those taxpayers involved in electric power generation for which both location approval and a certificate of convenience and necessity are required prior to commencing construction or operation of the facility pursuant to the Public Utility Act are not permitted to use the modified apportionment formula provided to manufacturers under the UDITPA. This amendment to UDIPTA was originally introduced as Senate Bill 256, but was ultimately incorporated into HB326.

  • Gross Receipts and Governmental Gross Receipts Deduction for Marketplace Sellers

Amends the deduction provided by NMSA 1978, Section 7-9-117 to also allow a deduction of governmental gross receipts for marketplace sellers where the marketplace provider is registered with the Taxation and Revenue Department and has remitted, or will remit taxes due on the transactions giving rise to the receipts of the marketplace seller.

Tax Deduction for Medical Equipment – HB109  Governor Signed on March 4, 2020

Receipts from the sale or rental of durable medical equipment (such as walkers, wheelchairs, and oxygen tanks) are currently deductible from gross receipts for purposes of gross receipts tax. The deduction is set to expire on July 1, 2020. HB109 will extend the deduction to July 1, 2030. HB109, which passed both the House and the Senate on unanimous votes, was signed by the Governor on March 4, 2020.

Lodger’s Tax Exemptions – HB117 – Governor Signed on March 4, 2020

HB117 expands the uses for which revenue generated by the lodger’s tax may be spent, and redefines taxable premises to include hotels, motels “or other premises used for lodging that is not the vendee’s household or primary residence.” The bill also permits the collection of the lodger’s tax past thirty days, if the premises rented are not the vendee’s household or primary residence. This bill will primarily affect the Southeast region of New Mexico where the booming oil and gas industry has seen a reciprocal boom in long-term rentals to house workers flooding the state. HB117 passed both the House and the Senate on nearly unanimous votes and was signed by the Governor on March 4, 2020.

Custodial Memory Care Facility Gross Receipts Exemption – HB174 – Passed Both Chambers Unanimously; Pocket Vetoed by the Governor

HB174 creates an exemption from gross receipts for receipts of healthcare providers for providing custodial care for people living with advanced dementia and persons attributable to the operation of residential facilities designed and used for providing custodial care for people living with advanced dementia. HB174 passed both the House and the Senate on unanimous votes, and was pocket vetoed by the Governor.

Technology Readiness Gross Receipts Tax Credit – HB255 – Governor Signed on March 4, 2020

HB255 will create a gross receipts tax credit which would apply only to national laboratories, which would be able to claim a credit for qualified expenditures, including salaries, wages, benefits, and employer payroll taxes, incurred in assisting businesses to license laboratory technology or participate in research and development. The credit is capped at $500,000 per national laboratory beginning on July 1, 2020, with an annual increase of $250,000 every year until July 1, 2023 when the credit reaches $1,000,000. However, national laboratories cannot claim both the Technology Readiness Gross Receipts Tax Credit and the credit allowed under the Small Business Tax Credit Act in the same taxable period. HB255 was signed by the Governor on March 4, 2020.

Other/Miscellaneous

DID NOT PASS

Public Regulation Commission Reorganization Bills:

Several bills were introduced in the 2020 legislative session to reorganize the Public Regulation Commission, including restructuring the staff of the Commission, creating new divisions of the Commission, and a stand-alone Regulatory Affairs Office, among others. None of the PRC reorganization bills passed both the House and the Senate, and thus will not go into effect.

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