The 2018 thirty-day session of the New Mexico Legislature adjourned February 15, 2018, after what was called an unusually cooperative and bipartisan effort. Following is a summary of select legislation that might be of interest to business owners. The deadline for Governor Susana Martinez to sign, veto or pocket veto these measures was March 7, 2018.
ECONOMIC DEVELOPMENT
PASSED
Wireless Consumer Advanced Infrastructure Investment Act – HB38/SB14 — Governor signed HB38 on 2-28-18 and SB14 on 3-7-18.
These mirror bills each passed both houses with identical amendments, allowing the construction of wireless infrastructure within public rights of way. The bills prohibit a municipality or county from entering into an exclusive agreement with a wireless provider for the use of public rights of way for wireless infrastructure but allow them to charge any number of wireless providers a “competitively neutral” fee for that use. The bills further govern the details of the construction, maintenance and use of such infrastructure.
Military Construction Services Gross Receipts – SB99 – Governor signed on 3-2-18.
Enacts a new gross receipts tax deduction for construction services to implement a fighter aircraft pilot training mission project at a military installation in a Class B county with a population greater than 60,000. It is designed to lower the overall cost of implementing an F-16 training mission at Holloman AFB. The bill repealed the existing deduction for construction services provided at military installations in Class B counties with a population greater than 42,000. .
Regional Air Center Special Economic District Act – HB197 – Governor vetoed on 3-7-18.
Allows a municipality and the county in which the municipality is located to form an Industrial Air Center Special Economic District for the purposes of capitalizing on the economic potential of a former military base and stimulating aviation-related activity and investment in the state. Such districts would be governed by an appointed board, which would be a governmental entity with the power of eminent domain. Any properties owned by the Authority would not be subject to property tax and there would be some exclusions from the gross receipts tax within the District. The Authority would be allowed to issue tax-free revenue bonds to acquire or improve infrastructure and promote business development with the District. This bill is designed to benefit the Roswell International Air Center on the site of the former Walker Air Force base, which is home to Dean Baldwin Aircraft Painting, AerSale, and several other aviation-related businesses. Its language is sufficiently broad to allow other locations to form Districts, however. HB2 (the budget) includes a $900,000 appropriation for the administration of the Roswell International Air Center.
Commercial Aerospace Protection Act – SB98 – Governor signed on 3-2-18.
Adds language to the Spaceport Development Act that exempts certain proprietary business information from inspection under the Inspection of Public Records Act (IPRA) to give Spaceport customers confidentiality. The information protected by the bill is already protected by the statute governing the Economic Development Department, to which the Spaceport Authority is administratively attached. Both agencies have consistently construed the Economic Development Department Act as prohibiting the disclosure of information related to the possible relocation or expansion of a business.
EMPLOYMENT AND LABOR
PASSED
Employer Statements of Withholding – HB276 – Governor signed on 3-2-18.
If enacted into law, would require all employers to file an annual report regarding employee withholdings rather than allowing some employers to file quarterly reports. Easily passed in both chambers.
Corporation Biennial Report Due Dates – SB225 – Governor signed on 3-1-18.
Would change the biennial corporate report due date from the 15th day of the third month to the 15th day of the fourth month after the end the taxable year. Easily passed both chambers.
DID NOT PASS
Increase Minimum Wage – HB60 and SB206
Both bills proposed increasing the minimum wage. Both died in committee.
Employee Preference Act – HB169 and SB179
Both bills proposed implementing an Employee Preference Act that would support employees either joining labor unions or declining to do so. Would prevent employers from using the requirement of becoming a member of a labor union; paying dues, fees, or assessments to a labor union; or having the recommendation or approval of a labor union as a condition of employee hiring, promotion or continued employment. Both bills died in committee.
State Law over Private Sector Employment Law – HB189
Would have prevented local governments from regulating benefits provided by private employers, such as unpaid leave, fringe benefits, and benefits provided at the employer’s expense. Died in committee.
LIQUOR ISSUES
PASSED
Liquor Control Act – HB258 – Governor signed on 3-1-18.
Amends the Liquor Control Act to prohibit nonretail licensees (manufacturers, importers and wholesalers) from offering, funding, producing, sponsoring, promoting, furnishing or redeeming any type of coupon or scanback. New Mexico’s unfair competition and tied-house laws prohibit manufacturers, importers and wholesalers from inducing retail licensees to purchase alcoholic beverages from the manufacturer, importer or wholesaler by paying money or giving anything of value to a retail licensee. Adds an additional limitation such that manufacturers, importers and wholesalers may no longer (1) issue to retailers coupons that allow a specified amount of money to be deducted from the normal price of a particular alcoholic malt beverage product purchased at retail by a consumer during a promotional period, or (2) reimburse retailers based on how many units of a particular alcoholic malt beverage product the retailer sells during a promotional period (scanbacks). Passed in the House 59-0 and passed in the Senate 3-0.
TAXATION
PASSED
Alternative Evidence for Tax Deductions – HB194 – Governor signed on 3-2-18.
This is taxpayer friendly legislation that removes a sometimes problematic administrative requirement for claiming deductions. It allows taxpayers to present alternative evidence to prove entitlement to gross receipts tax deductions currently requiring a nontaxable transaction certificate (NTTC) and removes the current 60-day deadline for possessing NTTCs. Makes it administratively easier for taxpayers, particularly small business without sophisticated accounting departments, to claim certain deductions. Passed the House 67-0 and passed the Senate 38-0.
“Construction Material” in Gross Receipts Act – HB245 – Governor signed on 3-2-18.
Amends the statutes governing gross receipts deductions for sales of tangible personal to governmental agencies and 501(c)(3) organizations to conform to standard practice and existing regulations and to resolve the recent issue of “cost segregation” affecting governmental entities and business-provided industrial revenue bonds (IRBs) by local governments. In effect, the bill would carve out from the definition of “construction material” tangible personal property that is or would be classified for depreciation purposes as three-, five-, seven or ten-year property under Section 168 of the Internal Revenue Code. Passed the House 65-0; amended version passed the Senate 35-0, with the House concurring on amendments.
Thanksgiving Saturday Gross Receipts – HB79 – Governor signed on 3-2-18.
Created a gross receipts tax holiday for small business retailers coinciding with “Small Business Saturday.” The deduction was limited to receipts from the sale of various specific types of tangible personal property sold for less than $500, and as amended by the Senate Finance Committee, could only be claimed by businesses employing 10 or fewer employees in New Mexico. The original version passed the House 43-20, the amended version passed the Senate 21-20, and the House concurred with those amendments.
Gross Receipts For Certain Nonprofits – SB17 – Governor vetoed on 3-7-18.
This bill would have amended NMSA § 7-9-29 to except the receipts of a prime contractor operating a national laboratory from the general exemption from gross receipts taxation for 501(c)(3) nonprofits. A nonprofit operator of Los Alamos National Lab or Sandia National Laboratories would thus be generally subject to gross receipts tax. The bill passed the Senate 31-4, and it passed the House 48-19. The bill generated some controversy and could be seen as off-message in her stated goal not to raise taxes. The bill’s fiscal impact report indicated that it would prevent the state losing $25 million to $30 million in tax revenue if a nonprofit were chosen to operate Los Alamos, but some legislators were concerned that the bill’s singular focus created “winners and losers.”
DID NOT PASS
Compensating & Gross Receipts Tax Changes – HB206
This bill, which was substantially changed by a committee substitute, would have amended several gross receipts tax statutes, most notably by: (i) clarifying the deduction from gross receipts for transactions in interstate commerce; (ii) providing that receipts from selling chemicals or reagents for use as fuel may not be deducted from gross receipts; (iii) repealing several gross receipts tax exemptions, deductions, and credits; and (iv) repealing several income tax credits, including the Venture Capital Investments Credit, but allowing them to be carried forward under certain conditions. The bill passed the House 61-1 but too late to move it out of committee to the Senate floor before the end of the session.
High-Wage Jobs Tax Credit Eligibility – HB200
Would have reduced the value of the credit per job per year, extended the maximum length of the credit from four to eight years, removed employer eligibility requirements other than JTIP eligibility, and reduced the number of weeks a job must be held from 48 to 44. The bill passed the House 64-0 and moved to the Transportation Committee with a “Do Pass” recommendation but died in committee.
Make Angel Investment Credit Refundable – HB201
As the title indicates, would have made the current Angel Investment Credit for state income taxes refundable to the taxpayer if the value of the credit exceeds the taxpayer’s tax liability. It passed the House 60-2 but died in committee.
Tax Code Cleanup & Reporting – SB128
This bill, the same as the similarly stalled Senate Bill 68, would have required the separate statement of various gross receipts tax deductions, including those for selling wind and solar generation equipment to governments, software development services, selling chemicals or reagents; and receipts of hospitals. It was reported out of the Senate Corporations and Transportation Committee with a “Do Not Pass” recommendation but died before it could move to the Senate floor.
Gross Receipts Tax Changes – SB162
Would have amended gross receipts and governmental gross receipts applicable to hospitals, subjected persons without physical presence in the state to gross receipts tax, and lowered the gross receipts tax rate. Died in committee along with companion SB175.
OTHER
PASSED
Uniform Guardianship & Other Arrangements – SB19 – Governor signed on 2-28-18.
Significantly changes Article 5 of the Uniform Probate Code beginning in 2018, and ultimately repeal Article 5 of the Uniform Probate Code. The 2018 changes protect a person’s voting rights; require conservators’ reports, accountability and bonding; change the process of appointing guardians and conservators; and allow for protective arrangements, which are less restrictive than guardianships and conservatorships. Ultimately, enactment repeals Article 5 of the Uniform Probate Code and replaces it with the Uniform Guardianship, Conservatorship and Other Protective Arrangements Act on July 1, 2020. The Uniform Guardianship, Conservatorship and Other Protective Arrangements Act would overhaul provisions of the Probate Code regarding protected persons and would create protections, procedures, rights, powers, duties and responsibilities for adult and minor guardianships, conservatorships and protective arrangements. In particular, makes families more involved in the process of selecting a guardian, conservator, or protective arrangement, and require adult guardians to be nominated by the respondent, a family member or another person that has shown concern for the respondent. Prohibits restrictions on an adult’s ability to communicate or interact with others, unless the restriction is put in place by the court, and requires guardians to develop a plan of care for the protected person, including plans regarding living arrangements, activities, visitation, and future goals. Finally, courts are required to monitor guardians, conservators and protective arrangements. Passed at the last minute.
Auto Recycler Electronic Reporting to Tax & Revenue Department – HB52 & SB24 – Governor signed both on 3-7-18.
Companion bills creating a new addition to the Motor Vehicle Code. Under the bills, auto recyclers must electronically inform the Department of any purchase of a motor vehicle within two business days after the purchase date. The notification must contain specific information about the purchaser, seller, vehicle, and the intent for the vehicle’s disposal. Auto recyclers must also confirm with the Department whether the vehicle has been reported as stolen via the Department’s electronic system before the vehicle is purchased. Further, it is the Department’s duty to upkeep the electronic system and to make it available for law enforcement agencies. The bills make changes to the Motor Vehicle Code with respect to electronic forms and vehicle dismantling. The bills’ effective date is January 1, 2019. The bills were amended during the session but passed with strong final votes.
Car Dealership Changes – HB46/SB27 – SB27 Governor signed 3-1-18.
Adds a new section to the Motor Vehicle Dealers Franchising Act. The new section makes it unlawful for car manufacturers to (i) use arbitrary or unfair performance standards in determining a franchise dealer’s compliance with a franchise agreement; (ii) not compensate a dealer for performing necessary repairs or for labor or parts required for a manufacturer recall, do not drive order, or stop sale order; or (iii) not compensate a dealer for delay in delivery of parts or equipment needed to repair vehicles subject to a do not drive order or a stop sale order. Contains similar restrictions on manufacturers related to dealer incentives.
Trust Company Act Changes – SB137 – Governor signed on 3-2-18.
Changes the Trust Company Act to include increasing minimum capital, fidelity bond and insurance requirements for trust companies. Specifically, insurance coverage must be sufficient to cover losses related to fraud or embezzlement. The changes require trust companies to comply with all rules under the Trust Company Act, the Uniform Probate Code, the Uniform Prudent Investor Act and the Uniform Trust Code. It requires trust companies to keep investments separate from their assets. It grants the director of the financial institutions division of the Regulation and Licensing Department authority to shut down companies failing to adhere to state laws. Requires a trust company seeking to cease business or reorganize to submit filing with the Financial Institutions Division regarding how trust accounts will be handled.
Uniform Directed Trust Act – SB101 – Governor signed on 3-2-18.
Enacts the Uniform Directed Trust Act (UDTA) to regulate directed trusts, or trusts in which an individual who is not trustee, possesses authority over a portion of the trust. Such an individual could be a “trust protector” or “trust director.” The UDTA addresses issues including the trust director’s scope of power, duty and liability as well as the responsibilities of a directed trustee. The UDTA would be effective January 1, 2019, and applies to decisions made on or after that date for previously existing trusts. The bill also makes changes to the Uniform Trust Code and the Uniform Trust Decanting Act so the laws can accommodate the UDTA’s enactment. Passed in the Senate and the House. The governor has not indicated whether she will sign.
DID NOT PASS
Uniform Resident Relations Act – HB110
Proposed to amend the Uniform Resident Relations Act (URRA) to lift the stay typically allowed when a tenant is ordered to leave a rented dwelling. For the stay to apply, the tenant would have to post a bond pending an appeal, which is typically taken to district court. Died in committee.
Alternate Business Name Registration – SB254
Proposed to allow a corporation to register a “doing business as” name in addition to its corporate name.
CONTRIBUTING LAWYERS
- Andrew J. Baranowski
- Suzanne Wood Bruckner
- Katharine C. Downey
- Brana L. Hardway
- Wade L. Jackson
- Robert J. Johnston
- Jacqueline K. Kafka
- L. Curtis Vernon
▼▼▼
Sutin, Thayer & Browne is a leading New Mexico business law firm serving clients in business transactions and litigation for more than 70 years.
If you have questions, please get in touch with your regular contact at Sutin, Thayer & Browne. The main phone number is 505-883-2500.