Tax Updates From the 2014 Legislative Session

February 13, 2014

The New Mexico Legislature saw a number of bills introduced on a variety of topics having to do with budget and finance. The sponsors of these bills often aim to accomplish their goals through the use of tax policy. At Sutin, Thayer & Browne, we believe it is important to help our clients stay in front of such changes so as to best position themselves for success in the new year. We are keeping our eye on the following proposed bills, which, if passed, could affect the tax treatment of our clients in 2014:

HOUSE BILL 234 – Extension of net operating loss carryover. HB 234 proposes an extension of the net operating loss carryover exclusion from net income in the Corporate Income and Franchise Tax Act for up to 20 years, up from the current 5 years. This brings the period in line with the federal standard and that of many other states. This will help New Mexico stay competitive when businesses are considering where they want to invest, and may influence New Mexico businesses’ decisions about whether to expand.

SENATE JOINT RESOLUTION 5 – Bi-annual tax expenditure budget. SJR 5 proposes a constitutional amendment to require a bi-annual tax expenditure budget.  It would require voter approval.  Tax expenditures include credits and deductions. Gathering information necessary to create such a budget would require additional reporting from public and private organizations claiming such credits and deductions. The increased cost of reporting could put a strain on current New Mexico businesses and may contribute to a tax policy framework that makes New Mexico look comparatively less attractive to out-of-state businesses looking to invest.

HOUSE BILL 131 / SENATE BILL 29 – Separate statement of gross receipts tax deductions and exemptions. HB 131 and SB 29 would require separately stating many gross receipts tax deductions and exemptions.  The bill also sunsets many redemptions and deductions beginning in 2025.

HOUSE BILL 210 – Reduce corporate income tax. HB 210 would reduce the top scheduled income tax rate on net income > $500k from 6.2% to 5.4% in 2017, and from 5.9% to 4.9% in years 2018 and after.

SENATE BILL 17 – Combined income tax reporting. SB 17 would require a bank that is a unitary corporation to report under a mandatory combined filing basis with other unitary corporations as though the entire combined net income were that of one corporation for taxable years beginning on January 1, 2015. Current law allows reporting on a separate company basis.

SENATE BILL 10 – New revenue income tax credit. SB 10 creates a new refundable personal and corporate income tax credit in the amount of 30% of new revenue created. Applicants must receive a certificate of eligibility from the Economic Development Department and cannot use certain other credits in conjunction.

SENATE BILL 47 – Business facility reinvestment tax rebate. SB 47 creates a 25% corporate income tax rebate for taxes paid for qualifying investments in new business of no less than $1,000,000, or in existing businesses in excess of $250,000. Applicants must receive a certificate of eligibility from the Economic Development Department.

HOUSE BILL 262 – Nonprofit hospital services gross receipts. Would create a new gross receipts tax deduction for sales of services by a health care professional to a nonprofit hospital pursuant to a contract with the hospital.

Click here to follow the progress of specific bills.  This article is to be updated shortly after the 2014 Legislature session ends.

Suzanne Wood Bruckner, head of the firm’s tax division, and John I. Pray III both practice in the firm’s commercial group.

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