The New Mexico State Legislature convened on January 21, 1997. During its 60-day regular session, the Legislature passed a number of acts affecting taxpayers and the Taxation and Revenue Department. This Bulletin gives an overview of the Department's role in the legislative process, followed by a summary of new legislation affecting the Department.

The Taxation and Revenue Department plays a unique and substantial role in the legislative process because of its expertise in tax and transportation development, analysis, and administration. In general, the Department performs in four different roles during the year.

Year-round Trend-spotter. During the year, Department members review federal legislation, court cases, and administrative tax protests to discover trends and effects on current laws and administrative practices. The Department brings these issues to the Legislature's attention through meetings of various standing committees, particularly the Interim Revenue Stabilization and Tax Policy Committee. In many cases, the Department's Director of Tax Policy assists with drafting bills related to ensuring stable revenues and improving services to taxpayers. The Department also plays a major role in detecting technical flaws in previously enacted legislation, and effecting revisions.

Year-round Advisor. Through the year, the Department advises the Governor, the Governor's tax policy committee(s), heads of other state agencies, legislators, interim legislative committees, and state agency task forces on various taxation matters. Tax proposals can turn out to have unexpected fiscal impacts, perverse economic effects, or unforeseen administrative difficulties, and the Department is asked for its nonpartisan opinion on proposals before they are formally introduced into the legislative process. For the Department, arriving at such an opinion may involve estimating fiscal and administrative impacts, examining the economic burden of the legislation, and conducting research on the legal issues involved.

Legislative Reviewer and Analyst. During the legislative session, the Department analyzes every bill that would have an impact on the Department or state revenues. Each "Fiscal Impact Report" examines a bill for its fiscal, legal, tax burden, and administrative impacts, incorporating the views of Department lawyers, economists, systems analysts and other specialists. The Department typically prepares reports on 400 or so pieces of legislation during a general session, which is held in odd-numbered years and runs for 60 days; and reports on some 250 pieces of legislation during a fiscal session, which is held in even-numbered years and runs for 30 days.

Legislative Advisor. Department members provide testimony and advice during the legislative session. During sessions, the Department maintains a full-time legislative liaison office at the State Capitol with at least five Department employees: the Department Secretary, Deputy Secretary, Assistant Secretary, Chief of Tax Information and Policy, and Chief Legal Counsel. These employees advise and testify before various House and Senate committees. They also draft legislation, explain fiscal and administrative impacts of proposed tax or transportation legislation, and work with the Legislative Finance Committee and Legislative Counsel Service to resolve problems. In addition, the Department lobbies for or against a bill if the Governor has established a position on the bill.

This publication provides instruction or general information to the taxpayer. It does not constitute a regulation or ruling as defined under Section 7-1-60, New Mexico Statutes Annotated, 1978. Taxpayers and preparers are responsible for being aware of New Mexico tax laws and rules. Consult the Department directly if you have questions or concerns about information provided in this publication.

The 1997 Legislature met for 60 days in regular session. Acts affecting the Taxation and Revenue Department (TRD) either administratively or programmatically are outlined below. The heading for each entry includes a title or description, the Laws 1997 chapter number and the effective date of the law's provisions.

 Tax Administration Act Amendments

The most significant change is to the successor in business provisions. They now extend to most TRD-administered business taxes and to all transfers of a business from one person to another. The successor remains liable if the transfer is an attempt to evade tax, is a de facto merger or the successor has assumed the liability. The other changes are: including unlawful abatements in "tax"; allowing TRD to accept as date of delivery the date shown by time stamps of qualifying courier services; placing a definite cut-off on TRD's time to act on refunds; allowing TRD to release liens in more circumstances; waiving penalty if TRD demand for payment is met within 10 days; and imposing a civil penalty on persons (e.g., corporate officers) who cause another (e.g., the corporation) to evade or attempt to evade taxes.

This act authorizes TRD to borrow up to $33.7 million to replace TRD's aged personal and corporate income tax systems, combined report system (gross receipts, compensating and withholding taxes) and the driver and vehicle systems. In the first 3 years, the borrowing will be repaid through charges to local governments and state entities and funds. After that, incremental revenues will be used to repay the bonds.

 Income Taxes—

 Intergovernmental Business Tax Credit

Mainly to assist the potential development of an agricultural processing plant in Indian country, qualifying corporations may credit against state corporate income tax up to 50% of business taxes owed to an Indian government with respect to its operations on that tribe's land in New Mexico. Only manufacturers, processors or growers may qualify; manufacturers and growers may count only tribal taxes due on business facilities created after July 1, 1997. Any tribal taxes covered by any other intergovernmental credit are not eligible under this credit.

A third option is added for calculating the quarterly estimated tax payments. If the prior year's tax return has not been filed and is not due by the time the first quarterly estimate is due, estimates may be based on 110% of the liability on the return for the year before the prior year.

Last year's act to require quarterly estimated income tax payments from individuals is amended to provide a third option for determining whether (and how much) penalty may be due on underpayment of estimated tax. The effect is similar to the federal annualized exception but is simpler. Farmers and ranchers will be treated as they are for federal purposes.

The longstanding tax rebate for a portion of property taxes paid by persons 65 and over on their principal residence now includes those with modified gross incomes of up to $25,000 but only if the county in which the person's principal place of residence is located reimburses the state for the added costs.

The 1994 law setting up an income tax administered tax rebate for a portion of property taxes paid by low

income taxpayers on their principal residence is expanded in two ways. The maximum tax rebate is raised to $350 and the maximum eligible modified gross income is raised to $24,000 from $16,000. Counties may elect to make this tax rebate available but must reimburse the state for the entire cost if they do. No county has yet adopted this tax rebate.

The Education Trust Fund and an administering board are set up, mainly as devices to allow prepayment of tuition and fees at public, in-state institutions. Amounts paid to the Fund through either a college investment agreement or a prepaid tuition plan are deductible from state income tax but, if the amounts paid in are withdrawn and used for purposes other than payment of tuition and fees at public, in-state institutions, the withdrawal is taxable in the year of withdrawal and is subject to 6% withholding.

 Gross Receipts Taxes—

 County Hospital Emerg. Gross Receipts Tax

This tax was due to expire on 7/1/99; it is now permanently authorized. Sierra County (the only county qualified to impose it) may also pledge the tax's proceeds to acquire, equip, remodel or improve a county hospital.

In addition to other authorized counties, Roosevelt County may now impose this tax (at 0.5%). It may use the proceeds to acquire, build, equip, operate or maintain a hospital or clinic, whether the facility is owned by the county or a private entity with whom the county has entered into a health care facilities contract. Generally, most other counties authorized to impose this tax may now use it for health clinics in addition to hospitals. The bill also restores a definition of "hospital facility revenues" deleted in signing order last year.

TRD may enter into agreements with Santa Clara Pueblo to collect any gross receipts tax imposed by the Pueblo. To resolve dual taxation issues, if the Pueblo grants a 25% credit against its tax and meets other specified conditions, the state will grant a credit against state and local gross receipts tax due from taxpayers subject to both taxes. The result will be that taxpayers will pay the same tax as they would under the state and local taxes alone—even after the Pueblo has imposed its tax. The credit applies only to receipts deriving from those areas on the Pueblo grant outside the municipal limits of Española.

An error in last year's law is corrected.

The rules have changed again, reverting more or less to the pre-1992 version. Taxpayers must demonstrate possession of NTTCs (and certain other deduction-supporting documents) within 60 days of notice from TRD requiring the demonstration. Notice is given on or after commencement of an audit.

The existing deduction is modified by expanding the definition of "spaceport" and defining "payload". The deduction sunsets 6/30/2001.

This restores a definition of "hospital facility revenues" deleted in signing order last year (duplicating language in Chapter 54).

Although strangely worded, this simply allows Raton and Ruidoso (only) to refund their existing water system bonds and to continue imposing this 1% tax to repay the refunded bonds.

 Other Excise Taxes—

 New Alternative Fuel

The definition of "alternative fuel" is expanded to include what is called "A55", an emulsion consisting basically of water (not less than 20%) and a hydrocarbon fuel.

The existing exemption from the severance tax surtax on coal for qualifying new contracts is extended two more years, to 6/30/99.

The definition of small winer is expanded by increasing the maximum allowable production from 220,000 to 375,000 liters (about 100,000 gallons).

The tax is (a) 10% of the receipts of manufacturers or distributors of gaming machines from selling or leasing gaming machines (except sales or leases by manufacturers to distributors) and (b) 25% of the net take of gaming operator licensees. This tax is in lieu of gross receipts tax on such receipts.

For special fuels (diesel and kerosene), fuel is received by the rack operator in every instance except when the rack operator delivers the fuel to a registered distributor at the rack, in which case the registered distributor becomes the taxpayer. Imported special fuel is received when it crosses the state line. When special fuel is received within the boundaries of an Indian reservation or pueblo grant by a person immune from state taxation, the fuel is received immediately upon its leaving the reservation or pueblo grant (except when transported by pipeline or in supply tanks of motor vehicles). Every person transporting special fuel must now carry a manifest or bill of lading. Gasoline is received by the rack operator in every instance except two. When the rack operator delivers fuel to a registered distributor at the rack or ships fuel to a registered distributor, the registered distributor becomes liable for the tax at the rack or the place where the fuel is actually unloaded, respectively. Imported gasoline is received at the place where it is actually unloaded. For both fuels, the deduction for exports has been narrowed to cut down on "daisy-chaining". A new deduction is granted for sales of gasoline to an Indian nation, tribe or pueblo for its exclusive use (which does not include re-sale).

 Property Taxes—

 Construction Contractors

If it is in New Mexico on January 1 of the tax year, equipment of construction contractors is valued as if it were in this state all year. This law adds that, if the equipment comes into the state later in the year and is present for 20 days or more, then its value is taxed based on the length of time it is here. This puts New Mexico practice in line with our neighboring states.

When a county mails the notice of valuation for the succeeding tax year with the current year's tax bill, the period for protesting the valuation extends until April 1 of the tax year to which it applies.

Counties will have sole responsibility for collecting delinquent property taxes owed with respect to personal property (livestock, manufactured homes and business depreciable property).

Each county valuation protests board consists of 3 members. This bill allows an alternate to be appointed for each member.

Once land is determined to be used for agricultural purposes, it is presumed in succeeding tax years to be used for agricultural purposes and the owner need not apply for this status. This change applies to land determined to be agricultural for the 1995, 1996 or 1997 tax years. Penalties are imposed for failing to report when the land is no longer used primarily for agricultural purposes.

 Other-

 Investment Credit Extension

The investment credit (against gross receipts, compensating and withholding taxes) is extended largely in its present form to 1/1/2000. The amount of credit claimable on any CRS return, however, is limited to 85% of CRS taxes due. Also, instead of being eligible for a refund of gross receipts tax paid on qualifying equipment, the taxpayer must claim the credit. Transition provisions are incorporated in case the Act changes form in 2000.

The tax rate is cut from 3.5% to 1.5%, effective for the 1996 and subsequent tax years, mainly to settle a lawsuit.

Just like the 4-year licenses, one-year licenses are to expire 30 days after the licensee's birthday in the expiration year. Almost all one-year licenses are issued to persons 75 years of age and older.

Loads may not extend more than 3 feet in front of a vehicle. To determine the foremost part of a solid waste collection vehicle (only), however, the loading equipment shall be considered part of the vehicle.

A $75 fine is imposed for having screening material on the windshield, side windows and (for passenger cars) rear window that does not comply with new standards, except for vehicles with screening applied before 7/1/97. Screening on windshields may not extend below the ASI line or 5 inches from the top and may not be red, yellow or amber. Material on other windows must be nonreflective and transmit at least 20% of ambient light. Manufacturers must certify that the material used and installation comply with law and affix a label on each window screened affirming compliance.

Persons eligible for purple heart plates may obtain plates for two vehicles.

In addition to other charges, fee agents will be entitled to $3 from the state as payment for each motorboat registration the agent processes.

This was intended to allow garbage trucks to run 18% overweight without permits but, since it did not change all the relevant weight limits, it will be without effect.

 Driving While Intoxicated—

Equivalent DWI convictions in other US jurisdictions now must be counted along with New Mexico convictions in determining whether a person is a subsequent offender. Judges must order persons convicted of DWI to participate in a program screening for alcohol and drug abusers. Judges are prohibited for suspending, deferring or taking under advisement the screening program requirement or any necessary treatment program.

If you challenge a DWI citation in court and lose, the lab fee you pay will be $65, up from $35.

This act duplicates Chapter 43 provisions regarding mandatory screening of persons convicted of DWI.

Persons arrested for DWI must be fingerprinted. To pay for this, all persons pleading guilty to or convicted of traffic violations will pay an additional $2. This law also sets up a brain injury services fund which will be fed by another $5 fee on traffic citations. The Health Department is to use fund balances to increase the independence of persons with traumatic brain injuries.

This duplicates the portions of Chapter 242 regarding the brain injury services fund and $5 add-on fee.

The 1995 model Uniform Unclaimed Property Act is adopted. Among other changes, provisions limit the terms of contracts between property "finders" and the owners, prohibit dormancy charges unless there is a written contract between the holder and the owner and impose penalty and interest for failure of holders to comply with the Act.

District and municipal courts now may request TRD to intercept income tax refunds for fines, fees and costs owed those courts. (Magistrate and metropolitan courts were granted this authority in 1993—and found it unuseful.)