The 1998 Legislature met for 30 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 1998 chapter number, [bill number] and the effective date of the law's provisions.

The rate for the top bracket (over $100,000 taxable income for married filing jointly and over $65,000 for singles) drops from 8.5% to 8.2%. This is expected to save taxpayers about $5,400,000 per year. The Low Income Comprehensive Tax Rebate is expanded to cover people with modified gross incomes of up to $22,000 and amounts in the existing table cells are increased. These changes are forecast to rebate an additional $10,800,000 to low income New Mexicans. The existing income tax partial credit for taxes paid on prescription drugs will be replaced at the end of the 1998 tax year with a gross receipts tax deduction, starting 1/1/99. Net, this is expected to save taxpayers about $13,200,000 in combined state and local taxes.

There were two other elements in the tax cut package. One is Chapter 96, explained under "Gross Receipts Taxes". The other was a reduction in the unemployment compensation rate (not administered by TRD and so not shown here).

This duplicates the prescription drug part of Chapter 99 above.

The Procurement Code is amended to allow the TRIMS contract (only) to extend beyond the regular

4-year limit. The project can then be finished by the year 2000 without interruption.

Under both the personal and corporate income taxes, a new credit is available to employers who hire "long-term family assistance recipients" who live in counties whose unemployment rate in the preceding year exceeded 10% for 6 or more months. The credit equals 50% of the federal welfare-to-work credit for the same person—up to $1,750 for the first year of employment and $2,500 for the second. A series of provisions guard against displacement of existing workers. To qualify for the credit, the employer must obtain certification of eligibility from the state Department of Labor.

This act recognizes an exemption for certain transactions with diplomats, allows the Department for the first time to accept documents issued by other states or the Multistate Tax Commission in lieu of New Mexico nontaxable transaction certificates and narrows the deductions for sales of "agricultural implements" (defined in the act).

For a two-year period beginning July 1, 1998, receipts from providing telecommunications, Internet or Internet access services to other persons who provide Internet access to final users may be deducted from both the gross receipts and the interstate telecommunications gross receipts taxes. Two other deductions are also created, for receipts from "hosting" web sites (and, further, web sites alone do not create nexus for the owner of the web site) and for receipts from the sale of a service or property through the Internet to a person with a billing address outside New Mexico.

The existing deduction at §7-9-53 is expanded to include receipts of trailer parks from long-term rental (periods of 30 days or more) of space for recreational vehicles.

This enacts the first breach in the principle that medical services, like all other services, should be taxed. Receipts of medical doctors and osteopaths (only) from Medicare will be deductible. The deduction is phased in over three years, with one-third deductible starting 7/1/98, two-thirds on 7/1/99 and 100% on 7/1/2000.

The original bill simply removed the 7/1/98 sunset. Because this deduction for one New Mexico firm also created an unintended compensating tax deduction, a requirement was added that the materials be sold for use outside New Mexico. Effectively this means that compensating tax will be due on railway roadbed materials used in New Mexico.

This explicitly authorizes the Department to enter into agreements with direct marketers for collection of compensating tax. §7-1-15 is also amended to allow quarterly reporting for direct marketers remitting compensating tax under an agreement.

This act deals mainly with who is eligible for a winegrower’s license (mostly people who produce wine). Along the way it gratuitously declares wine growers to be manufacturers for gross receipts tax purposes.

The existing deduction at §7-9-69 (for administrative, accounting or management services by one affiliated corporation for another on a non-profit basis) is broadened in two ways. First, affiliates may now include limited partnerships owned at least 50%. Second, the deduction may also be claimed with respect to customer services billed on a nonprofit basis by one member of the affiliated group to another.

Valencia County is designated as a county authorized to impose this tax so that it may rebuild its jail. The tax is to be used to pay off bonds issued by the NM Finance Authority sufficient to cover at least half the cost of construction.

This expands the purposes for which various local option gross receipts tax revenues may be bonded. It also provides that excess revenues are to be placed first into reserve accounts up to the federally allowed maximum and then into another fund for retiring bonds. A second 1/8^th percent increment is authorized, subject to voter approval, under the municipal infrastructure gross receipts tax. Tax proceeds may be used for transit systems and for projects included in the local economic development plan. A new county infrastructure gross receipts tax of up to 1/8^th percent is enacted on businesses outside municipalities; this is also subject to voter approval. Its proceeds may be used for the same purposes as the municipal tax.

This plugs a couple of holes in last year’s enactment, adding a definition of "gross receipts" and setting a due date of the 15^th day of the next month.

Fuel used off-road is subject to the gross receipts tax instead of fuel tax; fuel tax is often paid first and then refunded later. Tightening of enforcement of gasoline and special fuel excise taxes resulted in refund delays for some downstream dealers and customers. This act allows a deduction under the gasoline and special fuel excise taxes for fuel dyed in accordance with applicable state or federal regulations. Thus dyed fuel will be subject to gross receipts tax from the beginning, eliminating the need for refunds.

This tax is totally revamped, with tax imposition being shifted entirely to the processing plants. Tax will be measured by the mmbtu’s of natural gas at the plant’s inlet. The rate is set initially at $.0065 cents per mmbtu but will be adjusted every July 1. The adjustment factor is equal to the average value of natural gas produced in New Mexico the preceding calendar year divided by $1.33. The rate starting January 1, 1999 will be similarly adjusted. New deductions are added for gas legally flared or lost through plant malfunction.

A fractional interest is a tangible interest in real property (other than mineral property) that is less than the total interest in the property. When fractional interests are created, this act requires nonexempt owners of these interests to report those interests to the assessor or Property Tax Division, as appropriate. If the owner claims the fractional interest is exempt from property tax, the assessor or Division will determine its status and valuation. General rules on how the interests are to be valued are also established.

This proposed constitutional amendment is to be voted on in November 1998. This would require a total exemption of the residence owned by a veteran, or the veteran’s widow or widower, if the veteran is determined under federal law to be totally and permanently disabled in a service-related injury, the veteran occupies the residence as his principal place of residence and has specially adapted the residence for his disability using a grant to the veteran by the federal government for this purpose.

This allows state or federally chartered credit unions, banks, savings and loan associations and savings banks to verify accuracy of personal information submitted to the institution and to obtain correct information to prevent fraud or to recover a debt or security interest.

This fine-tunes the New Mexico Commercial Driver’s License Act to match federal standards more closely. It specifically bars employers from requiring drivers subject to an out-of-service order to drive commercial vehicles. New fines are imposed on drivers and employers who violate out-of-service orders; the driver may also be disqualified from driving for not less than 90 days for violating out-of-service orders.

This pulls all references to "certified motor vehicle liability policy" out of the Motor Vehicle Code, adds a definition of "motor vehicle insurance policy" and otherwise does some housekeeping on the Code. Certified policies have not been issued by insurance carriers in this state for decades.

Anyone employed as a firefighter in New Mexico may apply for this new plate, with the fire chief’s approval. The plate will cost $25.

Persons who own vehicles that are 30 years old or older may use as a registration plate a plate originally issued in the year the vehicle was manufactured if the Motor Vehicle Division agrees that the plate is in good condition, the number is not already assigned and the person pays a one-time $25 fee in addition to the regular fees. The year-of-manufacture plate may remain with the vehicle upon its sale for a transfer fee of $10.

Mainly intended to combat misuse of dealer plates, the number of plates authorized for use by dealers is restricted to a maximum of ten (for dealers who sold 500 or more vehicles in the prior year). Instead a new series of temporary permits for purchasers (30 days), financial institutions or dealers (5 days) or manufacturers or transporters (10 days) will be issued to operate or move vehicles. Temporary demonstration permits may also be issued for each specific vehicle in a dealer’s inventory for testing, demonstrating or preparing the vehicle for sale. The distinction between vehicles in a dealer’s or wrecker’s inventory and his work or service vehicles is elaborated. In addition, every seller of registered vehicles must deliver the title properly assigned to the vehicle upon delivery. Dealers may also register inventory vehicles with a collegiate special registration plate for the use of full-time coaches or athletic directors at New Mexico four-year institutions of higher education.

This lengthy measure makes uniform the rules for appealing many decisions of agencies (including local governments) to the courts. The basic standard is that courts may set aside, reverse or remand the agency decision if the agency acted fraudulently, arbitrarily, capriciously or not in accordance with law or if the decision was not supported by substantial evidence. Not all decisions are included. For example, decisions of the Taxation and Revenue Department subject to the new law are only those regarding disputes arising under the Uniform Unclaimed Property Act, an order issued by a county valuations protest board or the Department on the valuation of a specific property, the refusal to issue or the cancellation or suspension of a motor vehicle dealer’s or wrecker’s business license, the denial, cancellation, suspension or revocation of a driver’s license or the refusal or cancellation of a motor vehicle registration for failure to comply with the Mandatory Financial Responsibility Act. Appeals are to the district court and, although the new law does not say so explicitly, will be on the record. The Tax Administration Act still applies to tax disputes.

This memorial asks the Taxation and Revenue Department to study the feasibility of using corporate income tax forms to collect information—on a voluntary basis—to establish a database for economic forecasting.

Among other things, this study could involve examining the merits of transferring the Motor Transportation Division officers to the Department of Public Safety.