Pub. 16 2019 Issue 1

Issue 1 • 2019 5 O V E R A C E N T U R Y : B U I L D I N G B E T T E R B A N K S - H E L P I N G N E W M E X I C O R E A L I Z E D R E A M S charged with permitting and otherwise regulating hemp manufacturers (including extractors, and man - ufacturers that produce products intended for human consumption). Within the regulatory framework estab- lished by the Act, the bill: • allows for and regulates the possession and use of hemp derived products that contain THC concentra- tions of not more than .3 percent in manufacturing; • allows for and regulates hemp plant breeders to use plants that contain THC concentrations of not more than .3 percent; • regulates the storage and disposal of accumulated THC at levels that may be greater than .3 percent; • provides oversight to ensure finished food products con - taining hemp are manufactured within sanitary guide- lines and that they do not exceed .3 percent THC; and • recognizes tribal entities’ authority to develop their own regulation of the production of hemp on their lands and outlines hemp agreement opportunities between those entities and the state. HB 581 also amends the State Controlled Substances Act to exempt hemp consistent with the purposes stated in the Act. • Taxation: HB 6 makes personal income tax rate and bracket changes, bringing the top rate to 5.9 percent from the current 4.9 percent. The top rate is imposed on single filers and estates with taxable incomes over $210 thou - sand, on married filing jointly and head-of-household filers with taxable incomes over $315 thousand, and on married individuals filing separately with taxable incomes over $157.5 thousand. These changes are contingent on FY20 general fund revenues exceeding FY19 revenues by less than 5 percent. The rates and brackets would take effect January 1, 2021. The bill also reduces the capital gains deduction from 50 percent to 40 percent, increases the working families tax credit to 17 percent from the 15 percent, and increases the motor vehicle excise tax rate to 4 percent from the 3.5 percent. The bill makes changes to the distributions frommotor vehicle excise tax revenues in addition to increasing the rate from the existing statu - tory rate of 3 percent to 4 percent as follows: • For FY20 and FY21, the general fund will continue to receive the existing 3 percent, and the additional 1 percent will be sent to the Department of Transporta - tion for expenditures needed to mitigate the emergency road conditions related to activity in the oil field in state transportation commission district 2; and • For FY22 and subsequent fiscal years, the general fund will receive 2.5 percent (0.5 percent less than current statute), and the remaining 1.5 percent will be split equally between the state road fund and half to the local governments road fund. The bill taxes remote (Internet) sales immediately and then applies local GRT increments andmoves to destination-based sourcing (sourcing at the location of the buyer rather than the seller) with a two-year delay (effective July 1, 2019 and July 1, 2021, respectively). The bill distributes $24 million annually from the general fund to local governments in FY20-FY21 until the local increments are applied to remote sales. Once destination sourcing takes effect, all sales will have an in-state location, so current GRT transactions coded as out of state would be shifted into counties andmunicipalities. The bill takes the existing 50 percent deduction applicable to for-profit hospitals, increases it to 60 percent, and applies it to nonprofit and governmental hospitals as well, subjecting the remaining gross receipts of for-profits and nonprofits to state-only GRT rates and of governmental hospitals to the governmental GRT rate. The hospital credit is repealed. Part of the additional revenue could be used to increase Medicaid provider rates, offsetting the additional taxes levied on hospitals by leveraging federal funds. Finally, the bill implements corporate income tax combined reporting for certain corporate entities for tax year starting on January 1, 2020. The tax revisions in HB 6 are expected to generate an additional $71 million in state revenues. • Right to Work: HB 85 creates a law permitting an employer or labor organization in the state to execute and apply an agreement requiring membership in a la- bor organization as condition of employment to the full extent allowed by federal law. HB 85 precludes cities, counties, home rule municipalities, and other politi- cal subdivisions from adopting or continuing in effect ordinances, rules or resolutions that prohibit agree- ments requiring membership in a labor organization as a condition of employment in the state. • Environment: SB 489 creates the Energy Transition Act which among other matters establishes new renew- able and zero carbon emission portfolio standards for both utilities and rural electric cooperatives and authoriz- es an alternative mechanism for financing the retirement of coal-fired power plants. Current law requires renew - able energy to supply 20 percent of NewMexico’s elec - tricity by 2020. The bill increases the renewable energy requirement for all utilities and rural electric cooperatives to 40 percent by 2025 and 50 percent by 2030. For utili- ties, the bill increases the renewable portfolio standards to 80 percent by 2040 and requires 100 percent zero car- bon resources by 2045 after considering safety, reliability, and costs to customers. For rural electric cooperatives, the bill requires 100 percent zero carbon resources by 2050, composed of at least 80 percent renewable energy after considering safety, reliability, and costs to customers. • Film: SB 2 amends the Film Production Tax Credit Act to pay off the film credit backlog up to set amounts (up to an additional $195 million by the end of FY20 plus up to an additional $30 million contingent on FY19 revenues ex - ceeding the forecast), change the annual $50 million roll- ing cash cap to a $110 million cash cap, implement a $100 million hard cap for liabilities in excess of the cash cap, and carve out credit payments made to production com- panies (referred to as “NewMexico film partners”) who purchase or sign a 10-year lease for a qualified production facility from both the cash cap and the liability cap. Legislation Not Approved by Legislature: • State Bank: The Legislature failed to approve either SM 5 or HM 41. Both memorials requested that the Leg - islative Finance Committee undertake a feasibility study of establishing a state-owned bank in New Mexico. • Consumer Privacy: The Legislature failed to approve SB 176, a bill patterned after the California Privacy Act which has been referred to as arguably the most significant U.S. n EXECUTIVE VICE PRESIDENT’S MESSAGE continued on page 6