Pub. 16 2019 Issue 2

8 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 Taxes: HB 6 (Tax Package) - On July 1, the state will impose increased taxes on certain transactional products: • Statewide gross receipts tax of 5.125% is imposed on out-of-state online sales to New Mexicans. Untaxed internet sales have eroded New Mexico’s retail sales tax base and reducing general fund revenues by tens of millions of dollars annually. Taxing local retailers but not large, online retail operations creates significant disparities and makes it very difficult for local shops to compete with remote sellers. This bill levels the play- ing field for local businesses by requiring all remote sellers that sell more than $100 thousand within New Mexico to collect and pay GRT on all sales, including third-party platform sales. Sales will be determined to take place at the location to which the product is delivered, and after revenue sharing with local govern- ments through direct distributions in FY20 and FY21, local GRT rates will apply to these sales beginning in FY22. It is important to note that while generally, and for tangible personal property specifically, the sale lo - cation is determined by delivery location, professional services are an exception and are to be reported from the location at which the services are performed. • The motor vehicle excise tax is increased from 3% to 4%. 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 (Eddy, Lea coun- ties). 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 government’s road fund. • Effective beginning tax years starting on or after January 1, 2020, the new law requires corporate income tax com - bined reporting. More than half of the states that impose a corporate income tax require combined reporting. • HB 163 (Trust Taxation): The Legislature approved the NMBA Trust Committee-sponsored HB 163 which creates a new section of the Income Tax Act to provide a deduction from net income of an estate or trust for certain income sequestered within the overall trust or estate that is set aside for future distributions to a nonresident individual. The deduction would not include income from allocable sources of income occurring in NewMexico such as income derived from real property, mineral, oil and gas interests, and water rights, but would allow the deduction for business income that would be apportioned to the non-resident’s state of residence were the income directly distributed to the beneficiary rather than flowing through the trust. The purpose of the deduction is to assist in the expansion of the trust and estate business in NewMexico by allowing the trustee to hold and invest income seques- tered in the trust by not having to distribute that income to non-resident trust beneficiaries in the year of receipt. The provisions of the new law apply to taxable years be- ginning on or after January 1, 2019. • SB 2 (Film Production Tax Credit): The new law n EXECUTIVE VICE PRESIDENT’S MESSAGE continued from page 7 amends the Film Production Tax Credit Act to pay off the film credit backlog up to set amounts (up to an ad - ditional $195 million by the end of FY20 plus up to an additional $30 million contingent on FY19 revenues ex - ceeding the forecast), changes the annual $50 million “rolling” cash cap to a $110 million cash cap, imple - ments a $100 million “hard” cap for liabilities in excess of the cash cap, and carves out credit payments made to production companies (referred to as “New Mexico film partners”) who purchase or sign a 10-year lease for a qualified production facility from both the cash cap and the liability cap. For fiscal years FY20 through FY22, if the aggregate number of claims paid minus the carve-out for film partners is less than the $110 million cap, the lesser of that amount or $20 million shall be added to the cap in the immediately following year. The bill eliminates the tiered system of payouts for mid-size and large productions over two to three years. It also adds another 5 percent increase to the credit value for expenditures made on locations more than 60 miles outside of Bernalillo and Santa Fe counties. This credit increase is stackable with either of the two existing possible 5 percent increases for filming in a qualified production facility or filming a television pilot or series. This results in a maximum possible credit rebate value of 35 percent of qualified expenditures. n