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--- version:introduced version+++ version:(document, no version)@@ -1,846 +1,47 @@-underscored material = new-[bracketed material] = delete-1-2-3-4-5-6-7-8-9-10-11-12-13-14-15-16-17-18-19-20-21-22-23-24-25+FIFTY-SEVENTH LEGISLATURE SB151 C/S++SECOND SESSION, 2026++February 7, 2026++Mr. President:++ Your TAX, BUSINESS AND TRANSPORTATION COMMITTEE, to+whom has been referred+SENATE BILL 151-57TH LEGISLATURE - STATE OF NEW MEXICO - SECOND SESSION, 2026-INTRODUCED BY-Peter Wirth and Cristina Parajón and Heather Berghmans-and Natalie Figueroa-AN ACT-RELATING TO TAXATION; DECOUPLING FROM CERTAIN PROVISIONS OF-FEDERAL LAW RELATING TO CORPORATE INCOME TAX BY AMENDING THE-DEFINITION OF "BASE INCOME" IN THE CORPORATE INCOME AND-FRANCHISE TAX ACT TO CONFORM TO THE FEDERAL INCLUSION OF-CERTAIN INCOME OF CONTROLLED FOREIGN CORPORATIONS AND-SUBTRACTING AMOUNTS DEDUCTED FOR BONUS DEPRECIATION AND-INTEREST EXPENSES; PROVIDING THAT APPORTIONMENT RULES APPLY TO-ATTRIBUTED INCOME FROM A CONTROLLED FOREIGN CORPORATION.-BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF NEW MEXICO:-SECTION 1. Section 7-2A-2 NMSA 1978 (being Laws 1986,-Chapter 20, Section 33, as amended) is amended to read:-"7-2A-2. DEFINITIONS.--For the purpose of the Corporate-Income and Franchise Tax Act and unless the context requires-otherwise:-.233165.5-underscored material = new-[bracketed material] = delete-1-2-3-4-5-6-7-8-9-10-11-12-13-14-15-16-17-18-19-20-21-22-23-24-25-A. "bank" means any national bank, national banking-association, state bank or bank holding company;-B. "apportioned net income" or "apportioned net-loss" means net income allocated and apportioned to New Mexico-pursuant to the provisions of the Corporate Income and-Franchise Tax Act or the Uniform Division of Income for Tax-Purposes Act, but excluding from the sales factor any sales-that represent intercompany transactions between members of the-filing group;-C. "base income" means the federal taxable income-or the federal net operating loss of a corporation for the-taxable year calculated pursuant to the Internal Revenue Code,-after special deductions provided in Sections 241 through 249-of the Internal Revenue Code but without any deduction for net-operating losses, as if the corporation filed a federal tax-return as a separate domestic entity, modified as follows:-(1) adding to that income:-(a) interest received on a state or-local bond exempt under the Internal Revenue Code;-(b) the amount of any deduction claimed-in calculating taxable income for all expenses and costs-directly or indirectly paid, accrued or incurred to a captive-real estate investment trust;-(c) the amount of any deduction, other-than for premiums, for amounts paid directly or indirectly to a-.233165.5-- 2 --underscored material = new-[bracketed material] = delete-1-2-3-4-5-6-7-8-9-10-11-12-13-14-15-16-17-18-19-20-21-22-23-24-25-commonly controlled entity that is exempt from corporate income-tax pursuant to Section 7-2A-4 NMSA 1978; and-(d) for taxable years beginning on or-after January 1, 2023, an amount equal to the amount of credit-claimed and allowed for that year pursuant to Section 7-3A-10-NMSA 1978 with respect to the distributed net income of a pass--through entity;-(2) subtracting from that income:-(a) income from obligations of the-United States net of expenses incurred to earn that income;-(b) other amounts that the state is-prohibited from taxing because of the laws or constitution of-this state or the United States net of any related expenses;-[and-(c) an amount equal to one hundred-percent of the income of the corporation under Section 951A of-the Internal Revenue Code, less the amount deducted pursuant to-Section 250 of the Internal Revenue Code;]-(c) the amount of any deduction taken-pursuant to Sections 168(k) and 168(n) of the Internal Revenue-Code in excess of the deduction amount that would have been-allowed by Sections 168(a) through 168(j) of the Internal-Revenue Code; and-(d) the amount of additional interest-deducted as a result of the changes to Subparagraph (A) of-.233165.5-- 3 --underscored material = new-[bracketed material] = delete-1-2-3-4-5-6-7-8-9-10-11-12-13-14-15-16-17-18-19-20-21-22-23-24-25-Section 163(j)(8) of the Internal Revenue Code made by Section-70303 of Public Law 119–21; provided that such interest shall-be eligible for the carryforward provisions of Section-163(j)(2) of the Internal Revenue Code;-(3) making other adjustments deemed necessary-to properly reflect income of the unitary group, including-attribution of income or expense related to unitary assets held-by related corporations that are not part of the filing group;-and-(4) for a taxpayer that conducts a lawful-business pursuant to the laws of this state, excludes an amount-equal to any expenditure that is eligible to be claimed as a-federal income tax deduction but is disallowed pursuant to-Section 280E of the Internal Revenue Code, as that section may-be amended or renumbered;-D. "captive real estate investment trust" means a-corporation, trust or association taxed as a real estate-investment trust pursuant to Section 857 of the Internal-Revenue Code, the shares or beneficial interests of which are-not regularly traded on an established securities market;-provided that more than fifty percent of any class of-beneficial interests or shares of the real estate investment-trust are owned directly, indirectly or constructively by the-taxpayer during all or a part of the taxpayer's taxable year;-E. "common ownership" means the direct or indirect-.233165.5-- 4 --underscored material = new-[bracketed material] = delete-1-2-3-4-5-6-7-8-9-10-11-12-13-14-15-16-17-18-19-20-21-22-23-24-25-control or ownership of more than fifty percent of the-outstanding voting stock, ownership of which is determined-pursuant to Section 1563 of the Internal Revenue Code, as that-section may be amended or renumbered, of:-(1) a parent-subsidiary controlled group as-defined in Section 1563 of the Internal Revenue Code, except-that fifty percent shall be substituted for eighty percent;-(2) a brother-sister controlled group as-defined in Section 1563 of the Internal Revenue Code; or-(3) three or more corporations each of which-is a member of a group of corporations described in Paragraph-(1) or (2) of this subsection, and one of which is:-(a) a common parent corporation included-in a group of corporations described in Paragraph (1) of this-subsection; and-(b) included in a group of corporations-described in Paragraph (2) of this subsection;-F. "consolidated group" means the group of entities-properly filing a federal consolidated return under the-Internal Revenue Code for the taxable year;-G. "corporation" means corporations, joint stock-companies, real estate trusts organized and operated under the-Real Estate Trust Act, financial corporations and banks, other-business associations and, for corporate income tax purposes,-partnerships and limited liability companies taxed as-.233165.5-- 5 --underscored material = new-[bracketed material] = delete-1-2-3-4-5-6-7-8-9-10-11-12-13-14-15-16-17-18-19-20-21-22-23-24-25-corporations under the Internal Revenue Code;-H. "department" means the taxation and revenue-department, the secretary of taxation and revenue or any-employee of the department exercising authority lawfully-delegated to that employee by the secretary;-I. "filing group" means a group of corporations-properly included in a return pursuant to Section 7-2A-8.3 NMSA-1978 for a particular taxable year;-J. "fiscal year" means any accounting period of-twelve months ending on the last day of any month other than-December;-K. "grandfathered net operating loss carryover"-means:-(1) the amount of net loss properly reported-to New Mexico for taxable years beginning January 1, 2013 and-prior to January 1, 2020 as part of a timely filed original-return, or an amended return for those taxable years filed-prior to January 1, 2020, to the extent such loss can be-attributed to one or more corporations that are properly-included in the taxpayer's return for the first taxable year-beginning on or after January 1, 2020;-(2) reduced by:-(a) adding back deductions that were-taken by the corporation or corporations for royalties or-interest paid to one or more related corporations, but only to-.233165.5-- 6 --underscored material = new-[bracketed material] = delete-1-2-3-4-5-6-7-8-9-10-11-12-13-14-15-16-17-18-19-20-21-22-23-24-25-the extent that such adjustment would not create a net loss for-such related corporations; and-(b) the amount of net operating loss-deductions taken prior to January 1, 2020 that would be charged-against those losses consistent with the Internal Revenue Code-and provisions of the Corporate Income and Franchise Tax Act-applicable to the year of the deduction; and-(3) apportioned to New Mexico using the-apportionment factors that can properly be attributed to the-corporation or corporations for the year of the net loss;-L. "Internal Revenue Code" means the United States-Internal Revenue Code of 1986, as amended;-M. "net income" means:-(1) the base income of a corporation properly-filing a tax return as a separate entity; or-(2) the combined base income and losses of-corporations that are part of a filing group that is computed-after eliminating intercompany income and expense in a manner-consistent with the consolidated filing requirements of the-Internal Revenue Code and the Corporate Income and Franchise-Tax Act;-N. "net operating loss carryover" means the-apportioned net loss properly reported on an original or-amended tax return for taxable years beginning on or after-January 1, 2020 by the taxpayer:-.233165.5-- 7 --underscored material = new-[bracketed material] = delete-1-2-3-4-5-6-7-8-9-10-11-12-13-14-15-16-17-18-19-20-21-22-23-24-25-(1) plus:-(a) the portion of an apportioned net-loss properly reported to New Mexico for a taxable year-beginning on or after January 1, 2020, on a separate year-return, to the extent the taxpayer would have been entitled to-include the portion of such apportioned net loss in the-taxpayer's consolidated net operating loss carryforward under-the Internal Revenue Code if the taxpayer filed a consolidated-federal return; and-(b) the taxpayer's grandfathered net-operating loss carryover; and-(2) minus:-(a) the amount of the net operating loss-carryover attributed to an entity that has left the filing-group, computed in a manner consistent with the consolidated-filing requirements of the Internal Revenue Code and applicable-regulations, as if the taxpayer were filing a consolidated-return; and-(b) the amount of net operating loss-deductions properly taken by the taxpayer;-O. "net operating loss deduction" means the portion-of the net operating loss carryover that may be deducted from-the taxpayer's apportioned net income under the Internal-Revenue Code as of January 1, 2018 for the taxable year in-which the deduction is taken, including the eighty percent-.233165.5-- 8 --underscored material = new-[bracketed material] = delete-1-2-3-4-5-6-7-8-9-10-11-12-13-14-15-16-17-18-19-20-21-22-23-24-25-limitation of Section 172(a) of the Internal Revenue Code as of-January 1, 2018 calculated on the basis of the taxpayer's-apportioned net income;-P. "person" means any individual, estate, trust,-receiver, cooperative association, club, corporation, company,-firm, partnership, limited liability company, joint venture,-syndicate or other association; "person" also means, to the-extent permitted by law, any federal, state or other-governmental unit or subdivision or agency, department or-instrumentality thereof;-Q. "real estate investment trust" has the meaning-ascribed to the term in Section 856 of the Internal Revenue-Code, as that section may be amended or renumbered;-R. "related corporation" means a corporation that-is under common ownership with one or more corporations but-that is not included in the same tax return;-S. "return" means any tax or information return,-including a water's-edge or worldwide combined return, a-consolidated return, a declaration of estimated tax or a claim-for refund, including any amendments or supplements to the-return, required or permitted pursuant to a law subject to-administration and enforcement pursuant to the Tax-Administration Act and filed with the department by or on-behalf of any person;-T. "secretary" means the secretary of taxation and-.233165.5-- 9 --underscored material = new-[bracketed material] = delete-1-2-3-4-5-6-7-8-9-10-11-12-13-14-15-16-17-18-19-20-21-22-23-24-25-revenue or the secretary's delegate;-U. "separate year return" means a properly filed-original or amended return for a taxable year beginning on or-after January 1, 2020 by a taxpayer reporting a loss, a portion-of which is claimed as part of the net operating loss carryover-by another taxpayer in a subsequent return period;-V. "state" means any state of the United States,-the District of Columbia, the commonwealth of Puerto Rico, any-territory or possession of the United States or political-subdivision thereof or any political subdivision of a foreign-country;-W. "state or local bond" means a bond issued by a-state other than New Mexico or by a local government other than-one of New Mexico's political subdivisions, the interest from-which is excluded from income for federal income tax purposes-under Section 103 of the Internal Revenue Code, as that section-may be amended or renumbered;-X. "taxable income" means a taxpayer's apportioned-net income minus the net operating loss deduction for the-taxable year;-Y. "taxable year" means the calendar year or fiscal-year upon the basis of which the net income is computed under-the Corporate Income and Franchise Tax Act and includes, in the-case of the return made for a fractional part of a year under-the provisions of that act, the period for which the return is-.233165.5-- 10 --underscored material = new-[bracketed material] = delete-1-2-3-4-5-6-7-8-9-10-11-12-13-14-15-16-17-18-19-20-21-22-23-24-25-made;-Z. "taxpayer" means any corporation or group of-corporations filing a return pursuant to Section 7-2A-8.3 NMSA-1978 subject to the taxes imposed by the Corporate Income and-Franchise Tax Act;-AA. "unitary group" means a group of two or more-corporations, including a captive real estate investment trust,-but not including an S corporation, an insurance company-subject to the provisions of the New Mexico Insurance Code, an-insurance company that would be subject to the New Mexico-Insurance Code if the insurance company engaged in business in-this state or a real estate investment trust that is not a-captive real estate investment trust, that are:-(1) related through common ownership; and-(2) economically interdependent with one-another as demonstrated by the following factors:-(a) centralized management;-(b) functional integration; and-(c) economies of scale;-BB. "water's-edge group" means all corporations-that are part of a unitary group, except:-(1) corporations that are exempt from-corporate income tax pursuant to Section 7-2A-4 NMSA 1978; and-(2) corporations organized or incorporated-outside the United States or its possessions or territories-.233165.5-- 11 --underscored material = new-[bracketed material] = delete-1-2-3-4-5-6-7-8-9-10-11-12-13-14-15-16-17-18-19-20-21-22-23-24-25-that have less than twenty percent of their property, payroll-and sales sourced to locations within the United States,-following the sourcing rules of the Uniform Division of Income-for Tax Purposes Act; and-CC. "worldwide combined group" means all members of-a unitary group, except members that are exempt from corporate-income tax pursuant to Section 7-2A-4 NMSA 1978, irrespective-of the country in which the corporations are incorporated or-conduct business activity."-SECTION 2. Section 7-4-10 NMSA 1978 (being Laws 1993,-Chapter 153, Section 1, as amended) is amended to read:-"7-4-10. APPORTIONMENT OF BUSINESS INCOME.---A. Except as provided in Subsections B and C of-this section, all business income shall be apportioned to this-state by multiplying the income by a fraction, the numerator of-which is the property factor plus the payroll factor plus the-sales factor and the denominator of which is three. The-apportionment calculation shall include the factors of a-controlled foreign corporation to the extent the income of the-corporation is included in net income.-B. If eighty percent or more of the New Mexico-numerators of the property and payroll factors for a filing-group, or for a taxpayer that is not a member of a filing-group, are employed in manufacturing or operating a computer-processing facility, the filing group or the taxpayer may elect-.233165.5-- 12 --underscored material = new-[bracketed material] = delete-1-2-3-4-5-6-7-8-9-10-11-12-13-14-15-16-17-18-19-20-21-22-23-24-25-to have business income apportioned to this state by-multiplying the income by the sales factor for the taxable-year.-C. If a filing group, or a taxpayer that is not a-member of a filing group, has a headquarters operation in New-Mexico, the filing group or the taxpayer may elect to have-business income apportioned to this state by multiplying the-income by the sales factor for the taxable year.-D. To elect the method of apportionment provided by-Subsection B or C of this section, the taxpayer shall notify-the department of the election, in writing, no later than the-date on which the taxpayer files the return for the first-taxable year to which the election will apply. The election-shall apply as follows:-(1) if the election is made for taxable years-beginning prior to January 1, 2020, to the taxable year in-which the election is made and to each taxable year thereafter-for three years, or until the taxable year ending prior to-January 1, 2020, whichever is earlier;-(2) if the election is made for a taxable year-beginning on or after January 1, 2020, to the taxable year in-which the election is made and to each taxable year thereafter-until the taxpayer notifies the department, in writing, that-the election is terminated, except that the taxpayer shall not-terminate the election until the method of apportioning-.233165.5-- 13 --underscored material = new-[bracketed material] = delete-1-2-3-4-5-6-7-8-9-10-11-12-13-14-15-16-17-18-19-20-21-22-23-24-25-business income provided by Subsection B or C of this section-has been used by the taxpayer for at least three consecutive-taxable years, including a total of at least thirty-six-calendar months; and-(3) if the election is made by a qualifying-filing group, the election shall apply to the members of the-filing group properly included pursuant to Section 7-2A-8.3-NMSA 1978.-E. For purposes of this section:-(1) "controlled foreign corporation" means a-foreign corporation as defined by Section 957 of the Internal-Revenue Code of 1986, as that section may be amended or-renumbered;-[(1)] (2) "filing group" means "filing group"-as that term is defined in the Corporate Income and Franchise-Tax Act;-[(2)-] (3) "headquarters operation" means:-(a) the center of operations of a-business: 1) where corporate staff employees are physically-employed; 2) where the centralized functions are primarily-performed, including administrative, planning, managerial,-human resources, purchasing, information technology and-accounting, but not including operating a call center; 3) the-function and purpose of which is to manage and direct most-aspects and functions of the business operations within a-.233165.5-- 14 --underscored material = new-[bracketed material] = delete-1-2-3-4-5-6-7-8-9-10-11-12-13-14-15-16-17-18-19-20-21-22-23-24-25-subdivided area of the United States; 4) from which final-authority over regional or subregional offices, operating-facilities and any other offices of the business are issued;-and 5) including national and regional headquarters if the-national headquarters is subordinate only to the ownership of-the business or its representatives and the regional-headquarters is subordinate to the national headquarters; or-(b) the center of operations of a-business: 1) the function and purpose of which is to manage-and direct most aspects of one or more centralized functions;-and 2) from which final authority over one or more centralized-functions is issued;-[(3)-] (4) "manufacturing" means combining or-processing components or materials to increase their value for-sale in the ordinary course of business, but does not include:-(a) construction;-(b) farming;-(c) power generation; provided that-"manufacturing" includes electricity generation at a facility-that does not require location approval and a certificate of-convenience and necessity prior to commencing construction or-operation of the facility pursuant to the Public Utility Act;-(d) processing natural resources,-including hydrocarbons; or-(e) processing or preparation of meals-.233165.5-- 15 --underscored material = new-[bracketed material] = delete-1-2-3-4-5-6-7-8-9-10-11-12-13-14-15-16-17-18-19-20-21-22-23-24-25-for immediate consumption; and-[(4)-] (5) "operating a computer processing-facility" means managing the necessary and ancillary activities-for the operation of a facility primarily used to process data-or information, but does not include managing the operation of-facilities that are predominantly used to support sales of-tangible property or the provision of banking, financial or-professional services."-SECTION 3. APPLICABILITY.--The provisions of this act-apply to taxable years beginning on or after January 1, 2027.-- 16 --.233165.5++has had it under consideration and reports same with recommendation+that it DO NOT PASS, but that++SENATE TAX, BUSINESS AND TRANSPORTATION++COMMITTEE SUBSTITUTE FOR++SENATE BILL 151++DO PASS, and thence referred to the FINANCE COMMITTEE.++ Respectfully submitted,++ ___________________________________++ Senator Carrie Hamblen, Chair++Adopted_______________________ Not Adopted_______________________++ (Chief Clerk) (Chief Clerk)++ Date ________________________++The roll call vote was 6 For 4 Against++Yes: Berghmans, Figueroa, Hamblen, Jaramillo, O'Malley, Wirth++No: Ramos, Sanchez, Sharer, Wilson++Excused: None++Absent: None++SB0151CT1.wpd
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