The Newsletter of the New Mexico Tax Research Institute

Tax Matters The Newsletter of the New Mexico Tax Research Institute

Issue No. 2021-05 February 21, 2021 New Mexico Tax Research Institute 505-842-5833 P.O. Box 91657 [email protected] Albuquerque, New Mexico 87199-1657 www.nmtri.org

Views expressed in this publication are those of the editorial staff unless otherwise indicated. They do not necessarily reflect the views of any member or members of the New Mexico Tax Research Institute. Nothing in this publication is intended to be nor should be construed as offering tax advice. No tax planning decision should be made without consulting your professional tax advisor. All rights reserved. No material in this publication may be reproduced or redistributed without the express written permission of the New Mexico Tax Research Institute. © 2021 NMTRI

IN THIS “LEGISLATIVE SESSION” ISSUE OF TAX MATTERS:

➢ Into the Legislative Session ➢ Don’t Forget the Principles ➢ “Tax-pectations” for the Session ➢ List of Tax Related Legislation ➢ Knick Knacks ➢ Tax Quotable

INTO THE LEGISLATIVE SESSION – IT BEGAN - JANUARY 15, 2021

The 2021 Regular Session of the New Mexico Legislature convened at noon on Tuesday, January 19, and ends at noon (or somewhere thereabouts) on March 20. The deadline for bill introduction is February 18. Legislation not acted on by the governor is pocket vetoed on April 9. The effective date of legislation that is not a general appropriation bill, a bill carrying an emergency clause or other specified effective date takes effect on June 18. Being a “long” or 60-day “budget” session, non-budgetary legislation and items not related to the budget are fair game for introduction and are not limited by the call of the Governor. It is an interesting time. Foremost is the economy and the COVID-19 epidemic. There is still talk of some tax reform, tax relief, and tax increases. So, while there’s plenty to fight about and money to fight over, unknowns around how the session will operate seem to be adding confusion, but also perhaps reducing some tension.

New Mexico has an uncompensated volunteer legislature comprised of a 70-member House of Representatives and a 42-member Senate. Legislative sessions alternate between 30-day budget related sessions in even numbered years, and unconstrained 60-day sessions in odd-numbered years.

Click here to the see the daily bill locator on the legislative website. We have our list of introduced tax related legislation in both chambers below.

The Legislative Council Service maintains copies of bills, compiles locators, and publishes lists of bill conflicts during the course of the session. Most information is available in a timely and electronic fashion from their robust website, which can be reached at https://www.nmlegis.gov/. The site has become increasingly functional and reliable over time. Information is reasonably up to date and legislation can be easily followed from home.

DON’T FORGET THE PRINCIPLES

It’s important, particularly when dealing with tough economies, tough decisions, and the emotionally charged subject of taxes, to view the world in the context of principles. Taxes are good in that they raise the money we need to pay for the services we need. They can also be bad if they create inefficiencies, distortions, or inequities. It’s a more rational approach to look at our entire tax system rather than getting lost in the weeds focusing only on a particular rate or some item we choose to tax or not tax. We must raise the revenue we need for government (putting aside the debate over how much) while doing the least harm to the economy and to those things we need most (e.g. job creation) while being fair and protecting the most vulnerable in our communities. Accordingly, we’ve taken the opportunity to reprint our principles of good tax policy here:

State and local taxes should be adequate to provide an appropriate level of those goods and services best provided by the public sector, such as education, public safety, law enforcement, streets and highways, and the courts.

▪ State and local tax policy should do the least harm to the private economy. Therefore, tax bases should be as broad as possible so that tax rates can be as low as possible in order to raise the necessary revenues.

▪ State and local tax policy should be fair and equitable towards individuals and businesses similarly situated. Individuals with the same income level should be taxed the same. Businesses engaged in similar commercial activities should be subject to the same level of taxation.

▪ State and local tax policy should not be costly to administer and should be easily understood by taxpayers so as to minimize taxpayer compliance costs.

▪ The state and local tax burden should be evaluated on the basis of the impact of all taxes levied on a given taxpayer, not just a single tax or tax rate.

▪ Deviations from established tax policy in pursuit of economic development, social or other goals should be well-reasoned and pursued only when established tax policies are not significantly undermined and the results of such deviations can subsequently be measured and evaluated.

“Tax-pectations” for the Session

The 60-day session is well underway. In addition to a new year, Governor Michelle Lujan Grisham has COVID to deal with… and lots of new House and Senate members – mostly Democrats in the Senate following the blue wave that hit again, although the House gained red seats.

This year, it is the House that remains consistent. Representative Brian Egolf remains the top- dog in the House as Speaker, and Sheryl Stapleton-Williams remains Majority Floor Leader, while Majority Floor Whip continues to be Doreen Gallegos. Representative Jim Townshend remains Minority Floor Leader, while Rod Montoya continues as Minority Whip. Javier Martinez also continues as House Taxation and Revenue Committee Chair, while Patricia Lundstrom remains chair of the House Appropriations and Finance Committee.

It is the Senate where we’ve seen significant change. After a changing Senate composition, Mimi Stewart emerged as President Pro Tempore, while Peter Wirth remains the Majority Floor Leader. Linda Lopez is the new Majority Whip. Sen. Greg Baca is the new Minority Floor Leader, with Craig Brandt becoming the new Minority Whip. Key committee chairs are also changed, as George Munoz will now preside over the Senate Finance Committee and Sen. Benny Shendo will be at the helm of the new Senate Tax, Business and Transportation Committee, the new re-congealed Corporations and Transportation Committee. Sen. Ivey-Soto is the new chair of the Senate Rules Committee.

Being an open 60-day session in the midst of a pandemic with restrictive public health orders and new legislators and Senate leadership, we’re expecting an interesting but different session, with no real idea of how many bills will be introduced or how quickly they can be processed. It’s said that House members are limited to five bills a-piece, however Governor’s bills are not included in that number.

The forecast was strengthened some on stronger-than-anticipated oil prices and stronger personal income and gross receipts tax revenue than initially expected. That, coupled with strong reserves, means there is less immediate pressure on the budget. The December consensus revenue estimate can be found on the LFC website here.

In her Executive budget (found here on the Governor’s DFA website) Governor Lujan Grisham has proposed spending of around $7.3B. That doesn’t differ greatly from the legislative proposal in total amount; however the legislative proposal does differ in that it proposes to send $300M in general fund support of the unemployment insurance trust fund, in the absence of federal aid. Both sides want some similar things, although they differ in amount and general approach.

4 Tax Matters: The Newsletter of the New Mexico Tax Research Institute © 2021 New Mexico Tax Research Institute. All rights reserved. What Happened this Week? Quite a bit more is the short answer. The House and Senate floors are meeting more intermittently, but committees are starting to move more quickly. Below you will see the tax proposals thus far. There are now 353 House bills and 454 Senate bills introduced and that’s all there will be as the bill introduction deadline passed at noon on Thursday (or thenabouts). Those numbers include “dummy” bills, or bills introduced with titles like “Public Peace, Health, Safety & Welfare” that are introduced by leadership before the introduction deadline. They serve as placeholders or vehicles for essentially new legislation when and if the need arises, and there are dozens of them. The answer to the question of whether the COVID-19 situation would slow the flow of legislation is apparently yes, as we can’t remember so few bills being introduced in a 60-day session in recent memory.

As tax bills go, we are already tracking 27 House and 30 Senate proposals (for a total of 57, not including the ones we’ve missed), so far. Some represent continuation or modifications of existing provisions, while others are new ideas.

The consensus revenue estimating group revised the general fund forecast upward last week. That’s good news. The FY20 general fund forecast was revised to $7.194B, down only $666M from FY20 (an increase from the December forecast of $192M. FY22 revenues are now projected to be $7.548B, which is an increase from the December forecast of $170M. FY22 “new money”, the amount of recurring revenue in excess of recurring appropriations, is now projected to be $338.6M… an increase of 2.3%. It’s here.

What’s Moving Fastest?

As is usually and still the case, the bills with little or no fiscal impact can often move the quickest. That’s certainly the case with the HB 89 proposal to al low personal income tax refunds to be earmarked to the healthy soil fund and with the RSTP sponsored TRD proposals in HB 90 and HB 98. They’re all awaiting their first senate committee hearing. Both houses tend to coral the others’ bills until the other side starts hearing their bills. Both sides have made an exception. HB 11 is on the floor of senate. It appropriates $200M in general fund to an economic development recovery act fund for grants to certain small business for rent/lease payments, if certain conditions are met. That bill also creates permanent GRT revenue sharing provisions with some varying state and local portions going to the LEDA fund on LEDA projects where >$350M in capital investment is made, however those provisions were stripped in committee. Those bills represent the only tax bills to leave the House and cross-over to the Senate. Senator Wirth’s SB 1 – the temporary gross receipts tax deduction for receipts of certain restaurants combined with the $600 personal income tax rebate for some people and families, is waiting to be heard on the floor of the House.

5 Tax Matters: The Newsletter of the New Mexico Tax Research Institute © 2021 New Mexico Tax Research Institute. All rights reserved. We counted eight new tax bills being introduced last week. The most comprehensive appears to be Representatives Martinez and Chandler’s HB 291, which increases/adds brackets to the personal income tax, substantially narrows the capital gain exclusion, increases the rate of the low income comprehensive tax rebate and indexes it while expanding the base beyond the federal, and provides for a 10% increase in valuation of residential property that isn’t a primary residence. Representative Dow introduced a GRT proposal apparently designed to mirror the temporary preference for restaurants with the sale of movie tickets and concessions by movie theaters being deductible until 7/1/21 (see HB 350). Senator Burt introduced a bill that few will understand at first blush, but makes changes and adds definitions to the Tax Administration Act and Withholding Tax Act in an effort to conform state law/treatment to recent changes in federal audit assessment and amended return procedures for certain large partnerships (see SB 410).

[NMTRI note: the proposed business sale exclusion remainder of the capital gain deduction repeal in HB 291 is likely inadequate for its intended purpose. SB 410 is actual tax policy and beneficial to taxpayers and tax administrators alike… making it somewhat of a long shot.]

Thanks for Reading

Join us weekly through the session as we try to provide balanced policy analysis, commentary and discussions of the tax and budget proposals that implicate tax policy in New Mexico. Of course, tax proposals – particularly bad ones – tend to be regurgitated (so to speak) from year to year. So, merely recalling what has been introduced (but failed to pass) in recent years will give you some idea of what will be introduced again. For confirmation of that, all you need do is scroll down to the table of bills already introduced below.

Join us weekly through the session as we try to provide balance policy analysis, commentary and discussions of the tax and budget proposals that implicate tax policy in New Mexico.

(See the Bill Table on the Following Pages)

6 Tax Matters: The Newsletter of the New Mexico Tax Research Institute © 2021 New Mexico Tax Research Institute. All rights reserved. Bills with significant tax implications in the 2021 Regular Legislative Session:

Note – Income Tax bills are effective tax years beginning on or after January 1, 2022 unless otherwise noted. “TYBA” = Tax years beginning on or after. Bills with an emergency clause are effective upon signature if enough votes are obtained. Bills with no effective date Other notes: “CS” indicates committee substitute; “a” indicates amended.

Bill Title: Link to bill language: Description Assignments- Number/ Location: Sponsor: HB 11 GRT & Permanent Fund for LEDA Projects: HB 11 HCEDC/HTR Chandler/Eg Appropriates $200M general fund to a economic development recovery S-HEDC- olf act fund for grants to certain small business for rent/lease payments if DP/a-HTRC- certain conditions are met. It also creates permanent GRT revenue DNP-CS-DP- sharing provisions with some varying state and local portions going to ref HAFC - the LEDA fund on LEDA projects where >$350M in capital investment w/drn – is made. Passed/H- SFC-DP/a- fl/a-Passed/S HB 12 Cannabis Regulation Act: HB 12 HHHC/HTRC Martinez/Ro Creates a regulatory and tax scheme for the sale of recreational cannabis. -HHHC-DNP- mero CS-DP-HTRC HB 15 Sustainable Building Tax Credit: HB 15 HENRC/HTR Ortez Renames and sunsets early the new sustainable building tax credit, and -HENRC-DP- replaces it with the newer 2021 sustainable building credit. HTRC HB 17 Cannabis Regulation Act: HB 17 HHHC/HTRC Lujan Creates a regulatory and tax scheme for the sale of recreational cannabis. -HHHC HB 26 Exclude Greenfields from Certain Taxes HB 26 HLLC/HENR G. Andres Creates a definition of “greenfield area” TID Act and creates an C-HLLC Romero exclusion from provisions for such areas if not voted and approved by DFA prior to 7/1/21. HB 42 Low-Income Comprehensive Tax Rebate Changes: HB 42 HCPAC/HTR Chandler Broadens brackets and increases eligibility thresholds of modified gross C-HCPAC- income for purposes of the low income comprehensive tax rebate DP-HTRC (LICTR). HB 45 Change Rural Healthcare Practitioner Tax Credit: HB 45 HHHC/HTRC M. Garcia Expands the categories of healthcare practitioners eligible for the $5K -HHHC-DP- credit to include those previously eligible for the $3K credit. HTRC

7 Tax Matters: The Newsletter of the New Mexico Tax Research Institute © 2021 New Mexico Tax Research Institute. All rights reserved. HB 49 Exempt Social Security from Income Tax: HB 49 HLVMC/HT Brown/ Dow/ Exempts Social Security from income taxation but does not allow an RC-HLVMC- Armstrong/ overlapping deduction with that provided for the elderly in 7-2-5.2. DP-HTRC Pettigrew/Ez ell HB 89 Healthy Soil Tax Refund Contribution: HB 89 HAWC/HTR Chatfield/ Provides for the taxation and revenue department to allow individual C-HAWC- Armstrong/ income tax filers to designate a portion of a refund due them to NMSU DP-HTRC- Chandler regents for the support of the healthy soil program. DP-Passed/H- SCONC/STB TC-SCONC HB 90 Tax Penalties and Remedies: HB 90 HSEIC- Chandler Makes various changes to the Tax Administration Act as endorsed by the HSEIC-ref- Interim Revenue Stabilization and Tax Policy Committee. HTRC- HSEIC-DP- HTRC-DP/a- Passed/H- STBTC/SJC- STBTC HB 98 Omnibus Tax Bill: HB 98 HTRC-DNP- Martinez/Har Makes mostly technical changes, including most notably changes to the CS/DP-fl/a- per healthcare practitioner GRT rules, a provision allowing grocers to deliver Passed/H- groceries tax free, and increased thresholds for garnishments. STBTC/SFC- STBTC HB 104 Expand Rural Health Tax Credit for Pandemic: HB 104 HHHC/HTRC Allison Expands the categories of healthcare practitioners eligible for the $3K -HHHC-DP- personal income tax credit to include those “essential health care workers HTRC who provide assistance to other health care professionals during the coronavirus disease 2019 pandemic.” HB 115 Tax Return Preparer Information: HB 115 HTRC/HJC- Martinez Expands the definition of “tax preparer” in the tax administration act to HTRC expand the scope of tax preparers (non-CPA’s) HB 118 Homeless Youth Employment Tax Credit: HB 118 HHHC/HTRC Johnson Deletes the purpose language and expands eligibility of the foster youth -HHHC employment income tax credit in various ways including adding homeless youth to the those eligible. HB 122 Health Insurance Premiums Surtax: HB 122 HHHC/HTRC Armstrong Increases the health insurance premiums tax from one to three and -HHHC-DP- seventy-five hundredths percent and distributes 50% of the increase to a HTRC-DP newly created Health Care Affordability Fund. HB 148 Unemployment Contribution Rate Change: HB 148 HLVMC/HA Chandler Beginning 1/01/2022 and ending 1/01/2024, adds 2/10% to the state’s FC-HLVMC- unemployment insurance tax rates otherwise required by statute. DP/a-HAFC HB 167 Increase Cigarette and Tobacco Products Tax: HB 167 HHHC/HTRC Lujan/Chand Increases the cigarette tax <> 600% and the tobacco products tax a little -HHHC-DP- ler/Ferrary more than 300% July 1, 2021. HTRC

8 Tax Matters: The Newsletter of the New Mexico Tax Research Institute © 2021 New Mexico Tax Research Institute. All rights reserved. HB 174 Double Certain Tax Exemptions: HB 174 HHHC/HTRC Anderson Increases from a maximum of $8K to $16K the personal income tax -HHHC-DP- credit for those 65 or older or blind. HTRC HB 181 Oil & Gas Tax Changes: HB 181 HENRC/HTR Scott/Towns Exempts from the oil and gas severance tax the value of carbon dioxide C-HENRC end/Pettigre when that carbon dioxide is used in an enhanced oil recovery project. w/Montoya CO2 doesn’t appear to be subject to the severance tax in this case. HB 186 Reduce County Property Taxes: HB 186 HHHC/HTRC Rehm After 1/1/22, reduces property tax mill levy maximum authorizations in -HHHC Class A counties (Bernalillo), by <>2/3. HB 228 Change Motor Vehicle Tax Distribution: HB 228 HTPWC/HTR Castellano Moves motor vehicle distributions from the motor vehicle suspense fund C-HTPWC- that went to the local government road fund, to the transportation project DP-HTRC fund. HB 262 Energy Storage System Tax Credit: HB 262 HENRC/HTR Sarinana/Ste Through 2023, creates a personal income tax credit up to the 40% of the C-HENRC wart cost of the qualified equipment, not to exceed $5K. The program is capped at $1M/yr (considered in order of receipt). HB 278 Manufacturing Services Gross Receipts: HB 278 HTRC Harper Adds/changes definitions and creates gross receipts tax deductions for the sale or lease of manufacturing equipment. Also creates a deduction for certain professional services sold to certain businesses. HB 283 No Film Tax Credits for Certain Films: HB 283 HCEDC/HCP Lane/Sweets For purposes of the film credit, narrows the definition of “film” to AC-HCEDC er/Armstrong exclude those of a lascivious or lewd nature. /Lord HB 291 Tax Changes: HB 291 HTRC Martinez/Ch Increases/adds brackets to the personal income tax, substantially narrows andler the capital gain exclusion, increases the rate of the low income comprehensive tax rebate and indexes it while expanding the base beyond the federal, and provides for a 10% increase in valuation of residential property that isn’t a primary residence. HB 295 Study of No Tax on Military Retirement: HB 295 HLVMC/HT Terrezas/Her Appropriates $50K to New Mexico State University to study the RC-HLVMC nandez/Dixo economic and state and local fiscal impacts of reducing or eliminating n/Black the state income tax on military retirement pay.

HB 350 Movie Theater Gross Receipts: HB 350 HCEDC/HTR Dow Creates a temporary gross receipts tax deduction until 7/1/21 for sales of C-HCEDC concessions and movie tickets by movie theaters.

9 Tax Matters: The Newsletter of the New Mexico Tax Research Institute © 2021 New Mexico Tax Research Institute. All rights reserved. SB 1 Restaurant Gross Receipts Tax Deduction: SB 1 STBTC/SFC- Wirth/Candel From March through June 2021, creates a separately reported gross STBTC-DP- aria/Hemphil receipts tax deduction as well as associated municipal and county “hold SFC-DP l harmless” tax distributions for receipts from the sale of prepared food or non-packaged beverages. Also creates a 2021 $600 personal income tax rebate for those who claimed the working families tax credit in 2020 and had less than $31.2K in adjusted gross income. SB 25 Waiver of Penalties on Certain Taxes: SB 25 STBTC/SFC- Pirtle Temporarily suspends penalty and interest on gross receipts and STBTC-DP- compensating tax liabilities not paid until two months following the SFC expiration of the public health order, provided that any liabilities are paid by the third month following the end of the public health order. SB 26 Gross Receipt Tax Deduction for Data Centers: SB 26 STBTC/SFC- Padilla Creates a new GRT deduction for the sale or lease of certain property and STBTC allows the value of other “eligible costs” related to the project to be factored into the credit against compensating taxes due. SB 56 New Personal Income Tax Bracket: SB 56 STBTC/SFC- O’Neill Adds an upper tax bracket of 8.2% for singles taxable income above STBTC $187.5K, and married households with taxable income in excess of $375K. SB 58 Electric Vehicle Charging Unit Tax Credit: SB 58 STBTC/SFC- Tallman For 5 years, creates two new personal income tax credits: one in the STBTC amount of $2500 or $5000 (capped at $10M annual spend), depending on income for the purchase or lease of electric vehicles; and the other for charging units in the amount of $300 (capped at $1M annual spend). SB 62 Healthcare Preceptor Income Tax Credit: SB 62 STBTC/SFC- Ortiz y Pino Creates a personal income tax credit in the amount $1000 for certain STBTC healthcare professionals acting as uncompensated preceptors. The credit may be carried forward indefinitely. SB 78 Exempting Social Security from Income Tax: SB 78 STBTC/SFC- Padilla Exempts Social Security from income taxation but does not allow an STBTC overlapping deduction with that provided for the elderly in 7-2-5.2. SB 89 Amend Personal Income Tax Brackets: SB 89 STBTC/SFC- Tallman Changes and expands existing tax brackets up to 6.5% for incomes above STBTC $150K (individuals) and $300K (married/HOH). SB 98 Economic Incentive Development Reports: SB 98 STBTC/SFC- Tallman Requires recipients of certain incentives to report (no penalties) to STBTC Taxation and Revenue Dept., and TRD to report on tax expenditures and deviations with certain parameters and requirements. SB 153 Gaming Tax Changes: SB 153 STBTC/SFC- Campos Provides a credit for up to 100% of a taxpayer’s monthly liability, up to STBTC $1.5M per fiscal year, if the taxpayer had a net take of less than $25M in the previous year.

10 Tax Matters: The Newsletter of the New Mexico Tax Research Institute © 2021 New Mexico Tax Research Institute. All rights reserved. SB 161 Withholding Wages for Taxes: SB 161 STBTC/SFC- Schmedes Provides an optional exclusion from income tax withholding obligations STBTC for employers with 50 or fewer employees, if the taxpayer notifies the department. SB 162 Exempt Social Security from Income Tax: SB 162 STBTC/SFC- Campos Exempts up to $30K in social security derived income from state taxation STBTC SB 168 Increase Gas Tax: SB 168 STBTC/SFC- Gonzales Increases gasoline tax 1 cent per year, from 18 to 22 cents, with special STBTC fuels tax (diesel), also increasing by 1 cent per year, from 21 to 26 cents per gallon. SB 175 Rural Teachers Tax Credit: SB 175 STBTC/SFC- Gallegos Creates a $1500 personal income tax credit for certain teachers who’ve STBTC taught in a “rural school district” the prior year for a requisite period of time. The credit may be carried forward three years. SB 197 Increase Cigarette Taxes: SB 197 STBTC/SFC- Lopez Doubles the cigarette tax, increases the tobacco products tax a little more STBTC than 300%, reduces credits and changes distributions July 1, 2021. SB 208 Exempt Social Security from Income Tax: SB 208 STBTC/SFC- Gallegos Exempts Social Security from income taxation but does not allow an STBTC overlapping deduction with that provided for the elderly in 7-2-5.2. SB 211 Corporate Income Tax Rates: SB 211 STBTC/SFC- Wirth Increases the top corporate rate over time from 5.9 to 7.6% and decreases STBTC the statewide gross receipts tax rate from 5.125% to 5%. SB 218 Uniform Division of Income for Tax Purposes: SB 218 STBTC/SFC- Shendo Conforms elements of the multistate compact with the income STBTC apportionment changes in HB 6. SB 243 Remove Some Solar Energy GRT Deductions: SB 243 STBTC/SCO Hickey Broadens the deductions for solar systems in 7-9-112 by removing the NC-STBTC- limitation the system serve the property to which it is installed, adds a DP-STBTC sunset provision (7/1/2030) and reporting requirements. SB 259 Tax Reduction for Uniformed Retirees: SB 259 STBTC/SFC- Burt Phases in a personal income tax deduction for uniformed service retiree’s STBTC income not to exceed 100% of that income or $25K in 2025. SB 277 Military Retirement Pay: SB 277 STBTC/SFC- Pope Creates a personal income tax deduction up to $30K for military retiree STBTC pay otherwise included in income. SB 288 Cannabis Regulation Act: HB 288 STBTC/SFC- Pirtle Creates a regulatory and tax scheme for the sale of recreational cannabis. STBTC SB 300 Paid Time Off Tax Credit: SB 300 STBTC/SFC- Sedillo- Creates a new personal and corporate income tax credit for PTO paid by STBTC Lopez those with 12 or fewer employees and upon which the credit can only be claimed for those making $16/hr or less. The credit is for 3 years in the amount of 100% of PTO expense in 2021, 75% in 2022, and 25% in 2023. The credit cannot be refunded or carried forward.

11 Tax Matters: The Newsletter of the New Mexico Tax Research Institute © 2021 New Mexico Tax Research Institute. All rights reserved. SB 339 Low-Income Comprehensive Tax Rebate: SB 339 STBTC/SFC- Candelaria Broadens brackets and increases eligibility thresholds of modified gross STBTC income for purposes of the low-income comprehensive tax rebate (LICTR). SB 363 Cannabis Regulation Act: SB 363 STBTC/SJC- Candelaria Creates a regulatory and tax scheme for the sale of recreational cannabis. STBTC SB 372 Regional Transit District Gross Receipts: SB 372 STBTC/SFC- Jaramillo Creates a distribution for regional transit districts and provides for STBTC expanded taxing authority in conjunction with an allowed increase in the administrative fee collected by the NM SB 386 Recordation Tax Act: SB 386 STBTC/SFC- Griggs Creates a real estate transfer and recordation tax (25 and 10 mils STBTC respectively); creates and imposes a food gross receipts tax; creates exemptions from personal income tax for military social security retirement income. SB 397 Tribal Land Gross Receipts: SB 397 SIRC/STBTC McKenna Provides that the GRT rate within tribal boundaries is the combined state /SFC-STBTC- and local rate at a minimum. SIRC SB 402 Angel Investors Tax Credit Changes: SB 402 STBTC/SFC- Hickey Doubles the rate of the credit from 25 to 50%, increases the credit’s STBTC annual cap from $2M to $10M, and makes the credit refundable. SB 410 Adjustment of Certain Taxes: SB 410 STBTC/SFC- Burt Makes changes and adds definitions to the Tax Administration Act and STBTC Withholding Tax Act in an effort to conform to recent federal partnership audit procedure changes.

Shamelessly borrowed from the Federation of Tax Administrators newsletter:

WHEN HELL AND TEXAS FREEZE OVER -- OH, WAIT… A segment of the tax preparer community has been pushing for another extension of the federal filing season. Yesterday the House Oversight subcommittee, which has jurisdiction over federal agencies, held a hearing that featured free tax prep services arguing for an extension; their main complaint is that the pandemic limits the number of clients who can be served each day. Also yesterday, majority members of the House Ways and Means committee sent a letter to the IRS saying an extension of both filing and payment deadlines “will benefit and be a comfort to taxpayers, practitioners and the IRS alike.”

LET IT GO Governors’ budgets were lined up to increase general fund spending by more than $33 billion in FY2021, which began for most states last July 1. Instead, according to the National Conference of State Legislatures, pandemic shutdowns and health spending caused governors to cut more than $6 billion in state program spending.

FROZEN HEART Tax attorneys gleefully sent out a "we warned you" email yesterday pointing out that they had filed suit on behalf of four trade associations in an effort to upturn Maryland’s new tax on digital advertising. The U.S. Chamber of Commerce, the Internet Association, NetChoice and the Computer and Communications Industry Association filed their complaint in the U.S. District Court of Maryland. It says Maryland’s first-of-its-kind law is prohibited by the Internet Tax Freedom Act (saying there not a comparable non-electronic tax on advertising) and the due process and commerce clauses of the U.S. Constitution. The email called out Connecticut, California and Montana, where similar laws are under consideration, saying "We hope that policymakers in those states will recognize that following Maryland only leads to the courthouse.” NetChoice CEO Steve DelBianco complained, “This law is like a toll booth that collects only from new cars and no one else, so any state following Maryland’s awful example will have to refund all those tolls when a court rules that it’s illegal discrimination."

LATEST FROM THE LAWMAKERS: ‘OOH, THAT’S A ROUGH BUSINESS TO BE IN RIGHT NOW!” Maryland has a new law that calls for direct state economic relief payments of $300 for individuals and $500 for families, followed by a second payment of $150 for individuals and $250 for families. The $1 billion tax relief plan also excludes 2020 results in a business’s unemployment tax rate calculation and it generates sales tax credits for small businesses that could be worth as much as $12,000.

Washington State’s full Senate will consider a plan to tax capital gains at a rate of 7%, on gains greater than $250,000. Real estate sales and exchanges would not be taxed. Washington State does not have an individual income tax; proponents are calling this an excise tax. Said one opponent: 13 Tax Matters: The Newsletter of the New Mexico Tax Research Institute © 2021 New Mexico Tax Research Institute. All rights reserved. "It doesn't matter how much lipstick they put on this pig, it is still an unconstitutional graduated income tax.”

Illinois Gov. Pritzker’s budget plan would temporarily cap NOLs, reduce state deductions for GILTI income and stop a planned phaseout of a franchise tax. He also wants to cap the 1.75% sales tax retailer discount at $1,000 a month. Some of the proposals were signed into law two years ago but the governor says he needs to close “unaffordable corporate loopholes.”

New Hampshire’s House minority members have filed a lawsuit in a U.S. district court in hopes of forcing the majority leadership to allow House members with vulnerable health conditions to attend sessions remotely. New Hampshire’s legislature is planning to meet Feb. 25 and 25 at the New Hampshire Sportsplex, a 50,000-square-foot venue. The governor has issued a statewide mask mandate but lawmakers often refused to wear masks during their previous outdoor and large- venue gatherings.

IT’S A WARM HUG The CARES Act made a temporary change to the federal EITC calculation. Taxpayers with earned income that was higher in 2019 than in 2020 will be allowed to use the 2019 amount to calculate the credit for 2020.

MORE THAN ONE WAY TO SLIP AND HURT YOURSELF Criminal hackers attacked the computer network in Chatham County, N.C. in October with a ransomware named DoppelPayment. Someone opened a phishing email with a malicious attachment that encrypted the network infrastructure and business systems. Hackers demanded about $2.4 million in bitcoin to release the system. The county refused, and now information stolen from the system — including personnel records and sheriff’s investigation documents — has been posted on the dark web. The county is setting up a call center and is taking related steps to assist individuals whose personal identification may have been affected.

"ALL ONE CAN DO IS THE NEXT RIGHT THING" The IRS has issued a statement on its CP59 notices: "Earlier this month, the IRS issued notices to approximately 260,000 taxpayers stating they haven’t filed their 2019 federal tax return. These notices, referred to as CP59 notices, are issued yearly to identified taxpayers who have failed to file a tax return that was due the prior calendar year (Tax Year 2019). Due to pandemic related shutdowns, the IRS has not completed processing all 2019 returns at this time. Therefore, the CP59 notices should not have been sent because some portion of the recipients may actually have filed a return that is still being processed. People who filed their 2019 return but nevertheless received the CP59 notice, can disregard the letter and do not need to take to take any action. There is no need to call or respond to the CP59 notice because the IRS continues to process 2019 tax returns as quickly as possible. The IRS regrets any confusion caused by this mailing."

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TAX QUOTABLES

"It’s income tax time again, Americans: time to gather up those receipts, get out those tax forms, sharpen up that pencil, and stab yourself in the aorta."

~ Dave Barry

“He was getting to the point that he didn't understand why tax attorneys didn't just kill themselves.”

~ Orson Scott Card, First Meetings in Ender's Universe

COMMENTS: Your suggestions and comments on this newsletter, the conferences (past or future), the Distinguished Lectures Series, our research or any aspect of NMTRI’s operation and programs are welcome. Please send them to [email protected], call 505-269-6791 or mail them to P.O. Box 91657, Albuquerque, New Mexico 87199-1657. We genuinely solicit your input and thank you for your support.

"The power to tax involves the power to destroy" - McCulloch v. Maryland, 17 U.S. 316 (1819), Chief Justice John Marshall.

“Taxes are what we pay for civilized society” Campañía General de Tabacos v. Collector, 275 U.S. 87, 100 (1927), Justice Oliver Wendell Holmes, dissenting. Join NMTRI today!