TAX CHANGES, the official text

HOUSE BILL 291

57th legislature - STATE OF NEW MEXICO - second session, 2026

INTRODUCED BY

Derrick J. Lente and Sarah Silva

AN ACT

RELATING TO TAXATION; ALLOWING ATTORNEY FEES TO BE PAID FROM
REVENUE DISTRIBUTIONS; PREVENTING THE ACCRUAL OF INTEREST WHEN
AN EXTENSION OF TIME TO FILE A RETURN HAS BEEN GRANTED;
AMENDING ROUNDING REQUIREMENTS; CLARIFYING THAT A TAXPAYER WHO
HAS ENTERED INTO AN INSTALLMENT AGREEMENT IS NOT CONSIDERED A
DELINQUENT TAXPAYER FOR PURPOSES OF LICENSE OR PERMIT RENEWAL;
PROVIDING THAT A MINIMUM CIVIL PENALTY OF FIVE DOLLARS ($5.00)
SHALL NOT APPLY FOR FAILURE TO PAY A TAX LEVIED PURSUANT TO THE
WITHHOLDING TAX ACT, THE OIL AND GAS PROCEEDS AND PASS-THROUGH
ENTITY WITHHOLDING TAX ACT OR THE WORKERS' COMPENSATION FEE;
AMENDING THE FILM PRODUCTION TAX CREDIT ACT; AMENDING
DEFINITIONS IN THE TECHNOLOGY JOBS AND RESEARCH AND DEVELOPMENT
TAX CREDIT ACT; CLARIFYING THE TOBACCO PRODUCTS TAX ON CLOSED
SYSTEM CARTRIDGES; ALLOWING EXCESS PROPERTY TAX AUCTION
PROCEEDS TO BE APPLIED TO OUTSTANDING TAX DEBT; REQUIRING
SPECIFIC EFFECTIVE DATES FOR AN ORDINANCE CHANGING THE
IMPOSITION OF TAX IMPOSED BY AN INDIAN NATION, TRIBE OR PUEBLO
AND COLLECTED BY THE TAXATION AND REVENUE DEPARTMENT PURSUANT
TO A TRIBAL COOPERATIVE AGREEMENT; AMENDING WITH WHOM THE
SECRETARY OF TAXATION AND REVENUE MAY ENTER INTO TRIBAL
COOPERATIVE AGREEMENTS.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF NEW MEXICO:

SECTION 1. Section 7-1-6 NMSA 1978 (being Laws 1978,
Chapter 55, Section 1, as amended) is amended to read:

"7-1-6. RECEIPTS--DISBURSEMENTS--FUNDS CREATED.--

A. All money received by the department with
respect to laws administered pursuant to the provisions of the
Tax Administration Act shall be deposited with the state
treasurer before the close of the next succeeding business day
after receipt of the money, except that money received with
respect to the Income Tax Act and the Corporate Income and
Franchise Tax Act during the period starting with the fifth day
prior to the due date for payment of the taxes for the year and
ending on the tenth day following that due date shall be
deposited before the close of the tenth business day after
receipt of the money.

B. Money received or disbursed by the department
shall be accounted for by the department as required by law or
rule of the secretary of finance and administration.

C. Disbursements for tax credits, tax rebates,
refunds, the payment of interest, the payment of fees charged
by attorneys or collection agencies for collection of accounts
as agent for the department, attorney fees and costs awarded by
a court or hearing officer, [as the result of oil and gas
litigation] the payment of credit card service charges on
payments of taxes by use of credit cards, distributions and
transfers shall be made by the department of finance and
administration upon request and certification of their
appropriateness by the secretary or the secretary's delegate.

D. There are hereby created in the state treasury
the "tax administration suspense fund", the "extraction taxes
suspense fund" and the "workers' compensation collections
suspense fund" for the purpose of making the disbursements
authorized by the Tax Administration Act.

E. All revenues collected or received by the
department pursuant to the provisions of the taxes and tax acts
set forth in Subsection A of Section 7-1-2 NMSA 1978 shall be
credited to the tax administration suspense fund and are
appropriated for the purpose of making the disbursements
authorized in this section or otherwise authorized or required
by law to be made from the tax administration suspense fund.

F. All revenues collected or received by the
department pursuant to the taxes or tax acts set forth in
Subsection B of Section 7-1-2 NMSA 1978 shall be credited to
the extraction taxes suspense fund and are appropriated for the
purpose of making the disbursements authorized in this section
or otherwise authorized or required by law to be made from the
extraction taxes suspense fund.

G. All revenues collected or received by the
department pursuant to the taxes or tax acts set forth in
Subsection C of Section 7-1-2 NMSA 1978 may be credited to the
tax administration suspense fund, unless otherwise directed by
law to be credited to another fund or agency, and are
appropriated for the purpose of making disbursements authorized
in this section or otherwise authorized or required by law.

H. All revenues collected or received by the
department pursuant to the provisions of Section 52-5-19 NMSA
1978 shall be credited to the workers' compensation collections
suspense fund and are appropriated for the purpose of making
the disbursements authorized in this section or otherwise
authorized or required by law to be made from the workers'
compensation collections suspense fund.

I. Disbursements to cover expenditures of the
department shall be made only upon approval of the secretary or
the secretary's delegate.

J. Miscellaneous receipts from charges made by the
department to defray expenses pursuant to the provisions of
Section 9-11-6.1 NMSA 1978 and similar charges are appropriated
to the department for its use.

K. From the tax administration suspense fund, there
may be disbursed each month amounts approved by the secretary
or the secretary's delegate necessary to maintain a fund hereby
created and to be known as the "income tax suspense fund". The
income tax suspense fund shall be used for the payment of
income tax refunds."

SECTION 2. Section 7-1-13 NMSA 1978 (being Laws 1965,
Chapter 248, Section 18, as amended) is amended to read:

"7-1-13. TAXPAYER RETURNS--PAYMENT OF TAXES--EXTENSION OF
TIME.--

A. Taxpayers are liable for tax at the time of and
after the transaction or incident giving rise to tax until
payment is made. Taxes are due on and after the date on which
their payment is required until payment is made.

B. Every taxpayer shall, on or before the date on
which payment of any tax is due, complete and file a tax return
in a form prescribed and according to the regulations issued by
the secretary. Except as provided in Section 7-1-13.1 NMSA
1978 or by regulation, ruling, order or instruction of the
secretary, the payment of any tax or the filing of any return
may be accomplished by mail. When the filing of a tax return
or payment of a tax is accomplished by mail, the date of the
postmark shall be considered the date of submission of the
return or payment.

C. Payment of the total amount of all taxes that
are due from the taxpayer shall precede or accompany the
return. Delivery to the department of a check or electronic
check that is not paid upon presentment does not constitute
payment.

D. The secretary or the secretary's delegate may,
for good cause, extend in favor of a taxpayer or a class of
taxpayers, for no more than a total of twelve months, the date
on which payment of any tax is required or on which any return
required by provision of the Tax Administration Act shall be
filed [but no extension shall prevent the accrual of interest
as otherwise provided by law]. When an extension of time for
income tax has been granted a taxpayer pursuant to the Internal
Revenue Code, the extension shall serve to extend the time for
filing New Mexico income tax; provided that a copy of the
approved federal extension of time is attached to the
taxpayer's New Mexico income tax return. The secretary by
regulation may also provide for the automatic extension for no
more than six months of the date upon which payment of any New
Mexico income tax or the filing of any New Mexico income tax
return is required. If the secretary or the secretary's
delegate believes it necessary to ensure the collection of the
tax, the secretary or the secretary's delegate may require, as
a condition of granting any extension, that the taxpayer
furnish security in accordance with the provisions of Section
7-1-54 NMSA 1978.

E. Except as provided in Subsection F of this
section, no later than one hundred eighty days after the final
determination date, a taxpayer shall file a federal adjustments
report with the department and pay any state tax due with
respect to final net-positive federal adjustments arising from:

(1) an audit or other action by the internal
revenue service; or

(2) a timely filed amended federal income tax
return, including a return or other similar information filed
pursuant to Section 6225(c)(2) of the Internal Revenue Code.

F. Except for federal adjustments that are required
to be reported pursuant to Subsection E of this section,
partnerships and partners shall report final net-positive
federal adjustments arising from a partnership level audit or
an administrative adjustment request and make payments as
follows:

(1) except for where the partnership or tiered
partner makes an election pursuant to Subsection G of this
section, the partnership or tiered partner shall:

(a) file: 1) a completed federal
adjustments report and notify each of its direct partners of
their distributive share of the final federal adjustments,
including information necessary for reporting state tax due as
required by the department; and 2) an amended withholding
return for the reviewed year if such return was filed, or would
have been required pursuant to the Withholding Tax Act;

(b) in the case of an audited
partnership, file the returns required by this paragraph no
later than ninety days after the final determination date; and

(c) in the case of a tiered partner of
an audited partnership, file the returns required by this
paragraph no later than ninety days after the time for the
audited partnership's filing and furnishing statements to
tiered partnerships and their partners as established pursuant
to Section 6226 of the Internal Revenue Code and the
regulations thereunder; and

(2) a partner of a partnership or a tiered
partner subject to tax pursuant to Section 7-2-3 or 7-2A-3 NMSA
1978 on adjustments to which Paragraph (1) of this subsection
applies shall file a federal adjustments report reporting the
partner's distributive share of the adjustments and shall pay
the additional amount of state tax due, plus any penalty and
interest due and less any credit for related amounts paid or
withheld and remitted on behalf of the partner pursuant to
Paragraph (1) of this subsection as follows:

(a) for taxable direct partners of the
audited partnership, no later than one hundred eighty days
after the final determination date; or

(b) for taxable indirect partners of the
audited partnership, no later than one hundred eighty days
after the time for the audited partnership's filing and
furnishing statements to tiered partnerships and their partners
as established pursuant to Section 6226 of the Internal Revenue
Code and the regulations thereunder.

G. The election provided by this subsection applies
only to federal adjustments other than the distributive share
of federal adjustments that must be included in the unitary
business income of any direct or indirect corporate partner;
provided that this can be reasonably determined, or federal
adjustments resulting from an administrative adjustment
request. A partnership making an election pursuant to this
subsection shall:

(1) file a completed federal adjustments
report and notify the department that it is making the election
pursuant to this subsection; and

(2) pay an amount, determined as follows, in
lieu of taxes owed by its direct and indirect taxable partners:

(a) exclude from the total final federal
adjustments the distributive share reported to a direct partner
that is an exempt partner unless the adjustment represents
unrelated business taxable income;

(b) include only the portion of the
total federal adjustment to distributive shares of partners
taken into account pursuant to Section 6225(b)(2) of the
Internal Revenue Code;

(c) apportion and allocate the
adjustments as provided by the Uniform Division of Income for
Tax Purposes Act as applied at the partnership level following
any department regulations adopted for this purpose;

(d) multiply the resulting amount by the
highest tax rate provided by Section 7-2A-5 NMSA 1978; and

(e) add to the amount calculated
pursuant to Subparagraph (d) of this paragraph an amount of
penalty and interest computed pursuant to the Tax
Administration Act.

H. In any action required or allowed to be taken
pursuant to the Tax Administration Act with respect to the
reporting of federal adjustments by a partnership, the state
partnership representative for the reviewed year shall have the
sole authority to act on behalf of the partnership, and the
partnership's direct partners and indirect partners shall be
bound by those actions. The state partnership representative
is the partnership's federal partnership representative for the
reviewed year, unless the partnership designates in writing
another person as its state partnership representative;
provided that the person meets any qualifications established
by the department.

I. Pursuant to procedures that may be adopted by
the department, an audited partnership or tiered partner of
that partnership may enter into an agreement with the
department to utilize an alternative reporting and payment
method, including applicable time requirements or any other
provision pursuant to Subsections E through H of this section,
if the audited partnership or tiered partner demonstrates that
the requested method will reasonably provide for the reporting
and payment of taxes, penalties and interest due pursuant to
Subsections E through H of this section. Application for
approval of an alternative reporting and payment method must be
made by the audited partnership or tiered partner within the
time for election as provided in Subsection G of this section,
as appropriate.

J. An election made pursuant to Subsection G or I
of this section is irrevocable, unless the department, in its
discretion, determines otherwise. If properly reported and
paid by the audited partnership or tiered partner, the amount
determined in Paragraph (2) of Subsection G of this section, or
similarly under an optional election pursuant to Subsection I
of this section, will be treated as paid in lieu of taxes owed
by its direct and indirect partners on the same final federal
adjustments. The direct or indirect partners of the
partnership that pays this in lieu of amount may not claim any
deduction, credit or refund with respect to that amount.

K. A taxpayer may make estimated payments of state
tax expected to result from a pending audit by the internal
revenue service prior to the final determination date,
following the process prescribed by the department, and such
payments will limit the accrual of further statutory interest
on that amount.

L. A taxpayer may claim an amount of state tax
resulting from final net-negative federal adjustments as
provided in Section 7-1-26 NMSA 1978.

M. Nothing in Subsections E through L of this
section shall prevent the department from assessing direct
partners or indirect partners for taxes they owe, using the
best information available, in the event that a partnership or
tiered partner fails to timely make any report or payment
required for any reason.

N. As used in this section:

(1) "administrative adjustment request" means
an administrative adjustment request filed by a partnership
pursuant to Section 6227 of the Internal Revenue Code;

(2) "audited partnership" means a partnership
subject to a partnership level audit resulting in a federal
adjustment;

(3) "corporate partner" means a partner,
direct or indirect, that is subject to tax pursuant to the
Corporate Income and Franchise Tax Act;

(4) "direct partner" means any partner that
holds an interest directly in a partnership or pass-through
entity;

(5) "exempt partner" means a partner, direct
or indirect, that is exempt from New Mexico income tax except
on unrelated business taxable income;

(6) "federal adjustment" means a change to an
item or amount determined pursuant to the Internal Revenue Code
that is used by a taxpayer to compute an amount of state tax
owed, whether that change results from action by the internal
revenue service, including a partnership level audit, or the
filing of an amended federal return, federal refund claim or an
administrative adjustment request by a partnership;

(7) "federal adjustments report" includes the
methods or forms required by the department for use by a
taxpayer to report final federal adjustments, including an
amended tax return, information return or a uniform multistate
report;

(8) "final determination date" means:

(a) except as provided in Subparagraphs
(b), (c) and (d) of this paragraph, if a federal adjustment
arises from an audit or other action by the internal revenue
service, the final determination date is the first day on which
no federal adjustments arising from that audit or other action
remain to be finally determined, whether by a decision of the
internal revenue service with respect to which all rights of
appeal have been waived or exhausted, by agreement, or, if
appealed or contested, by a final decision with respect to
which all rights of appeal have been waived or exhausted. For
agreements required to be signed by the internal revenue
service and the taxpayer, the final determination date is the
date on which the last party signed the agreement;

(b) for federal adjustments arising from
an internal revenue service audit or other action by the
internal revenue service, if the taxpayer filed as a member of
a filing group pursuant to the Corporate Income and Franchise
Tax Act, the final determination date means the first day on
which no related federal adjustments arising from that audit
remain to be finally determined, as described in Subparagraph
(a) of this paragraph, for the entire group;

(c) except as provided in Subparagraph
(d) of this paragraph, if the federal adjustment results from
filing an amended federal return, a federal refund claim or an
administrative adjustment request, or if it is a federal
adjustment reported on an amended federal return or other
similar report filed pursuant to Section 6225(c) of the
Internal Revenue Code, the final determination date means the
day on which the amended return, refund claim, administrative
adjustment request or other similar report was filed; and

(d) for adjustments resulting from a
partnership level audit or an administrative adjustment request
for which the final determination date pursuant to Subparagraph
(a) or (c) of this paragraph is determined to be a date
occurring prior to [the effective date of this 2021 act] June
18, 2021, the final determination date shall be July 1, 2021;

(9) "final federal adjustments" means
adjustments for which the final determination date has passed,
including final net-positive federal adjustments and final net-negative federal adjustments;

(10) "indirect partner" means a partner in a
partnership or pass-through entity in which the partner holds
an interest directly, or through another indirect partner, in a
partnership or pass-through entity;

(11) "net-negative federal adjustments" means
federal adjustments relating to the same tax period, whether
made by the taxpayer or the internal revenue service, the net
effect of which is to decrease state tax due as compared to tax
originally reported for that period;

(12) "net-positive federal adjustments" means
federal adjustments relating to the same tax period, whether
made by the taxpayer or the internal revenue service, the net
effect of which is to increase state tax due as compared to tax
originally reported for that period;

(13) "partner" means a person that holds an
interest directly or indirectly in a partnership or other
pass-through entity;

(14) "partnership" means an entity subject to
taxation pursuant to Subchapter K of the Internal Revenue Code;

(15) "partnership level audit" means an
examination by the internal revenue service at the partnership
level pursuant to Subchapter C or Subtitle F, Chapter 63 of the
Internal Revenue Code [which] that results in federal
adjustments;

(16) "pass-through entity" means an entity,
other than a partnership, that is not subject to tax pursuant
to the Corporate Income and Franchise Tax Act;

(17) "reviewed year" means the taxable year of
a partnership that is subject to a partnership level audit from
which federal adjustments arise;

(18) "taxpayer" means a taxpayer, including a
partnership subject to a partnership level audit or a
partnership that has made an administrative adjustment request,
as well as a tiered partner of that partnership, unless the
context indicates otherwise;

(19) "tiered partner" means any partner that
is a partnership or pass-through entity; and

(20) "unrelated business taxable income" means
"unrelated business taxable income" as used in Section 512 of
the Internal Revenue Code."

SECTION 3. Section 7-1-15.1 NMSA 1978 (being Laws 1987,
Chapter 169, Section 4) is amended to read:

"7-1-15.1. SECRETARY MAY PERMIT OR REQUIRE ROUNDING.--By
regulation or instruction, the secretary may permit or require
rounding to the nearest whole dollar of [tax due; provided that
for any tax or tax act the revenues from which are required by
the provisions of the Tax Administration Act to be distributed
or transferred partly to local governments and partly to state
funds, the gain or loss due to rounding shall be attributed to
the state funds] an amount due pursuant to the Income Tax Act
or the Corporate Income and Franchise Tax Act, and to the
nearest five cents ($.05) of an amount due pursuant to all
other taxes administered by the department pursuant to Section
7-1-2 NMSA 1978."

SECTION 4. Section 7-1-16 NMSA 1978 (being Laws 1965,
Chapter 248, Section 19, as amended) is amended to read:

"7-1-16. DELINQUENT TAXPAYER.--

A. Except as provided in [Subsection] Subsections D
and E of this section, any taxpayer to whom taxes have been
assessed as provided in Section 7-1-17 NMSA 1978 or upon whom
demand for payment has been made as provided in Section 7-1-63
NMSA 1978 who does not within ninety days after the date of
assessment or demand for payment make payment of the undisputed
amount, protest the assessment or demand for payment as
provided by Section 7-1-24 NMSA 1978 or furnish security for
payment as provided by Section 7-1-54 NMSA 1978 becomes a
delinquent taxpayer and remains such until:

(1) payment of the total amount of all such
taxes is made;

(2) security is furnished for payment; or

(3) no part of the assessment remains
unabated.

B. Any taxpayer who fails to provide security as
required by Subsection D of Section 7-1-54 NMSA 1978 shall be
deemed to be a delinquent taxpayer.

C. If a taxpayer files a protest as provided in
Section 7-1-24 NMSA 1978, the taxpayer nevertheless becomes a
delinquent taxpayer upon failure of the taxpayer to appear, in
person or by authorized representative, at the hearing set or
upon failure to perfect an appeal from any decision or part
thereof adverse to the taxpayer to the next higher appellate
level, as provided in that section, unless the taxpayer makes
payment of the total amount of all taxes assessed and remaining
unabated or furnishes security for payment.

D. A taxpayer does not become a delinquent taxpayer
if the taxpayer has been issued an assessment as a result of a
managed audit but is still within the allowed time period to
pay the tax due as specified in Paragraph (4) of Subsection A
of Section 7-1-67 NMSA 1978.

E. For the purposes of license or permit renewal, a
taxpayer shall not be considered a delinquent taxpayer if the
taxpayer has entered into an installment agreement pursuant to
Section 7-1-21 NMSA 1978 that is in good standing with the
department and the taxpayer has not failed to meet the
conditions of the installment agreement with the department
during the five calendar years immediately preceding the
current calendar year. If an installment agreement is relied
on for purposes of license or permit renewal, it shall be
secured with a payment of a minimum of twenty percent of the
taxpayer's delinquent tax amount for the tax programs required
for renewal."

SECTION 5. Section 7-1-69 NMSA 1978 (being Laws 1965,
Chapter 248, Section 70, as amended) is amended to read:

"7-1-69. CIVIL PENALTY FOR FAILURE TO PAY TAX OR FILE A
RETURN.--

A. Except as provided in Subsection C of this
section, in the case of failure due to negligence or disregard
of department rules and regulations, but without intent to
evade or defeat a tax, to pay when due the amount of tax
required to be paid, to pay in accordance with the provisions
of Section 7-1-13.1 NMSA 1978 when required to do so or to file
by the date required a return regardless of whether a tax is
due, there shall be added to the amount assessed a penalty in
an amount equal to the greater of:

(1) two percent per month or any fraction of a
month from the date the tax was due multiplied by the amount of
tax due but not paid, not to exceed twenty percent of the tax
due but not paid;

(2) two percent per month or any fraction of a
month from the date the return was required to be filed
multiplied by the tax liability established in the late return,
not to exceed twenty percent of the tax liability established
in the late return; or

(3) a minimum of five dollars ($5.00), but the
five-dollar ($5.00) minimum penalty shall not apply to taxes
levied under the Income Tax Act, Corporate Income and Franchise
Tax Act, Withholding Tax Act, Oil and Gas Proceeds and Pass-Through Entity Withholding Tax Act, workers' compensation fee
authorized by Section 52-5-19 NMSA 1978 or taxes administered
by the department pursuant to Subsection B of Section 7-1-2
NMSA 1978.

B. No penalty shall be assessed against a taxpayer
if the failure to pay an amount of tax when due results from a
mistake of law made in good faith and on reasonable grounds.

C. If a different penalty is specified in a compact
or other interstate agreement to which New Mexico is a party,
the penalty provided in the compact or other interstate
agreement shall be applied to amounts due under the compact or
other interstate agreement at the rate and in the manner
prescribed by the compact or other interstate agreement.

D. In the case of failure, with willful intent to
evade or defeat a tax, to pay when due the amount of tax
required to be paid, there shall be added to the amount fifty
percent of the tax or a minimum of twenty-five dollars
($25.00), whichever is greater, as penalty.

E. If demand is made for payment of a tax,
including penalty imposed pursuant to this section, and if the
tax is paid within ten days after the date of such demand, no
penalty shall be imposed for the period after the date of the
demand with respect to the amount paid.

F. If a taxpayer makes electronic payment of a tax
but the payment does not include all of the information
required by the department pursuant to the provisions of
Section 7-1-13.1 NMSA 1978 and if the department does not
receive the required information within five business days from
the later of the date a request by the department for that
information is received by the taxpayer or the due date, the
taxpayer shall be subject to a penalty of two percent per month
or any fraction of a month from the fifth day following the
date the request is received. If a penalty is imposed under
Subsection A of this section with respect to the same
transaction for the same period, no penalty shall be imposed
under this subsection.

G. No penalty shall be imposed on:

(1) tax due in excess of tax paid in
accordance with an approved estimated basis pursuant to Section
7-1-10 NMSA 1978;

(2) tax due as the result of a managed audit;
or

(3) tax that is deemed paid by crediting
overpayments found in an audit or managed audit of multiple
periods pursuant to Section 7-1-29 NMSA 1978."

SECTION 6. Section 7-2F-2 NMSA 1978 (being Laws 2003,
Chapter 127, Section 2, as amended) is amended to read:

"7-2F-2. DEFINITIONS.--As used in the Film Production Tax
Credit Act:

A. "affiliated person" means a person who directly
or indirectly owns or controls, is owned or controlled by or is
under common ownership or control with another person through
ownership of voting securities or other ownership interests
representing a majority of the total voting power of the
entity;

B. "background artist" means a person who is not a
performing artist but is a person of atmospheric business whose
work includes atmospheric noise, normal actions, gestures and
facial expressions of that person's assignment; or a person of
atmospheric business whose work includes special abilities that
are not stunts; or a substitute for another actor, whether
photographed as a double or acting as a stand-in;

C. "below-the-line crew" means a person in a
position that is off-camera and who provides technical services
during the physical production of a film. "Below-the-line
crew" does not include a person who is a writer, director,
producer or background artist or performing artist for the
film;

D. "commercial audiovisual product" means a film or
a video game intended for commercial exploitation;

E. "direct production expenditure" means a
transaction that is subject to taxation in New Mexico, except
as provided in Subparagraph (f) of Paragraph (1) of this
subsection, and is certified pursuant to Subsection A of
Section 7-2F-12 NMSA 1978:

(1) including an expenditure for:

(a) payment of wages, fringe benefits or
fees for talent, management or labor to a person who is a New
Mexico resident;

(b) payment for standard industry craft
inventory when provided by a below-the-line crew that is a New
Mexico resident in addition to its below-the-line crew
services;

(c) payment for wages and per diem for a
performing artist who is not a New Mexico resident and who is
directly employed by the film production company; provided that
the film production company deducts and remits, or causes to be
deducted and remitted, income tax from the first day of
services rendered in New Mexico at the maximum rate pursuant to
the Withholding Tax Act;

(d) payment to a personal services
business for the services of a performing artist if: 1) the
personal services business pays gross receipts tax in New
Mexico on the portion of those payments qualifying for the tax
credit; and 2) the film production company deducts and remits,
or causes to be deducted and remitted, income tax at the
maximum rate in New Mexico pursuant to Subsection H of Section
7-3A-3 NMSA 1978 on the portion of those payments qualifying
for the tax credit paid to a personal services business where
the performing artist is a full or part owner of that business
or subcontracts with a personal services business where the
performing artist is a full or part owner of that business;
[and]

(e) any of the following provided by a
vendor: 1) the story and scenario to be used for a film; 2)
set construction and operations, wardrobe, accessories and
related services; 3) photography, sound synchronization,
lighting and related services; 4) editing and related services;
5) rental of facilities and equipment; 6) the first one hundred
fifty dollars ($150) of the daily expense of leasing of
vehicles, not including the chartering of aircraft for out-of-state transportation; however, New Mexico-based chartered
aircraft for in-state transportation directly attributable to
the production shall be considered a direct production
expenditure; 7) food; 8) the first three hundred dollars ($300)
of lodging per individual, per day; 9) commercial airfare if
purchased through a New Mexico-based travel agency or travel
company for travel to and from New Mexico or within New Mexico
that is directly attributable to the production; 10) insurance
coverage and bonding if purchased through a New Mexico-based
insurance agent, broker or bonding agent; 11) subcontracted
goods and services from businesses; provided that the ordinary
course of business of the vendor procuring the goods and
services from the subcontractor directly relates to standard
film industry goods and services; and 12) other direct costs of
producing a film in accordance with generally accepted
entertainment industry practice; and

(f) payments for the lease or rental of
facilities and equipment located on, or purchases from
businesses located on, a federally recognized Indian nation,
tribe or pueblo located in New Mexico and those payments and
purchases are exempt from taxation in New Mexico; and

(2) does not include an expenditure for:

(a) a gift with a value greater than one
hundred dollars ($100);

(b) artwork or jewelry, except that a
work of art or a piece of jewelry may be a direct production
expenditure if: 1) it is used in the film production; and 2)
the expenditure is less than two thousand five hundred dollars
($2,500);

(c) entertainment, amusement or
recreation;

(d) subcontracted goods or services
provided by a vendor when the subcontractors providing those
goods or services to the vendor are not subject to state
taxation, such as equipment and locations provided by the
military, government and organizations that demonstrate to the
taxation and revenue department that they have been granted
exemption from the federal income tax by the United States
commissioner of internal revenue as organizations described in
Section 501(c)(3) of the United States Internal Revenue Code of
1986, as amended or renumbered;

(e) subcontracted services provided by a
vendor when the subcontracted services are provided by a person
who is below-the-line crew and is not a New Mexico resident;

(f) hidden or other indirect service
fees, costs, commissions or other remuneration received by
third parties and that are not directly paid by the film
production company or expressly enumerated on a film production
company's filing to claim a new film production tax credit;

(g) wages for a person who is not a New
Mexico resident and who falsely claims to be a New Mexico
resident. The wages of such person shall not be considered an
eligible expense for two years from the date in which the
person is determined by the taxation and revenue department as
having made a false claim, regardless of whether the person
becomes a New Mexico resident within that time frame; or

(h) which the film production company
receives funding pursuant to Section 21-19-7.1 NMSA 1978; F. "division" means the New Mexico film division of
the economic development department;

G. "federal new markets tax credit program" means
the tax credit program codified as Section 45D of the United
States Internal Revenue Code of 1986, as amended;

H. "film" means a single medium or multimedia
program, including television programs but excluding
advertising messages other than national or regional
advertising messages intended for exhibition, that:

(1) is fixed on film, a digital medium,
videotape, computer disc, laser disc or other similar delivery
medium;

(2) can be viewed or reproduced;

(3) is not intended to and does not violate a
provision of Chapter 30, Article 37 NMSA 1978; and

(4) is intended for reasonable commercial
exploitation for the delivery medium used;

I. "film production company" means a person that
produces one or more films or commercial audiovisual products
or any part of a film or commercial audiovisual product;

J. "fiscal year" means the state fiscal year
beginning on July 1;

K. "New Mexico film partner" means a film
production company that has made a commitment to produce films
or commercial audiovisual products in New Mexico and has
purchased or executed a ten-year contract to lease a qualified
production facility;

L. "New Mexico film partner production" means a
film or commercial audiovisual product in New Mexico for which
a New Mexico film partner:

(1) owns at least fifty percent of the
production for which the budget is certified pursuant to
Subsection A of Section 7-2F-12 NMSA 1978 for at least one year
from the date of the last direct production expenditure or
postproduction expenditure in New Mexico;

(2) owns or controls underlying intellectual
property resulting from the production for at least five years
from the date of the last direct production expenditure or
postproduction expenditure in New Mexico; or

(3) has funded at least fifty percent of the
production budget certified pursuant to Subsection A of Section
7-2F-12 NMSA 1978;

[L.] M. "New Mexico resident" means an individual
who is domiciled in this state during any part of the taxable
year or an individual who is physically present in this state
for one hundred eighty-five days or more during the taxable
year; but any individual, other than someone who was physically
present in the state for one hundred eighty-five days or more
during the taxable year and who, on or before the last day of
the taxable year, changed the individual's place of abode to a
place without this state with the bona fide intention of
continuing actually to abide permanently without this state is
not a resident for the purposes of the Film Production Tax
Credit Act for periods after that change of abode;

[M.] N. "performing artist" means an actor, on-camera stuntperson, puppeteer, pilot who is a stuntperson or
actor, specialty foreground performer or narrator; and who
speaks a line of dialogue, is identified with the product or
reacts to narration as assigned. "Performing artist" does not
include a background artist;

[N.] O. "personal services business" means a
business organization, with or without physical presence, that
receives payments pursuant to the Film Production Tax Credit
Act for the services of a performing artist;

[O.] P. "physical presence" means a physical
address in New Mexico from which a vendor conducts business,
stores inventory or otherwise creates, assembles or offers for
sale the product purchased or leased by a film production
company and the vendor or an employee of the vendor is a
resident;

[P.] Q. "postproduction expenditure" means an
expenditure, certified pursuant to Subsection A of Section
7-2F-12 NMSA 1978, for editing, Foley recording, automatic
dialogue replacement, sound editing, special effects, including
computer-generated imagery or other effects, scoring and music
editing, beginning and end credits, negative cutting,
soundtrack production, dubbing, subtitling or addition of sound
or visual effects; but not including an expenditure for
advertising, marketing, distribution or expense payments;

[Q.] R. "principal photography" means the
production of a film during which the main visual elements are
created;

[R.] S. "qualified production facility" means a
building, or complex of buildings, building improvements and
associated back-lot facilities in which films are or are
intended to be regularly produced and that contain at least
one:

(1) sound stage with contiguous floor space of
at least seven thousand square feet and a ceiling height of no
less than eighteen feet; or

(2) standing set that includes at least one
interior, and at least five exteriors, built or re-purposed for
film production use on a continual basis and is located on at
least fifty acres of contiguous space designated for film
production use; and

[S.] T. "vendor" means a person who sells or leases
goods or services that are related to standard industry craft
inventory, who has a physical presence in New Mexico and is
subject to gross receipts tax pursuant to the Gross Receipts
and Compensating Tax Act or income tax pursuant to the Income
Tax Act or corporate income tax pursuant to the Corporate
Income and Franchise Tax Act but excludes a personal services
business and services provided by nonresidents hired or
subcontracted if the tasks and responsibilities are associated
with the standard industry job position of director, writer or
producer."

SECTION 7. Section 7-2F-12 NMSA 1978 (being Laws 2019,
Chapter 87, Section 6, as amended) is amended to read:

"7-2F-12. CREDIT CLAIMS--CERTIFICATION OF DIRECT
PRODUCTION AND POSTPRODUCTION EXPENDITURES--AGGREGATE AMOUNT OF
CLAIMS ALLOWED--EXCEPTION.--

A. The division shall certify a film production
company's budget for direct production expenditures and
postproduction expenditures during a preproduction meeting with
the division; provided that the division is prohibited from
certifying a film production company's budget if the total
expected claims in excess of the aggregate amount of claims
that may be authorized for payment pursuant to Subsection B of
this section would exceed one hundred million dollars
($100,000,000) in any fiscal year; and provided further that
the limitation in this subsection shall not apply to
certification of a budget for a New Mexico film partner
production.

B. [Except as provided in Laws 2019, Chapter 87,
Section 10] The aggregate amount of claims for a credit
provided by the Film Production Tax Credit Act that may be
authorized in any fiscal year with respect to the direct
production expenditures or postproduction expenditures made on
film or commercial audiovisual products shall be in the
following amounts; provided that direct production expenditures
and postproduction expenditures made [by] for a New Mexico film
partner production shall not be subject to the aggregate amount
of claims provided by this subsection:

(1) prior to fiscal year 2024, one hundred ten
million dollars ($110,000,000);

(2) from fiscal year 2024 through fiscal year
2028, the amount provided in Paragraph (1) of this subsection
shall be increased by ten million dollars ($10,000,000) in each
of those fiscal years; and

(3) for fiscal year 2029 and subsequent fiscal
years, one hundred sixty million dollars ($160,000,000).

C. If a film production company submits a claim to
the taxation and revenue department for a credit pursuant to
the Film Production Tax Credit Act and the aggregate amount of
claims pursuant to Subsection B of this section has been met
for the fiscal year, the claim shall be placed at the front of
a queue for payment in a subsequent fiscal year. Claims shall
be placed in order of the date on which the completed return in
which the credit is claimed is filed. Claims authorized for
payment shall be paid pursuant to the Tax Administration Act.

D. To provide guidance to film production companies
regarding the amount of credit capacity remaining in the fiscal
year, the taxation and revenue department shall post monthly on
that department's website the aggregate amount of credits
claimed and paid for the fiscal year. In addition, the
division shall post monthly on the division's website the
aggregate amount of claims certified pursuant to Subsection A
of this section for the fiscal year or any subsequent fiscal
year."

SECTION 8. Section 7-2F-13 NMSA 1978 (being Laws 2019,
Chapter 87, Section 7, as amended) is amended to read:

"7-2F-13. NEW FILM PRODUCTION TAX CREDIT.--

A. The tax credit created by this section may be
referred to as the "new film production tax credit".

B. A film production company that meets the
requirements of the Film Production Tax Credit Act may apply
for, and the taxation and revenue department may allow, a tax
credit in an amount equal to twenty-five percent of:

(1) direct production expenditures made in New
Mexico that:

(a) are directly attributable to the
production in New Mexico of a film or commercial audiovisual
product;

(b) are: 1) subject to taxation by the
state of New Mexico; or 2) payments for the lease or rental of
facilities and equipment located on, or purchases from
businesses located on, a federally recognized Indian nation,
tribe or pueblo located in New Mexico, and those payments and
purchases are subject to taxation by that Indian nation, tribe
or pueblo;

(c) exclude direct production
expenditures for which another taxpayer claims the new film
production tax credit; and

(d) do not exceed the usual and
customary cost of the goods or services acquired when purchased
by unrelated parties. The secretary of taxation and revenue
may determine the value of the goods or services for purposes
of this section when the buyer and seller are affiliated
persons or the sale or purchase is not an arm's length
transaction; and

(2) postproduction expenditures made in New
Mexico that:

(a) are directly attributable to the
production of a commercial film or audiovisual product;

(b) are for services performed in New
Mexico;

(c) are: 1) subject to taxation by the
state of New Mexico; or 2) for services performed by businesses
located on a federally recognized Indian nation, tribe or
pueblo located in New Mexico, and those services are subject to
taxation by that Indian nation, tribe or pueblo;

(d) exclude postproduction expenditures
for which another taxpayer claims the new film production tax
credit; and

(e) do not exceed the usual and
customary cost of the goods or services acquired when purchased
by unrelated parties. The secretary of taxation and revenue
may determine the value of the goods or services for purposes
of this section when the buyer and seller are affiliated
persons or the sale or purchase is not an arm's length
transaction.

C. With respect to expenditures attributable to a
production for which the film production company receives a tax
credit pursuant to the federal new markets tax credit program,
the percentage to be applied in calculating the amount of
credit allowed pursuant to the Film Production Tax Credit Act
is twenty percent.

D. A claim for new film production tax credits
shall be filed as part of a return filed pursuant to the Income
Tax Act or the Corporate Income and Franchise Tax Act [or an
information return filed by an entity assigned payment of an
authorized credit pursuant to Section 7-2F-5 NMSA 1978]. A
credit that has been assigned pursuant to Section 7-2F-5 NMSA
1978 shall not be authorized for payment unless the assignee
files a return pursuant to the Income Tax Act or the Corporate
Income and Franchise Tax Act. If the assignee is a pass-through entity with no New-Mexico-sourced income, the taxation
and revenue department may allow a credit to be claimed on a
pass-through entity return. The date a complete credit claim
is received by the taxation and revenue department shall
determine the order that a credit claim is authorized for
payment by the department. The film production company may
apply all or a portion of the new film production tax credit
granted against personal income tax liability or corporate
income tax liability. If the amount of the credit claimed
exceeds the film production company's tax liability for the
taxable year in which the credit is being claimed, the excess
shall be refunded.

E. A taxpayer may be allocated the right to claim a
new film production tax credit in proportion to the taxpayer's
ownership interest if the taxpayer owns an interest in a
business entity that is taxed for federal income tax purposes
as a partnership and that business entity has met all of the
requirements to be eligible for the credit. The total credit
claimed by all members of that entity shall not exceed the
allowable credit pursuant to this section.

[E.] F. A credit claim shall only be considered
received by the taxation and revenue department if the credit
claim is made on a complete return filed after the close of the
taxable year. [All direct production expenditures and
postproduction expenditures incurred during the taxable year by
a film production company shall be submitted as part of the
same income tax return and paid pursuant to this section] A
credit shall be claimed on the return for the taxable year in
which the direct production expenditures or postproduction
expenditures were incurred. If a certificate of eligibility
includes expenditures that cross multiple taxable years, the
taxpayer may elect to claim the entire credit on the return for
either taxable year. A credit claim shall not be divided and
submitted with multiple returns or in multiple years.

[F.] G. For purposes of determining the payment of
credit claims pursuant to this section, the secretary of
taxation and revenue may require that credit claims of
affiliated persons be combined into one claim if necessary to
accurately reflect closely integrated activities of affiliated
persons.

[G.] H. The new film production tax credit shall
not be claimed with respect to direct production expenditures
or postproduction expenditures for which the film production
company has delivered a nontaxable transaction certificate
[pursuant to Section 7-9-86 NMSA 1978] or alternative evidence
pursuant to Section 7-9-43 NMSA 1978.

[H.] I. A production for which the new film
production tax credit is claimed pursuant to Paragraph (1) of
Subsection B of this section shall contain an acknowledgment to
the state of New Mexico. Unless otherwise agreed upon in
writing by the film production company and the division, the
acknowledgment shall be in the end screen credits that the
production was filmed in New Mexico and a three-second static
or animated state logo provided by the division shall be
included and embedded in the following:

(1) end screen credits before the below-the-line crew crawl for the life of the project of long-form
narrative film productions; and

(2) body of the program for the life of
television episodes, the placement of which shall be:

(a) in the opening sequence;

(b) as a bumper into or out of a
commercial break; or

(c) in a prominent position in each
single project's end credits with no less than a half screen
exposure, but not covering content.

[I.] J. To be eligible for the new film production
tax credit, a film production company shall submit to the
division information required by the division to demonstrate
conformity with the requirements of the Film Production Tax
Credit Act, including production data deemed necessary by the
division and the economic development department to determine
the effectiveness of the credit, and a projection of the new
film production tax credit claim the film production company
plans to submit. In addition, the film production company
shall agree in writing:

(1) to pay all obligations the film production
company has incurred in New Mexico;

(2) to post a notice at completion of
principal photography on the website of the division that:

(a) contains production company
information, including the name of the production and contact
information that includes a working phone number and email
address for both the local production office and the permanent
production office to notify the public of the need to file
creditor claims against the film production company; and

(b) remains posted on the website until
all financial obligations incurred in the state by the film
production company have been paid;

(3) that outstanding obligations are not
waived should a creditor fail to file;

(4) to delay filing of a claim for the new
film production tax credit until the division delivers written
notification to the taxation and revenue department that the
film production company has fulfilled all requirements for the
credit; and

(5) to submit a completed application for the
new film production tax credit and supporting documentation to
the division within one year of [making] incurring the final
qualified expenditures in New Mexico [that were incurred] for
the registered project and that are included in the credit
claim.

[J.] K. The division, in consultation with the
taxation and revenue department, shall determine the
eligibility of the film production company and shall report
this information to the taxation and revenue department in a
manner and at times the economic development department and the
taxation and revenue department shall agree upon. The division
shall also post on its website all information provided by the
film production company that does not reveal revenue, income or
other information that may jeopardize the confidentiality of
income tax returns.

[K.] L. To receive a new film production tax
credit, a film production company shall apply to the taxation
and revenue department on forms and in the manner the taxation
and revenue department may prescribe. The application shall
include a certification of the amount of direct production
expenditures or postproduction expenditures made in New Mexico
with respect to the film production for which the film
production company is seeking the credit; provided that [for]
to receive the credit, the application shall be submitted to
the division within one year of the date of the last direct
production expenditure in New Mexico or that the last
postproduction expenditure in New Mexico was incurred. If the
amount of the requested tax credit exceeds five million dollars
($5,000,000), the application shall also include the results of
an audit, conducted by a certified public accountant licensed
or otherwise eligible to practice in New Mexico, verifying that
the expenditures have been made in compliance with the
requirements of this section. If the requirements of this
section have been complied with, the taxation and revenue
department shall approve the credit and issue a [document
granting the credit] dated certificate of eligibility to the
taxpayer providing the amount of the credit that the taxpayer
may claim.

[L.] M. Except as provided in Subsection [M] N of
this section, that amount of a new film production tax credit
for total payments as applied to direct production expenditures
for the services of performing artists shall not exceed five
million dollars ($5,000,000) for services rendered by
nonresident performing artists in a production. This
limitation shall not apply to the services of background
artists or resident performing artists cast in industry
standard feature performing roles.

[M.] N. In addition to the amount of payments
allowed pursuant to Subsection [L] M of this section, that
amount of a new film production tax credit for total payments
as applied to direct production expenditures made [by] for a
New Mexico film partner production for the services of
nonresident performing artists, directors, producers,
screenwriters and editors shall not exceed ten million dollars
($10,000,000) for services rendered for each production;
provided that the total payments allowed pursuant to this
subsection shall not exceed an annual aggregate maximum of
forty million dollars ($40,000,000) for all productions in a
fiscal year. If the aggregate amount of payments made in a
fiscal year is less than the annual aggregate maximum, then the
difference in that fiscal year shall be added to the annual
aggregate maximum allowed in the following fiscal year."

SECTION 9. Section 7-2F-15 NMSA 1978 (being Laws 2019,
Chapter 87, Section 9, as amended) is amended to read:

"7-2F-15. NONRESIDENT BELOW-THE-LINE CREW CREDIT.--A film
production company may apply for, and the taxation and revenue
department may allow, a tax credit, which may be referred to as
the "nonresident below-the-line crew credit", in an amount
equal to fifteen percent of the payment of wages for below-the-line crew who are not New Mexico residents, that are directly
attributable to the production in New Mexico of a film or
commercial audiovisual product for which the film production
company is claiming a new film production tax credit; provided
that:

A. the service for which payment is made is
rendered in New Mexico;

B. the payment of wages excludes payments:

(1) for below-the-line crew who are producers,
directors, screenwriters, cast and production assistants; and

(2) made to a personal services business;

C. prior to July 1, 2028, for [a film production
company that is] a New Mexico film partner production, the
total amount of wages applied toward the additional credit
allowed pursuant to this section may be up to one hundred
percent of the amount of wages of resident below-the-line wages
claimed; provided that the film production company provides a
seventy-two-hour notice of the opportunity to be hired to
resident below-the-line crew, which may be through a collective
bargaining unit that represents resident below-the-line crew;
and

D. for a film [production company] or commercial
audiovisual product that is not a New Mexico film partner
production and, beginning July 1, 2028, for [a film production
company that is] a New Mexico film partner production:

(1) the total eligible wages for below-the-line crew who are not New Mexico residents are not more than
fifteen percent of the production's total New Mexico budget for
below-the-line crew wages; and

(2) the film production company may claim the
nonresident below-the-line crew credit for employing up to the
following numbers of nonresident below-the-line crew in New
Mexico and shall be as calculated by the division upon
application for certification pursuant to Subsection A of
Section 7-2F-12 NMSA 1978; provided that the total number shall
not exceed twenty positions:

(a) five positions if the production's
final New Mexico budget is up to two million seven hundred
fifty thousand dollars ($2,750,000);

(b) ten positions if the production's
final New Mexico budget is greater than two million seven
hundred fifty thousand dollars ($2,750,000) and up to seven
million five hundred thousand dollars ($7,500,000);

(c) fifteen positions if the
production's final New Mexico budget is greater than seven
million five hundred thousand dollars ($7,500,000) and up to
eleven million dollars ($11,000,000);

(d) one position in addition to the
number of positions provided in Subparagraph (c) of this
paragraph for every ten million dollars ($10,000,000) over
eleven million dollars ($11,000,000) of the production's final
New Mexico budget; and

(e) five positions in addition to the
number of positions provided in Subparagraphs (a) through (d)
of this paragraph for a television pilot episode that has been
ordered to series; provided that the film production company
certifies to the division that the series is intended to be
produced in New Mexico."

SECTION 10. Section 7-9-40 NMSA 1978 (being Laws 1970,
Chapter 60, Section 2, as amended) is amended to read:

"7-9-40. EXEMPTION--GROSS RECEIPTS TAX--PURSES AND JOCKEY
REMUNERATION AT NEW MEXICO RACETRACKS--RECEIPTS FROM GROSS
AMOUNTS WAGERED.--

A. Exempted from the gross receipts tax are the
receipts of horsemen, jockeys and trainers from race purses at
New Mexico horse racetracks subject to the jurisdiction of the
state racing commission.

B. Exempted from the gross receipts tax are the
receipts of a racetrack from the commissions and other amounts
authorized by Section [60-1-10] 60-1A-19 NMSA 1978 to be
retained by a racetrack conducting horse races under the
authority of a license from the state racing commission."

SECTION 11. Section 7-9F-3 NMSA 1978 (being Laws 2000
(2nd S.S.), Chapter 22, Section 3, as amended by Laws 2019,
Chapter 270, Section 38 and by Laws 2019, Chapter 274, Section
12) is amended to read:

"7-9F-3. DEFINITIONS.--As used in the Technology Jobs and
Research and Development Tax Credit Act:

A. "affiliate" means a person who directly or
indirectly owns or controls, is owned or controlled by or is
under common ownership or control with another person through
ownership of voting securities or other ownership interests
representing a majority of the total voting power of the
entity;

B. "annual payroll expense" means the wages paid or
payable to employees in the state by the taxpayer in the
taxable year for which the taxpayer applies for an additional
credit pursuant to the Technology Jobs and Research and
Development Tax Credit Act;

C. "base payroll expense" means the wages paid or
payable by the taxpayer in the taxable year prior to the
taxable year for which the taxpayer applies for an additional
credit pursuant to the Technology Jobs and Research and
Development Tax Credit Act, adjusted for any increase from the
preceding taxable year in the consumer price index for the
United States for all items as published by the United States
department of labor in the taxable year for which the
additional credit is claimed. In a taxable year during which a
taxpayer has been part of a business merger or acquisition or
other change in business organization, the taxpayer's base
payroll expense shall include the payroll expense of all
entities included in the reorganization for all positions that
are included in the business entity resulting from the
reorganization;

D. "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;

E. "facility" means a factory, mill, plant,
refinery, warehouse, dairy, feedlot, building or complex of
buildings located within the state, including the land on which
it is located and all machinery, equipment and other real and
tangible personal property located at or within it and used in
connection with its operation;

F. "local option gross receipts tax" means a tax
authorized to be imposed by a county or municipality upon a
taxpayer's gross receipts, as that term is defined in the Gross
Receipts and Compensating Tax Act, and required to be collected
by the department at the same time and in the same manner as
the gross receipts tax;

G. "qualified expenditure" means an expenditure or
an allocated portion of an expenditure by a taxpayer in direct
connection with qualified research, essential for conducting
qualified research at a qualified facility, including
expenditures for depletable land and rent paid or incurred for
land, improvements, the allowable amount paid or incurred to
operate or maintain a facility, buildings, equipment, computer
software, computer software upgrades, consultants and
contractors performing work in New Mexico, [payroll] wages paid
for employees conducting qualified research in New Mexico at a
qualified facility, technical books and manuals and test
materials, but not including any expenditure on property that
is owned by a municipality or county in connection with an
industrial revenue bond project, property for which the
taxpayer has received any credit pursuant to the Investment
Credit Act, property that was owned by the taxpayer or an
affiliate before July 3, 2000 or research and development
expenditures reimbursed by a person who is not an affiliate of
the taxpayer. If a "qualified expenditure" is an allocation of
an expenditure, the cost accounting methodology used for the
allocation of the expenditure shall be the same cost accounting
methodology used by the taxpayer in its other business
activities;

H. "qualified facility" means a facility in New
Mexico at which qualified research is conducted other than a
facility operated by a taxpayer for the United States or any
agency, department or instrumentality thereof;

I. "qualified research" means "qualified research"
[(1) that is undertaken for the purpose of discovering
information:

(a) that is technological in nature; and

(b) the application of which is intended
to be useful in the development of a new or improved business
component of the taxpayer; and

(2) substantially all of the activities of
which constitute elements of a process of experimentation
related to a new or improved function, performance, reliability
or quality, but not related to style, taste or cosmetic or
seasonal design factors] as defined by Section 41(d) of the
United States Internal Revenue Code of 1986;

J. "qualified research and development small
business" means a taxpayer that:

(1) employed no more than fifty employees as
determined by the number of employees for which the taxpayer
was liable for unemployment insurance coverage in the taxable
year for which an additional credit is claimed;

(2) had total qualified expenditures of no
more than five million dollars ($5,000,000) in the taxable year
for which an additional credit is claimed; and

(3) did not have more than fifty percent of
its voting securities or other equity interest with the right
to designate or elect the board of directors or other governing
body of the business owned directly or indirectly by another
business;

K. "rural area" means any area of the state other
than the state fairgrounds, an incorporated municipality with a
population of thirty thousand or more according to the most
recent federal decennial census and any area within three miles
of the external boundaries of an incorporated municipality with
a population of thirty thousand or more according to the most
recent federal decennial census;

L. "taxpayer" means any of the following persons,
other than a federal, state or other governmental unit or
subdivision or an agency, department, institution or
instrumentality thereof:

(1) a person liable for payment of any tax;

(2) a person responsible for withholding and
payment or collection and payment of any tax;

(3) a person to whom an assessment has been
made if the assessment remains unabated or the assessed amount
has not been paid; or

(4) for purposes of the additional credit
against the taxpayer's income tax pursuant to the Technology
Jobs and Research and Development Tax Credit Act and to the
extent of their respective interest in that entity, the
shareholders, members, partners or other owners of:

(a) a small business corporation that
has elected to be treated as an S corporation for federal
income tax purposes; or

(b) an entity treated as a partnership
or disregarded entity for federal income tax purposes; and

M. "wages" means remuneration for services
performed by an employee in New Mexico for an employer, not to
exceed a maximum annual wage of five hundred thousand dollars
($500,000) per employee."

SECTION 12. Section 7-12A-2 NMSA 1978 (being Laws 1986,
Chapter 112, Section 3, as amended) is amended to read:

"7-12A-2. DEFINITIONS.--As used in the Tobacco Products
Tax Act:

A. "department" means the taxation and revenue
department, the secretary or any employee of the department
exercising authority lawfully delegated to that employee by the
secretary;

B. "cigar" means a roll for smoking made wholly or
in part of tobacco and weighing greater than four and one-half
pounds per thousand;

C. "distribute" means to sell or to give;

D. "closed system cartridge" means a single-use,
pre-filled disposable cartridge containing [five milliliters or
less of] e-liquid for use in an e-cigarette;

E. "e-cigarette" means any electronic oral device,
whether composed of a heating element and battery or an
electronic circuit, that provides a vapor of nicotine or any
other substance the use or inhalation of which simulates
smoking and includes any such device, or any part thereof,
whether manufactured, distributed, marketed or sold as an
e-cigarette, e-cigar, e-pipe or any other product, name or
descriptor. "E-cigarette" does not include any product
regulated as a drug or device by the United States food and
drug administration under the Federal Food, Drug, and Cosmetic
Act;

F. "e-liquid" means liquid or other substance
intended for use in an e-cigarette, not including any substance
containing cannabis or oil derived from cannabis;

G. "engaging in business" means carrying on or
causing to be carried on any activity with the purpose of
direct or indirect benefit;

H. "first purchaser" means a person engaging in
business in New Mexico that manufactures tobacco products or
that purchases or receives on consignment tobacco products from
any person outside of New Mexico, which tobacco products are to
be distributed in New Mexico in the ordinary course of
business;

I. "little cigar" means a roll for smoking made
wholly or in part of tobacco, using an integrated cellulose
acetate or other similar filter, and weighing not more than
four and one-half pounds per thousand;

J. "person" means any individual, estate, trust,
receiver, cooperative association, club, corporation, company,
firm, partnership, joint venture, syndicate, limited liability
company, limited liability partnership, other association or
gas, water or electric utility owned or operated by a county or
municipality or other entity of the state; "person" also means,
to the extent permitted by law, a federal, state or other
governmental unit or subdivision or an agency, department or
instrumentality;

K. "product value" means the amount paid, net of
any discounts taken and allowed, for tobacco products or, in
the case of tobacco products received on consignment, the value
of the tobacco products received or, in the case of tobacco
products manufactured and sold in New Mexico, the proceeds from
the sale by the manufacturer of the tobacco products; and

L. "tobacco product" means:

(1) any product, other than cigarettes, cigars
and little cigars, made from or containing tobacco;

(2) e-liquid;

(3) e-cigarettes; and

(4) closed system cartridges."

SECTION 13. Section 7-12A-3 NMSA 1978 (being Laws 1986,
Chapter 112, Section 4, as amended) is amended to read:

"7-12A-3. IMPOSITION AND RATES OF TAX--REDUCTION OF RATE
FOR CERTAIN TOBACCO PRODUCTS--DENOMINATION AS "TOBACCO PRODUCTS
TAX"--DATE PAYMENT OF TAX DUE.--

A. For the manufacture or acquisition of tobacco
products in New Mexico, not including cigars, little cigars,
e-liquid, e-cigarettes or closed system cartridges, to be
distributed in the ordinary course of business and for the
consumption of tobacco products in New Mexico, there is imposed
an excise tax at the rate of twenty-five percent of the product
value of the tobacco products.

B. For the manufacture or acquisition of cigars in
New Mexico to be distributed in the ordinary course of business
and for the consumption of cigars in New Mexico, there is
imposed an excise tax at a rate equal to twenty-five percent of
the product value of the cigar, not to exceed fifty cents
($.50) per cigar.

C. For the manufacture or acquisition of little
cigars in New Mexico to be distributed in the ordinary course
of business and for the consumption of little cigars in New
Mexico, there is imposed an excise tax at a rate equal to the
rate imposed on cigarettes pursuant to Section 7-12-3 NMSA 1978
per package of little cigars.

D. For the manufacture or acquisition of e-liquid
or closed system cartridges containing more than five
milliliters of e-liquid in New Mexico to be distributed in the
ordinary course of business and for the consumption of e-liquid
in New Mexico, there is imposed an excise tax at a rate equal
to twelve and one-half percent of the product value of the
e-liquid.

E. For the manufacture or acquisition of closed
system cartridges containing five milliliters or less of e-liquid in New Mexico to be distributed in the ordinary course
of business, there is imposed an excise tax at a rate of fifty
cents ($.50) per closed system cartridge.

[H.] F. The taxes imposed by this section may be
referred to as the "tobacco products tax".

[I.] G. The tobacco products tax shall be paid by
the first purchaser on or before the twenty-fifth day of the
month following the month in which the taxable event occurs."

SECTION 14. Section 7-38-38 NMSA 1978 (being Laws 1973,
Chapter 258, Section 78, as amended) is amended to read:

"7-38-38. PAYMENT OF PROPERTY TAXES--INSTALLMENT DUE
DATES--REFUND IN CASES OF OVERPAYMENTS--ROUNDING.--

A. Unless otherwise provided in the Property Tax
Code, property taxes in the amount of ten dollars ($10.00) or
over are payable to the county treasurer in two equal
installments due on November 10 of the year in which the tax
bill was prepared and mailed and on April 10 of the following
year. A board of county commissioners may, by ordinance,
provide that property taxes under ten dollars ($10.00) are due
and payable in a single payment on November 10 of the year in
which the tax bill was prepared and mailed. No demand for
payment of property taxes is necessary.

B. If a taxpayer remits an amount in payment of
[his] the taxpayer's property taxes that exceeds the total
property tax liability shown on the property tax bill, together
with any applicable penalty and interest computed to the date
payment is received by the county treasurer, a refund of the
amount in excess shall be made to the taxpayer if either of the
following conditions are met:

(1) a written request for the refund is made
by the taxpayer and received by the county treasurer within
sixty days of the date the excess payment is received by the
county treasurer; or

(2) the county treasurer on [his] the county
treasurer's own initiative determines by June 30 of the year
following the year for which taxes are imposed that an excess
payment has been made.

C. The secretary may by rule permit or require
rounding to the nearest five cents ($.05) of any amount due
pursuant to the Property Tax Code."

SECTION 15. Section 7-38-71 NMSA 1978 (being Laws 1973,
Chapter 258, Section 111, as amended) is amended to read:

"7-38-71. DISTRIBUTION OF AMOUNTS RECEIVED FROM SALE OF
PROPERTY.--

A. Money received by the department from the sale
of real or personal property for delinquent property taxes
shall be deposited in a suspense fund and distributed as
follows in the order provided:

(1) first, that portion equal to the costs
shall be retained by the department for use, subject to
appropriation by the legislature, in administration of the
Property Tax Code;

(2) second, that portion equal to the
penalties and interest due shall be retained by the department
for use, subject to appropriation by the legislature, by the
department in administration of the Property Tax Code;

(3) third, that portion equal to the
delinquent taxes due shall be remitted by the department to the
appropriate county treasurer for distribution by the treasurer
to the governmental units in accordance with the law and the
regulations of the department of finance and administration;
[and]

(4) fourth, if the former owner of the
property sold is a delinquent taxpayer pursuant to Section
7-1-16 NMSA 1978, that portion equal to any delinquent amount
for any tax program administered by the department pursuant to
Section 7-1-2 NMSA 1978 shall be retained by the department to
satisfy the delinquent amount; and

[(4)] (5) fifth, the balance shall be paid to
the former owner of the property sold or to any other person
designated by order directed to the department by a court of
competent jurisdiction, provided that the department may first
apply all or any portion of the balance to be paid against the
amount of any property tax, including any penalty and interest
related thereto, owed by the person to whom the balance would
otherwise be paid.

B. As a condition precedent to payment of the
balance of the sale amount received to the former owner of the
property, the department may require any person claiming to be
entitled to that payment to present sufficient evidence of
proof of former ownership of the property to the department.
The department shall adopt regulations providing for the
procedures to be followed by persons claiming sale proceeds as
former owners in those instances where conflicting claims exist
or the department requires proof of ownership.

C. If no person claims the balance of sale proceeds
[whether the property was sold under the provisions of the
Property Tax Code or prior law] as the former owner of the
property within two years of the date of the sale and after a
reasonable search to determine the former owner is made by the
department and no former owner is found, the balance of the
sale proceeds shall be considered abandoned property and
deposited in accordance with the provisions of the Uniform
Unclaimed Property Act (1995).

D. If the balance of proceeds from the sale after
paying a higher priority claim under Subsection A of this
section is insufficient to pay all of the next priority claim,
then the complete balance shall be applied to that next
priority claim as partial payment."

SECTION 16. Section 9-11-12.1 NMSA 1978 (being Laws 1997,
Chapter 64, Section 1, as amended) is amended to read:

"9-11-12.1. TRIBAL COOPERATIVE AGREEMENTS.--

A. The secretary may enter into cooperative
agreements with the Pueblos of Acoma, Cochiti, Jemez, Isleta,
Laguna, Nambe, Ohkay Owingeh, Picuris, Pojoaque, Sandia, San
Felipe, San Ildefonso, [San Juan] Santa Ana, Santa Clara, Santo
Domingo, Taos, Tesuque, Zia and Zuni; the Jicarilla Apache
Nation; the Navajo Nation; the Mescalero Apache Tribe; and the
nineteen pueblos acting collectively for the exchange of
information and the reciprocal, joint or common enforcement,
administration, collection, remittance and audit of gross
receipts tax and cannabis excise tax revenues of the party
jurisdictions.

B. Money collected by the department on behalf of a
tribe in accordance with an agreement entered into pursuant to
this section is not money of this state and shall be collected
and disbursed in accordance with the terms of the agreement,
notwithstanding any other provision of law.

C. The secretary is empowered to promulgate such
rules and to establish such procedures as the secretary deems
appropriate for the collection and disbursement of funds due a
tribe and for the receipt of money collected by a tribe for the
account of this state under the terms of a cooperative
agreement entered into under the authority of this section,
including procedures for identification of taxpayers or
transactions that are subject only to the taxing authority of
the tribe, [taxpayers or transactions that are subject only to
the taxing authority] of this state and [taxpayers or
transactions that are subject to the taxing authority] of both
party jurisdictions.

D. Nothing in an agreement entered into pursuant to
this section shall be construed as authorizing this state or a
tribe to tax a person or transaction that federal law prohibits
that government from taxing, authorizing a state or tribal
court to assert jurisdiction over a person who is not otherwise
subject to that court's jurisdiction or affecting any issue of
the respective civil or criminal jurisdictions of this state or
the tribe. Nothing in an agreement entered into pursuant to
this section shall be construed as an assertion or an admission
by either this state or a tribe that the taxes of one have
precedence over the taxes of the other when a person or
transaction is subject to the taxing authority of both
governments. An agreement entered into pursuant to this
section shall be construed solely as an agreement between the
two party governments and shall not alter or affect the
government-to-government relations between this state and any
other tribe.

E. Except as provided in Subsection F of this
section, any ordinance of a tribe imposing, amending or
repealing a tax administered by the department pursuant to this
section shall include an effective date of the first July 1
after the expiration of at least three months from the date
that the adopted ordinance is mailed or delivered to the
secretary.

F. If the governor of New Mexico declares a state
of emergency, or if there is an unforeseen occurrence that
would cause an undue hardship for a tribe, an ordinance
changing the imposition of a tax shall become effective on the
first January 1 after the expiration of at least three months
after such a declaration or event and notification to the
department.

[E.] G. As used in this section:

(1) "tribal" means of or pertaining to a
tribe; and

(2) "tribe" means an Indian nation, tribe or
pueblo located entirely in New Mexico or the Navajo Nation."

SECTION 17. A new section of the Motor Vehicle Code,
Section 66-2-19 NMSA 1978, is enacted to read:

"66-2-19. [NEW MATERIAL] ROUNDING.--The secretary may by
rule permit or require rounding to the nearest five cents
($.05) of any amount due pursuant to the Motor Vehicle Code."

SECTION 18. APPLICABILITY.--The provisions of Sections 6
through 9 of this act apply to taxable years beginning on or
after January 1, 2027.

SECTION 19. EFFECTIVE DATE.--

A. The effective date of the provisions of Sections
1 through 5 and 10 through 17 of this act is July 1, 2026.

B. The effective date of the provisions of Sections
6 through 9 of this act is January 1, 2027.

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