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HOUSE BILL 504
57
TH LEGISLATURE
-
STATE
OF
NEW
MEXICO
-
FIRST SESSION
,
2025
INTRODUCED BY
Cristina Parajón and Joseph Franklin Hernandez
and Micaela Lara Cadena and Angel M. Charley
AN ACT
RELATING TO TAXATION; EXCLUDING RECEIPTS OF A PRIME CONTRACTOR
THAT ARE DERIVED FROM OPERATING A FACILITY IN NEW MEXICO
DESIGNATED AS A NATIONAL LABORATORY BY AN ACT OF CONGRESS OR
FROM OPERATING A RESEARCH FACILITY IN NEW MEXICO THAT IS OWNED
BY THE STATE FROM CERTAIN GROSS RECEIPTS TAX DEDUCTIONS FOR
MANUFACTURERS.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF NEW MEXICO:
SECTION 1. Section 7-9-46 NMSA 1978 (being Laws 1969,
Chapter 144, Section 36, as amended) is amended to read:
"7-9-46. DEDUCTION--GROSS RECEIPTS--GOVERNMENTAL GROSS
RECEIPTS--SALES TO MANUFACTURERS AND MANUFACTURING SERVICE
PROVIDERS.--
A. Receipts from selling tangible personal property
may be deducted from gross receipts or from governmental gross
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receipts if the sale is made to a person engaged in the
business of manufacturing who delivers a nontaxable transaction
certificate to the seller or provides alternative evidence
pursuant to Section 7-9-43 NMSA 1978. The buyer must
incorporate the tangible personal property as an ingredient or
component part of the product that the buyer is in the business
of manufacturing.
B. Receipts from selling a manufacturing consumable
to a manufacturer or a manufacturing service provider may be
deducted from gross receipts or from governmental gross
receipts if the buyer delivers a nontaxable transaction
certificate to the seller or provides alternative evidence
pursuant to Section 7-9-43 NMSA 1978; provided that if the
seller is a utility company, an agreement with the department
pursuant to Section 7-1-21.1 NMSA 1978 and a nontaxable
transaction certificate shall be required.
C. Receipts from selling or leasing qualified
equipment may be deducted from gross receipts if the sale is
made to, or the lease is entered into with, a person engaged in
the business of manufacturing or a manufacturing service
provider who delivers a nontaxable transaction certificate to
the seller or provides alternative evidence pursuant to Section
7-9-43 NMSA 1978; provided that a manufacturer or manufacturing
service provider delivering a nontaxable transaction
certificate or alternative evidence with respect to the
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qualified equipment shall not claim an investment credit
pursuant to the Investment Credit Act for that same equipment.
D. The purpose of the deductions provided in this
section is to encourage manufacturing businesses to locate in
New Mexico and to reduce the tax burden, including reducing
pyramiding, on the tangible personal property that is consumed
in the manufacturing process and that is purchased by
manufacturing businesses in New Mexico.
E. This section does not apply to receipts of a
prime contractor that are derived from operating a:
(1) facility in New Mexico designated as a
national laboratory by an act of congress; or
(2) research facility in New Mexico that is
owned by the state.
[E.] F. The department shall annually report to the
revenue stabilization and tax policy committee the aggregate
amount of deductions taken pursuant to this section, the number
of taxpayers claiming each of the deductions and any other
information that is necessary to determine that the deductions
are performing the purposes for which they are enacted.
[F.] G. A taxpayer deducting gross receipts
pursuant to this section shall report the amount deducted
separately for each deduction provided in this section and
attribute the amount of the deduction to the appropriate
authorization provided in this section in a manner required by
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the department that facilitates the evaluation by the
legislature of the benefit to the state of these deductions.
[G.] H. As used in this section:
(1) "manufacturing consumable" means tangible
personal property, other than qualified equipment or an
ingredient or component part of a manufactured product, that is
incorporated into, destroyed, depleted or transformed in the
process of manufacturing a product, including electricity,
fuels, water, manufacturing aids and supplies, chemicals, gases
and other tangibles used to manufacture a product;
(2) "manufacturing operation" means a plant
operated by a manufacturer or manufacturing service provider
that employs personnel to perform production tasks to produce
goods, in conjunction with machinery and equipment; and
(3) "qualified equipment" means machinery,
equipment and tools, including component, repair, replacement
and spare parts thereof, that are used directly in the
manufacturing process of a manufacturing operation. "Qualified
equipment" includes computer hardware and software used
directly in the manufacturing process of a manufacturing
operation but excludes any motor vehicle that is required to be
registered in this state pursuant to the Motor Vehicle Code."
SECTION 2. Section 7-9-46.1 NMSA 1978 (being Laws 2022,
Chapter 47, Section 14) is amended to read:
"7-9-46.1. DEDUCTION--GROSS RECEIPTS--GOVERNMENTAL GROSS
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RECEIPTS--SALES OF SERVICES TO MANUFACTURERS.--
A. Receipts from selling professional services may
be deducted from gross receipts or from governmental gross
receipts if the sale is made to a person engaged in the
business of manufacturing who delivers a nontaxable transaction
certificate to the seller or provides alternative evidence
pursuant to Section 7-9-43 NMSA 1978. The professional
services shall be related to the product that the buyer is in
the business of manufacturing.
B. The purpose of the deductions provided in this
section is to encourage manufacturing businesses to locate in
New Mexico and to reduce the tax burden, including reducing
pyramiding, on the professional services that are purchased by
manufacturing businesses in New Mexico.
C. This section does not apply to receipts of a
prime contractor that are derived from operating a:
(1) facility in New Mexico designated as a
national laboratory by an act of congress; or
(2) research facility in New Mexico that is
owned by the state.
[C.] D. A taxpayer allowed a deduction pursuant to
this section shall report the amount of the deduction
separately in a manner required by the department.
[D.] E. The department shall compile an annual
report on the deduction provided by this section that shall
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include the number of taxpayers that claimed the deduction, the
aggregate amount of deductions claimed and any other
information necessary to evaluate the effectiveness of the
deduction. The department shall compile and present the report
to the revenue stabilization and tax policy committee and the
legislative finance committee with an analysis of the cost of
the deduction and whether the deduction is performing the
purpose for which it was created.
[E.] F. As used in this section:
(1) "accounting services" means the systematic
and comprehensive recording of financial transactions
pertaining to a business entity and the process of summarizing,
analyzing and reporting these transactions to oversight
agencies or tax collection entities, including certified public
auditing, attest services and preparing financial statements,
bookkeeping, tax return preparation, advice and consulting and,
where applicable, representing taxpayers before tax collection
agencies. "Accounting services" does not include, except as
provided with respect to financial management services,
investment advice, wealth management advice or consulting or
any tax return preparation, advice, counseling or
representation for individuals, regardless of whether those
individuals are owners of pass-through entities, such as
partnerships, limited liability companies or S corporations;
(2) "architectural services" means services
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related to the art and science of designing and building
structures for human habitation or use and includes planning,
providing preliminary studies, designs, specifications and
working drawings and providing for general administration of
construction contracts;
(3) "engineering services" means consultation,
the production of a creative work, investigation, evaluation,
planning and design, the performance of studies and reviewing
planning documents when performed by, or under the supervision
of, a licensed engineer, including the design, development and
testing of mechanical, electrical, hydraulic, chemical,
pneumatic or thermal machinery or equipment, industrial or
commercial work systems or processes and military equipment.
"Engineering services" does not include medical or medical
laboratory services, any engineering performed in connection
with a construction service or the design and installation of
computer or computer network infrastructure;
(4) "information technology services" means
separately stated services for installing and maintaining a
business's computers and computer network, including performing
computer network design; installing, repairing, maintaining or
restoring computer networks, hardware or software; and
performing custom software programming or making custom
modifications to existing software programming. "Information
technology services" does not include:
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(a) software maintenance and update
agreements, unless made in conjunction with custom programming;
(b) computers, servers, chilling
equipment and pre-programmed software;
(c) data processing services or the
processing or storage of information to compile and produce
records of transactions for retrieval or use, including data
entry, data retrieval, data searches and information
compilation; or
(d) access to telecommunications or
internet;
(5) "legal services" means services performed
by a licensed attorney or under the supervision of a licensed
attorney for a client, regardless of the attorney's form of
business entity or whether the services are prepaid, including
legal representation before courts or administrative agencies;
drafting legal documents, such as contracts or patent
applications; legal research; advising and counseling;
arbitration; mediation; and notary public and other ancillary
legal services performed for a client in conjunction with and
under the supervision of a licensed attorney. "Legal services"
does not include lobbying or government relations services,
title insurance agent services, licensing or selling legal
software or legal document templates, insurance investigation
services or any legal representation involving financial crimes
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or tax evasion in New Mexico; and
(6) "professional services" means accounting
services, architectural services, engineering services,
information technology services and legal services."
SECTION 3. EFFECTIVE DATE.--The effective date of the
provisions of this act is July 1, 2025.
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