For the purpose of the Corporate Income and Franchise Tax Act and unless the context requires otherwise:
A. "bank" means any national bank, national banking association, state bank or bank holding company;
B. "apportioned net income" or "apportioned net loss" means net income allocated and apportioned to New Mexico pursuant to the provisions of the Corporate Income and Franchise Tax Act or the Uniform Division of Income for Tax Purposes Act [Chapter 7, Article 4 NMSA 1978], but excluding from the sales factor any sales that represent intercompany transactions between members of the filing group;
C. "base income" means the federal taxable income or the federal net operating loss of a corporation for the taxable year calculated pursuant to the Internal Revenue Code, after special deductions provided in Sections 241 through 249 of the Internal Revenue Code but without any deduction for net operating losses, as if the corporation filed a federal tax return as a separate domestic entity, modified as follows:
(1) adding to that income:
(a) interest received on a state or local bond exempt under the Internal Revenue Code;
(b) the amount of any deduction claimed in calculating taxable income for all expenses and costs directly or indirectly paid, accrued or incurred to a captive real estate investment trust; and
(c) the amount of any deduction, other than for premiums, for amounts paid directly or indirectly to a commonly controlled entity that is exempt from corporate income tax pursuant to Section 7-2A-4 NMSA 1978;
(2) subtracting from that income:
(a) income from obligations of the United States net of expenses incurred to earn that income;
(b) other amounts that the state is prohibited from taxing because of the laws or constitution of this state or the United States net of any related expenses;
(c) an amount equal to one hundred percent of the subpart F income, as that term is defined in Section 952 of the Internal Revenue Code, as that section may be amended or renumbered, included in the income of the corporation; and
(d) an amount equal to one hundred percent of the income of the corporation under Section 951A of the Internal Revenue Code, after allowing the deduction provided in Section 250 of the Internal Revenue Code; and
(3) making other adjustments deemed necessary to properly reflect income of the unitary group, including attribution of income or expense related to unitary assets held by related corporations that are not part of the filing group;
D. "captive real estate investment trust" means a corporation, trust or association taxed as a real estate investment trust pursuant to Section 857 of the Internal Revenue Code, the shares or beneficial interests of which are not regularly traded on an established securities market; provided that more than fifty percent of any class of beneficial interests or shares of the real estate investment trust are owned directly, indirectly or constructively by the taxpayer during all or a part of the taxpayer's taxable year;
E. "common ownership" means the direct or indirect control or ownership of more than fifty percent of the outstanding voting stock, ownership of which is determined pursuant to Section 1563 of the Internal Revenue Code, as that section may be amended or renumbered, of:
(1) a parent-subsidiary controlled group as defined in Section 1563 of the Internal Revenue Code, except that fifty percent shall be substituted for eighty percent;
(2) a brother-sister controlled group as defined in Section 1563 of the Internal Revenue Code; or
(3) three or more corporations each of which is a member of a group of corporations described in Paragraph (1) or (2) of this subsection, and one of which is:
(a) a common parent corporation included in a group of corporations described in Paragraph (1) of this subsection; and
(b) included in a group of corporations described in Paragraph (2) of this subsection;
F. "consolidated group" means the group of entities properly filing a federal consolidated return under the Internal Revenue Code for the taxable year;
G. "corporation" means corporations, joint stock companies, real estate trusts organized and operated under the Real Estate Trust Act [47-2-1 to 47-2-6 NMSA 1978], financial corporations and banks, other business associations and, for corporate income tax purposes, partnerships and limited liability companies taxed as corporations under the Internal Revenue Code;
H. "department" means the taxation and revenue department, the secretary of taxation and revenue or any employee of the department exercising authority lawfully delegated to that employee by the secretary;
I. "filing group" means a group of corporations properly included in a return pursuant to Section 7-2A-8.3 NMSA 1978 for a particular taxable year;
J. "fiscal year" means any accounting period of twelve months ending on the last day of any month other than December;
K. "grandfathered net operating loss carryover" means:
(1) the amount of net loss properly reported to New Mexico for taxable years beginning January 1, 2013 and prior to January 1, 2020 as part of a timely filed original return, or an amended return for those taxable years filed prior to January 1, 2020, to the extent such loss can be attributed to one or more corporations that are properly included in the taxpayer's return for the first taxable year beginning on or after January 1, 2020;
(2) reduced by:
(a) adding back deductions that were taken by the corporation or corporations for royalties or interest paid to one or more related corporations, but only to the extent that such adjustment would not create a net loss for such related corporations; and
(b) the amount of net operating loss deductions taken prior to January 1, 2020 that would be charged against those losses consistent with the Internal Revenue Code and provisions of the Corporate Income and Franchise Tax Act applicable to the year of the deduction; and
(3) apportioned to New Mexico using the apportionment factors that can properly be attributed to the corporation or corporations for the year of the net loss;
L. "Internal Revenue Code" means the United States Internal Revenue Code of 1986, as amended;
M. "net income" means:
(1) the base income of a corporation properly filing a tax return as a separate entity; or
(2) the combined base income and losses of corporations that are part of a filing group that is computed after eliminating intercompany income and expense in a manner consistent with the consolidated filing requirements of the Internal Revenue Code and the Corporate Income and Franchise Tax Act;
N. "net operating loss carryover" means the apportioned net loss properly reported on an original or amended tax return for taxable years beginning on or after January 1, 2020 by the taxpayer:
(1) plus:
(a) the portion of an apportioned net loss properly reported to New Mexico for a taxable year beginning on or after January 1, 2020, on a separate year return, to the extent the taxpayer would have been entitled to include the portion of such apportioned net loss in the taxpayer's consolidated net operating loss carryforward under the Internal Revenue Code if the taxpayer filed a consolidated federal return; and
(b) the taxpayer's grandfathered net operating loss carryover; and
(2) minus:
(a) the amount of the net operating loss carryover attributed to an entity that has left the filing group, computed in a manner consistent with the consolidated filing requirements of the Internal Revenue Code and applicable regulations, as if the taxpayer were filing a consolidated return; and
(b) the amount of net operating loss deductions properly taken by the taxpayer;
O. "net operating loss deduction" means the portion of the net operating loss carryover that may be deducted from the taxpayer's apportioned net income under the Internal Revenue Code as of January 1, 2018 for the taxable year in which the deduction is taken, including the eighty percent limitation of Section 172(a) of the Internal Revenue Code as of January 1, 2018 calculated on the basis of the taxpayer's apportioned net income;
P. "person" means any individual, estate, trust, receiver, cooperative association, club, corporation, company, firm, partnership, limited liability company, joint venture, syndicate or other association; "person" also means, to the extent permitted by law, any federal, state or other governmental unit or subdivision or agency, department or instrumentality thereof;
Q. "real estate investment trust" has the meaning ascribed to the term in Section 856 of the Internal Revenue Code, as that section may be amended or renumbered;
R. "related corporation" means a corporation that is under common ownership with one or more corporations but that is not included in the same tax return;
S. "return" means any tax or information return, including a water's-edge or worldwide combined return, a consolidated return, a declaration of estimated tax or a claim for refund, including any amendments or supplements to the return, required or permitted pursuant to a law subject to administration and enforcement pursuant to the Tax Administration Act [Chapter 7, Article 1 NMSA 1978] and filed with the department by or on behalf of any person;
T. "secretary" means the secretary of taxation and revenue or the secretary's delegate;
U. "separate year return" means a properly filed original or amended return for a taxable year beginning on or after January 1, 2020 by a taxpayer reporting a loss, a portion of which is claimed as part of the net operating loss carryover by another taxpayer in a subsequent return period;
V. "state" means any state of the United States, the District of Columbia, the commonwealth of Puerto Rico, any territory or possession of the United States or political subdivision thereof or any political subdivision of a foreign country;
W. "state or local bond" means a bond issued by a state other than New Mexico or by a local government other than one of New Mexico's political subdivisions, the interest from which is excluded from income for federal income tax purposes under Section 103 of the Internal Revenue Code, as that section may be amended or renumbered;
X. "taxable income" means a taxpayer's apportioned net income minus the net operating loss deduction for the taxable year;
Y. "taxable year" means the calendar year or fiscal year upon the basis of which the net income is computed under the Corporate Income and Franchise Tax Act and includes, in the case of the return made for a fractional part of a year under the provisions of that act, the period for which the return is made;
Z. "taxpayer" means any corporation or group of corporations filing a return pursuant to Section 7-2A-8.3 NMSA 1978 subject to the taxes imposed by the Corporate Income and Franchise Tax Act;
AA. "unitary group" means a group of two or more corporations, including a captive real estate investment trust, but not including an S corporation, an insurance company subject to the provisions of the New Mexico Insurance Code, an insurance company that would be subject to the New Mexico Insurance Code if the insurance company engaged in business in this state or a real estate investment trust that is not a captive real estate investment trust, that are:
(1) related through common ownership; and
(2) economically interdependent with one another as demonstrated by the following factors:
(a) centralized management;
(b) functional integration; and
(c) economies of scale;
BB. "water's-edge group" means all corporations that are part of a unitary group, except:
(1) corporations that are exempt from corporate income tax pursuant to Section 7-2A-4 NMSA 1978; and
(2) corporations wherever organized or incorporated that have less than twenty percent of their property, payroll and sales sourced to locations within the United States, following the sourcing rules of the Uniform Division of Income for Tax Purposes Act; and
CC. "worldwide combined group" means all members of a unitary group, except members that are exempt from corporate income tax pursuant to Section 7-2A-4 NMSA 1978, irrespective of the country in which the corporations are incorporated or conduct business activity.
History: 1978 Comp., § 7-2A-2, enacted by Laws 1986, ch. 20, § 33; 1991, ch. 9, § 25; 1993, ch. 307, § 3; 1993, ch. 309, § 1; 1995, ch. 11, § 5; 1999, ch. 47, § 6; 2014, ch. 53, § 2; 2017, ch. 95, § 1; 2019, ch. 270, § 16; 2020 (1st S.S.), ch. 4, § 2.
ANNOTATIONSCross references. — For Sections 103 and 172 of the Internal Revenue Code, see 26 U.S.C. §§ 103 and 172, respectively.
The 2020 (1st S.S.) amendment, effective June 29, 2020, amended the definition of "net operating loss deduction" for purposes of the Corporate Income and Franchise Tax Act to conform to the definitions found in the federal Tax Cuts and Jobs Act of 2017; and in Subsection O, after each occurrence of "Internal Revenue Code", added "as of January 1, 2018".
The 2019 amendment, effective January 1, 2020, defined "apportioned net income", "common ownership", "consolidated group", "filing group", "grandfathered net operating loss carryover", "net operating loss deduction", "related corporation", "return", separate year return", "taxable income", "waters-edge group" and "worldwide combined group", and revised and removed the definitions of certain terms, as used in the Corporate Income and Franchise Tax Act; deleted former Subsection A, which defined "affiliated group", and redesignated former Subsection B as Subsection A; added a new Subsection B; in Subsection C, deleted "that part of the taxpayer's income defined as taxable income and upon which the federal income tax is calculated in the Internal Revenue Code for income tax purposes plus:" and added "the federal taxable income or the federal net operating loss of a corporation for the taxable year calculated pursuant to the Internal Revenue Code, after special deductions provided in Sections 241 through 249 of the Internal Revenue Code but without any deduction for net operating losses, as if the corporation filed a federal tax return as a separate domestic entity, modified as follows", deleted former Paragraphs C(1) through C(3) and added new Paragraphs C(1) through C(3); added new Subsections E and F and redesignated former Subsections E and F as Subsections G and H, respectively; added a new Subsection I and redesignated former Subsection G as Subsection J; added a new Subsection K and redesignated former Subsections H and I as Subsections L and M, respectively; in Subsection M, after "means", deleted "base income adjusted to exclude", deleted Paragraphs (1) through (5) and added new Paragraphs M(1) and M(2); deleted former Subsection J, which defined "net operating loss", and redesignated former Subsection K as Subsection N; in Subsection N, deleted "the amount, or any portion of the amount, of a net operating loss for any taxable year that, pursuant to Paragraph (3), (4) or (5) of Subsection I of this section, may be excluded from base income" and added "the apportioned net loss properly reported on an original or amended tax return for taxable years beginning on or after January 1, 2020 by the taxpayer", and added new Paragraphs N(1) and N(2); added a new Subsection O and redesignated former Subsections L and M as Subsections P and Q, respectively; added new Subsections R and S and redesignated former Subsection N as Subsection T; added a new Subsection U and redesignated former Subsections O and P as Subsections V and W, respectively; added a new Subsection X and redesignated former Subsections Q through S as Subsections Y, Z and AA, respectively; in Subsection Z, after "corporation", added "or group of corporations filing a return pursuant to Section 7-2A-8.3 NMSA 1978"; in Subsection AA, after "unitary", deleted "corporations" and added "group", after "means", deleted "two or more integrated corporations other than any foreign corporation incorporated in a foreign country and not engaged in trade or business in the United States during the taxable year, that are owned in the amount of more than fifty percent and controlled by the same person and for which at least one of the following conditions exists" and added "a group of two or more corporations, including a captive real estate investment trust, but not including an S corporation, an insurance company subject to the provisions of the New Mexico Insurance Code, an insurance company that would be subject to the New Mexico Insurance Code if the insurance company engaged in business in this state or a real estate investment trust that is not a captive real estate investment trust, that are", deleted former Paragraphs (1) through (3) and added new Paragraphs AA(1) through AA(2); and added new Subsections BB and CC.
Applicability. — Laws 2019, ch. 270, § 59 provided that the provisions of Laws 2019, ch. 270, § 16 apply to taxable years beginning on or after January 1, 2020.
The 2017 amendment, effective June 16, 2017, defined "captive real estate investment trust" and "real estate investment trust", and revised the definition of "base income", for purposes of the Corporate Income and Franchise Tax Act; in Subsection C, after "for income tax purposes plus", added paragraph designation "(1)", in Paragraph C(1), after "for that year", deleted "'base income' also includes", added paragraph designation "(2)", and added Paragraph C(3); added a new Subsection D and redesignated former Subsections D through K as Subsections E through L, respectively; in Subsection K, after "Subsection", changed "H" to "I"; and added a new Subsection M and redesignated former Subsections L through Q as Subsections N through S.
The 2014 amendment, effective May 21, 2014, excluded net operating loss carryover from net income for twenty years; in Subsection H, in Paragraph (4), after the first and second instances of "January 1, 1991", added "and prior to January 1, 2013"; in Subsection H, in Paragraph (4), in Subparagraph (c), after "carryover is exhausted", added "for any net operating loss carryover from a taxable year prior to January 1, 2013", after "operating loss carryover", added "from a taxable year beginning prior to January 1, 2013"; in Subsection H, added Paragraph (5), including Subparagraphs (a) through (c); and in Subsection J, after "Paragraph (3), (4)", added "or (5)".
The 1999 amendment, effective June 18, 1999, deleted former Subsection F, which defined "financial corporation" and redesignated subsequent subsections accordingly; in Subsection H deleted former Paragraph (1), which read "amounts that have been taxed as income under the Banking and Financial Corporations Tax Act" and redesignated subsequent paragraphs accordingly; and updated statutory references.
The 1995 amendment, effective June 16, 1995, inserted "and limited liability companies" near the end of Subsection D and "of 1986" in Subsection H.
The 1993 amendment, added the language beginning "in no event" at the end of Subparagraph (5)(c) of Subsection I; inserted "limited liability company" in Subsection L; and inserted "other than any foreign corporation incorporated in a foreign country and not engaged in trade or business in the United States during the taxable year" in Subsection R.
The 1991 amendment, effective June 14, 1991, added the language beginning "plus, for taxable years" at the end of Subsection C; deleted "or 'director'" following "'department'" in Subsection E; deleted former Subsection F which read "'director' means the secretary of taxation and revenue or the secretary's delegate"; redesignated former Subsections G to J as present Subsections F to I; in present Subsection I, added present Paragraph (2) and Paragraphs (4) and (5), added "other" at the beginning of Paragraph (3) and made a related stylistic change; added present Subsections J, K and O; and redesignated former Subsections K to M and N to P as present Subsections L to N and P to R, respectively.
Law reviews. — For note, "The Entry and Regulation of Foreign Corporations Under New Mexico Law and Under the Model Business Corporation Act," see 6 Nat. Resources J. 617 (1966).
For comment, "Coal Taxation in the Western States: The Need for a Regional Tax Policy," see 16 Nat. Resources J. 415 (1976).
Am. Jur. 2d, A.L.R. and C.J.S. references. — 71 Am. Jur. 2d State and Local Taxation §§ 103 to 107, 255, 266 to 270, 272 to 276, 304, 451, 452.
Building and loan association as within provisions as to franchise taxes, 86 A.L.R. 826, 143 A.L.R. 1026.
Holding companies, 98 A.L.R. 1511.
Association or joint stock company, meaning of, within statutes taxing associations or joint stock companies as corporations, 108 A.L.R. 340, 144 A.L.R. 1050, 166 A.L.R. 1461.
Foreign corporation, validity, under Federal Constitution, of state tax on, or measured by, income of, 67 A.L.R.2d 1322.
Construction and application of state corporate income tax statutes allowing net operating loss deductions, 33 A.L.R.5th 509.