A. Except as otherwise provided in this section, a remitter shall deduct and withhold from each payment of oil and gas proceeds being made to a remittee for each quarter an amount equal to the rate specified in Subsection D of this section multiplied by the amount prior to withholding that otherwise would have been payable to the remittee.
B. Except as otherwise provided in this section, a pass-through entity shall deduct and withhold from each owner's allocable share of net income for that calendar year an amount equal to the rate specified in Subsection D of this section multiplied by the owner's allocable share of that net income, reduced, but not below zero, by the amount required to be withheld from the owner's allocable share of net income under Subsection A of this section.
C. The obligation to deduct and withhold from payments or allocable net income as provided in Subsections A and B of this section does not apply to payments that are made to:
(1) a corporation whose principal place of business is in New Mexico or an individual who is a resident of New Mexico;
(2) remittees with a New Mexico address as shown on internal revenue service form 1099-Misc or a successor form or on a pro forma 1099-Misc or a successor form for those entities that do not receive an internal revenue service form 1099-Misc;
(3) the United States, this state or any agency, instrumentality or political subdivision of either;
(4) any federally recognized Indian nation, tribe or pueblo or any agency, instrumentality or political subdivision thereof; or
(5) organizations that 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 Internal Revenue Code. However, the obligation to deduct and withhold from payments of allocable net income to organizations identified in this paragraph applies if that income constitutes unrelated business income.
D. Except as provided in Subsection H of this section, the rate of withholding shall be set by a department directive; provided that the rate may not exceed the higher of the maximum bracket rate set by Section 7-2-7 NMSA 1978 for the taxable year or the maximum bracket rate set by Section 7-2A-5 NMSA 1978 for the taxable year; and provided further that remitters shall be given ninety days' notice of a change in the rate.
E. If a remitter receives oil and gas proceeds from which an amount has been deducted and withheld pursuant to the Oil and Gas Proceeds and Pass-Through Entity Withholding Tax Act or a pass-through entity has deducted and withheld an amount pursuant to the Oil and Gas Proceeds and Pass-Through Entity Withholding Tax Act from the allocable share of net income of an owner that is also a pass-through entity, the remitter or payee pass-through entity may take credit for that amount in determining the amount the remitter or payee pass-through entity must withhold and deduct pursuant to this section.
F. If the amount to be withheld from all payments to a remittee in a calendar quarter has not exceeded thirty dollars ($30.00) and a payment to a remittee is less than ten dollars ($10.00), no withholding is required. If the amount to be withheld from an owner's allocable share of net income in any calendar year is less than one hundred dollars ($100), no withholding is required.
G. Except as provided in Subsection H of this section, at the option of a remitter or pass-through entity, a remitter or pass-through entity may agree with a remittee or an owner that the remittee or owner pay the amount that the remitter or pass-through entity would have been required to withhold and remit to the department on behalf of the remittee or owner pursuant to the Oil and Gas Proceeds and Pass-Through Entity Withholding Tax Act. The payments by the remittee or owner shall be remitted on the dates set forth in Section 7-3A-6 NMSA 1978 on forms and in the manner required by the department.
H. Excluding wages, a personal services business shall deduct and withhold an amount equal to the owner's allocable share of net income multiplied by the highest rate for single individuals provided in Section 7-2-7 NMSA 1978.
I. If the remittee or owner is an insurance company and falls under the provisions of Section 59A-6-6 NMSA 1978, no withholding is required pursuant to this section.
History: 1978 Comp., § 7-3A-3, enacted by Laws 2003, ch. 86, § 6; 2010, ch. 53, § 10; 2011, ch. 177, § 6; 2012, ch. 40, § 2.
ANNOTATIONSThe 2012 amendment, effective May 16, 2012, required quarterly withholding; exempted payment to remittees with a New Mexico address from withholding; required withholding if payments to charitable organizations constitute unrelated business income; increased the minimum annual amount that required withholding; exempted payments to insurance companies from withholding; in Subsection A, after "being made to a remittee", added "for each quarter"; in Subsection B, after "and withhold from each owner's" added "allocable"; after "income for that", deleted "quarter" and added "calendar", after "multiplied by the owner's" added "allocable", and after "to be withheld from the owner's" added "allocable share of"; in Subsection C, in the introductory sentence, after "payments or", added "allocable", added Paragraph (2), and in Paragraph (5), added the last sentence; deleted former Subsection E, which required a pass-through entity that had been in existence for one full taxable year to compute withholding based on the net income of the entity for the preceding year; in Subsection E, after "Tax Act from the", added "allocable share of"; in Subsection F, in the second sentence, after "from an owner's", added "allocable", after "in any calendar", deleted "quarter" and added "year", and after "is less than", deleted "thirty dollars ($30.00)" and added "one hundred dollars ($100.00)"; in Subsection H, after "equal to the owner's", added "allocable"; and added Subsection I.
Applicability. — Laws 2012, ch. 40, § 8 provided that the provisions of Laws 2012, ch. 40, §§ 1 through 7 are applicable to taxable years beginning on or after January 1, 2012.
The 2011 amendment, effective July 1, 2011, required personal services businesses to deduct and withhold income tax from payments to performing artists.
The 2010 amendment, effective May 19, 2010, in Subsection A, after "Subsection", changed "C" to "D"; after "multiplied by the", deleted "gross"; and after "multiplied by the amount", added "prior to withholding"; added Subsection B; in Subsection C, after "withhold from payments", added "or net income" and after "as provided in", changed "Subsection A of this section" to "Subsections A and B of this section"; in Paragraph (1) of Subsection C, deleted "remittees with a New Mexico address as shown on internal revenue service form 1099-MISC or successor form" and added "a corporation whose principal place of business is in New Mexico or an individual who is a resident of New Mexico"; in Subsection D, after "The rate of withholding", deleted "is six and three-fourths percent for the period October 1, 2003 through December 31, 2004. Thereafter the rate shall be set by department regulation." and added "shall be set by a department directive"; added Subsections E and F; in Subsection G, in the first sentence, added "all payments to a remittee in a calendar quarter has not exceeded thirty dollars ($30.00) and" and added the last sentence; and added Subsection H.
Temporary provisions. — Laws 2010, ch. 53, § 17 provided that for a taxable year beginning on or after January 1, 2011, but before January 1, 2012, no remitter or pass-through entity shall be subject to the penalty imposed pursuant to Section 7-1-69 NMSA 1978 for failure to comply with the provisions of the Oil and Gas Proceeds and Pass-Through Entity Withholding Tax Act.