Signed by Governor Bill Richardson

Vote Smart's Synopsis:

Vote to pass a bill that requires pass-through entities to withhold and deduct tax payments on quarterly net income from owners who aren't residents of New Mexico beginning tax year 2011.

Highlights:

-Amends the definition of "person" to include, but not limited to, the following (Sec. 3):

-Limited liability companies; -Limited liability partnerships; and -Gas, water, or electric utilities owned or operated by a county or municipality.

-Defines "pass-through entity" as any business association other than the following (Sec. 9):

-A sole proprietorship; -An estate or trust that does not distribute income to beneficiaries; -A corporation, limited liability company, partnership or other entity that is not a sole proprietorship taxed as a corporation for federal income tax purposes; -A partnership that is organized as an investment partnership in which the partners' income is derived solely from interest, dividends and sales of securities; -A single member limited liability company that is treated as a disregarded entity for federal income tax purposes; or -A publicly traded partnership.

-Requires pass-through entities to deduct and withhold from each owner's share of net income for that quarter an amount to be set by a Taxation and Revenue Department directive (Sec. 10). -Specifies that the obligation to deduct and withhold payments or net income doesn't apply to payments made to residents of New Mexico (Sec. 10). -Authorizes pass-through entities in existence for at least one full taxable year prior to the current year to use 1/4 of its total net income to compute the amount to be deducted and withheld (Sec. 10). -Authorizes a remitter who receives oil and gas proceeds from which an amount has been deducted and withheld, or a pass-through entity that has deducted and withheld an amount from the net income of an owner that is also a pass-through entity, to take credit for that amount when determining the amount that must be withheld or deducted (Sec. 10). -Specifies that no withholding is required if the amount to be withheld from an owner's share of net income in any calendar quarter is less than $30.00 (Sec. 10). -Authorizes pass-through entities to agree with an owner that the owner pay the amount the pass-through entity would have been required to withhold and remit on behalf of the owner (Sec. 10). -Specifies that a remitter or pass-through entity is not liable for required amounts which were not deducted or withheld if (Sec. 12):

-If the tax amounts that would have been credit against is paid; -The failure to deduct and withhold the required amounts is due to reasonable cause; or -The net income of a quarter changes due to a timely election for federal income tax purposes.

-Requires every pass-through entity doing business in New Mexico to (Sec. 14):

-File an annual information return; and -Provide each of its owners with sufficient information to enable the owner to comply with the Income Tax Act and Corporate Income and Franchise Tax Act with respect to the owner's share of net income.

-Requires the Taxation and Revenue Department to compile the annual statements of withholding and annual information returns received each year and compare the compilations with records of corporations, individuals, estates, or trusts filing income tax returns (Sec. 14).

Full Bill Text