NMSA 1978, § 7-2-38 — 7-2-38

Deduction; income set aside for future distribution from an
estate or trust to a nonresident individual.

# A.

Before January 1, 2025, a taxpayer that is an estate or trust may claim a
deduction from net income in the amount equal to income, excluding income derived
from real property located in New Mexico, mineral, oil and gas interests located in New
Mexico, water rights located in New Mexico and any other income allocated or
apportioned to New Mexico, set aside for future distribution to a nonresident individual
beneficiary as provided in the estate's or trust's governing instrument.

# B.

The purpose of the deduction allowed by this section is to increase estate and
trust business in New Mexico.

# C.

Concerning the deduction allowed by this section, in determining:
(1) the extent to which income of an estate or trust is set aside for future
distribution to a nonresident individual beneficiary, if all or part of the estate's or trust's
federal taxable income, regardless of whether it is added to the estate or trust corpus for
estate or trust accounting purposes, is distributable in future taxable years to or for the
benefit of a named individual beneficiary or a first-named class of individual
beneficiaries and if, on the last day of the estate's or trust's taxable year, one or more
named individual beneficiaries or one or more members of the first-named class of
individual beneficiaries is living, then the portion of the federal taxable income
considered set aside for future distribution to:
(a) a named individual beneficiary is determined by: 1) ascertaining the share
or shares of each named individual beneficiary as if the estate or trust had terminated
on the last day of the taxable year and then ascertaining the portion of that income
realized by the estate or trust during the taxable year while the beneficiary was a
nonresident; and 2) presuming that the beneficiary was living and residing in the state in
which the putative parents resided during the taxable year; and
(b) a first-named class of individual beneficiaries is determined by: 1)
ascertaining the members of the class and the share of each member as if the estate or
trust had terminated on the last day of the taxable year and then ascertaining the
portion of that income of each share realized by the estate or trust while the member
was a nonresident; and 2) presuming that the member was living and residing with the
person the relationship to whom defines membership in the class;
(2) the share of income of each beneficiary of an estate or trust in the federal
taxable income, it is presumed that the discretion of a person over the distribution of
that income, regardless of whether the person acts in a fiduciary capacity or is subject
to a standard, has not been exercised, unless that discretion is irrevocably exercised as
of the last day of the taxable year; and
(3) the time federal taxable income is realized:
(a) interest income is considered realized when payable;
(b) dividend income is considered realized on the day the dividend is payable;
(c) gains and losses from the sale or exchange of property are considered
realized or deductible, as appropriate, on the settlement date of the sale or the effective
date of the exchange; and
(d) commissions on income or principal are deemed deductible on the date
charged.

# D.

A taxpayer allowed a deduction in accordance with this section shall report the
amount of the deduction separately and as required by the department.

# E.

Beginning in 2020, the department shall compile an annual report on the
deduction allowed by this section that includes the number of taxpayers that claimed the
deduction, the aggregate amount of deductions claimed and other information
necessary to evaluate the deduction's effectiveness. The department shall present the
report to the revenue stabilization and tax policy committee and the legislative finance
committee with an analysis of the effectiveness and cost of the deduction and whether
the deduction is fulfilling its purpose.