NMSA 1978, § 7-2A-2 — Definitions

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;
(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;
(d) for taxable years beginning on or after January 1, 2023, an amount equal
to the amount of credit claimed and allowed for that year pursuant to Section 7-3A-10
NMSA 1978 with respect to the distributed net income of a pass-through entity;
(e) the amount of any deduction taken pursuant to Sections 168(k) and 168(n)
of the Internal Revenue Code in excess of the deduction amount that would have been
allowed by Sections 168(a) through 168(j) of the Internal Revenue Code; and
(f) the amount of additional interest deducted as a result of the changes to
Subparagraph (A) of Section 163(j)(8) of the Internal Revenue Code made by Section
70303 of Public Law 119-21; provided that such interest shall be eligible for the
carryforward provisions of Section 163(j)(2) of the Internal Revenue Code;
(2) subtracting from that income:
(a) income from obligations of the United States net of expenses incurred to
earn that income; and
(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;
(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; and
(4) for a taxpayer that conducts a lawful business pursuant to the laws of this
state, excludes an amount equal to any expenditure that is eligible to be claimed as a
federal income tax deduction but is disallowed pursuant to Section 280E of the Internal
Revenue Code, as that section may be amended or renumbered;

# 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 [Chapter 59A NMSA 1978,
except for Articles 30A and 42A], 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 organized or incorporated outside the United States or its
possessions or territories 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 [Chapter 7, Article 4 NMSA 1978];
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.