us-nm/stat
NMSA 1978, § 7-3A-10 — Election of entity-level tax; credit
A.
A pass-through entity may elect on an annual basis to pay a tax at the entity level
for a taxable year. The tax that may elected to be paid pursuant to this section may be
referred to as the "entity-level tax".
B.
A pass-through entity electing to pay the entity-level tax shall make the election
by filing a complete entity-level tax return with the department in the form and manner
as prescribed by the department. The election shall be binding on all owners of the
electing pass-through entity. The return shall be filed no later than the original or
extended due date of the entity's federal partnership or S corporation return for the
taxable year. Payment of the entity-level tax shall accompany or precede the filing of
the return.
C.
The entity-level tax is imposed on the distributed net income of the pass-through
entity for the taxable year. The rate of entity-level tax is equal to the higher of the
maximum tax rate imposed pursuant to Section 7-2-7 NMSA 1978 or the maximum tax
rate imposed pursuant to Section 7-2A-5 NMSA 1978 for the taxable year.
D.
Distributed net income of a pass-through entity shall equal the amount allocated
and apportioned to New Mexico pursuant to the Uniform Division of Income for Tax
Purposes Act [Chapter 7, Article 4 NMSA 1978] from the following:
(1) the total income of the pass-through entity properly reported for federal
income tax purposes plus, for partnerships, the amount of guaranteed payments other
than premiums for health insurance paid by the partnership on behalf of a partner, less
the net income or guaranteed payments properly allocated or made to:
(a) the United States, this state or a political subdivision of either;
(b) a federally recognized Indian nation, tribe or pueblo located wholly or
partially in New Mexico, or any political subdivision thereof;
(c) an organization that has been granted exemption from the federal income
tax by the United States commissioner of internal revenue as an organization described
in Section 501(c)(3) of the Internal Revenue Code;
(d) a corporate partner that would properly include the income in the partner's
New Mexico tax return as part of the partner's unitary business income; or
(e) a pass-through entity that is an owner of the electing pass-through entity;
and
(2) less the amount of net capital gains that may be deducted pursuant to
Section 7-2-34 NMSA 1978 and is properly allocated to owners who are subject to tax
pursuant to the Income Tax Act [Chapter 7, Article 2 NMSA 1978].
E.
A net operating loss shall not be included in the distributed net income calculated
pursuant to Subsection D of this section but may be carried forward until exhausted.
F.
Pass-through entities electing to pay the entity-level tax shall make estimated
payments of the tax on forms and in the manner as determined by the department.
Amounts remitted pursuant to Subsection B of Section 7-3A-3 NMSA 1978 by entities
electing to pay the entity-level tax shall be deemed payments of estimated entity-level
tax.
G.
If, for a taxable year, the sum of the estimated payments of tax made by a pass-
through entity pursuant to Subsection F of this section exceeds the amount of entity-
level tax owed, the pass-through entity may apply for a refund of the difference. If, for a
taxable year, the entity-level tax owed by a pass-through entity exceeds the sum of the
estimated payments made by the pass-through entity, the pass-through entity shall
remit the difference on or before the date the pass-through entity's entity-level tax is
due.
H.
An owner of a pass-through entity electing to pay the tax imposed under this
section may be allowed a tax credit in an amount equal to the owner's share of the tax;
provided that the pass-through entity paid the tax and furnished sufficient information on
the pass-through entity's tax return to identify that owner. If the amount of the credit
exceeds the amount of the owner's tax liabilities pursuant to the Income Tax Act or the
Corporate Income and Franchise Tax Act [Chapter 7, Article 2A NMSA 1978], the
excess shall be refunded to the owner.
I.
As used in this section:
(1) "guaranteed payments" means the guaranteed payments described in
Section 707(c) of the Internal Revenue Code, as that section may be amended or
renumbered;
(2) "net capital gain" means "net capital gain" as defined in Section 1222(11)
of the Internal Revenue Code;
(3) "net operating loss" means "net operating loss" as defined in Section 7-2-2
NMSA 1978; and
(4) "pass-through entity" means a partnership or corporation that elects to
pass income, losses, deductions and credits through to the entity's owners for federal
tax purposes.
Source: official text