HB 163 — TAX DEDUCTION FOR NONRESIDENT BENEFICIARY

HOUSEAN BILLACT 163RELATING 54THTO LEGISLATURETAXATION; - STATE OF NEW MEXICO - FIRST SESSIO, 2019 INTRODUCED BY Jim R.

Trujillo 6 8 10 AN ACT RELATING TO TAXATION;

156 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF NEW MEXICO:

A new section of the Income Tax Act is enacted e t 17 to read:

w"DEDUCTION--INCOME l n d 18 "[NEW MATERIAL] DEDUCTION--INCOME SET ASIDE FOR FUTURE = = 19 DISTRIBUTION FROM AN ESTATE OR TRUST TO A NONRESIDENT a l i a e r 20 INDIVIDUAL.-- a t m m 21 A.

Before January 1, 2025, a taxpayer that is an d r e 22 estate or trust may claim a deduction from net income in the c e s k 23 amount equal to income, excluding income derived from real e a n b 24 property located in New Mexico, mineral, oil and gas interests u [ located in New Mexico, water rights located in New Mexico and .211019.1 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.

(1) the extent to which income of an estate HB 163 Page 1 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 e e 17 last day of the estate's or trust's taxable year, one or more e e n d 18 named individual beneficiaries or one or more members of the = = l ] 19 first-named class of individual beneficiaries is living, then a l r i 20 the portion of the federal taxable income considered set aside t e a t for future distribution to:

m m 21 e d r e 22 (a) a named individual beneficiary is c e r c 23 determined by:

1) ascertaining the share or shares of each e a n b 24 named individual beneficiary as if the estate or trust had u [ terminated on the last day of the taxable year and then .211019.1 - 2 - ascertaining the portion of that income realized by the estate or trust during the taxable year while the beneficiary was a nonresident;

1) ascertaining the members of the class and the share of each member as if the estate or HB 163 Page 2 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;

(2) the share of income of each beneficiary of an estate or trust in the federal taxable income, it is e e 17 presumed that the discretion of a person over the distribution e e n d 18 of that income, regardless of whether the person acts in a = = l ] 19 fiduciary capacity or is subject to a standard, has not been a l r i 20 exercised, unless that discretion is irrevocably exercised as t e a t of the last day of the taxable year;

and m m 21 e d r e 22 (3) the time federal taxable income is c e r c 23 realized:

e a n b 24 (a) interest income is considered u [ realized when payable;

.211019.1 - 3 - (b) dividend income is considered realized on the day the dividend is payable;

HB 163 Page 3 D.

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 e e 17 effectiveness.

The department shall present the report to the e e n d 18 revenue stabilization and tax policy committee and the = = l ] 19 legislative finance committee with an analysis of the a l r i 20 effectiveness and cost of the deduction and whether the t e a t deduction is fulfilling its purpose." m m 21 e d r e 22 SECTION 2.

APPLICABILITY.--The provisions of this act c e r c 23 apply to taxable years beginning on or after January 1, 2019.

eHB a163 nPage b 24 - 4 -25 u [ .211019.1