SENATE BILL 243
56th legislature - STATE OF NEW MEXICO - second session, 2024
INTRODUCED BY
Siah Correa Hemphill
AN ACT
RELATING TO TAXATION; CREATING THE HOTEL RENOVATION INCOME TAX CREDIT AND THE HOTEL RENOVATION CORPORATE INCOME TAX CREDIT.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF NEW MEXICO:
SECTION 1. A new section of the Income Tax Act is enacted to read:
"[NEW MATERIAL] HOTEL RENOVATION INCOME TAX CREDIT.--
A. A taxpayer who is not a dependent of another individual and who, beginning on the effective date of this section and prior to January 1, 2028, incurs qualifying costs for a hotel renovation project may claim a credit against the taxpayer's tax liability imposed pursuant to the Income Tax Act. The tax credit provided by this section may be referred to as the "hotel renovation income tax credit".
B. The credit provided by this section shall be in an amount equal to the following percentages of qualifying costs incurred by a taxpayer for a hotel renovation project; provided that an amount of credit shall not exceed five percent of the aggregate amount of credits that may be certified as provided by Subsection D of this section:
(1) thirty percent of qualifying costs for a hotel that receives a certification level of LEED-NC silver; or
(2) twenty percent of qualifying costs.
C. Prior to incurring qualifying costs, a taxpayer shall apply for preliminary certification of eligibility for the tax credit from the tourism department, on forms and in the manner prescribed by the tourism department. The application shall include a proposal for the hotel renovation project, including a detailed description of the project, projected costs, the expected beginning and completion dates and a hotel renovation project plan, including phases of construction, if any. Such preliminary certification shall be made in consultation with the construction industries division of the regulation and licensing department and shall be limited to confirming that the qualifying costs proposed to be made by the taxpayer will be used for a hotel renovation project and providing an estimate of the amount of tax credit for which the taxpayer may be eligible. A taxpayer shall be eligible for only one certificate of eligibility per hotel renovation project.
D. Within twelve months of completion of a hotel renovation project, the taxpayer shall seek final certification from the tourism department on forms and in the manner prescribed by the tourism department and including an affidavit from a certified public accountant verifying that the qualifying costs were incurred by the taxpayer and meet the requirements of this section. The aggregate amount of credits that may be certified as eligible in a calendar year is twenty-five million dollars ($25,000,000). Completed applications shall be considered in the order received. If, after consultation with the construction industries division of the regulation and licensing department, the tourism department determines that the taxpayer meets the requirements of this section, the tourism department shall issue a dated certificate of eligibility to the taxpayer providing the amount of tax credit for which the taxpayer is eligible and the taxable years in which the credit may be claimed; provided that applications for certification received after the limitation on the aggregate amount of credits has been met in a calendar year shall not be approved. The tourism department shall provide the department with the certificates of eligibility issued pursuant to this subsection in an electronic format at regularly agreed-upon intervals.
E. A taxpayer allowed to claim the tax credit shall claim the credit in a manner required by the department. The tax credit shall be claimed within one taxable year of the end of the calendar year in which the tourism department provides final certification of the credit. That portion of approved credit claimed by a taxpayer that exceeds the taxpayer's income tax liability in the taxable year in which the credit is claimed may be carried forward for five consecutive taxable years.
F. Married individuals filing separate returns for a taxable year for which they could have filed a joint return may each claim only one-half of the credit that would have been claimed on a joint return.
G. A taxpayer may be allocated the right to claim the credit provided by this section in proportion to the taxpayer's ownership interest if the taxpayer owns an interest in a business entity that is taxed for federal income tax purposes as a partnership or limited liability company and that business entity has met all of the requirements to be eligible for the credit. The total credit claimed by all members of the partnership or limited liability company shall not exceed the allowable credit pursuant to this section.
H. A taxpayer allowed a credit pursuant to this section shall report the amount of the credit to the taxation and revenue department on a form and in a manner required by the department.
I. The department shall compile an annual report on the credit provided by this section that shall include the number of taxpayers approved by the department to receive the tax credit, the aggregate amount of tax credits approved and any other information necessary to evaluate the tax credit. The department shall compile and present the annual report to the revenue stabilization and tax policy committee and the legislative finance committee with an analysis of the cost of the tax credit.
J. As used in this section:
(1) "hotel" means a building in New Mexico:
(a) where, for consideration, lodging is regularly furnished to the general public; and
(b) that provides at least fifteen guest rooms or suites for overnight guest use;
(2) "hotel renovation project" means the restoration, renovation and rehabilitation of at least forty percent of the guest rooms or suites of a hotel. "Hotel renovation project" does not mean new construction;
(3) "LEED-NC silver" means the rating in compliance with, or exceeding, the third-highest rating awarded by the LEED certification process for new buildings and major renovations. As used in this paragraph, "LEED" means the most current leadership in energy and environmental design green building rating system guidelines developed and adopted by the United States green building council; and
(4) "qualifying costs" means costs incurred by the taxpayer:
(a) for planning, designing, construction and construction-related equipment for the restoration, renovation and rehabilitation of a hotel;
(b) in an amount equal to or greater than: 1) twenty-five thousand dollars ($25,000) in a county with a population of fifteen thousand or less according to the most recent federal decennial census; or 2) forty thousand dollars ($40,000) in a county with a population greater than fifteen thousand according to the most recent federal decennial census; and
(c) that shall not include any amount for which a tax credit pursuant to the federal new markets tax credit has been claimed pursuant to Section 45D of the Internal Revenue Code, as that section may be amended or renumbered."
SECTION 2. A new section of the Corporate Income and Franchise Tax Act is enacted to read:
"[NEW MATERIAL] HOTEL RENOVATION CORPORATE INCOME TAX CREDIT.--
A. A taxpayer that, beginning on the effective date of this section and prior to January 1, 2028, incurs qualifying costs for a hotel renovation project may claim a credit against the taxpayer's tax liability imposed pursuant to the Corporate Income and Franchise Tax Act. The tax credit provided by this section may be referred to as the "hotel renovation corporate income tax credit".
B. The credit provided by this section shall be in an amount equal to the following percentages of qualifying costs incurred by a taxpayer for a hotel renovation project; provided that an amount of credit shall not exceed five percent of the aggregate amount of credits that may be certified as provided by Subsection D of this section:
(1) thirty percent of qualifying costs for a hotel that receives a certification level of LEED-NC silver; or
(2) twenty percent of qualifying costs.
C. Prior to incurring qualifying costs, a taxpayer shall apply for preliminary certification of eligibility for the tax credit from the tourism department, on forms and in the manner prescribed by the tourism department. The application shall include a proposal for the hotel renovation project, including a detailed description of the project, projected costs, the expected beginning and completion dates and a hotel renovation project plan, including phases of construction, if any. Such preliminary certification shall be made in consultation with the construction industries division of the regulation and licensing department and shall be limited to confirming that the qualifying costs proposed to be made by the taxpayer will be used for a hotel renovation project and providing an estimate of the amount of tax credit for which the taxpayer may be eligible. A taxpayer shall be eligible for only one certificate of eligibility per hotel renovation project.
D. Within twelve months of completion of a hotel renovation project, the taxpayer shall seek final certification from the tourism department on forms and in the manner prescribed by the tourism department and including an affidavit from a certified public accountant verifying that the qualifying costs were incurred by the taxpayer and meet the requirements of this section. The aggregate amount of credits that may be certified as eligible in a calendar year is twenty-five million dollars ($25,000,000). Completed applications shall be considered in the order received. If, after consultation with the construction industries division of the regulation and licensing department, the tourism department determines that the taxpayer meets the requirements of this section, the tourism department shall issue a dated certificate of eligibility to the taxpayer providing the amount of tax credit for which the taxpayer is eligible and the taxable years in which the credit may be claimed; provided that applications for certification received after the limitation on the aggregate amount of credits has been met in a calendar year shall not be approved. The tourism department shall provide the department with the certificates of eligibility issued pursuant to this subsection in an electronic format at regularly agreed-upon intervals.
E. A taxpayer allowed to claim the tax credit shall claim the credit in a manner required by the department. The tax credit shall be claimed within one taxable year of the end of the calendar year in which the tourism department provides final certification of the credit. That portion of approved credit claimed by a taxpayer that exceeds the taxpayer's corporate income tax liability in the taxable year in which the credit is claimed may be carried forward for five consecutive taxable years.
F. A taxpayer allowed a credit pursuant to this section shall report the amount of the credit to the taxation and revenue department on a form and in a manner required by the department.
G. The department shall compile an annual report on the credit provided by this section that shall include the number of taxpayers approved by the department to receive the tax credit, the aggregate amount of tax credits approved and any other information necessary to evaluate the tax credit. The department shall compile and present the annual report to the revenue stabilization and tax policy committee and the legislative finance committee with an analysis of the cost of the tax credit.
H. As used in this section:
(1) "hotel" means a building in New Mexico:
(a) where, for consideration, lodging is regularly furnished to the general public; and
(b) that provides at least fifteen guest rooms or suites for overnight guest use;
(2) "hotel renovation project" means the restoration, renovation and rehabilitation of at least forty percent of the guest rooms or suites of a hotel. "Hotel renovation project" does not mean new construction;
(3) "LEED-NC silver" means the rating in compliance with, or exceeding, the third-highest rating awarded by the LEED certification process for new buildings and major renovations. As used in this paragraph, "LEED" means the most current leadership in energy and environmental design green building rating system guidelines developed and adopted by the United States green building council; and
(4) "qualifying costs" means costs incurred by the taxpayer:
(a) for planning, designing, construction and construction-related equipment for the restoration, renovation and rehabilitation of a hotel;
(b) in an amount equal to or greater than: 1) twenty-five thousand dollars ($25,000) in a county with a population of fifteen thousand or less according to the most recent federal decennial census; or 2) forty thousand dollars ($40,000) in a county with a population greater than fifteen thousand according to the most recent federal decennial census; and
(c) that shall not include any amount for which a tax credit pursuant to the federal new markets tax credit has been claimed pursuant to Section 45D of the Internal Revenue Code, as that section may be amended or renumbered."
SECTION 3. APPLICABILITY.--The provisions of this act apply to taxable years beginning on or after January 1, 2024.
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