New Mexico Administrative Code
Title 3 - TAXATION
Chapter 5 - UNIFORM DIVISION OF INCOME FOR TAX PURPOSES
Part 19 - EQUITABLE ADJUSTMENT OF STANDARD ALLOCATION OR APPORTIONMENT
Section 3.5.19.17 - SPECIAL RULES - FINANCIAL INSTITUTIONS
Universal Citation: 3 NM Admin Code 3.5.19.17
Current through Register Vol. 35, No. 18, September 24, 2024
A. Apportionment and allocation.
(1) Except as otherwise
specifically provided, a financial institution whose business activity is
taxable both within and without this state shall allocate and apportion its net
income as provided in this section. All items of nonbusiness income (income
which is not includable in the apportionable income tax base) shall be
allocated pursuant to the provisions of Sections
7-4-5
through
7-4-9
NMSA 1978 and Parts 3.5.5 through 3.5.9 NMAC. A financial institution organized
under the laws of a foreign country, the commonwealth of Puerto Rico, or a
territory or possession of the United States whose effectively connected income
(as defined under the federal Internal Revenue Code) is taxable both within
this state and within another state, other than the state in which it is
organized, shall allocate and apportion its net income as provided in this
section.
(2) All business income
(income which is includable in the apportionable income tax base) shall be
apportioned to this state by multiplying such income by the apportionment
percentage. The apportionment percentage is determined by adding the taxpayer's
receipts factor (as described in Subsection C of this section), property factor
(as described in Subsection D of this section), and payroll factor (as
described in Subsection E of this section) together and dividing the sum by
three. If one of the factors is missing, the two remaining factors are added
and the sum is divided by two. If two of the factors are missing, the remaining
factor is the apportionment percentage. A factor is missing if both its
numerator and denominator are zero, but it is not missing merely because its
numerator is zero.
(3) Each factor
shall be computed according to the method of accounting used by the taxpayer
for federal income tax purposes for the taxable year, except as provided in
Section 3.5.14.8 NMAC.
(4) If the
allocation and apportionment provisions of this section do not fairly represent
the extent of the taxpayer's business activity in this state, the taxpayer may
petition for or the Secretary may require, in respect to all or any part of the
taxpayer's business activity, if reasonable:
(a) separate accounting;
(b) the exclusion of any one or more of the
factors,
(c) the inclusion of one
or more additional factors which will fairly represent the taxpayer's business
activity in this state; or
(d) the
employment of any other method to effectuate an equitable allocation and
apportionment of the taxpayer's income.
B. Definitions. As used in this section, unless the context otherwise requires:
(1) "billing address" means the location
indicated in the books and records of the taxpayer on the first day of the
taxable year (or on such later date in the taxable year when the customer
relationship began) as the address where any notice, statement and/or bill
relating to a customer's account is mailed;
(2) "borrower or credit card holder located
in this state" means:
(a) a borrower, other
than a credit card holder, that is engaged in a trade or business which
maintains its commercial domicile in this state; or
(b) a borrower that is not engaged in a trade
or business or a credit card holder whose billing address is in this
state;
(3) "commercial
domicile" means:
(a) the headquarters of the
trade or business, that is, the place from which the trade or business is
principally managed and directed; or
(b) if a taxpayer is organized under the laws
of a foreign country, or of the commonwealth of Puerto Rico, or any territory
or possession of the United States, such taxpayer's commercial domicile shall
be deemed for the purposes of this section to be the state of the United States
or the District of Columbia from which such taxpayer's trade or business in the
United States is principally managed and directed. It shall be presumed,
subject to rebuttal, that the location from which the taxpayer's trade or
business is principally managed and directed is the state of the United States
or the District of Columbia to which the greatest number of employees are
regularly connected or out of which they are working, irrespective of where the
services of such employees are performed, as of the last day of the taxable
year;
(4) "compensation"
means wages, salaries, commissions and any other form of remuneration paid to
employees for personal services that are included in such employee's gross
income under the federal Internal Revenue Code. In the case of employees not
subject to the federal Internal Revenue Code, e.g., those employed in foreign
countries, the determination of whether such payments would constitute gross
income to such employees under the federal Internal Revenue Code shall be made
as though such employees were subject to the federal Internal Revenue
Code;
(5) "credit card" means
credit, travel or entertainment card;
(6) "credit card issuer's reimbursement fee"
means the fee a taxpayer receives from a merchant's bank because one of the
persons to whom the taxpayer has issued a credit card has charged merchandise
or services to the credit card;
(7)
"employee" means, with respect to a particular taxpayer, any individual who,
under the usual common-law rules applicable in determining the
employer-employee relationship, has the status of an employee of that
taxpayer;
(8) "financial
institution" means:
(a) any corporation or
other business entity registered under state law as a bank holding company or
registered under the federal Bank Holding Company Act of 1956, as amended, or
registered as a savings and loan holding company under the federal National
Housing Act, as amended;
(b) a
national bank organized and existing as a national bank association pursuant to
the provisions of the National Bank Act,
12
U.S.C. 21 et seq.;
(c) a savings association or federal savings
bank as defined in the Federal Deposit Insurance Act,
12
U.S.C. 1813(b)(1);
(d) any bank or thrift institution
incorporated or organized under the laws of any state;
(e) any corporation organized under the
provisions of
12
U.S.C. Sections 611 to
631.
(f) any agency or branch of a foreign
depository as defined in
12
U.S.C. Section 3101;
(g) a state credit union the loan assets of
which exceed $50,000,000 as of the first day of its taxable year;
(h) a production credit association organized
under the federal Farm Credit Act of 1933, all of whose stock held by the
federal production credit corporation has been retired;
(i) any corporation whose voting stock is
more than fifty percent (50%) owned, directly or indirectly, by any person or
business entity described in items (a) through (h) of this paragraph other than
an insurance company taxable under the Insurance Code, Chapter 59A NMSA
1978;
(j) a corporation or other
business entity that derives more than fifty percent (50%) of its total gross
income for financial accounting purposes from finance leases. For purposes of
this subparagraph, a "finance lease" shall mean - any lease transaction which
is the functional equivalent of an extension of credit and that transfers
substantially all of the benefits and risks incident to the ownership of
property. The phrase shall include any "direct financing lease" or "leverage
lease" that meets the criteria of financial accounting standards board
statement No. 13, "accounting for leases" or any other lease that is accounted
for as a financing by a lessor under generally accepted accounting principles.
No corporation or other business entity will be classified as a financial
institution under this subparagraph unless the income from finance leases
exceeds fifty percent of gross income for the current year and each of the two
immediately preceding years and gross income from non-recurring, extraordinary
items is disregarded; and
(k) any
other person, other than an insurance company or a reciprocal or
inter-insurance exchange that pays a premium tax to this state, that derives
more than fifty percent of its gross income from activities that a person
described in subparagraphs (b) through (h) and (j) of this paragraph is
authorized to transact. For the purpose of this subparagraph, the computation
of gross income shall not include income from non-recurring, extraordinary
items;
(9) "gross rents"
means the actual sum of money or other consideration payable for the use or
possession of property. "Gross rents" shall include, but not be limited to:
(a) any amount payable for the use or
possession of real property or tangible property whether designated as a fixed
sum of money or as a percentage of receipts, profits or otherwise;
(b) any amount payable as additional rent or
in lieu of rent, such as interest, taxes, insurance, repairs or any other
amount required to be paid by the terms of a lease or other arrangement;
and
(c) a proportionate part of the
cost of any improvement to real property made by or on behalf of the taxpayer
which reverts to the owner or lessor upon termination of a lease or other
arrangement. The amount to be included in gross rents is the amount of
amortization or depreciation allowed in computing the taxable income base for
the taxable year. However, where a building is erected on leased land by or on
behalf of the taxpayer, the value of the land is determined by multiplying the
gross rent by eight and the value of the building is determined in the same
manner as if owned by the taxpayer;
(d) The following are not included in the
term "gross rents":
(i) reasonable amounts
payable as separate charges for water and electric service furnished by the
lessor;
(ii) reasonable amounts
payable as service charges for janitorial services furnished by the
lessor;
(iii) reasonable amounts
payable for storage, provided such amounts are payable for space not designated
and not under the control of the taxpayer; and
(iv) that portion of any rental payment which
is applicable to the space subleased from the taxpayer and not used by
it;
(10)
"loan" means any extension of credit resulting from direct negotiations between
the taxpayer and its customer, and/or the purchase, in whole or in part, of
such extension of credit from another. Loans include participations,
syndications, and leases treated as loans for federal income tax purposes.
Loans shall not include: properties treated as loans under Section 595 of the
federal Internal Revenue Code; futures or forward contracts; options; notional
principal contracts such as swaps; credit card receivables, including purchased
credit card relationships; non-interest bearing balances due from depository
institutions; cash items in the process of collection; federal funds sold;
securities purchased under agreements to resell; assets held in a trading
account; securities; interests in a REMIC, or other mortgage-backed or
asset-backed security; and other similar items;
(11) "loan secured by real property" means
that fifty percent or more of the aggregate value of the collateral used to
secure a loan or other obligation, when valued at fair market value as of the
time the original loan or obligation was incurred, was real property;
(12) "merchant discount" means the fee (or
negotiated discount) charged to a merchant by the taxpayer for the privilege of
participating in a program whereby a credit card is accepted in payment for
merchandise or services sold to the card holder;
(13) "participation" means an extension of
credit in which an undivided ownership interest is held on a pro rata basis in
a single loan or pool of loans and related collateral. In a loan participation,
the credit originator initially makes the loan and then subsequently resells
all or a portion of it to other lenders. The participation may or may not be
known to the borrower;
(14)
"person" means an individual, estate, trust, partnership, corporation and any
other business entity;
(15)
"principal base of operations" with respect to transportation property means
the place of more or less permanent nature from which said property is
regularly directed or controlled; with respect to an employee, the "principal
base of operations" means the place of more or less permanent nature from which
the employee regularly
(a) starts his or her
work and to which he or she customarily returns in order to receive
instructions from his or her employer;
(b) communicates with his or her customers or
other persons; or
(c) performs any
other functions necessary to the exercise of his or her trade or profession at
some other point or points;
(16) "real property owned" and "tangible
personal property owned" mean real and tangible personal property,
respectively, on which the taxpayer may claim depreciation for federal income
tax purposes or property to which the taxpayer holds legal title and on which
no other person may claim depreciation for federal income tax purposes (or
could claim depreciation if subject to federal income tax). Real and tangible
personal property do not include coin, currency, or property acquired in lieu
of or pursuant to a foreclosure;
(17) "regular place of business" means an
office at which the taxpayer carries on its business in a regular and
systematic manner and which is continuously maintained, occupied and used by
employees or authorized representatives of the taxpayer;
(18) "state" means a state of the United
States, the District of Columbia, the commonwealth of Puerto Rico, any
territory or possession of the United States or any foreign country;
(19) "syndication" means an extension of
credit in which two or more persons fund and each person is at risk only up to
a specified percentage of the total extension of credit or up to a specified
dollar amount;
(20) "taxable" means
either:
(a) that a taxpayer is subject in
another state to a net income tax, a franchise tax measured by net income, a
franchise tax for the privilege of doing business, a corporate stock tax
(including a bank shares tax), a single business tax, or an earned surplus tax,
or any tax which is imposed upon or measured by net income; or
(b) that another state has jurisdiction to
subject the taxpayer to any of such taxes regardless of whether, in fact, the
state does or does not;
(21) "transportation property" means vehicles
and vessels capable of moving under their own power, such as aircraft, trains,
water vessels and motor vehicles, as well as any equipment or containers
attached to such property, such as rolling stock, barges, trailers or the
like.
C. Receipts factor.
(1)
General. The receipts factor is a fraction, the numerator of which is the
receipts of the taxpayer in this state during the taxable year and the
denominator of which is the receipts of the taxpayer within and without this
state during the taxable year. The method of calculating receipts for purposes
of the denominator is the same as the method used in determining receipts for
purposes of the numerator. The receipts factor shall include only those
receipts described in this subsection which constitute business income and are
included in the computation of the apportionable income base for the taxable
year.
(2) Receipts from the lease
of real property. The numerator of the receipts factor includes receipts from
the lease or rental of real property owned by the taxpayer if the property is
located within this state or receipts from the sublease of real property if the
property is located within this state.
(3) Receipts from the lease of tangible
personal property.
(a) Except as described in
Subparagraph (b) of this paragraph, the numerator of the receipts factor
includes receipts from the lease or rental of tangible personal property owned
by the taxpayer if the property is located within this state when it is first
placed in service by the lessee.
(b) Receipts from the lease or rental of
transportation property owned by the taxpayer are included in the numerator of
the receipts factor to the extent that the property is used in this state. The
extent an aircraft will be deemed to be used in this state and the amount of
receipts that is to be included in the numerator of this state's receipts
factor is determined by multiplying all the receipts from the lease or rental
of the aircraft by a fraction, the numerator of which is the number of landings
of the aircraft in this state and the denominator of which is the total number
of landings of the aircraft. If the extent of the use of any transportation
property within this state cannot be determined, then the property will be
deemed to be used wholly in the state in which the property has its principal
base of operations. A motor vehicle will be deemed to be used wholly in the
state in which it is registered.
(4) Interest from loans secured by real
property.
(a) The numerator of the receipts
factor includes interest and fees or penalties in the nature of interest from
loans secured by real property if the property is located within this state. If
the property is located both within this state and one or more other states,
the receipts described in this subparagraph are included in the numerator of
the receipts factor if more than fifty percent of the fair market value of the
real property is located within this state. If more than fifty percent of the
fair market value of the real property is not located within any one state,
then the receipts described in this subparagraph shall be included in the
numerator of the receipts factor if the borrower is located in this
state.
(b) The determination of
whether the real property securing a loan is located within this state shall be
made as of the time the original agreement was made and any and all subsequent
substitutions of collateral shall be disregarded.
(5) Interest from loans not secured by real
property. The numerator of the receipts factor includes interest and fees or
penalties in the nature of interest from loans not secured by real property if
the borrower is located in this state.
(6) Net gains from the sale of loans. The
numerator of the receipts factor includes net gains from the sale of loans. Net
gains from the sale of loans includes income recorded under the coupon
stripping rules of Section 1286 of the Internal Revenue Code.
(a) The amount of net gains (but not less
than zero) from the sale of loans secured by real property included in the
numerator is determined by multiplying such net gains by a fraction the
numerator of which is the amount included in the numerator of the receipts
factor pursuant to Paragraph (4) of this subsection and the denominator of
which is the total amount of interest and fees or penalties in the nature of
interest from loans secured by real property.
(b) The amount of net gains (but not less
than zero) from the sale of loans not secured by real property included in the
numerator is determined by multiplying such net gains by a fraction the
numerator of which is the amount included in the numerator of the receipts
factor pursuant to Paragraph (5) of this subsection and the denominator of
which is the total amount of interest and fees or penalties in the nature of
interest from loans not secured by real property.
(7) Receipts from credit card receivables.
The numerator of the receipts factor includes interest and fees or penalties in
the nature of interest from credit card receivables and receipts from fees
charged to card holders, such as annual fees, if the billing address of the
card holder is in this state.
(8)
Net gains from the sale of credit card receivables. The numerator of the
receipts factor includes net gains (but not less than zero) from the sale of
credit card receivables multiplied by a fraction, the numerator of which is the
amount included in the numerator of the receipts factor pursuant to Paragraph
(7) of this subsection and the denominator of which is the taxpayer's total
amount of interest and fees or penalties in the nature of interest from credit
card receivables and fees charged to card holders.
(9) Credit card issuer's reimbursement fees.
The numerator of the receipts factor includes all credit card issuer's
reimbursement fees multiplied by a fraction, the numerator of which is the
amount included in the numerator of the receipts factor pursuant to Paragraph
(7) of this subsection and the denominator of which is the taxpayer's total
amount of interest and fees or penalties in the nature of interest from credit
card receivables and fees charged to card holders.
(10) Receipts from merchant discount. The
numerator of the receipts factor includes receipts from merchant discount if
the commercial domicile of the merchant is in this state. Such receipts shall
be computed net of any cardholder charge backs, but shall not be reduced by any
interchange transaction fees or by any issuer's reimbursement fees paid to
another for charges made by its card holders.
(11) Loan servicing fees.
(a) The numerator of the receipts factor
includes loan servicing fees derived from loans secured by real property
multiplied by a fraction the numerator of which is the amount included in the
numerator of the receipts factor pursuant to Paragraph (4) of this subsection
and the denominator of which is the total amount of interest and fees or
penalties in the nature of interest from loans secured by real property. The
numerator of the receipts factor includes loan servicing fees derived from
loans not secured by real property multiplied by a fraction the numerator of
which is the amount included in the numerator of the receipts factor pursuant
to Paragraph (5) of this subsection and the denominator of which is the total
amount of interest and fees or penalties in the nature of interest from loans
not secured by real property.
(b)
In circumstances in which the taxpayer receives loan servicing fees for
servicing either the secured or the unsecured loans of another, the numerator
of the receipts factor shall include such fees if the borrower is located in
this state.
(12)
Receipts from services. The numerator of the receipts factor includes receipts
from services not otherwise apportioned under this subsection if the service is
performed in this state. If the service is performed both within and without
this state, the numerator of the receipts factor includes receipts from
services not otherwise apportioned under this subsection, if a greater
proportion of the income-producing activity is performed in this state based on
cost of performance.
(13) Receipts
from investment assets and activities and trading assets and activities.
(a) Interest, dividends, net gains (but not
less than zero) and other income from investment assets and activities and from
trading assets and activities shall be included in the receipts factor.
Investment assets and activities and trading assets and activities include but
are not limited to: investment securities; trading account assets; federal
funds; securities purchased and sold under agreements to resell or repurchase;
options; futures contracts; forward contracts; notional principal contracts
such as swaps; equities and foreign currency transactions. With respect to the
investment and trading assets and activities described in Items (i) and (ii) of
this subparagraph, the receipts factor shall include the amounts described in
such items.
(i) The receipts factor shall
include the amount by which interest from federal funds sold and securities
purchased under resale agreements exceeds interest expense on federal funds
purchased and securities sold under repurchase agreements.
(ii) The receipts factor shall include the
amount by which interest, dividends, gains and other income from trading assets
and activities, including but not limited to assets and activities in the
matched book, in the arbitrage book, and foreign currency transactions, exceed
amounts paid in lieu of interest, amounts paid in lieu of dividends, and losses
from such assets and activities.
(b) The numerator of the receipts factor
includes interest, dividends, net gains (but not less than zero) and other
income from investment assets and activities and from trading assets and
activities described in Subparagraph (a) of this paragraph that are
attributable to this state.
(i) The amount of
interest, dividends, net gains (but not less than zero) and other income from
investment assets and activities in the investment account to be attributed to
this state and included in the numerator is determined by multiplying all such
income from such assets and activities by a fraction, the numerator of which is
the average value of such assets which are properly assigned to a regular place
of business of the taxpayer within this state and the denominator of which is
the average value of all such assets.
(ii) The amount of interest from federal
funds sold and purchased and from securities purchased under resale agreements
and securities sold under repurchase agreements attributable to this state and
included in the numerator is determined by multiplying the amount described in
Item (i) of Subparagraph (a) of this paragraph from such funds and such
securities by a fraction, the numerator of which is the average value of
federal funds sold and securities purchased under agreements to resell which
are properly assigned to a regular place of business of the taxpayer within
this state and the denominator of which is the average value of all such funds
and such securities.
(iii) The
amount of interest, dividends, gains and other income from trading assets and
activities, including but not limited to assets and activities in the matched
book, in the arbitrage book and foreign currency transactions, (but excluding
amounts described in Item (i) or (ii) of this subparagraph), attributable to
this state and included in the numerator is determined by multiplying the
amount described in Item (ii) of Subparagraph (a) of this paragraph by a
fraction, the numerator of which is the average value of such trading assets
which are properly assigned to a regular place of business of the taxpayer
within this state and the denominator of which is the average value of all such
assets.
(iv) For purposes of this
item, average value shall be determined using the rules for determining the
average value of tangible personal property set forth in Subsection D of this
section.
(c) In lieu of
using the method set forth in Subparagraph (b) of this paragraph, the taxpayer
may elect, or the department may require in order to fairly represent the
business activity of the taxpayer in this state, the use of the method set
forth in this item.
(i) The amount of
interest, dividends, net gains (but not less than zero) and other income from
investment assets and activities in the investment account to be attributed to
this state and included in the numerator is determined by multiplying all such
income from such assets and activities by a fraction, the numerator of which is
the gross income from such assets and activities which are properly assigned to
a regular place of business of the taxpayer within this state and the
denominator of which is the gross income from all such assets and
activities.
(ii) The amount of
interest from federal funds sold and purchased and from securities purchased
under resale agreements and securities sold under repurchase agreements
attributable to this state and included in the numerator is determined by
multiplying the amount described in Item (i) of Subparagraph (a) of this
paragraph from such funds and such securities by a fraction, the numerator of
which is the gross income from such funds and such securities which are
properly assigned to a regular place of business of the taxpayer within this
state and the denominator of which is the gross income from all such funds and
such securities.
(iii) The amount
of interest, dividends, gains and other income from trading assets and
activities, including but not limited to assets and activities in the matched
book, in the arbitrage book and foreign currency transactions (but excluding
amounts described in Item (i) or (ii) of this subparagraph), attributable to
this state and included in the numerator is determined by multiplying the
amount described in Item (ii) of Subparagraph (a) of this paragraph by a
fraction, the numerator of which is the gross income from such trading assets
and activities which are properly assigned to a regular place of business of
the taxpayer within this state and the denominator of which is the gross income
from all such assets and activities.
(d) If the taxpayer elects or is required by
the department to use the method set forth in Subparagraph (c) of the
paragraph, it shall use this method on all subsequent returns unless the
taxpayer receives prior permission from the department to use, or the
department requires a different method.
(e) The taxpayer shall have the burden of
proving that an investment asset or activity or trading asset or activity was
properly assigned to a regular place of business outside of this state by
demonstrating that the day-to-day decisions regarding the asset or activity
occurred at a regular place of business outside this state. Where the
day-to-day decisions regarding an investment asset or activity or trading asset
or activity occur at more than one regular place of business and one such
regular place of business is in this state and one such regular place of
business is outside this state, such asset or activity shall be considered to
be located at the regular place of business of the taxpayer where the
investment or trading policies or guidelines with respect to the asset or
activity are established. Unless the taxpayer demonstrates to the contrary,
such policies and guidelines shall be presumed to be established at the
commercial domicile of the taxpayer.
(14) All other receipts. The numerator of the
receipts factor includes all other receipts pursuant to the rules set forth in
Sections
7-4-17
and
7-4-18
NMSA 1978 and Parts 3.5.17 and 3.5.18 NMAC.
(15) Attribution of certain receipts to
commercial domicile. All receipts which would be assigned under this subsection
to a state in which the taxpayer is not taxable shall be included in the
numerator of the receipts factor, if the taxpayer's commercial domicile is in
this state.
D. Property factor.
(1)
General. The property factor is a fraction, the numerator of which is the
average value of real property and tangible personal property rented to the
taxpayer that is located or used within this state during the taxable year, the
average value of the taxpayer's real and tangible personal property owned that
is located or used within this state during the taxable year, and the average
value of the taxpayer's loans and credit card receivables that are located
within this state during the taxable year, and the denominator of which is the
average value of all such property located or used within and without this
state during the taxable year.
(2)
Property included. The property factor shall include only property the income
or expenses of which are included (or would have been included if not fully
depreciated or expensed, or depreciated or expensed to a nominal amount) in the
computation of the apportionable income base for the taxable year.
(3) Value of property owned by the taxpayer.
(a) The value of real property and tangible
personal property owned by the taxpayer is the original cost or other basis of
such property for federal income tax purposes without regard to depletion,
depreciation or amortization.
(b)
Loans are valued at their outstanding principal balance, without regard to any
reserve for bad debts. If a loan is charged-off in whole or in part for federal
income tax purposes, the portion of the loan charged off is not outstanding. A
specifically allocated reserve established pursuant to regulatory or financial
accounting guidelines which is treated as charged-off for federal income tax
purposes shall be treated as charged-off for purposes of this
subsection.
(c) Credit card
receivables are valued at their outstanding principal balance, without regard
to any reserve for bad debts. If a credit card receivable is charged-off in
whole or in part for federal income tax purposes, the portion of the receivable
charged-off is not outstanding.
(4) Average value of property owned by the
taxpayer. The average value of property owned by the taxpayer is computed on an
annual basis by adding the value of the property on the first day of the
taxable year and the value on the last day of the taxable year and dividing the
sum by two. If averaging on this basis does not properly reflect average value,
the department may require averaging on a more frequent basis. The taxpayer may
elect to average on a more frequent basis. When averaging on a more frequent
basis is required by the department or is elected by the taxpayer, the same
method of valuation must be used consistently by the taxpayer with respect to
property within and without this state and on all subsequent returns unless the
taxpayer receives prior permission from the department or the department
requires a different method of determining average value.
(5) Average value of real property and
tangible personal property rented to the taxpayer.
(a) The average value of real property and
tangible personal property that the taxpayer has rented from another and which
is not treated as property owned by the taxpayer for federal income tax
purposes, shall be determined annually by multiplying the gross rents payable
during the taxable year by eight.
(b) Where the use of the general method
described in this subparagraph results in inaccurate valuations of rented
property, any other method which properly reflects the value may be adopted by
the department or by the taxpayer when approved in writing by the department.
Once approved, such other method of valuation must be used on all subsequent
returns unless the taxpayer receives prior approval from the department or the
department requires a different method of valuation.
(6) Location of real property and tangible
personal property owned by or rented to the taxpayer.
(a) Except as described in Subparagraph (b)
of this paragraph, real property and tangible personal property owned by or
rented to the taxpayer is considered to be located within this state if it is
physically located, situated or used within this state.
(b) Transportation property is included in
the numerator of the property factor to the extent that the property is used in
this state. The extent an aircraft will be deemed to be used in this state and
the amount of value that is to be included in the numerator of this state's
property factor is determined by multiplying the average value of the aircraft
by a fraction, the numerator of which is the number of landings of the aircraft
in this state and the denominator of which is the total number of landings of
the aircraft everywhere. If the extent of the use of any transportation
property within this state cannot be determined, then the property will be
deemed to be used wholly in the state in which the property has its principal
base of operations. A motor vehicle will be deemed to be used wholly in the
state in which it is registered.
(7) Location of loans.
(a) A loan is considered to be located within
this state if it is properly assigned to a regular place of business of the
taxpayer within this state.
(i) A loan is
properly assigned to the regular place of business with which it has a
preponderance of substantive contacts. A loan assigned by the taxpayer to a
regular place of business without the state shall be presumed to have been
properly assigned if the taxpayer has assigned, in the regular course of its
business, such loan on its records to a regular place of business consistent
with federal or state regulatory requirements; such assignment on its records
is based upon substantive contacts of the loan to such regular place of
business; and the taxpayer uses said records reflecting assignment of loans for
the filing of all state and local tax returns for which an assignment of loans
to a regular place of business is required.
(ii) The presumption of proper assignment of
a loan provided in Item (i) of Subparagraph (a) of this paragraph may be
rebutted upon a showing by the department, supported by a preponderance of the
evidence, that the preponderance of substantive contacts regarding such loan
did not occur at the regular place of business to which it was assigned on the
taxpayer's records. When such presumption has been rebutted, the loan shall
then be located within this state if the taxpayer had a regular place of
business within this state at the time the loan was made and the taxpayer fails
to show, by a preponderance of the evidence, that the preponderance of
substantive contacts regarding such loan did not occur within this
state.
(b) In the case
of a loan which is assigned by the taxpayer to a place without this state which
is not a regular place of business, it shall be presumed, subject to rebuttal
by the taxpayer on a showing supported by the preponderance of evidence, that
the preponderance of substantive contacts regarding the loan occurred within
this state if, at the time the loan was made the taxpayer's commercial
domicile, as defined by Paragraph (3) of Subsection B of this section, was
within this state.
(c) To determine
the state in which the preponderance of substantive contacts relating to a loan
have occurred, the facts and circumstances regarding the loan at issue shall be
reviewed on a case-by-case basis and consideration shall be given to such
activities as the solicitation, investigation, negotiation, approval and
administration of the loan. The terms "solicitation", "investigation",
"negotiation", "approval" and "administration" are defined as follows:
(i) "Solicitation". Solicitation is either
active or passive. Active solicitation occurs when an employee of the taxpayer
initiates the contact with the customer. Such activity is located at the
regular place of business which the taxpayer's employee is regularly connected
with or working out of, regardless of where the services of such employee were
actually performed. Passive solicitation occurs when the customer initiates the
contact with the taxpayer. If the customer's initial contact was not at a
regular place of business of the taxpayer, the regular place of business, if
any, where the passive solicitation occurred is determined by the facts in each
case.
(ii) "Investigation".
Investigation is the procedure whereby employees of the taxpayer determine the
credit-worthiness of the customer as well as the degree of risk involved in
making a particular agreement. Such activity is located at the regular place of
business which the taxpayer's employees are regularly connected with or working
out of, regardless of where the services of such employees were actually
performed.
(iii) "Negotiation".
Negotiation is the procedure whereby employees of the taxpayer and its customer
determine the terms of the agreement (e.g., the amount, duration, interest
rate, frequency of repayment, currency denomination and security required).
Such activity is located at the regular place of business which the taxpayer's
employees are regularly connected with or working out of, regardless of where
the services of such employees were actually performed.
(iv) "Approval". Approval is the procedure
whereby employees or the board of directors of the taxpayer make the final
determination whether to enter into the agreement. Such activity is located at
the regular place of business which the taxpayer's employees are regularly
connected with or working out of, regardless of where the services of such
employees were actually performed. If the board of directors makes the final
determination, such activity is located at the commercial domicile of the
taxpayer.
(v) "Administration".
Administration is the process of managing the account. This process includes
bookkeeping, collecting the payments, corresponding with the customer,
reporting to management regarding the status of the agreement and proceeding
against the borrower or the security interest if the borrower is in default.
Such activity is located at the regular place of business which oversees this
activity.
(8)
Location of credit card receivables. For purposes of determining the location
of credit card receivables, credit card receivables shall be treated as loans
and shall be subject to the provisions of Paragraph (7) of this
subsection.
(9) Period for which
properly assigned loan remains assigned. A loan that has been properly assigned
to a state shall, absent any change of material fact, remain assigned to said
state for the length of the original term of the loan. Thereafter, said loan
may be properly assigned to another state if said loan has a preponderance of
substantive contact to a regular place of business there.
E. Payroll factor.
(1) General. The payroll factor is a
fraction, the numerator of which is the total amount paid in this state during
the taxable year by the taxpayer for compensation and the denominator of which
is the total compensation paid both within and without this state during the
taxable year. The payroll factor shall include only that compensation which is
included in the computation of the apportionable income tax base for the
taxable year.
(2) Compensation
relating to nonbusiness income and independent contractors. The compensation of
any employee for services or activities which are connected with the production
of nonbusiness income (income which is not includable in the apportionable
income base) and payments made to any independent contractor or any other
person not properly classifiable as an employee shall be excluded from both the
numerator and denominator of the factor.
(3) When compensation paid in this state.
Compensation is paid in this state if any one of the following tests, applied
consecutively, is met.
(a) The employee's
services are performed entirely within this state.
(b) The employee's services are performed
both within and without the state, but the service performed without the state
is incidental to the employee's service within the state. The term "incidental"
means any service which is temporary or transitory in nature, or which is
rendered in connection with an isolated transaction.
(c) If the employee's services are performed
both within and without this state, the employee's compensation will be
attributed to this state:
(i) if the
employee's principal base of operations is within this state; or
(ii) if there is no principal base of
operations in any state in which some part of the services are performed, but
the place from which the services are directed or controlled is in this state;
or
(iii) if the principal base of
operations and the place from which the services are directed or controlled are
not in any state in which some part of the service is performed but the
employee's residence is in this state.
F. Section 3.5.19.17 NMAC applies to taxable years beginning on or after January 1, 1996.
Disclaimer: These regulations may not be the most recent version. New Mexico may have more current or accurate information. We make no warranties or guarantees about the accuracy, completeness, or adequacy of the information contained on this site or the information linked to on the state site. Please check official sources.
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