By Matthew Reichbach
The state Senate passed a narrow combined reporting bill (SB9) that would require so-called “big box” stores to pay taxes on income earned in New Mexico. The bill, which tracked the Senate Finance Committee substitute, exempts other businesses like multi-state banks and national fast-food and restaurant chains from combined reporting.
The measure cleared the Senate on a party line vote, with all Democrats voting for the legislation, all Republicans except for one, who was absent, voting for the legislation.
In addition to requiring the big box stores to file taxes using combined reporting, the bill drops taxes on the top corporate income tax rate from 7.6 percent to 7.5 percent. One reason, according to the bill’s sponsor Sen. Peter Wirth (D-Santa Fe), is that the Senate Finance Committee was wary of dropping the corporate tax rate too far in the current turbulent economic times.
There was a long debate on an amendment by Sen. Eric Griego (D-Albuquerque) that would have returned the bill to the original language before it was changed in the Senate Finance Committee. This would have required all out of state corporations to pay their taxes using combined reporting. This, Griego said, would have made sure that entities such as banks would pay their fair share in taxes in the state.
That amendment failed with only five Senators voting for it.
This was the first time that the legislation, which Wirth has carried since he joined the legislature in 2005, has passed the Senate. Wirth made a number of concessions to allow the bill to pass, including lowering the top corporate tax rate and restricting the combined reporting requirement to “big box” stores.
The legislation defines a “big box” store as those ” a unitary corporation that provides retail sales in a facility of more than thirty thousand square feet under one roof.”
Wirth referred to the legislation as a “baby step” a number of times and is a revenue-neutral piece of legislation. He noted that if his bill in 2009, which did not drop the top income corporate tax rate and related to all out of state corporations, it would have increased state revenues by $80 million to $90 million per year according to the fiscal impact report.
Sen. Steven Neville (R-Aztec) disputed the notion that this was a tax loophole that gave out of state corporations an edge. He said that it “is the law of the land of the state of New Mexico.”
Griego said that it was all semantics and they could debate what a loophole really is.
Allan Oliver, CEO of the New Mexico Green Chamber of Commerce, applauded the Senate vote. Oliver said, “This is a big win for New Mexico’s small businesses. This bill lowers corporate taxes for small business, requires ‘big-box’ corporations to pay their fair share and helps our small retail businesses compete on a level playing field.”
Wirth also referred to the bill being one that would help level the playing field for locally owned businesses and used it as an example of why he believed that broader tax reform is needed.
“We’ve got a tax code right now filled with winners and losers,” Wirth said.