It’s Alive: Bill to close out-of-state corporate tax loophole clears first committee

By Matthew Reichbach

A combined reporting bill that would close the loophole that allows multi-state corporations to avoid paying income tax on profits created in New Mexico, passed a key Senate committee Wednesday night, the first hurdle in its effort to become law.

After over two hours of debate, the Senate Corporations and Transportation Committee passed SB 9 on a 5-4 vote with no recommendation. Sen. Phil Griego (D-San Jose) voted along with the Republicans on the panel.

Sen. Peter Wirth (D-Santa Fe) brought the law for the fourth straight year, this time with some tweaks. In addition to calling for combined reporting, Wirth’s law would reduce the top corporate income tax rate to 7.0 percent from 7.6 percent, a difference from the past years to entice votes that otherwise have gone against the bill.

Wirth and supporters of the bill say the bill would level the playing field for small businesses in New Mexico that do not have the option of paying corporate taxes in another state. Those who oppose the bill say it would make New Mexico less competitive and stop businesses from coming to New Mexico to do business.

“These small businesses are put in a position of competing against multistate conglomerates,” Wirth said, saying the large corporations can expense profits to other states instead of paying the New Mexico taxes.

In an attempt to make the legislation hit a more narrow area of businesses, Griego proposed an amendment that would only require retail outlets of more than 30,000 square feet to comply with combined reporting. Griego called it his “big box amendment.” It was aimed squarely at corporations like Walmart and Target while attempting to exempt other businesses like Intel Corporation. But it would also have exempted large fast food chains.

Wirth called the bill a sort of “reverse carveout” which “carves everybody out except big box stores.”

The amendment ultimately failed.

A common complaint of those who were opposing the bill, who were all lobbyists for multistate corporations, is that this bill would be favoring one class of businesses (locally owned businesses) over another class of businesses (multi-state corporations).

“I’m not the one pitting businesses against businesses,” Wirth told the committee. “We already do that in our tax code.” Wirth said this bill would level the playing field.

The bill now heads to the Senate Finance Committee where it probably faces a similarly tough debate. Nevertheless, clearing Senate Corporations was a notable achievement, given the committee’s long-standing and well-deserved reputation as the home field for corporate lobbyists.

Odds and Ends

  • One problem is that no one quite knows just how much the tax loopholes and carveouts cost the state in lost revenue. A bill requiring a tax expenditure budget, which would fully account for the effects of all the tax breaks, was vetoed last year — something that Sen. Tim Keller (D-Albuquerque) called a preemptive strike against tax reform. Gov. Susana Martinez will release her own tax expenditure budget, but, due to the veto, the next governor will not be required by statute to follow her example. Former Gov. Bill Richardson also vetoed a tax expenditure budget.
  • Former Sen. Kent Cravens came back to the New Mexico legislature, this time as a lobbyist for the New Mexico Oil and Gas Association. He objected to the term “loophole” to describe businesses paying taxes in other states on the revenue created in New Mexico, saying it “demonized” businesses for filing in an appropriate fashion. Cravens probably also objects to the terminology of the “revolving door” — a reference to the practice of former legislators immediately returning to the Roundhouse as corporate lobbyists.
  • Sen. George Munoz (D-Gallup) said that the bill would ultimately make corporations layoff workers to keep their profits up.
  • Though the room cleared out because of the late start to the hearing (SB 9 was not heard until after 6:00), the room still had many supporters of the legislation. When they applauded after public comment, committee chair Griego seemed visibly upset and instructed the audience that they were not in a city council or county commission hearing and to not burst into applause. Before coming to the state Senate in 1996, Griego served on the Santa Fe City Council.
  • Supporters of the bill asked questions of Frank Katz, the former General Counsel at the New Mexico Taxation & Revenue Department. Opponents of the bill tended to direct their questions to Dick Minzner, a lobbyist who has long opposed combined reporting on behalf of his clients.

Restaurant Gun Bill Now Law

There was unpleasant news today as Governor Bill Richardson signed a bill that will allow people who have permits to carry concealed weapons to take them into restaurants that serve beer and wine.

You know, like the places you and I take our children to.

The legislation was introduced during the most recent regular session by Sen. George Munoz, a Democrat, who had complained in the press that his gun was stolen from a locked car while in the possession of his sister – in the state of Nevada. If people were allowed to take their guns with them while they ate, they wouldn’t be stolen from their cars, Sen. Munoz argued.

Never mind that the incident that prompted Sen. Munoz to sponsor this bill took place in another state. Never mind that none of the bill’s supporters could produce any statistics showing that this is an actual problem in New Mexico.

The whole premise – that people should be able to bring concealed guns into places where alcohol is served – goes against common sense, not to mention specific studies done by non-partisan think tanks like the Virginia Center for Public Safety.

“I just think it’s a terrible idea,” said Sen. Eric Griego, a Democrat who opposed the bill and spoke out against it. “Families who go to restaurants now have to worry about whether someone may or may not be carrying a weapon.”

Griego acknowledged that permitted gun carriers may have great intentions to use their guns only for protection, but said he worries that accidents can happen whenever a dangerous weapon is present.

Griego said the new law puts restaurant owners – many of whom opposed the bill – in an unenviable position of enforcing the new law.

Griego said he tried to amend the bill to include a measure that would require restaurants to post a notice indicating whether they allow concealed guns or not – forcing the issue so customers would know. That amendment failed, he said. Now, if a restaurant doesn’t post a notice, it can be assumed that they allow concealed carry guns.

In my opinion, Gov. Richardson played awfully coy with this gun bill. He put it on the call for a session that was supposed to focus on the budget. Then the Governor had a spokesman say that in no way should be taken as a sign that he supports the bill. Immediately after the session, Richardson declined to say whether he’d approve the bill, saying “We’ll have to wait and see.”

Today in his announcement, he said, “My decision to sign this bill came after much contemplation and thought. I heard strong opinions from both those for and against the bill. As the Governor of a western state, I know well the deep feelings that come with such a measure, but I also understand those feelings and beliefs must be tempered by the enactment of certain safeguards.”

Richardson also said today that he was directing the New Mexico Department of Public Safety to revise a regulation that would make it clear that those with concealed weapons could not consume alcohol.

Sorry, that’s not good enough.

Thank God that restaurants who reject this new law can opt out by posting a conspicuous notice telling patrons that concealed weapons are not permitted in their restaurant.

Let’s hope they all do.

I won’t take my family to the ones that don’t.

Guns + Alcohol = Bad Idea

Let me get this straight.

Because Democratic Sen. George Munoz of Gallup lent his car to his sister and got his gun stolen from the car while it was IN ANOTHER STATE, legislators in New Mexico now might make it legal for people to carry concealed guns into restaurants that serve beer and wine.

“If you leave guns in vehicles, they’re going to be stolen,” Munoz told the Albuquerque Journal, when asked to explain why he introduced SB40, which would allow people with permits for concealed weapons to carry them into establishments that serve beer and wine. The bill has passed several committees during the current session and could end up making it into law.

I see.

So because of one thing that happened in another state, I may now have to worry about people whipping out guns whenever I take my kids to Scarpas or Saggios or Slate Street Café.

Whatever your beliefs about gun rights and licensing and training and law-abiding citizens, it just makes sense to know that combining concealed weapons and any kind of alcohol is a bad idea. The law bars anyone who carries from actually drinking, but how is a server going to enforce that, when the gun is concealed?

An analysis from the state prepared in conjunction with the bill lays it straight out.

From the Journal story:

According to the state Department of Public Safety, more than 17,000 New Mexicans have been issued concealed carry licenses since 2004.

“The introduction of a firearm, legal or otherwise, into an environment where alcohol is consumed is inherently dangerous,” the department is quoted as saying in an analysis of Munoz’s bill prepared for legislators.

But it really doesn’t take a government analysis to see that SB40 is a bill that deserves to die on the floor.