April 29, 1991
TO: MEMBERS - ONE PER COMPLEX NO. 18-91
CLOSED-END FUND MEMBERS NO. 19-91
TAX MEMBERS NO. 11-91
UNIT INVESTMENT TRUST MEMBERS NO. 18-91
ACCOUNTING/TREASURERS MEMBERS NO. 10-91
RE: NEW MEXICO RETROACTIVELY IMPOSES TAXATION ON OUT-OF-STATE
MUNICIPAL BOND INCOME
__________________________________________________________
As we have informed you in our Surveys of State Income
Taxation, prior to 1991 New Mexico exempted from state tax the
interest income paid on federal obligations and on municipal
obligations of New Mexico and all other states, whether the
income was received directly or through a mutual fund. (See
Institute Memorandum to Members - One Per Complex No. 51-90,
Closed-End Fund Members No. 46-90, Tax Members No. 48-90, Unit
Investment Trust Members No. 73-90 and Accounting/Treasurers
Members No. 23-90, dated November 21, 1990). New Mexico's
treatment thus differed from the prevailing state position of
exempting from tax only the interest paid on federal obligations
and on that state's own obligations.
The attached New Mexico Taxation and Revenue Department
announcement discusses recently enacted legislation (also
attached), effective retroactively to January 1, 1991, which
exempts from New Mexico tax only federal obligation interest and
New Mexico obligation interest. The law does not include a
grandfather provision for interest income paid on out-of-state
municipal bonds purchased prior to January 1, 1991. Thus, all
interest income from out-of-state bonds has been taxable in New
Mexico since January 1, 1991.
We will keep you informed of developments.
Keith D. Lawson
Associate Counsel - Tax
Attachments
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