N.M. Admin. Code § 3.3.1.10

Current through Register Vol. 35, No. 20, October 22, 2024

Section 3.3.1.10 - MODIFIED GROSS INCOME

A.Modified gross income definitions.

(1) The following definitions apply in determining the amount of modified gross income for each taxable year:

(a) "Social Security Benefits" means only cash payments made pursuant to Title II of the Social Security Act for old age, survivors and disability benefits, including any amount deducted for part B coverage.

(b) "Unemployment Compensation Benefits" means cash benefits paid through the employment security division of the New Mexico department of labor or any similar state agency of another state or any private income substitution program.

(c) "Workers' Compensation Benefits" means cash payments to the worker made by the employer or any insurance company providing workers' compensation coverage where such payments are based on the worker's average weekly wage, but does not include payments for medical or rehabilitative services, whether made directly to the provider or made to the worker for reimbursement of such expenses.

(d) "Public Assistance and Welfare Benefits" means unrestricted cash payments made under the supplemental security income program, the aid to families with dependent children program, general assistance or similar programs. It does not include medical payments or reimbursements under medicaid, medicare, hospital indigency programs, department of vocational rehabilitation programs, V.A. medical assistance, CHAMPUS or other such programs. It does not include housing subsidies or payments.

(e) "Cost of Living Allowances" or "Gifts" do not include provision of free room and board to persons when that room is provided based on financial need or noncommercial considerations. "Costs of living allowances" does include provision of room or compensation for room made during an employer-employee relationship or other commercial situation.

(f) "Income From Discharge of Indebtedness" means income which becomes available because of the forgiveness of a debt. It does not include debts which are discharged by bankruptcy or when the discharge fails to result in the availability of cash resources.

(g) "Gains Derived From Dealings in Property" mean "gains derived from dealings in property" as defined in 26 C.F.R. (Internal Revenue Service Income Tax Regulation) 1.61-6, as amended or renumbered.

(h) "Interest" means "interest" as defined in 26 C.F.R. (Internal Revenue Service Income Tax Regulation) 1.61-7, as amended or renumbered.

(i) "Net Rents" means cash income derived from the rental of real or personal property over and above all expenditures related to the rented property, including but not limited to mortgage payments, management expenses, housekeeping, property taxes, brokerage fees, special assessments and other operating charges.

(j) "Annuities" and "Income From Life Insurance and Endowment Contracts" mean "annuities" and "certain proceeds of endowment and life insurance contracts" as defined in 26 U.S.C. Section 72 (Internal Revenue Code of 1986), as amended or renumbered, and regulations promulgated thereunder.

(2) Scholarships, grants, fellowships or similar payments, made either to the taxpayer or to an educational institution or to both, which do not have to be repaid are modified gross income.

(3) Modified gross income does not include:

(a) payments made for hospital, dental, medical or drug expenses, whether the payment is made directly to the insured/recipient or to a third party provider, and regardless of whether a premium is paid or not.

(b) the value of room and board provided by federal, state or local government or by private individuals or agencies when the assistance is based upon financial need or other noncommercial considerations, and not as a form of compensation.

(c) debts that have been discharged by a United States bankruptcy court.

(d) gifts or gratuities which are not cash or which have no market value or only negligible market value.

(e) any additional benefits or payments made pursuant to a government program made directly or indirectly to a third party, when identified to a particular use or invoice, such as housing rehabilitation grants for low income housing, housing subsidies or payments, weatherization payments and energy crisis intervention payments pursuant to the Home Energy Assistance Act of 1980 (Title III of Public Law 96-223).

(f) payments made to New Mexico residents pursuant to the foster grandparent program under the National Older American Volunteer Act (42 U.S.C. Section 5011).

(g) the value of food stamp coupons under the Food Stamp Act, 7 U.S.C. § 2016 c.

(h) monies received during the taxable year as comprehensive low income, food, medical, low income food and medical or property tax rebates.

(i) proceeds from loans which the taxpayer is legally obligated to repay.

(4) Example 1: G has two children and receives $2,796 per year AFDC (Aid to Families with Dependent Children) from the human services department. The monthly rate is $233 per month. G lives in a Section VIII rent subsidy house for which G pays $50 a month rent and the housing authority pays the owner an additional $150 per month. During the year the human services department pays $550 for health and medical expenses for G and G's children under the medicaid program. G's modified gross income is $2,796. Neither the rent subsidy nor medicaid is includable as modified gross income.

(5) Example 2: A is 75 years old and receives a total of $238 per month from social security and supplemental security income ($170 per month social security and $68 per month SSI). A lives in a trailer which A's daughter and son-in-law own and in which A has permission to remain until A dies. A also received two tanks of bottled gas under the community action energy crisis program. A's modified gross income is $2,856 ($238 a month times 12 months). The rental value of the trailer is not included in modified gross income since it was provided upon noncommercial considerations and to a person in need. The utility assistance A received is also not included.

(6) Example 3: B is a retired person. B has medical bills of $600 for which B's insurance will reimburse B after B pays the doctor. B also received approximately $1,500 in housing rehabilitation benefits, which were paid in one check made payable to B and the housing contractor. Later on B was given a check for $200 by the housing rehabilitation agency to pay for materials which B had purchased on credit as part of the rehabilitation program. B is living on a savings account which earns interest. B's modified gross income is only the amount of interest earned by the savings account. The insurance payment is not modified gross income because it is an indirect medical payment and identified to a particular expense. The same reasoning applies to the $200 payment made for the materials. Finally, the weatherization or rehabilitation benefits are not modified gross income.

(7) Example 4: M is an elderly person who lives alone and receives $500 per month ($6,000 per year) social security payments. Periodically, M receives gifts of food and used clothing from community sources. M is given a used pickup truck, valued at $1,000, and jewelry valued at $3,000 by a relative. M's modified gross income is $6,000 plus $1,000, plus $3,000, for a total of $10,000. The car and jewelry are included since they are gifts which are tangible marketable items. The food and clothing do not represent cash or marketable items and so are not included in modified gross income.

B.Impact of losses on modified gross income. "Modified gross income" may not be diminished by deductions or offset by losses which may be allowed under the New Mexico Income Tax Act or under the Internal Revenue Code of 1986, as amended or renumbered. Despite any loss occurring from any transaction, or any expense connected therewith, zero is the lowest amount which may be reported for any item in computing "modified gross income". The loss from one business or activity shall not reduce the income from another business or activity. If a business incurs a loss during the taxable year, the amount of income to be included in modified gross income from that business is zero (-0-) for that taxable year.

C.Sick pay included in modified gross income. "Sick pay", payments received for damages for personal injury or illness and disability payments from whatever source are "modified gross income".

D.Settlement of claims included in modified gross income. Amounts received in settlement of a claim or as a result of a judgment are "modified gross income".

N.M. Admin. Code § 3.3.1.10

1/18/82, 12/29/89, 7/20/90, 3/16/92, 1/15/97; 3.3.1.10 NMAC - Rn, 3 NMAC 3.1.10, 12/14/00