A. The following coal is exempt from the surtax imposed on coal under the provisions of Section 7-26-6 NMSA 1978:

(1) coal sold and delivered pursuant to coal sales contracts that are entered into on or after July 1, 1990, under which deliveries start after July 1, 1990, if the sales contracts are not the result of:

(a) a producer and purchaser mutually rescinding an existing contract and negotiating a revised contract under substantially similar terms and conditions;

(b) a purchaser establishing an affiliated company to purchase coal on behalf of the purchaser; or

(c) a purchaser independently abrogating a contract that was in effect on July 1, 1990 with a producer for the purpose of securing the benefits of the exemption granted by this section; and

(2) coal sold and delivered pursuant to a contract in effect on July 1, 1990 that exceeds the average calendar year deliveries under the contract during production years 1987, 1988 and 1989 or the highest contract minimum during 1987, 1988 and 1989, whichever is greater.

B. If a contract existing on July 1, 1990 is renegotiated between a producer and a purchaser after May 20, 1992 and if that renegotiated contract requires the purchaser to take annual coal deliveries in excess of the greater of the average calendar year deliveries under the contract during production years 1987, 1988 and 1989 or the highest contract minimum during 1987, 1988 and 1989, the surtax imposed by Subsection B of Section 7-26-6 NMSA 1978 shall not apply to such excess deliveries for the remaining term of the renegotiated contract.

C. For coal exempt under the provisions of Paragraph (2) of Subsection A of this section, if the contract involved was for a lesser term during the production years specified, then actual deliveries shall be annualized to establish average calendar year deliveries, and in the event that coal sold and delivered in a calendar year after June 30, 2009 falls below the average calendar year deliveries during 1987, 1988 and 1989, the exemption shall no longer apply unless the deliveries are reduced due to causes beyond the reasonable control of either party to the contract.

D. The taxpayer, prior to taking the exemption provided by this section, shall register any contract for the sale of coal that qualifies for the exemption from the surtax under the provisions of this section with the department on forms provided by the secretary. If upon examination of the contract or upon audit or inspection of transactions occurring under the contract the secretary or the secretary's delegate determines that a person who is a party to the contract has taken an action to circumvent the intent and purpose of this section, the exemption shall be disallowed.

History: 1978 Comp., § 7-26-6.2, enacted by Laws 1990, ch. 83, § 1 and Laws 1990, ch. 84, § 1; 1992, ch. 65, § 1; 1992, ch. 115, § 1; 1994, ch. 73, § 1; 1995, ch. 53, § 1; 1997, ch. 61, § 1; 1999, ch. 86, § 1.

The 1999 amendment, effective June 18, 1999, in Subsection A, deleted "until July 1, 2009" following "is exempt" in the introductory language, and "and before June 30, 1999" following "July 1, 1990" in Paragraph (1); in Subsection B, deleted "prior to June 30, 1999 and" following "a purchaser" near the beginning and "or until July 1, 2009, whichever occurs first" at the end; in Subsection C, substituted "June 30, 2009" for "June 30, 1999"; and made minor stylistic changes.

The 1997 amendment, effective June 20, 1997, substituted "1999" for "1997" following "June 30," in Subsection B.

The 1995 amendment, effective June 16, 1995, substituted "June 30, 1997" for "June 30, 1995" in Paragraph (1) of Subsection A and in Subsections B and C.

The 1994 amendment, effective July 1, 1994, substituted "1995" for "1994" in Paragraph A(1), in the first sentence of Subsection B, and in Subsection C; substituted "May 20, 1992" for "effective date of this 1992 act" in Subsection B; and deleted "taxation and revenue" preceding "department" in the first sentence of Subsection D.

The 1992 amendment, effective May 20, 1992, substituted "highest contract minimum during 1987, 1988 and 1989, whichever is greater" for "contract minimum, whichever is greater" in Subsection A(2) and rewrote Subsection B.