New Mexico § 46-3A-411 - Minerals, water and other natural resources

§ 46-3A-411. Minerals, water and other natural resources

(a) To the extent that a trustee accounts for receipts from an interest in minerals

or other natural resources pursuant to this section, the trustee shall allocate them

as follows: (1) If received as nominal delay rental or nominal annual rent on a lease, a receipt

must be allocated to income. (2) If received from a production payment, a receipt must be allocated to income if

and to the extent that the agreement creating the production payment provides a factor

for interest or its equivalent. The balance must be allocated to principal. (3) If an amount is received from a working interest, royalty payment, shut-in well

payment, take-or-pay payment, bonus or delay rental or any other interest not provided

for in Paragraph (1) or (2) of this subsection, the amount that is allowed as a deduction

from gross income for depletion purposes under the federal income tax law in effect

at the time of severance shall be allocated to principal and the balance to income. If the amount that is allowed as a deduction is less than fifteen percent of gross

income for depletion purposes, or if depletion is not allowed, then the amount to

be allocated to principal and the amount to be allocated to income shall be determined

in accordance with Section 104. (b) An amount received on account of an interest in water that is renewable must be

allocated to income. If the water is not renewable, ninety percent of the amount must be allocated to

principal and the balance to income. (c) The Uniform Principal and Income Act applies whether or not a decedent or donor

was extracting minerals, water or other natural resources before the interest became

subject to the trust. (d) If a trust owns an interest in minerals, water or other natural resources on the

effective date of the Uniform Principal and Income Act, the trustee may allocate receipts

from the interest as provided in that act or in the manner used by the trustee before

the effective date of that act. If the trust acquires an interest in minerals, water or other natural resources

after the effective date of the Uniform Principal and Income Act, the trustee shall

allocate receipts from the interest as provided in that act.