As used in the Venture Capital Investment Act: A. “capital gain tax differential” equals either:

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(1)     an amount equal to fifty percent of the federal income tax paid by the taxpayer on qualified diversifying business net capital gains; or

(2)     in the event that the taxpayer makes an election pursuant to Section 7-2D- 13 NMSA 1978, and the taxpayer has not previously paid federal income tax on the qualified diversifying business net capital gain that accrued prior to that election, then an amount equal to fifty percent of the federal income tax paid by the taxpayer on the gain on the sale of that qualified diversifying business stock times the percentage derived by dividing the gain on such stock accruing since the election by the total gain on the stock accruing since its original acquisition without regard to the election;

B. “department” means the taxation and revenue department, the secretary of taxation and revenue or any employee of the department exercising authority lawfully delegated to that employee by the secretary;

C. “Internal Revenue Code” means the federal Internal Revenue Code of 1986, as amended or renumbered;

D. “manufacturing business” means the manufacture of, and the business activities related to the manufacture of, all nondurable and durable goods;

E. “New Mexico income tax” means the tax imposed pursuant to the Income Tax Act [N.M. Stat. Ann. Chapter 7, Article 2];

F. “qualified diversifying business net capital gain” means the net capital gain for the taxable year determined under the Internal Revenue Code by taking into account only gains or losses from sales or exchanges of qualified diversifying business stock with a holding period of more than five years at the time of the sale or exchange;

G. “secretary” means the secretary of taxation and revenue or the secretary’s delegate;

H. “taxpayer” means any individual subject to the tax imposed pursuant to the Income Tax Act; and

I. “testing period” means the five-year period a stock is held by a taxpayer, beginning with the first day of the taxpayer’s holding period for the stock.