On Wednesday, March 6, 2024, New Mexico Governor Michelle Lujan Grisham signed an omnibus tax bill (HB 252) into law, capping off a two-year effort to pass the package. The bill was introduced and sponsored by Rep. Derrick J. Lente on January 25, 2024. The bill passed in the New Mexico House of Representatives on February 7, 2024, with a vote of 48-21, and in the New Mexico Senate on February 11, 2024, with a vote of 26-13. The legislation is projected to save New Mexicans $231 million in income tax adjustments, provide consumer incentives for the purchase of electric vehicles, and introduce new economic incentives for advanced energy manufacturing projects.
“Cutting costs for families has been a hallmark of my administration from Day One. Since 2019, our policies have saved New Mexico taxpayers more than $910 million. On top of the savings for families and businesses, we are growing our clean energy economy through credits for advanced manufacturing, clean cars, geothermal, and more. This is what fair and responsible tax leadership looks like.”
- New Mexico Governor Lujan Grisham (D-NM)
1. The Bill Restructures New Mexico’s Income Tax Brackets
The bill restructures the state's income tax brackets, offering significant relief, particularly to low- and middle-income earners, introducing a six-bracket system with rates ranging from 1.5% to 5.9%. A married couple with a $50,000 joint income could see annual savings of $303, marking the first major adjustment since 2005.
"This bill continues the steady and significant progress we’ve made over the past five years to lower the tax burden for New Mexico families and businesses, with annual savings of about $1 billion per year,"
- New Mexico Taxation and Revenue Secretary Stephanie Schardin Clarke
2. The Bill Introduces New Consumer Tax Credits for Electric Vehicle Purchases
The legislation introduces income tax credits aimed at promoting the adoption of electric and plug-in hybrid vehicles. These credits, ranging from $2,000 to $3,000, will phase out in 2029. Additionally, the legislation promotes the purchase of charging units for electric vehicles, ranging from $400 to $25,000.
- Credits for Electric Vehicle Purchase:
- New Mexicans will receive $2,000 for the purchase of previously owned plug-in hybrid electric vehicles.
- New Mexicans will receive $3,000 for the purchase of new electric vehicles during the first three years of the program.
- Charging Units Credits:
- New Mexicans will receive up to $400 for the purchase of residential electric vehicle charging units.
- New Mexicans will receive up to $25,000 for the purchase and installation of commercial-scale direct current charging units.
"With these new credits, we address both electric vehicle affordability and infrastructure at the same time."
- New Mexico State Senator Bill Tallman (D-NM-18)
3. The Bill Introduces the Advanced Energy Equipment Income Tax Credit
The bill introduced the Advanced Energy Equipment Income Tax Credit, which will offset up to 20% of the costs of equipment to produce components that qualify under the Inflation Reduction Act’s Section 45X provision for solar, wind, battery manufacturing, and rare earth element production. The credits will leverage the federal incentives to attract clean energy businesses, fostering job creation and economic growth.
- 20% of qualified equipment costs up to $25 million per project. For example, a project with qualified equipment costs of $50 million would receive a credit of $10 million. Additionally, projects with qualified equipment costs of $125 million or projects with qualified equipment costs of $525 million would only receive a credit of $25 million because of the cap.
- Facility operations must continue for at least two years after claiming the tax credit.
"New Mexico’s leadership in advanced-energy manufacturing is creating jobs, diversifying our economy, and providing the world with clean energy that is essential to combating climate change." This credit will continue to attract investments from around the globe that we need in our state to meet our ambitious climate goals,”
- New Mexico Environment Department Cabinet Secretary James Kenney
4. The Bill Expands Clean Energy Incentives
The bill extended and expanded clean energy tax credits available from the state, including:
- Solar Market Development Tax Credit:
- “For taxable years prior to January 1, 2032, a taxpayer who is not a dependent of another individual and who, on or after March 1, 2020, purchases and installs a solar thermal system or a photovoltaic system in a residence, business or agricultural enterprise in New Mexico owned by that taxpayer or by a federally recognized Indian nation, tribe or pueblo and held in leasehold by that taxpayer may apply for, and the department may allow, a credit against the taxpayer's tax liability imposed pursuant to the Income Tax Act.”1
- The tax credit cannot exceed $6,000.
- The cap for awarded credits for 2024 and thereafter was increased from $12 million to $30 million.
- An additional $20 million for homeowners previously excluded due to the existing cap can be awarded if the limitation is met.
- Geothermal Heat Pump and Electricity Credits:
- “A taxpayer who files an individual New Mexico income tax return for a taxable year beginning on or after January 1, 2024 and who purchases and installs after the effective date of this section but before December 31, 2034 a geothermal ground-coupled heat pump in a residence, business or agricultural enterprise in New Mexico owned by that taxpayer may apply for, and the department may allow, a tax credit of up to thirty percent of the purchase and installation costs of the system.”2
- The maximum credit allowed to a taxpayer is $9,000.
- Gross Receipts Tax Deduction:
- “Prior to July 1, 2034, receipts from selling wind generation equipment or solar generation equipment to a government for the purpose of installing a wind or solar electric generation facility may be deducted from gross receipts.”3
"We advocated for these changes to the immensely popular Solar Market Development Tax so that more New Mexicans can access this important clean energy solution,"
- New Mexico Deputy Secretary of the Energy, Minerals, and Natural Resources Department Dylan Fuge
5. The Bill Increases Economic Relief Benefits for Families
The tax bill extends beyond economic relief to encompass a range of benefits for individuals and families:
- Childcare Services Deduction:
- Receipts from the sale of childcare assistance services may be deducted from gross receipts.
- Receipts from the sale of for-profit pre-kindergarten may be deducted from gross receipts.
- Military Pensions:
- Armed forces retirees and surviving spouses of armed forces retirees may claim an exemption of $30,000 of armed forces retirement pay includable, except in net income.
- Special-Needs Adopted Child Tax Credit:
- Taxpayers who adopt a special needs child can claim the “special needs adopted child tax credit” in the amount of $1,500 each year the child is claimed as a dependent.
- Teacher Supplies Deduction:
- Public school teachers may claim a deduction from net income in an equal amount to the cost of school supplies purchased by the teacher of up to $500 before January 1, 2025, and up to $1,000 after January 1, 2025, and prior to January 1, 2029.
- Home Fire Recovery Credits:
- A taxpayer who incurs qualified home expenditures for a home in New Mexico to replace a prior home of the taxpayer that was destroyed by a wildfire in calendar years 2021 – 2023 can claim an income tax credit in an equal amount to the expenditures, up to $50,000.
- Rural Healthcare Practitioner Income Tax Credit:
- Eligible healthcare practitioners who have provided healthcare services in New Mexico in a rural healthcare underserved area may claim a credit against the tax liability imposed by the Income Tax Act.
- The maximum credit to be claimed is $5,000.
Relevant Resources
Governor Michelle Lujan Grisham Press Release
1 New Mexico House. HB 252. 2024. https://www.nmlegis.gov/Legislation/Legislation?Chamber=H&LegType=B&LegNo=252&year=24.
2 Ibid.
3 Ibid.
© Copyright 2024. The views expressed herein are those of the author(s) and not necessarily the views of Ankura Consulting Group, LLC., its management, its subsidiaries, its affiliates, or its other professionals. Ankura is not a law firm and cannot provide legal advice.
