Summary:

 Senate Bill 431 (SB 431) amends the Liquor Excise Tax Act by modifying the distribution of liquor excise tax revenues, imposing a new liquor excise surtax on alcohol retailers, and establishing the Tribal Alcohol Harms Alleviation Program Act to provide funding for programs addressing alcohol-related harms in tribal communities. The bill also renames the Local DWI Grant Program Act as the Local Alcohol Harms Alleviation Program Act, expanding its funding scope beyond impaired driving prevention to include general alcohol harm reduction initiatives. Additionally, the bill requires the legislative finance committee and the revenue stabilization and tax policy committee to review liquor excise tax rates and distributions by December 1, 2032, to assess whether changes should be made. SB 431 takes effect on July 1, 2025. 

Legislation Overview:

 Senate Bill 431 (SB 431) revises the Liquor Excise Tax Act by adjusting the allocation of liquor excise tax revenues and imposing a new excise surtax on alcohol retailers. Under the bill, 94% of liquor excise tax revenue will be directed to the Local Alcohol Harms Alleviation Fund, replacing the current allocation to the Local DWI Grant Fund, while 6% will be allocated to the Drug Court Fund. The bill also introduces a liquor excise surtax, set at 6% of the retail price of alcoholic beverages, which will be collected from alcohol retailers and directed entirely to the new Tribal Alcohol Harms Alleviation Fund.

The bill renames the Local DWI Grant Program Act as the Local Alcohol Harms Alleviation Program Act, broadening its purpose beyond impaired driving prevention to include general alcohol harm reduction programs. The restructured program will continue to be administered by the Local Government Division of the Department of Finance and Administration, which will allocate funds for county-level programs addressing alcohol-related harm, treatment services, and prevention efforts.

SB 431 also creates the Tribal Alcohol Harms Alleviation Program Act, establishing the Tribal Alcohol Harms Alleviation Fund, which will receive revenue from the new liquor excise surtax. The Indian Affairs Department will administer grants from this fund to tribal governments, organizations serving Indigenous communities, and local governments assisting urban Native populations. The bill directs that up to $2 million annually may be used for program administration and up to $3 million for research on alcohol-related harms and prevention strategies. From 2027 to 2036, the bill allocates $3 million annually to the University of New Mexico’s Center on Alcohol, Substance Abuse, and Addictions and the Division of Community Behavioral Health to conduct research on alcohol policy, prevention strategies, and the public health and economic impacts of the liquor excise tax and surtax.

Additionally, SB 431 excludes liquor excise tax and surtax revenues from the definition of gross receipts under the Gross Receipts and Compensating Tax Act, ensuring that businesses do not pay gross receipts tax on the liquor excise tax collected. The bill mandates that the legislative finance committee and the revenue stabilization and tax policy committee conduct a comprehensive review of the liquor excise tax and surtax rates and distributions by December 1, 2032, to determine whether adjustments should be made. SB 431 takes effect on July 1, 2025.

Implications

SB 431 increases funding for alcohol harm reduction programs, particularly in tribal and rural communities, by restructuring how liquor excise tax revenues are distributed and imposing a new retail surtax on alcohol sales. The creation of the Tribal Alcohol Harms Alleviation Fund provides dedicated resources for alcohol prevention, treatment, and research efforts focused on Native American communities, which experience disproportionate alcohol-related health and social issues. The bill also expands the Local Alcohol Harms Alleviation Program, shifting its focus beyond impaired driving prevention to a broader range of alcohol-related public health interventions.

The liquor excise surtax represents a significant policy change, shifting part of the tax burden directly to alcohol retailers rather than wholesalers and distributors. This could lead to higher alcohol prices for consumers, depending on whether retailers absorb the tax or pass it on. While supporters argue that higher alcohol prices may discourage excessive consumption and reduce alcohol-related harms, opponents—including the alcohol industry and retailers—may argue that the additional tax burden could negatively impact businesses, particularly small retailers and bars.

The bill’s research funding for the University of New Mexico ensures a long-term evaluation of the effectiveness of the excise tax and alcohol prevention efforts, potentially providing data-driven recommendations for future policy changes. However, the scheduled review of liquor tax rates and distributions in 2032 suggests that further adjustments to the tax structure could be considered, depending on revenue performance and public health outcomes.
 

Current Law:

 Under current law, the Local DWI Grant Fund receives 45% of net liquor excise tax revenue, while other portions are allocated to specific municipal alcohol treatment programs and the Drug Court Fund. SB 431 eliminates these specific municipal allocations and redirects nearly all of the local program funding to the Local Alcohol Harms Alleviation Fund. Additionally, there is no existing liquor excise surtax on retailers, meaning that all liquor excise tax revenue is currently collected at the wholesale level.

The Tribal Alcohol Harms Alleviation Fund is a new initiative that does not currently exist in state law. While certain state and federal grants are available for alcohol prevention in Native communities, there is no dedicated state tax revenue source for tribal alcohol harm reduction programs. SB 431 introduces a stable funding mechanism for these efforts by directing 100% of the new surtax revenue to the Tribal Alcohol Harms Alleviation Fund.