Summary:

 House Bill 511 (HB 511) establishes the Retail Center Renovation Income Tax Credit and the Retail Center Renovation Corporate Income Tax Credit, providing financial incentives for the renovation and redevelopment of retail centers in New Mexico. The credits apply to qualifying renovation costs incurred between the bill’s effective date and January 1, 2035. Each credit is equal to 10% of qualifying renovation costs, capped at $1.5 million per project. The total aggregate amount of tax credits issued under both programs is limited to $15 million per year. The bill sets eligibility requirements, reporting obligations, and restrictions on the use of multiple tax incentives for the same project. The credits are non-refundable but may be carried forward for five years. HB 511 applies to taxable years beginning on or after January 1, 2025, and is repealed effective January 1, 2036. 

Legislation Overview:

 House Bill 511 (HB 511) creates two tax credits to incentivize the renovation and redevelopment of retail centers in New Mexico. The Retail Center Renovation Income Tax Credit applies to individual taxpayers, while the Retail Center Renovation Corporate Income Tax Credit applies to businesses subject to corporate income tax. Both credits provide an amount equal to 10% of qualifying renovation costs, with a maximum of $1.5 million per project. To qualify, a project must renovate at least 50% of a retail center’s total square footage, including indoor and outdoor areas, and may involve the conversion of a retail center into a mixed-use development or multifamily residential housing.

Applicants must apply for certification of eligibility from the Economic Development Department within one year of project completion. The application must include a compliance certificate from the local jurisdiction verifying adherence to building codes and permitting requirements, as well as a notarized declaration affirming that at least 50% of the retail center’s leasable space was renovated. The Economic Development Department will review applications in the order received and issue certificates of eligibility until the annual $15 million aggregate cap is met.

The credits are non-refundable, but any unused amount may be carried forward for five years. Taxpayers cannot claim both the Retail Center Renovation Income Tax Credit and the Retail Center Renovation Corporate Income Tax Credit for the same project. Additionally, projects that receive the federal New Markets Tax Credit under Section 45D of the Internal Revenue Code are ineligible. The bill requires the Taxation and Revenue Department to include these credits in the annual tax expenditure budget, reporting on their economic impact, including job creation and changes in property values. HB 511 applies to taxable years beginning on or after January 1, 2025, and is automatically repealed on January 1, 2036.

Implications

HB 511 aims to stimulate investment in the renovation and redevelopment of aging or underutilized retail centers, encouraging economic revitalization and repurposing commercial spaces to better meet current market demands. By allowing mixed-use and multifamily residential conversions, the bill supports adaptive reuse strategies that could help address housing shortages in urban and suburban areas while maintaining commercial viability. The credits may encourage property owners to invest in structural improvements, energy efficiency upgrades, and accessibility enhancements, aligning with broader economic and environmental goals.

The program’s $15 million annual cap provides a financial safeguard for the state while limiting the total number of projects that can benefit each year. Because the credits are non-refundable, they primarily benefit taxpayers with sufficient tax liability to offset, making them less accessible to smaller developers with limited tax exposure. However, the five-year carryforward provision offers flexibility for businesses to utilize the credits over time.

The certification process ensures accountability by requiring verification of compliance with building codes and renovation thresholds. However, the additional administrative burden on the Economic Development Department to review applications, issue eligibility certificates, and enforce compliance may require additional staffing or resources. The exclusion of projects already benefiting from the New Markets Tax Credit prevents duplication of incentives but may discourage some developers from pursuing federal and state funding sources simultaneously.
 

Current Law:

 Under current law, New Mexico does not offer a specific tax credit for retail center renovations. Existing economic development incentives, such as the Job Training Incentive Program and the Local Economic Development Act, focus on job creation and business expansion rather than physical infrastructure improvements. Some commercial properties may qualify for federal tax incentives, including the New Markets Tax Credit and Historic Preservation Tax Credit, but these programs have different eligibility criteria and application processes.