Summary:

 Senate Bill 112 (SB 112) amends Section 7-36-4 NMSA 1978 to exempt certain student housing facilities from property taxation. The exemption applies when the facilities are located on land owned by an exempt higher education institution, leased by the institution to a nonexempt entity, and used to operate or assist in the operation of residential housing for students or medical residents. SB 112 is effective for property tax years beginning in 2026. 

Legislation Overview:

 Senate Bill 112 (SB 112) proposes changes to the Property Tax Code by exempting specific student housing facilities from property taxation. Under the bill, the exemption applies to residential housing for students or medical residents if the facilities are located on land owned by an exempt institution of higher education enumerated in Article 12, Section 11 of the New Mexico Constitution. To qualify for the exemption, the housing facilities must also be leased by the institution to a nonexempt entity to operate or assist in their operation.

The bill clarifies that fractional property interests held by nonexempt entities in real property owned by exempt entities remain subject to taxation unless explicitly exempted. It also outlines reporting and valuation requirements for nonexempt fractional interests in such properties. Nonexempt property must be reported to the appropriate valuation authority, and valuation is to be determined under the applicable provisions of the Property Tax Code.

SB 112 applies to property tax years beginning in 2026.

Fiscal Implications

SB 112 may reduce property tax revenues for local taxing authorities, as certain student housing facilities previously taxed would now qualify for exemption. The fiscal impact will vary depending on the number of facilities meeting the exemption criteria and their valuation under current law. Local governments and school districts could see reduced funding if the affected properties contribute significantly to the tax base. Additionally, valuation authorities may experience a slight increase in administrative costs to evaluate and monitor exemptions. 

Current Law:

 Under the current provisions of Section 7-36-4 NMSA 1978, fractional property interests in real property owned by exempt entities are generally subject to property taxation if held by nonexempt entities. Improvements made on exempt land and leased or owned by nonexempt entities are also subject to taxation. Student housing facilities leased to nonexempt entities are not explicitly exempt, even when the facilities benefit students or medical residents of an exempt higher education institution. 

Amendments:

 Amended March 19, 2025 in HTRC

HTRCa/SB 112: The House Taxation & Revenue Committee amendment to Senate Bill 112 inserts the word “exclusive” before “use” on page 3, line 18 of the bill. This change clarifies that the property tax exemption for student or medical resident housing applies only when the improvements are used exclusively as residential housing facilities.

Implication
The inclusion of the term “exclusive” narrows the scope of the property tax exemption, preventing unintended tax relief for properties that are not fully dedicated to student or medical resident housing. This clarification limits the fiscal impact on local governments and ensures that only facilities solely used for the exempt purpose are granted the benefit. The amendment also enhances administrative clarity, allowing assessors to more easily determine which properties qualify for the exemption, thus reducing potential confusion regarding mixed-use facilities and ensuring a more accurate application of the exemption.