CS/HB 252/a ADJUST INCOME TAX BRACKETS

Rep Derrick Lente

Actions: [4] HCEDC/HTRC-HCEDC [5] DP-HTRC [9] DNP-CS/DP [10] PASSED/H (48-21) [7] STBTC-STBTC [9] DP/a - PASSED/S (26-13) [14] h/cncrd SGND BY GOV (Mar. 6) Ch. 67 (partial veto).

Scheduled: Not Scheduled

 House Bill 252 (HB 252) modifies individual income tax brackets and rates. 

 House Bill 252 (HB 252) modifies individual income tax bracket. The changes expand the income brackets which lowers the tax rate.

(Tax Rate, Single, Married Filing Jointly/Head of Household, Married Filing Separately)

1.5%, $0-$5,500, $0-$8,000, $0-$4,000
3.2%, $5,501-$16,500, $8,001-$25,000, $4,001-$12,500
4.3%, $16,501-$33,500, $25,0001-$50,000, $12,501-$25,000
4.7%, $33,501-$66,500, $50,001-$100,000, $25,001-$50,000
4.9%, $66,501-$210,000, $100,001-$315,000, $50,001-$157,500
5.9%, over $210,000, $315,001, $157,501

If passed and signed into law, HB 252 is effective beginning Tax Year 2025.
 

 Amended February 12, 2024 in STBTC:

STBTCa/HB 252 HTRCcs: The Senate Tax, Business, and Transportation Committee amends House Bill 252 HTRCcs by adding as follows:

•	Strikes the HTRCcs provision that all business income in the state is required to be apportioned by the single sales factor instead of using sales, property, and payroll (three-factor) as the basis to determine allocation of profits and the portion of New Mexico income that is subject to taxation. [HB 216]

•	Strikes the requirement that only site-built homes qualify for the Home Fire Recovery Income Tax Credit thus allowing manufactured home replacement.
•	Increases the amount of the Special Needs Adopted Child Tax Credit from $1,000 to $1,500. [SB 117]

•	Provides a personal income tax deduction for the purchase of school supplies up to $500 for public school teachers for Tax Year 2024 (TY24). The maximum deduction increases to $1,000 for TY25 through TY28. [SB 171]

•	Extends the Geothermal Ground-Coupled Heath Pump Tax Credits to 2034 and raises the annual aggregate to $4 million for each credit and makes the credit refundable. [SB 40]

•	Creates Clean Car Income and Corporate Tax Credits and charging units credits in the amount of $3,000 for a new electric car and $2,500 for a new hybrid or fuel cell car. Credits for used cars are $2,500 for an electric and $2,000 for a hybrid.  Credits decrease until they reach $640 to $960 in 2029. Taxpayers purchasing charging units installed in the state may be eligible for a credit: either the lesser of $25,000 or cost and installation of a direct current fast charger or fuel cell charger and $400 for all others. If the credits exceed tax liability, the balances are refundable. The credits are repealed effective in 2030. [HB 140]

•	Permits taxpayers with electricity generating facilities to apportion business income by single sales factor permanently by removing the sunset date of January 1, 2024. [HB 118]

•	Allows receipts for services provided by health care practitioners to be deducted from Gross Receipts Tax (GRT) only if the service is within the scope of the health provider’s practice. The bill defines copayment as a fixed dollar amount that an insurer or managed care health plan requires an insured or enrollee to pay for receiving medical services. The deduction is repealed in 2028. [SB 36]

•	Provides a Gross Receipts Tax deduction for the sale of legal services to recover compensation for the Hermit’s Peak/Calf Canyon Fire. The annual aggregate total is $5 million. If the credit exceeds tax liability, the taxpayer may carry the balance forward for three years. [SB 174]

•	Creates a Gross Receipts Tax credit for the sale of dyed diesel fuel used for agriculture. The aggregate total of tax credits is $10 million. If the credit exceeds tax liability, the taxpayer may carry the balance forward for three years. The credit is repealed in 2029. [SB 118]

•	Provides an Oil and Gas Severance Tax exemption for the extraction of natural gas from a production compliance project (project) for the first ten years of production following the project’s completion or until the date that the amount of exempted tax equals the project’s cost. Production compliance project is defined as a project required after 2022 by either the Oil Conservation Commission to reduce the venting and flaring of natural gas from wells, equipment, and facilities or by the Environment Improvement Board to reduce ozone to remain in production. [SB 64]

•	Removes the sunset date for an income tax exemption for armed forces retirement pay and extends the exemption to surviving spouses. [SB 125]

•	Creates Geothermal Electricity Generation Income personal and corporate tax credits ($0.015 per kilowatt-hour) for electricity generated by a geothermal electricity generation facility. The aggregate total of credits per year is $5 million for each credit. If the credits exceed tax liability, the taxpayer may carry the balance forward for three years. The credits are repealed in 2031. [SB 58]

•	Creates a deduction from Gross Receipts Tax and Compensating Tax for sales related to Geothermal Electricity Generation facility costs. The deduction is repealed in 2032.

•	Creates the Advanced Energy Equipment Income Tax Credit and the Advanced Energy Equipment Corporate Income Tax Credit (credits) for qualified expenditures by advanced energy product manufacturing facilities located in the state that produce eligible components, i.e., solar, wind, inverter, batteries, and applicable critical minerals. Qualified expenditures are for the purchase of manufacturing equipment dedicated to manufacturing advanced energy products. The components are the same as those that are eligible for a federal tax credit under Section 45X of the Internal Revenue Code. The amount of credit is the lesser of 20% of the amount of expenditures or $25 million. The aggregate total of credits per year is $25 million (total of both credits). If the credits exceed tax liability, the taxpayer may carry the balance forward for five years. The credits are repealed in 2034. [HB 274, SB 316]

•	Subjects Subpart F Income (Internal Revenue Code Section 952) to Corporate Income Tax. Subpart F Income involves Controlled Foreign Corporations that accumulate certain types of income, mostly passive income. United States shareholders may have to pay tax on the earnings, even if the income is not distributed to the shareholders. SB 181 does allow for the deduction of foreign intangible income. The provisions applicable in include corporations with at least 20% of their property, payroll, and sales in the United States or its possessions or territories in a Water’s Edge Group. [SB 181]
•	Makes federally recognized Indian nation, tribe, or pueblo eligible for the New Solar Market Development Income Tax Credit and modifies the aggregate amount of credits allowed per year. For years 2020 through 2023 the aggregate total of credits is $12 million. If the limitation is exceeded, an additional $20 million in credits may be permitted. Fore calendar years after 2023, the aggregate total is $30 million. If the credits exceed tax liability, the balance is refundable.  The credit is repealed in 2032. [SB 121]

•	Creates Geothermal Electricity Generation deductions for facility construction costs. Qualifying geothermal electricity generation facility (facility) generates electricity from geothermal resources. New facilities begin construction after January 1, 2025. Existing facilities (prior to 2025) must increase the amount of electricity generated by a minimum of 100%. Geothermal resources mean the natural heat of the earth over 250 degrees. Oil, hydrocarbon gas, and heating or cooling methods such as an on-site geoexchange heat pump are excluded. The value of property or services connected to the construction, equipping, installation of a geothermal electricity generation facility can be deducted from GRT and CT. Selling or leasing property or selling services associated with construction plant costs to another with interest in a facility also qualifies for a deduction. 

 Committee Substitute February 6, 2024 in HTRC: 

HTRCcs/HB 252: The House Taxation and Revenue Committee Substitute for HB 252 makes the several tax changes from the original bill by adding and modifying Individual Income Tax brackets, Gross Receipts Tax (GRT) deductions and personal and corporate income tax credits and exemptions. These changes encompass several other bills that were introduced during the session.

•	Personal Income Tax
Modifies individual income tax bracket. The changes expand the income brackets which lowers the tax rate. This provision is effective January 1, 2025.

(Tax Rate, Single, Married Filing Jointly/Head of Household, Married Filing Separately)
1.5%, $0-$5,500, $0-$8,000, $0-$4,000
3.2%, $5,501-$16,500, $8,001-$25,000, $4,001-$12,500
4.3%, $16,501-$33,500, $25,0001-$50,000, $12,501-$25,000
4.7%, $33,501-$66,500, $50,001-$100,000, $25,001-$50,000
4.9%, $66,501-$210,000, $100,001-$315,000, $50,001-$157,500
5.9%, over $210,000, $315,001, $157,501

•	Industrial Revenue Bonds
The bill expands projects to include energy storage facilities that are eligible for authorization of industrial bonds by local governments. This provision is effective July 1, 2024.

•	Payment-in-Lieu-of-Tax (PILT) Payments 
Energy storage units are added to the list of energy facilities that local governments cannot approve unless their school districts receive annual PILT payments. This provision is effective July 1, 2024.

•	Angel Investment Credit
The repeal of the credit for qualified investments is extended by five years from 2025 to 2030.

•	Rural Health Care Practitioner Tax Credit
The bill expands eligible professions for the $3,000 Rural Health Care Practitioner Tax Credit to include pharmacists, nurses, midwives, social workers, mental health counselors, marriage and family therapists, art therapists, alcohol and substance abuse counselors, and physical therapists. The number of required practice hours in rural areas is reduced from 2,080 to 1,584 to qualify for the credit. Practitioners who practice at least 792 hours and less than 1, 584 qualify for half the credit. The definition of rural modified to mean a rural county or an unincorporated area of a rural county that is designated not by the state Department of Health but by the federal Health Resources and Services Administration of the Department of Health and Human Services. The Taxation and Revenue Department (TRD) must report annually to relevant legislative committees.

•	Capital Gains Deduction
New Mexico taxpayers with capital gains income can deduct 40 percent of their net gain from their New Mexico taxable income. HB 252 HTRCcs limit a taxpayer’s net capital gains deduction to $2,500 (for all types of investment gains), or 40 percent of up to a $1 million net capital gain from the sale of a New Mexico-based business. This provision is effective January 1, 2025.

•	Home Fire Recovery Tax Credit
HB 252 HTRCcs creates the Home Fire Recovery Income Tax Credit (credit) up to $50,000 for qualified New Mexico site-built home expenses to replace a prior home destroyed in a wildfire in 2021 through 2023. The aggregate total of credits is capped at $5 million. Claims exceeding the cap may be paid out in a subsequent year. Qualified site-built home expenses are for construction less compensation received under the federal Hermit’s Peak/Calf Canyon Fire Assistance Act. Site-built home means a permanent construction with a foundation and excludes manufactured or mobile homes. Taxpayers must file for eligibility to the Construction Industries Division of the Regulation and Licensing Department. A home must be built on the same property. Any portion of credit that exceeds tax liability is not refundable but may be carried forward for three consecutive tax years. TRD must submit annual reports to relevant legislative committees.

•	Corporate Income Tax Rate
The bill imposes a flat Corporate Income Tax rate of 5.9%. The current rate is 4.8% for taxable income up to $500,000 and 5.9% if over that threshold. This provision is effective January 1, 2025.

•	Single Sales Factor of Business Income Apportionment
All business income in the state is required to be apportioned by the single sales factor instead of using sales, property, and payroll (three-factor) as the basis to determine allocation of profits and the portion of New Mexico income that is subject to taxation. This provision is effective January 1, 2025.

•	Gross Receipts Tax (GRT) deductions:
o	HB 252 HTRCcs permits a Gross Receipts Tax deduction for eligible providers that install equipment or modifications for safety improvements to homes of Medicaid recipients. Eligible providers must meet Medical Assistance Division (MAD), the state’s Medicaid administrator, requirements to provide environmental modifications. Receipts prior to July 1, 2034, for modification services reimbursed by the MAD may be deducted. This provision is effective July 1, 2024.
o	Sale of Energy Storage Equipment to Governments
Sales to governments of energy storage equipment or related equipment for the purpose of installing energy storage facilities may be deducted from GRT. This provision is effective July 1, 2024.
o	Sale of Child Care Assistance Services
Receipts from child care services that has a grant or contract with the Early Childhood Education and Care Department can be deducted. Receipts from sales of pre-kindergarten services may also be deducted. TRD must submit an annual report to relevant legislative committees. This provision is effective July 1, 2024.