The Senate Tax, Business, and Transportation Committee amendment (STBTCa) to the House Taxation and Revenue Committee substitute for House Bill 14 (HTRCcs/HB 14) significantly expands the bill by increasing liquor excise tax rate by 20% and adding multiple new income tax credits and adjusting several taxation provisions. The amendment introduces new credits, including the Volunteer Emergency Medical Services Income Tax Credit, the Volunteer Firefighter Income Tax Credit, the Volunteer Search and Rescue Income Tax Credit, the Local Journalist Employment Income Tax Credit, and the Local News Printer Income Tax Credit. It also includes the Foster Parent and Guardian Income Tax Credit and the Quantum Facility Infrastructure Income Tax Credit, among others. Additionally, the amendment expands a gross receipts tax deduction for healthcare practitioners to include coinsurance payments, creates the University School of Medicine Fund, and introduces a gaming tax exemption for gaming operators located in disaster-declared wildfire areas. The amendment restructures tax deductions and credits, establishes new revenue distributions, and extends certain tax incentives. The bill includes an emergency clause, making it effective immediately upon passage. 

 House Bill 14 (HB 14) repeals Section 7-2-18.15 NMSA 1978, eliminating the Working Families Tax Credit and enacting a new Section 7-2-18.15 NMSA 1978, establishing a state Earned Income Tax Credit (EITC). The credit is available to eligible individuals who meet income and household qualifications under the federal EITC program.

The bill sets credit percentages based on the number of qualifying children in a household. The credit is refundable, meaning that if a taxpayer’s EITC amount exceeds their tax liability, they receive the difference as a tax refund. The bill establishes phaseout thresholds, reducing the credit as income increases beyond certain limits.

The bill also includes an annual inflation adjustment, ensuring that the earned income amount and phaseout thresholds increase each year to account for cost-of-living changes. The Taxation and Revenue Department must incorporate the credit in the state’s tax expenditure budget, reporting its annual cost and distribution.

Implications
HB 14 enhances tax relief for working families, ensuring that low-income households receive direct financial support through refundable tax credits. By aligning the state EITC with the federal EITC, the bill simplifies tax administration and ensures consistency for taxpayers claiming both credits.

The credit’s phaseout provisions ensure that tax benefits gradually decrease as incomes rise, preventing sudden benefit losses for middle-income households. The inflation adjustment provision safeguards the credit’s purchasing power, preventing erosion due to rising living costs.

HB 14 reduces state income tax revenue, requiring budgetary adjustments to offset the cost of providing larger tax refunds. However, by targeting assistance to working families, the credit may reduce poverty rates, increase consumer spending, and improve financial stability for lower-income households.
 

 Under current law, New Mexico offers the Working Families Tax Credit, which is similar to the federal EITC but has a lower credit percentage and different eligibility criteria.  

 Amended March 18, 2025 in STBTC

STBTCa/HTRCcs/HB 14: As amended, House Bill 14 (STBTCa/HTRCcs/HB 14) makes substantial revisions to New Mexico’s tax code by modifying oil and gas taxes, introducing multiple income tax credits, adjusting excise tax rates, and expanding gross receipts tax deductions. The bill retains the creation of the Oil and Gas Equalization Surtax, which imposes a 0.28% tax, from 3.15% to 3.43% on oil production when the West Texas Intermediate crude oil price exceeds $55 per barrel, while reducing the Oil and Gas Emergency School Tax rate on specific natural gas products from 4% to 3.9%. It repeals the Working Families Tax Credit and replaces it with the Earned Income Tax Credit, aligning with federal guidelines and setting the state credit at 34% of the federal Earned Income Tax Credit amount with a phased-out threshold.

The amendments introduce several new tax credits:
  •     Volunteer Emergency Medical Services Income Tax Credit: $500 per tax year for volunteer EMS personnel.
  •	Volunteer Firefighter Income Tax Credit: $500 per tax year for qualified volunteer firefighters.
  •	Volunteer Search and Rescue Income Tax Credit: $500 per tax year for active search and rescue volunteers.
  •	Local Journalist Employment Income Tax Credit: Up to $50,000 per tax year per journalist employed by a qualifying local news organization, capped at $2 million in total annual credits.
  •	Local News Printer Income Tax Credit: Covers up to $10,000 or $5,000 per tax year per employee depending on hours per week of employment for qualifying local newspapers, capped at $1 million in total annual credits.
  •	Foster Parent and Guardian Income Tax Credit: $250 each month per child for foster parents and legal guardians providing care in New Mexico. 
  •	Quantum Facility Infrastructure Income Tax Credit: Provides a refundable credit of 15% of eligible infrastructure investment costs, capped at $10 million per facility, capped at $15 million in total annual credits.

The bill also expands a gross receipts tax deduction for healthcare practitioners to include coinsurance payments, ensuring that deductibles, copayments, and other out-of-pocket expenses are treated similarly to covered insurance payments. It directs 25% of governmental gross receipts tax revenues from hospitals to a newly established University School of Medicine Fund, supporting medical education and physician training programs.

The liquor excise tax rate increases by 20% for spirits, beer, cider, wine, and fortified wine generating additional revenue for state programs. Additionally, the bill introduces a gaming tax exemption for gaming operators in disaster-declared wildfire areas, allowing affected businesses to temporarily suspend gaming tax obligations for up to two years following a declared emergency.

Several of these provisions include delayed repeal dates, ensuring they remain in effect for a limited period before requiring legislative renewal. The bill includes an emergency clause, making it effective immediately upon passage. 

 Committee Substitute March 14 2025 in HTRC:

HTRCcs/HB 14: The House Taxation and Revenue Committee Substitute for House Bill 14 introduces several key changes related to oil and gas taxation and tax credits. The original bill included provisions modifying the oil and gas emergency school tax, creating an equalization surtax, and restructuring tax credits for working families. The substitute bill retains these core elements but revises specific tax rates, adjusts the conditions under which the surtax applies, and replaces the Working Families Tax Credit with the Earned Income Tax Credit (EITC).

A notable change is the creation of the Oil and Gas Equalization Surtax, which only applies when oil prices exceed a specified threshold. Additionally, the substitute reduces the tax rate on certain natural gas products under the Oil and Gas Emergency School Tax Act. Another significant modification is the repeal of the Working Families Tax Credit and its replacement with a state-level Earned Income Tax Credit (EITC), which provides similar tax relief but with adjustments to credit percentages and phaseout amounts.

The Oil and Gas Equalization Surtax introduces a revenue mechanism that adjusts based on market conditions, ensuring that higher oil prices generate additional state revenue without burdening producers when prices are low. By tying the surtax to a $55 per barrel price threshold, the bill balances state revenue generation and industry sustainability, preventing excessive taxation when market conditions are weak. However, this adds volatility to state revenue projections, as oil prices fluctuate based on global economic conditions.

The reduction of the Oil and Gas Emergency School Tax rate on certain natural gas products is intended to support natural gas producers, particularly in stripper well properties, where production costs are higher, and margins are lower. This adjustment may encourage continued natural gas extraction, helping maintain jobs and state revenue from marginal wells, but it also reduces immediate tax revenue from this sector.

The bill’s replacement of the Working Families Tax Credit with the New Mexico Earned Income Tax Credit (EITC) aligns state tax policy with federal tax credits, making it simpler for taxpayers to claim benefits. The EITC adjustments in credit percentages and phaseout thresholds provide targeted relief to low- and moderate-income earners, ensuring that households receive a tax benefit proportional to their income level. However, the shift from the Working Families Tax Credit to the EITC could result in slightly different eligibility criteria, potentially affecting who qualifies for relief and how much they receive.

The bill maintains an overall goal of tax equity by ensuring that high oil prices contribute additional state revenue while reducing burdens on lower-income households through the EITC. However, the volatility of oil prices and the shift in tax credit structure may create some fiscal uncertainty, requiring ongoing adjustments to ensure stable revenue collection and taxpayer benefits.

Implications

HTRCcs/HB 14 has major implications for state revenue, energy production, and low-income tax relief. The Oil and Gas Equalization Surtax ensures that state revenue benefits from high oil prices, but it also introduces fiscal uncertainty since revenue generation depends on market fluctuations. The natural gas tax rate reduction helps producers but could lower state tax collections, requiring the Legislature to monitor revenue impacts carefully.

The repeal of the Working Families Tax Credit and adoption of the EITC ensures tax benefits are better aligned with federal guidelines, making it easier for taxpayers to claim their credits. However, the shift may slightly alter eligibility criteria, affecting who qualifies and how much relief they receive. Additionally, higher-income brackets within the EITC phaseout range may experience slight tax increases compared to the previous credit structure.

Municipalities and state agencies will need to adjust their revenue expectations based on the new surtax structure and natural gas tax adjustments. Meanwhile, low-income taxpayers will see direct benefits from the EITC, supporting economic stability for working families while maintaining incentives for employment.