Summary:

 Senate Bill 304 (SB 304) establishes the Qualifying Foster Care Organization Income Tax Credit, which allows individuals to claim a tax credit for contributions made to qualifying foster care organizations. The credit is capped at $500 for single filers and $1,000 for joint filers. To qualify, contributions must be made to organizations that provide foster care services and meet specific financial and service-based criteria. The credit is non-refundable but may be carried forward for up to five years. SB 304 applies to taxable years beginning on or after January 1, 2025. 

Legislation Overview:

 Senate Bill 304 (SB 304) creates an income tax credit to incentivize contributions to qualifying foster care organizations in New Mexico. A qualifying taxpayer who makes a financial contribution to an eligible foster care organization may claim a credit against their state income tax liability. The maximum credit amount is $500 for single filers, heads of households, and surviving spouses, while married couples filing jointly may claim up to $1,000. The credit is non-refundable, meaning that if a taxpayer's liability is lower than the credit amount, they will not receive the remaining balance as a refund, but they may carry forward any unused credit for up to five consecutive years.

To qualify as a recipient of tax-deductible donations, a foster care organization must meet several criteria. It must be a registered 501(c)(3) nonprofit under the Internal Revenue Code and must spend at least 50% of its budget on foster care services while serving at least 200 qualified individuals annually. Qualified individuals include foster children in state custody, participants in the fostering connections program, and young adults under 27 who have aged out of the foster system or were adopted or reunified after a certain age. Organizations must provide documentation to the Taxation and Revenue Department (TRD) certifying their eligibility, including budget details and service verification. 

SB 304 includes the tax credit in the Tax Expenditure Budget, ensuring that its financial impact is monitored. It applies to taxable years beginning on or after January 1, 2025.

Implications  
SB 304 will reduce state income tax revenue by providing a direct incentive for taxpayers to contribute to foster care organizations. The overall fiscal impact depends on taxpayer participation and the number of organizations meeting eligibility criteria. The carry-forward provision may lead to revenue losses in future years as taxpayers apply unused credits. Administrative costs will be incurred by the TRD to verify qualifying contributions and ensure compliance. The credit may encourage additional charitable contributions, strengthening financial support for foster care services across the state.
 

Current Law:

 Under current law, New Mexico taxpayers may deduct charitable contributions to nonprofit organizations from their federal taxable income, which indirectly lowers state taxable income. However, no specific income tax credit exists for contributions to foster care organizations. This bill creates a direct tax credit mechanism to encourage targeted support for these organizations.