SB0151CTS

SENATE TAX, BUSINESS AND TRANSPORTATION

COMMITTEE SUBSTITUTE FOR

SENATE BILL 151

57th legislature - STATE OF NEW MEXICO - second session, 2026

AN ACT

RELATING TO TAXATION; DECOUPLING FROM CERTAIN PROVISIONS OF FEDERAL LAW RELATING TO CORPORATE INCOME TAX BY AMENDING THE DEFINITION OF "BASE INCOME" IN THE CORPORATE INCOME AND FRANCHISE TAX ACT TO CONFORM TO THE FEDERAL INCLUSION OF CERTAIN INCOME OF CONTROLLED FOREIGN CORPORATIONS AND SUBTRACTING AMOUNTS DEDUCTED FOR BONUS DEPRECIATION AND INTEREST EXPENSES; PROVIDING THAT APPORTIONMENT RULES APPLY TO ATTRIBUTED INCOME FROM A CONTROLLED FOREIGN CORPORATION; CREATING THE LOCAL JOURNALIST EMPLOYMENT INCOME TAX CREDIT AND THE LOCAL JOURNALIST EMPLOYMENT CORPORATE INCOME TAX CREDIT; CREATING A GROSS RECEIPTS TAX DEDUCTION FOR THE SALE OF CONSTRUCTION MATERIALS AND LABOR USED FOR THE DEVELOPMENT OF AFFORDABLE HOUSING; CREATING THE PHYSICIAN TAX CREDIT PURSUANT TO THE INCOME TAX ACT; PROVIDING A GROSS RECEIPTS TAX DEDUCTION FOR THE SALE OF CERTAIN EQUIPMENT AND MEDICATION DISPENSED BY A HEALTH CARE PRACTITIONER IN A PRACTICE SETTING; PROVIDING A HOLD HARMLESS DISTRIBUTION TO MUNICIPALITIES AND COUNTIES; CREATING THE QUANTUM FACILITY INFRASTRUCTURE PROJECT FUND; CREATING THE CHILD CARE FACILITY DONATION INCOME TAX CREDIT AND THE CHILD CARE FACILITY DONATION CORPORATE INCOME TAX CREDIT.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF NEW MEXICO:

SECTION 1. Section 7-2A-2 NMSA 1978 (being Laws 1986, Chapter 20, Section 33, as amended) is amended to read:

"7-2A-2. DEFINITIONS.--For the purpose of the Corporate Income and Franchise Tax Act and unless the context requires otherwise:

A. "bank" means any national bank, national banking association, state bank or bank holding company;

B. "apportioned net income" or "apportioned net loss" means net income allocated and apportioned to New Mexico pursuant to the provisions of the Corporate Income and Franchise Tax Act or the Uniform Division of Income for Tax Purposes Act, but excluding from the sales factor any sales that represent intercompany transactions between members of the filing group;

C. "base income" means the federal taxable income or the federal net operating loss of a corporation for the taxable year calculated pursuant to the Internal Revenue Code, after special deductions provided in Sections 241 through 249 of the Internal Revenue Code but without any deduction for net operating losses, as if the corporation filed a federal tax return as a separate domestic entity, modified as follows:

(1) adding to that income:

(a) interest received on a state or local bond exempt under the Internal Revenue Code;

(b) the amount of any deduction claimed in calculating taxable income for all expenses and costs directly or indirectly paid, accrued or incurred to a captive real estate investment trust;

(c) the amount of any deduction, other than for premiums, for amounts paid directly or indirectly to a commonly controlled entity that is exempt from corporate income tax pursuant to Section 7-2A-4 NMSA 1978; [and]

(d) for taxable years beginning on or after January 1, 2023, an amount equal to the amount of credit claimed and allowed for that year pursuant to Section 7-3A-10 NMSA 1978 with respect to the distributed net income of a pass-through entity;

(e) the amount of any deduction taken pursuant to Sections 168(k) and 168(n) of the Internal Revenue Code in excess of the deduction amount that would have been allowed by Sections 168(a) through 168(j) of the Internal Revenue Code; and

(f) the amount of additional interest deducted as a result of the changes to Subparagraph (A) of Section 163(j)(8) of the Internal Revenue Code made by Section 70303 of Public Law 119–21; provided that such interest shall be eligible for the carryforward provisions of Section 163(j)(2) of the Internal Revenue Code;

(2) subtracting from that income:

(a) income from obligations of the United States net of expenses incurred to earn that income; and

(b) other amounts that the state is prohibited from taxing because of the laws or constitution of this state or the United States net of any related expenses; [and

(c) an amount equal to one hundred percent of the income of the corporation under Section 951A of the Internal Revenue Code, less the amount deducted pursuant to Section 250 of the Internal Revenue Code;]

(3) making other adjustments deemed necessary to properly reflect income of the unitary group, including attribution of income or expense related to unitary assets held by related corporations that are not part of the filing group; and

(4) for a taxpayer that conducts a lawful business pursuant to the laws of this state, excludes an amount equal to any expenditure that is eligible to be claimed as a federal income tax deduction but is disallowed pursuant to Section 280E of the Internal Revenue Code, as that section may be amended or renumbered;

D. "captive real estate investment trust" means a corporation, trust or association taxed as a real estate investment trust pursuant to Section 857 of the Internal Revenue Code, the shares or beneficial interests of which are not regularly traded on an established securities market; provided that more than fifty percent of any class of beneficial interests or shares of the real estate investment trust are owned directly, indirectly or constructively by the taxpayer during all or a part of the taxpayer's taxable year;

E. "common ownership" means the direct or indirect control or ownership of more than fifty percent of the outstanding voting stock, ownership of which is determined pursuant to Section 1563 of the Internal Revenue Code, as that section may be amended or renumbered, of:

(1) a parent-subsidiary controlled group as defined in Section 1563 of the Internal Revenue Code, except that fifty percent shall be substituted for eighty percent;

(2) a brother-sister controlled group as defined in Section 1563 of the Internal Revenue Code; or

(3) three or more corporations each of which is a member of a group of corporations described in Paragraph (1) or (2) of this subsection, and one of which is:

(a) a common parent corporation included in a group of corporations described in Paragraph (1) of this subsection; and

(b) included in a group of corporations described in Paragraph (2) of this subsection;

F. "consolidated group" means the group of entities properly filing a federal consolidated return under the Internal Revenue Code for the taxable year;

G. "corporation" means corporations, joint stock companies, real estate trusts organized and operated under the Real Estate Trust Act, financial corporations and banks, other business associations and, for corporate income tax purposes, partnerships and limited liability companies taxed as corporations under the Internal Revenue Code;

H. "department" means the taxation and revenue department, the secretary of taxation and revenue or any employee of the department exercising authority lawfully delegated to that employee by the secretary;

I. "filing group" means a group of corporations properly included in a return pursuant to Section 7-2A-8.3 NMSA 1978 for a particular taxable year;

J. "fiscal year" means any accounting period of twelve months ending on the last day of any month other than December;

K. "grandfathered net operating loss carryover" means:

(1) the amount of net loss properly reported to New Mexico for taxable years beginning January 1, 2013 and prior to January 1, 2020 as part of a timely filed original return, or an amended return for those taxable years filed prior to January 1, 2020, to the extent such loss can be attributed to one or more corporations that are properly included in the taxpayer's return for the first taxable year beginning on or after January 1, 2020;

(2) reduced by:

(a) adding back deductions that were taken by the corporation or corporations for royalties or interest paid to one or more related corporations, but only to the extent that such adjustment would not create a net loss for such related corporations; and

(b) the amount of net operating loss deductions taken prior to January 1, 2020 that would be charged against those losses consistent with the Internal Revenue Code and provisions of the Corporate Income and Franchise Tax Act applicable to the year of the deduction; and

(3) apportioned to New Mexico using the apportionment factors that can properly be attributed to the corporation or corporations for the year of the net loss;

L. "Internal Revenue Code" means the United States Internal Revenue Code of 1986, as amended;

M. "net income" means:

(1) the base income of a corporation properly filing a tax return as a separate entity; or

(2) the combined base income and losses of corporations that are part of a filing group that is computed after eliminating intercompany income and expense in a manner consistent with the consolidated filing requirements of the Internal Revenue Code and the Corporate Income and Franchise Tax Act;

N. "net operating loss carryover" means the apportioned net loss properly reported on an original or amended tax return for taxable years beginning on or after January 1, 2020 by the taxpayer:

(1) plus:

(a) the portion of an apportioned net loss properly reported to New Mexico for a taxable year beginning on or after January 1, 2020, on a separate year return, to the extent the taxpayer would have been entitled to include the portion of such apportioned net loss in the taxpayer's consolidated net operating loss carryforward under the Internal Revenue Code if the taxpayer filed a consolidated federal return; and

(b) the taxpayer's grandfathered net operating loss carryover; and

(2) minus:

(a) the amount of the net operating loss carryover attributed to an entity that has left the filing group, computed in a manner consistent with the consolidated filing requirements of the Internal Revenue Code and applicable regulations, as if the taxpayer were filing a consolidated return; and

(b) the amount of net operating loss deductions properly taken by the taxpayer;

O. "net operating loss deduction" means the portion of the net operating loss carryover that may be deducted from the taxpayer's apportioned net income under the Internal Revenue Code as of January 1, 2018 for the taxable year in which the deduction is taken, including the eighty percent limitation of Section 172(a) of the Internal Revenue Code as of January 1, 2018 calculated on the basis of the taxpayer's apportioned net income;

P. "person" means any individual, estate, trust, receiver, cooperative association, club, corporation, company, firm, partnership, limited liability company, joint venture, syndicate or other association; "person" also means, to the extent permitted by law, any federal, state or other governmental unit or subdivision or agency, department or instrumentality thereof;

Q. "real estate investment trust" has the meaning ascribed to the term in Section 856 of the Internal Revenue Code, as that section may be amended or renumbered;

R. "related corporation" means a corporation that is under common ownership with one or more corporations but that is not included in the same tax return;

S. "return" means any tax or information return, including a water's-edge or worldwide combined return, a consolidated return, a declaration of estimated tax or a claim for refund, including any amendments or supplements to the return, required or permitted pursuant to a law subject to administration and enforcement pursuant to the Tax Administration Act and filed with the department by or on behalf of any person;

T. "secretary" means the secretary of taxation and revenue or the secretary's delegate;

U. "separate year return" means a properly filed original or amended return for a taxable year beginning on or after January 1, 2020 by a taxpayer reporting a loss, a portion of which is claimed as part of the net operating loss carryover by another taxpayer in a subsequent return period;

V. "state" means any state of the United States, the District of Columbia, the commonwealth of Puerto Rico, any territory or possession of the United States or political subdivision thereof or any political subdivision of a foreign country;

W. "state or local bond" means a bond issued by a state other than New Mexico or by a local government other than one of New Mexico's political subdivisions, the interest from which is excluded from income for federal income tax purposes under Section 103 of the Internal Revenue Code, as that section may be amended or renumbered;

X. "taxable income" means a taxpayer's apportioned net income minus the net operating loss deduction for the taxable year;

Y. "taxable year" means the calendar year or fiscal year upon the basis of which the net income is computed under the Corporate Income and Franchise Tax Act and includes, in the case of the return made for a fractional part of a year under the provisions of that act, the period for which the return is made;

Z. "taxpayer" means any corporation or group of corporations filing a return pursuant to Section 7-2A-8.3 NMSA 1978 subject to the taxes imposed by the Corporate Income and Franchise Tax Act;

AA. "unitary group" means a group of two or more corporations, including a captive real estate investment trust, but not including an S corporation, an insurance company subject to the provisions of the New Mexico Insurance Code, an insurance company that would be subject to the New Mexico Insurance Code if the insurance company engaged in business in this state or a real estate investment trust that is not a captive real estate investment trust, that are:

(1) related through common ownership; and

(2) economically interdependent with one another as demonstrated by the following factors:

(a) centralized management;

(b) functional integration; and

BB. "water's-edge group" means all corporations that are part of a unitary group, except:

(1) corporations that are exempt from corporate income tax pursuant to Section 7-2A-4 NMSA 1978; and

(2) corporations organized or incorporated outside the United States or its possessions or territories that have less than twenty percent of their property, payroll and sales sourced to locations within the United States, following the sourcing rules of the Uniform Division of Income for Tax Purposes Act; and

CC. "worldwide combined group" means all members of a unitary group, except members that are exempt from corporate income tax pursuant to Section 7-2A-4 NMSA 1978, irrespective of the country in which the corporations are incorporated or conduct business activity."

SECTION 2. Section 7-4-10 NMSA 1978 (being Laws 1993, Chapter 153, Section 1, as amended) is amended to read:

"7-4-10. APPORTIONMENT OF BUSINESS INCOME.--

A. Except as provided in Subsections B and C of this section, all business income shall be apportioned to this state by multiplying the income by a fraction, the numerator of which is the property factor plus the payroll factor plus the sales factor and the denominator of which is three. The apportionment calculation shall include the factors of a controlled foreign corporation to the extent the income of the corporation is included in net income.

B. If eighty percent or more of the New Mexico numerators of the property and payroll factors for a filing group, or for a taxpayer that is not a member of a filing group, are employed in manufacturing or operating a computer processing facility, the filing group or the taxpayer may elect to have business income apportioned to this state by multiplying the income by the sales factor for the taxable year.

C. If a filing group, or a taxpayer that is not a member of a filing group, has a headquarters operation in New Mexico, the filing group or the taxpayer may elect to have business income apportioned to this state by multiplying the income by the sales factor for the taxable year.

D. To elect the method of apportionment provided by Subsection B or C of this section, the taxpayer shall notify the department of the election, in writing, no later than the date on which the taxpayer files the return for the first taxable year to which the election will apply. The election shall apply as follows:

(1) if the election is made for taxable years beginning prior to January 1, 2020, to the taxable year in which the election is made and to each taxable year thereafter for three years, or until the taxable year ending prior to January 1, 2020, whichever is earlier;

(2) if the election is made for a taxable year beginning on or after January 1, 2020, to the taxable year in which the election is made and to each taxable year thereafter until the taxpayer notifies the department, in writing, that the election is terminated, except that the taxpayer shall not terminate the election until the method of apportioning business income provided by Subsection B or C of this section has been used by the taxpayer for at least three consecutive taxable years, including a total of at least thirty-six calendar months; and

(3) if the election is made by a qualifying filing group, the election shall apply to the members of the filing group properly included pursuant to Section 7-2A-8.3 NMSA 1978.

E. For purposes of this section:

(1) "controlled foreign corporation" means a foreign corporation as defined by Section 957 of the Internal Revenue Code of 1986, as that section may be amended or renumbered;

[(1)] (2) "filing group" means "filing group" as that term is defined in the Corporate Income and Franchise Tax Act;

[(2)] (3) "headquarters operation" means:

(a) the center of operations of a business: 1) where corporate staff employees are physically employed; 2) where the centralized functions are primarily performed, including administrative, planning, managerial, human resources, purchasing, information technology and accounting, but not including operating a call center; 3) the function and purpose of which is to manage and direct most aspects and functions of the business operations within a subdivided area of the United States; 4) from which final authority over regional or subregional offices, operating facilities and any other offices of the business are issued; and 5) including national and regional headquarters if the national headquarters is subordinate only to the ownership of the business or its representatives and the regional headquarters is subordinate to the national headquarters; or

(b) the center of operations of a business: 1) the function and purpose of which is to manage and direct most aspects of one or more centralized functions; and 2) from which final authority over one or more centralized functions is issued;

[(3)] (4) "manufacturing" means combining or processing components or materials to increase their value for sale in the ordinary course of business, but does not include:

(a) construction;

(b) farming;

(c) power generation; provided that "manufacturing" includes electricity generation at a facility that does not require location approval and a certificate of convenience and necessity prior to commencing construction or operation of the facility pursuant to the Public Utility Act;

(d) processing natural resources, including hydrocarbons; or

(e) processing or preparation of meals for immediate consumption; and

[(4)] (5) "operating a computer processing facility" means managing the necessary and ancillary activities for the operation of a facility primarily used to process data or information, but does not include managing the operation of facilities that are predominantly used to support sales of tangible property or the provision of banking, financial or professional services."

SECTION 3. A new section of the Income Tax Act is enacted to read:

"[NEW MATERIAL] LOCAL JOURNALIST EMPLOYMENT INCOME TAX CREDIT.--

A. For taxable years prior to January 1, 2031, a taxpayer who is not a dependent of another individual and is an owner of a local news organization that employs a journalist may claim a credit against the taxpayer's tax liability imposed pursuant to the Income Tax Act in an amount provided in Subsection B of this section. The tax credit provided by this section may be referred to as the "local journalist employment income tax credit".

B. The amount of tax credit shall be in an amount equal to thirty percent of wages paid to each journalist employed by a local news organization.

C. A taxpayer shall apply for certification of eligibility for the tax credit from the department on forms and in the manner prescribed by the department no later than one year following the end of the calendar year in which the wages were paid. A taxpayer shall not be eligible to receive a tax credit for more than seventy-five journalists whom the taxpayer employs as a local news organization and, except as provided in Subsections F and G of this section, only one tax credit shall be certified for each journalist employed by a local news organization per taxable year. The total annual aggregate amount of local journalist employment income tax credits and local journalist employment corporate income tax credits that may be certified in a calendar year shall not exceed four million dollars ($4,000,000). Completed applications shall be considered in the order received.

D. If the department determines that the taxpayer meets the requirements of this section, the department shall issue a dated certificate of eligibility to the taxpayer providing the amount of tax credit for which the taxpayer is eligible and the taxable years in which the credit may be claimed.

E. That portion of tax credit that exceeds a taxpayer's income tax liability in the taxable year in which the credit is claimed shall be refunded to the taxpayer.

F. Married individuals filing separate returns for a taxable year for which they could have filed a joint return may each claim only one-half of the tax credit that would have been claimed on a joint return.

G. A taxpayer may be allocated the right to claim the tax credit in proportion to the taxpayer's ownership interest if the taxpayer owns an interest in a business entity that is taxed for federal income tax purposes as a partnership or limited liability company and the business entity has met all requirements to be eligible for the credit. The total credit claimed by all members of the partnership or limited liability company shall not exceed the allowable credit pursuant to this section.

H. A taxpayer allowed to claim a tax credit pursuant to this section shall claim the tax credit in a manner required by the department.

I. The tax credit provided by this section shall be included in the tax expenditure budget pursuant to Section 7-1-84 NMSA 1978, including the total annual aggregate cost of the tax credit.

J. As used in this section:

(1) "journalist" means a person who:

(a) is paid by a local news organization to regularly gather, prepare, collect, photograph, record, direct the recording of, produce, write, edit, report or publish news or information that concerns state or local events or other matters of public interest for dissemination to the state or a local community through reporting activities, including conducting interviews, observing current events or analyzing documents;

(b) resides within fifty miles of the coverage area assigned by the local news organization; and

(c) is employed as a journalist by the local news organization for more than twenty-eight weeks of the taxable year in which the credit is claimed;

(2) "local news organization" means an entity that:

(a) provides a print or digital publication that engages professionals who regularly gather, prepare, collect, photograph, record, direct the recording of, produce, write, edit, report or publish news or information that concerns state or local events or other matters of public interest for dissemination to the state or a local community through reporting activities, including conducting interviews, observing current events or analyzing documents;

(b) pays at least one individual, either through employment or by contract with the entity, as a journalist;

(c) in the case of print publications, has published at least one print publication per month over the previous twenty-four months and holds a valid United States postal service periodical permit or has at least thirty percent of its content dedicated to state or local news;

(d) in the case of digital-only entities, has published at least three originally produced stories about the state or a local community per week over the previous twenty-four months and has at least fifty percent of its digital audience in New Mexico, averaged over a twelve- month period;

(e) discloses in its print publication or on its website its beneficial ownership or, in the case of a not-for-profit entity, its board of directors;

(f) in the case of an organization that demonstrates to the department that the organization has been granted exemption from the federal income tax by the United States commissioner of internal revenue as organizations described in Section 501(c)(3) of the Internal Revenue Code, has declared the coverage of state or local news as the stated mission in its filings with the federal internal revenue service;

(g) has not received more than ten percent of its gross receipts for the previous year from political action committees or other entities described in Section 527 of the Internal Revenue Code, or from an organization that has been granted exemption from the federal income tax by the United States commissioner of internal revenue as an organization described in Section 501(c)(4) or 501(c)(6) of the Internal Revenue Code; and

(h) is not a publicly traded entity or is no more than forty-nine percent owned, directly or indirectly, by a publicly traded entity or subsidiary; and

(3) "wages" means not more than fifty thousand dollars ($50,000) in compensation paid by a local news organization to a journalist through the organization's payroll system, including those wages that the journalist elects to defer or redirect or the journalist's contribution to a 401(k) or cafeteria plan program. "Wages" does not mean benefits or the organization's share of payroll taxes, social security or medicare contributions, federal or state unemployment insurance contributions or workers' compensation."

SECTION 4. A new section of the Corporate Income and Franchise Tax Act is enacted to read:

"[NEW MATERIAL] LOCAL JOURNALIST EMPLOYMENT CORPORATE INCOME TAX CREDIT.--

A. For taxable years prior to January 1, 2031, a taxpayer that is a local news organization that employs a journalist may claim a credit against the taxpayer's tax liability imposed pursuant to the Corporate Income and Franchise Tax Act in an amount provided in Subsection B of this section. The tax credit provided by this section may be referred to as the "local journalist employment corporate income tax credit".

B. The amount of tax credit shall be in an amount equal to thirty percent of wages paid to each journalist employed by a local news organization.

C. A taxpayer shall apply for certification of eligibility for the tax credit from the department on forms and in the manner prescribed by the department no later than one year following the end of the calendar year in which the wages were paid. A taxpayer shall not be eligible to receive a tax credit for more than seventy-five journalists whom the taxpayer employs as a local news organization, and only one tax credit shall be certified for each journalist employed by a local news organization per taxable year. The total annual aggregate amount of local journalist employment corporate income tax credits and local journalist employment income tax credits that may be certified in a calendar year shall not exceed four million dollars ($4,000,000). Completed applications shall be considered in the order received.

E. That portion of tax credit that exceeds a taxpayer's corporate income tax liability in the taxable year in which the credit is claimed shall be refunded to the taxpayer.

F. A taxpayer allowed to claim a tax credit pursuant to this section shall claim the tax credit in a manner required by the department.

G. The tax credit provided by this section shall be included in the tax expenditure budget pursuant to Section 7-1-84 NMSA 1978, including the total annual aggregate cost of the tax credit.

H. As used in this section:

(1) "journalist" means a person who:

(b) resides within fifty miles of the coverage area assigned by the local news organization; and

(c) is employed as a journalist by the local news organization for more than twenty-eight weeks of the taxable year in which the credit is claimed;

(2) "local news organization" means an entity that:

(b) pays at least one individual, either through employment or by contract with the entity, as a journalist;

(e) discloses in its print publication or on its website its beneficial ownership or, in the case of a not-for-profit entity, its board of directors;

(h) is not a publicly traded entity or is no more than forty-nine percent owned, directly or indirectly, by a publicly traded entity or subsidiary; and

SECTION 5. A new section of the Gross Receipts and Compensating Tax Act is enacted to read:

"[NEW MATERIAL] DEDUCTION--GROSS RECEIPTS--SALE OF CONSTRUCTION MATERIALS AND LABOR USED FOR THE DEVELOPMENT OF AFFORDABLE HOUSING MULTIFAMILY RESIDENTIAL HOUSING PROJECTS.--

A. Prior to July 1, 2033, receipts from selling construction materials and labor may be deducted from gross receipts if:

(1) the construction materials and labor are being used for the purpose of developing multifamily residential housing;

(2) eighty percent or more of the housing units being developed will be affordable housing; and

(3) the construction materials and labor are sold to a qualifying grantee for a single project that is residential housing pursuant to the Affordable Housing Act.

B. A taxpayer allowed a deduction pursuant to this section shall report the amount of the deduction to the department in a manner required by the department.

C. The deduction provided by this section shall be included in the tax expenditure budget pursuant to Section 7-1-84 NMSA 1978, including the annual aggregate cost of the deduction.

D. As used in this section:

(1) "affordable housing" means multifamily residential housing primarily for persons or households of low or moderate income;

(2) "building" means a structure capable of being renovated or converted into affordable housing or a structure that is to be demolished and is located on land that is donated and upon which affordable housing will be constructed;

(3) "low or moderate income" means a household in which the current annual income is at or below eighty percent of the area median income for the geographic area in which the household is located, adjusted for family size, as determined by the United States department of housing and urban development; and

(4) "multifamily residential housing" means any building or portion thereof that is primarily occupied, or is designed or intended to be primarily occupied, as a residence by more than three households. "Multifamily residential housing" includes congregate housing and transitional or temporary housing for homeless persons."

SECTION 6. A new section of the Income Tax Act is enacted to read:

"[NEW MATERIAL] PHYSICIAN TAX CREDIT.--

A. A taxpayer who files an individual New Mexico tax return, is not a dependent of another individual, is a physician and provides health care services in New Mexico for at least one thousand five hundred eighty-four hours during a taxable year may claim a credit against the tax liability imposed by the Income Tax Act for that taxable year in an amount equal to ten thousand dollars ($10,000). The credit provided in this section may be referred to as the "physician tax credit".

B. A taxpayer shall apply for certification of eligibility for the tax credit from the department of health on forms and in the manner prescribed by that department. Completed applications shall be considered in the order received. For a taxpayer approved to receive the credit, the department of health shall issue a certificate of eligibility to the qualifying physician. The department of health shall provide the department with certificates of eligibility issued pursuant to this subsection in an electronic format at regularly agreed-upon intervals.

C. That portion of a tax credit that exceeds a taxpayer's tax liability in the taxable year in which the credit is being claimed may be carried forward for up to three consecutive taxable years.

D. A taxpayer allowed a tax credit pursuant to this section shall claim the credit on forms and in a manner required by the department.

E. The tax credit provided by this section shall be included in the tax expenditure budget pursuant to Section 7-1-84 NMSA 1978, including the annual aggregate cost of the tax credit.

F. As used in this section, "physician" means a health professional who is a medical physician or an osteopathic physician licensed to practice medicine in New Mexico pursuant to the Medical Practice Act."

SECTION 7. A new section of the Gross Receipts and Compensating Tax Act is enacted to read:

"[NEW MATERIAL] DEDUCTION--GROSS RECEIPTS--IN-OFFICE EQUIPMENT AND IN-OFFICE MEDICATION SOLD TO A HEALTH CARE PRACTITIONER.--

A. Except for receipts that may be deducted pursuant to Section 7-9-73.3 NMSA 1978, receipts from selling in-office equipment may be deducted from gross receipts if the sale is made to a health care practitioner who delivers a nontaxable transaction certificate to the seller or provides alternative evidence pursuant to Section 7-9-43 NMSA 1978. The health care practitioner must use the in-office equipment exclusively during a service that is within the scope of practice of the health care practitioner.

B. Except for receipts that may be deducted pursuant to Section 7-9-73.2 NMSA 1978, receipts from selling in-office medication may be deducted from gross receipts if the sale is made to a health care practitioner who delivers a nontaxable transaction certificate to the seller or provides alternative evidence pursuant to Section 7-9-43 NMSA 1978. The health care practitioner must use the in-office medication exclusively for treatment of patients within the scope of practice of the health care practitioner.

C. A taxpayer allowed a deduction pursuant to this section shall report the amount of the deduction separately in a manner required by the department.

D. The deduction provided by this section shall be included in the tax expenditure budget pursuant to Section 7-1-84 NMSA 1978, including the annual aggregate cost of the deductions.

E. As used in this section:

(1) "association of health care practitioners" means a corporation, an unincorporated business entity or other legal entity organized by, owned by or employing one or more health care practitioners; provided that the entity is not:

(a) an organization granted exemption from the federal income tax by the United States commissioner of internal revenue as organizations described in Section 501(c)(3) of the United States Internal Revenue Code of 1986, as that section may be amended or renumbered; or

(b) a health maintenance organization or a hospital, a hospice, a nursing home or an entity that is solely an outpatient facility or intermediate care facility licensed by the health care authority;

(2) "health care practitioner" means:

(a) a chiropractic physician licensed pursuant to the provisions of the Chiropractic Physician Practice Act;

(b) a dentist or dental hygienist licensed pursuant to the Dental Health Care Act;

(c) a doctor of oriental medicine licensed pursuant to the provisions of the Acupuncture and Oriental Medicine Practice Act;

(d) an optometrist licensed pursuant to the provisions of the Optometry Act;

(e) an osteopathic physician licensed pursuant to the provisions of the Medical Practice Act;

(f) a physical therapist licensed pursuant to the provisions of the Physical Therapy Act;

(g) a physician or physician assistant licensed pursuant to the provisions of the Medical Practice Act;

(h) a podiatric physician licensed pursuant to the provisions of the Podiatry Act;

(i) a psychologist licensed pursuant to the provisions of the Professional Psychologist Act;

(j) a registered lay midwife registered by the department of health;

(k) a registered nurse or licensed practical nurse licensed pursuant to the provisions of the Nursing Practice Act;

(l) a registered occupational therapist licensed pursuant to the provisions of the Occupational Therapy Act;

(m) a respiratory care practitioner licensed pursuant to the provisions of the Respiratory Care Act;

(n) a speech-language pathologist or audiologist licensed pursuant to the Speech-Language Pathology, Audiology and Hearing Aid Dispensing Practices Act;

(o) a professional clinical mental health counselor, marriage and family therapist or professional art therapist licensed pursuant to the provisions of the Counseling and Therapy Practice Act who has obtained a master's degree or a doctorate;

(p) an independent social worker licensed pursuant to the provisions of the Social Work Practice Act;

(q) a clinical laboratory that is accredited pursuant to 42 U.S.C. Section 263a but that is not a laboratory in a physician's office or in a hospital defined pursuant to 42 U.S.C. Section 1395x; and

(r) a naturopathic doctor licensed pursuant to the provisions of the Naturopathic Doctors' Practice Act;

(3) "in-office equipment" means equipment used by a health care practitioner primarily to provide medical treatment to patients in the health care practitioner's practice setting. "In-office equipment" does not mean office furniture that is not primarily used to provide medical treatment, including desks, desk chairs, computers and software; and

(4) "in-office medication" means saline or other non-prescription substance dispensed by a health care practitioner to a patient in the health care practitioner's practice setting to treat the patient's specific illness, injury or other medical necessity."

SECTION 8. A new section of the Tax Administration Act is

enacted to read:

"[NEW MATERIAL] DISTRIBUTION TO HOLD HARMLESS MUNICIPALITIES AND COUNTIES FROM GROSS RECEIPTS TAX DEDUCTIONS FOR RECEIPTS FOR THE SALE OF CERTAIN IN-OFFICE EQUIPMENT AND MEDICATIONS TO HEALTH CARE PRACTITIONERS.--

A. A distribution pursuant to Section 7-1-6.1 NMSA 1978 shall be made to a municipality in an amount, subject to any increase or decrease made pursuant to Section 7-1-6.15 NMSA 1978, equal to the total deductions claimed pursuant to Section 7 of this 2026 act for the month by taxpayers from business locations in the municipality multiplied by the sum of the combined rate of all municipal local option gross receipts taxes in effect in the municipality for the month plus one and two hundred twenty-five thousandths percent.

B. A distribution pursuant to Section 7-1-6.1 NMSA 1978 shall be made to a county in an amount, subject to any increase or decrease made pursuant to Section 7-1-6.15 NMSA 1978, equal to the total deductions claimed pursuant to Section 7 of this 2026 act for the month by taxpayers from business locations:

(1) within a municipality in the county multiplied by the combined rate of all county local option gross receipts taxes in effect for the month that are imposed throughout the county; and

(2) in the county but not within a municipality multiplied by the combined rate of all county local option gross receipts taxes in effect for the month that are imposed in the county area not within a municipality."

SECTION 9. [NEW MATERIAL] QUANTUM FACILITY INFRASTRUCTURE PROJECT FUND.--

A. The "quantum facility infrastructure project fund" is created as a nonreverting fund in the state treasury. The fund consists of distributions, appropriations, gifts, grants, donations and income from investment of the fund. The economic development department shall administer the fund, and money in the fund is subject to appropriation by the legislature to provide project funding for a quantum facility pursuant to this section. Expenditures from the fund shall be by warrant of the secretary of finance and administration pursuant to vouchers signed by the secretary of economic development or the secretary's authorized representative.

B. The economic development department shall:

(1) establish a streamlined application process;

(2) establish clear application evaluation criteria that are aligned with state economic development goals;

(3) verify applicant match funding requirements for a project when a match is applicable or match funding is being requested;

(4) monitor ongoing compliance with a funded project's match requirements when a match is applicable or match funding is being requested;

(5) establish procedures for addressing undelivered applicant funding commitments;

(6) annually report to the appropriate legislative interim committee on the administration, performance and efficacy of the project funding; and

(7) not impose limitations on the amount of project funding that may be awarded to public post-secondary educational institutions.

C. Applications may be submitted:

(1) up to three hundred sixty-five days prior to anticipated federal or private sector grant deadlines for new or recurring published opportunities;

(2) for pending proposals with multistage reviews that have been submitted but have not had an award finalized or, subject to department approval, within ninety days after such an award is finalized;

(3) for project funding awards pending successful non-state funding or private grant applications;

(4) for re-application by an applicant who has previously been denied project funding; provided that the applicant makes changes and improvements based on any feedback received from the prior application; and

(5) in response to grant award solicitations by the department.

D. An applicant shall make at least three million dollars ($3,000,000) in qualified quantum expenditures for infrastructure for a quantum facility located in New Mexico.

E. The amount of project funding shall not exceed thirty percent of the amount of the qualified quantum expenditures made by the applicant for infrastructure for a quantum facility, not to exceed fifty million dollars ($50,000,000) per quantum facility.

F. Prior to incurring a qualified quantum expenditure, an applicant shall apply for preliminary certification of eligibility for project funding from the department on forms and in the manner prescribed by the department. The preliminary certification shall be limited to confirming that the qualified quantum expenditures proposed to be made by the applicant will in whole or in part be used to provide infrastructure for a quantum facility and an estimate of the amount of project funding for which the applicant may be eligible. Only one certificate of eligibility shall be issued for a quantum facility, regardless of ownership of the facility.

G. Within twelve months of completion of construction of a quantum facility, the applicant shall seek final certification from the department. The maximum aggregate amount of project funding for all quantum facility infrastructure projects that may be certified shall not exceed seventy-five million dollars ($75,000,000), subject to the limitations pursuant to and the availability of money in the fund. An application for final certification shall include information required by the department to determine eligibility for project funding, including information substantiating qualified quantum expenditures.

H. As used in this section:

(1) "qualified quantum expenditure" means an expenditure made by an applicant for land and rent paid or incurred for land, improvements, buildings or infrastructure required for a quantum facility, but not including any expenditure for property that is owned by a municipality or county in connection with an industrial revenue bond project, property for which the applicant has received any credit pursuant to the Investment Credit Act or property that was owned by the applicant or an affiliate before January 1, 2025. If a qualified quantum expenditure is an allocation of an expenditure, the cost accounting methodology used for the allocation of the expenditure shall be the same cost accounting methodology used by the applicant in its other business activities;

(2) "quantum facility" means a facility in New Mexico at which research and development in quantum technology is conducted, other than a facility operated by an applicant for the United States or any agency, department or instrumentality thereof; and

(3) "quantum technology" means technology that relies on quantum superposition or quantum entanglement or innovations that enable those technologies."

SECTION 10. A new section of the Income Tax Act is enacted to read:

"[NEW MATERIAL] CREDIT--CHILD CARE FACILITY DONATION INCOME TAX CREDIT.--

A. For taxable years prior to January 1, 2037, a taxpayer who is not a dependent of another individual and who makes a donation to a licensed child care facility may claim a credit against the taxpayer's tax liability imposed pursuant to the Income Tax Act. The credit authorized pursuant to this section may be referred to as the "child care facility donation income tax credit".

B. The amount of tax credit shall be in an amount equal to fifty percent of the amount donated in the taxable year, not to exceed five hundred thousand dollars ($500,000) per taxpayer.

C. The "child care facility donation income tax credit fund" is created in the state treasury. The taxation and revenue department shall administer the fund, and money in the fund is subject to appropriation by the legislature to offset the tax credits and for any other purpose. The tax credits shall not be credited against any other fund. If the department approves a tax credit, the amount of the credit shall be transferred from the fund to the general fund. Disbursements from the fund shall be made upon warrants drawn by the secretary of finance and administration pursuant to vouchers signed by the secretary of taxation and revenue. Money in the fund shall revert to the general fund at the end of fiscal year 2037.

D. To be eligible for the tax credit, a donation shall be:

(1) monetary;

(2) made to a qualifying child care facility or program that meets the minimum enrollment requirements to receive subsidies from the state;

(3) used to promote child care in New Mexico for children twelve years of age or younger; and

(4) certified by the early childhood education and care department.

E. A taxpayer shall apply for certification of eligibility for the credit from the early childhood education and care department on forms and in the manner prescribed by that department. Except as provided in Subsections H and I of this section, only one tax credit shall be certified per taxpayer per taxable year. The total annual aggregate amount of child care facility donation income tax credits and child care facility donation corporate income tax credits that may be certified in a calendar year shall not exceed ten million dollars ($10,000,000). Completed applications shall be considered in the order received. Applications for certification received after this limitation has been met in a calendar year shall not be approved. The early childhood education and care department shall post monthly on that department's website the aggregate amount of credits claimed per calendar year.

F. If the early childhood education and care department determines that a taxpayer meets the requirements of this section, that department shall issue a dated certificate of eligibility to the taxpayer providing the amount of tax credit for which the taxpayer is eligible and the taxable years in which the credit may be claimed. The early childhood education and care department shall provide the department with the certificates of eligibility issued pursuant to this subsection in an electronic format at regularly agreed-upon intervals.

G. That portion of the credit that exceeds a taxpayer's income tax liability in the taxable year in which the credit is claimed shall be refunded to the taxpayer.

H. Married individuals filing separate returns for a taxable year for which they could have filed a joint return may claim only one-half of the credit that would have been claimed on a joint return.

I. A taxpayer may be allocated the right to claim the credit in proportion to the taxpayer's ownership interest if the taxpayer owns an interest in a business entity that is taxed for federal income tax purposes as a partnership or limited liability company and that business entity has met all of the requirements to be eligible for the credit. The total credit claimed by all members of the partnership or limited liability company shall not exceed the allowable credit pursuant to this section.

J. The credit provided by this section shall be included in the tax expenditure budget pursuant to Section 7-1-84 NMSA 1978, including the total annual aggregate cost of the credit.

K. As used in this section:

(1) "donation" means a monetary donation to a licensed child care facility, but does not include a donation made by a taxpayer:

(a) that claims the child care facility donation corporate income tax credit;

(b) that is an owner of the licensed child care facility;

(c) whose spouse, sibling, parent, aunt, uncle, grandparent, child or grandchild is an owner of the licensed child care facility;

(d) that is an investor of the licensed child care facility; or

(e) that is otherwise affiliated with the licensed child care facility; and

(2) "licensed child care facility" means a child care center, a group child care home, a family child care home or an out-of-school time program licensed by the early childhood education and care department that provides at least fifty percent of its child care services to children who receive child care assistance pursuant to contracts with the early childhood education and care department."

SECTION 11. A new section of the Corporate Income and Franchise Tax Act is enacted to read:

"[NEW MATERIAL] CREDIT--CHILD CARE FACILITY DONATION CORPORATE INCOME TAX CREDIT.--

A. For taxable years prior to January 1, 2037, a taxpayer that makes a donation to a licensed child care facility may claim a credit against the taxpayer's tax liability imposed pursuant to the Corporate Income and Franchise Tax Act. The credit authorized pursuant to this section may be referred to as the "child care facility donation corporate income tax credit".

B. The amount of tax credit shall be in an amount equal to fifty percent of the amount donated in the taxable year, not to exceed five hundred thousand dollars ($500,000) per taxpayer.

C. The "child care facility donation corporate income tax credit fund" is created in the state treasury. The taxation and revenue department shall administer the fund, and money in the fund is subject to appropriation by the legislature to offset the tax credits and for any other purpose. The tax credits shall not be credited against any other fund. If the department approves a tax credit, the amount of the credit shall be transferred from the fund to the general fund. Disbursements from the fund shall be made upon warrants drawn by the secretary of finance and administration pursuant to vouchers signed by the secretary of taxation and revenue. Money in the fund shall revert to the general fund at the end of fiscal year 2037.

D. To be eligible for the tax credit, a donation shall be:

(1) monetary;

(2) made to a qualifying child care facility or program that meets the minimum enrollment requirements to receive subsidies from the state;

(3) used to promote child care in New Mexico for children twelve years of age or younger; and

(4) certified by the early childhood education and care department.

E. A taxpayer shall apply for certification of eligibility for the credit from the early childhood education and care department on forms and in the manner prescribed by that department. The total annual aggregate amount of child care facility donation income tax credits and child care facility donation corporate income tax credits that may be certified in a calendar year shall not exceed ten million dollars ($10,000,000). Completed applications shall be considered in the order received. Applications for certification received after this limitation has been met in a calendar year shall not be approved. The early childhood education and care department shall post monthly on that department's website the aggregate amount of credits claimed per calendar year.

G. That portion of the credit that exceeds a taxpayer's income tax liability in the taxable year in which the credit is claimed shall be refunded to the taxpayer.

H. The credit provided by this section shall be included in the tax expenditure budget pursuant to Section 7-1-84 NMSA 1978, including the total annual aggregate cost of the credit.

I. As used in this section:

(1) "donation" means a monetary donation to a licensed child care facility, but does not include a donation made by a taxpayer that:

(a) claims the child care facility donation income tax credit;

(b) is an investor of the licensed child care facility; or

SECTION 12. APPLICABILITY.--

A. The provisions of Sections 1 and 2 of this act apply to taxable years beginning on or after January 1, 2027.

B. The provisions of Sections 3, 4, 6, 10 and 11 of this act apply to taxable years beginning on or after January 1, 2026.

SECTION 13. EFFECTIVE DATE.--The effective date of the provisions of Sections 5 and 7 through 9 of this act is July 1, 2026.

- 47 -