By Peter G. Pupke, Esq.
On April 7, 2023, New Mexico Governor Grisham has approved portions of an omnibus tax bill that provide an additional one-time tax rebate; an increase in the child tax credit for the lowest three income levels; an increase to the benefits of the film tax credit, including raising the cap for films not by New Mexico film partners, expanding subsidies for nonresidents, and enhancing the benefit of filming in rural locations; and an expansion of the medical services gross receipts tax deduction to add all receipts from a copayment or deductible paid by a patient to a healthcare practitioner for commercial contract services provided under health insurance. Among the provisions vetoed by the Governor were an addition phase-in reduction to the state’s gross receipts tax rate; several proposed gross receipts tax deductions; a reduction of income taxes on lower earners; a cap on the 40% capital gains deduction and limits on that deduction; a number of proposed tax credits; elimination of the existing 4.8% corporate income tax rate for income of $500,000 or less and imposition of the current 5.9% rate to all corporate income; and a transition to a single sales-factor apportionment formula for businesses. (L. 2023, H547 (c. 211), effective and operative as shown.)
Income tax rebates. As approved, the bill enacts a temporary personal income tax (PIT) rebate to be paid to all residents who filed state tax returns for tax year 2021. The rebate is $500 for single filers and married individuals filing separate returns and $1,000 for married individuals filing joint returns, heads of household, and surviving spouses. The amendment is effective April 1, 2023.
Child income tax credit. As approved, the bill increases the child tax credit for the lowest three income levels from $175 to $600, $150 to $400, and $125 to $200. The bill also adds language to annually adjust the credit amounts to account for inflation. The amendments apply to taxable years beginning on or after January 1, 2023.
Film tax credits. As approved, the bill increases the benefits of the film tax credit, including raising the cap for films not by New Mexico film partners, expanding subsidies for nonresidents, and enhancing the benefit of filming in rural locations. The amendments apply to film production companies that commence principal photography for a film or commercial audiovisual product on or after July 1, 2023.
Healthcare practitioner copayment or deductible GRT deduction. As approved, the bill expands the medical services gross receipts tax (GRT) deduction to add all receipts from a copayment or deductible paid by a patient to a healthcare practitioner for commercial contract services provided under health insurance. The effective date of the amendment is July 1, 2023, and the provisions sunset effective July 1, 2028.
Vetoed income tax provisions. Among the income tax provisions vetoed by the Governor were: a reduction of income taxes on lower earners; removal of the sunset date on the armed forces retirement pay exemption; amendments to the low-income comprehensive tax rebate; expansion of the rural healthcare practitioner tax credit to several new categories of health workers; an exemption for school supplies purchased by a public school teachers; and indexing the income caps on the income tax exemption for social security income to account for inflation. The Governor also vetoed the following proposed credits: electric vehicle and charging unit credits; an energy storage credit; a special needs adoption credit; and credits for geothermal energy generation and geothermal ground-coupled heat pumps.
The Governor also vetoed a cap on the 40% capital gains deduction and limits on that deduction; the elimination of the existing 4.8% corporate income tax rate for income of $500,000 or less and imposition of the current 5.9% rate to all corporate income; and a transition to a single sales-factor apportionment formula for businesses.
Gross receipts tax provisions vetoed. Among the provisions vetoed by the Governor was a further a phase-in reduction to the state’s gross receipts tax (GRT) rate, as well as a number of proposed gross receipts tax deductions.
Other vetoed provisions. The Governor also vetoed the following provisions in the ill: a liquor excise tax increase; the removal of the 50¢ per cigar cap on the tobacco products tax on cigars; and amendments related to industrial revenue bonds.
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