2024 Tax Credits
A number of different tax-related items were proposed as bills and eventually consolidated into the tax omnibus bill, Adjust Income Tax Brackets (SB 252). Following is information on five of the credits that CVNM was following during the session and how they’ll work. The links are to the legislation as introduced.
1. HB 92: Geothermal Electricity Generation Tax Credits creates a new geothermal electricity generation tax credit and a corporate tax credit (both defined in detail in the legislation). It also creates a gross receipts tax (GRT) and compensating tax reductions.
Under the terms of this new statute the Tax Administration Act is amended to allow compensation (following a formula outlined in the legislation) to municipalities or counties, equal to the sum of the deductions in gross receipt taxes claimed by taxpayers within those jurisdictions. The GRT exemption applies to personal property or services used for construction of geothermal electricity facilities and/or distribution of that electricity.
The Income Tax Act and the Corporate Income and Franchise Tax Act are amended to allow a tax credit at the rate of $0.015 (1 ½ cents) per kilowatt hour of geothermal electricity generated. The aggregate credits certified in any calendar year is capped at $5,000,000 per year.
Application for a certificate of eligibility is through the Energy, Minerals and Natural Resources Department (EMNRD), which will review them in the order received. The application must come in the calendar year in which the electricity was generated. Unused credits can be carried forward for up to three years.
Construction of new facilities for geothermal resources (defined in the legislation) has to begin on or after January 1, 2025. For existing facilities, an increase in generation also must start on or after January 1, 2025, which is the effective date of these provisions.
2. HB 140: Clean Car Income Tax Credit amends the Income Tax Act and the Corporate Income and Franchise Tax Act by creating personal and corporate tax credits for clean cars and clean car charging units. The credit applies to purchase of “an electric vehicle, plug-in hybrid electric vehicle or fuel cell vehicle” (all defined in detail in the legislation). It also extends to leased vehicles, but the lease must be for at least three years.
The amount of the tax credit – for individuals or corporations – diminishes over time:
- taxable years beginning January 1, 2024 and prior to January 1, 2027:
- $3,000 for a new electric vehicle
- $2,000 for a new plug-in hybrid electric vehicle or fuel cell vehicle
- $1,500 for a previously owned electric vehicle
- $1,000 for a previously owned plug-in hybrid electric vehicle or fuel cell vehicle
- taxable years beginning January 1, 2027 and prior to January 1, 2028:
- $2,200 for a new electric vehicle
- $1,480 for a new plug-in hybrid electric vehicle or fuel cell vehicle
- $1,110 for a previously owned electric vehicle
- $740 for a previously owned plug-in hybrid electric vehicle or fuel cell vehicle
- taxable years beginning on January 1, 2028 and prior to January 1, 2029:
- $1,470 for a new electric vehicle
- $980 for a new plug-in hybrid electric vehicle or fuel cell vehicle
- $735 for a previously owned electric vehicle
- $490 for a previously owned plug-in hybrid electric vehicle or fuel cell vehicle
- taxable year beginning January 1, 2029:
- $960 new electric vehicle;
- $640 for plug-in hybrid electric vehicle or fuel cell vehicle;
- $480 previously owned electric vehicle; and
- $320 previously owned plug-in hybrid electric vehicle or fuel cell vehicle
For residential and small scale electric vehicle charging units, the credit will be $400 or the cost to purchase and install the electric vehicle charging unit, whichever is less. The amount of tax credit for a direct current fast charger or fuel cell charging unit is $25,000 or the cost to purchase and install the direct current fast charger or fuel cell charging unit, whichever is less.
Application for a certificate of eligibility is through EMNRD and has to occur within a year of the purchase or lease of an eligible vehicle. The tax credit must be claimed within three years. Tax credits can be sold, exchanged or otherwise transferred at full value; the parties need to inform the department within 10 days of the transaction.
Taxpayers who apply through the 2021 sustainable buildings tax credit for purchase and installation of vehicle charging units cannot apply under this new tax credit as well.
The effective date of the credits is January 1, 2024. The credits apply to tax years starting January 2024, with repeal of the provisions effective January 1, 2031.
3. HB 274: Advanced Energy Equipment Tax Credit amends the Income Tax Act by creating a new tax credit for individuals and corporations for the manufacture of any advanced energy product, which is defined as “a technology, product, system or component eligible for a federal tax credit under Section 45X of the federal Internal Revenue Code” (to include wind and solar power, and other efforts targeted at reducing greenhouse gas emissions). Manufacturing equipment means “an essential machine, mechanism or tool or a component of an essential machine, mechanism or tool used directly and exclusively in a taxpayer’s qualified manufacturing facility and that is subject to depreciation pursuant to the federal Internal Revenue Code.”
The credit will be the lessor of 20% of the amount of qualified expenses or $25,000,000. The amendment applies to individuals with whole or partial ownership in a manufacturing facility, and to corporate owners of such a facility through amendments to the Corporate Income and Franchise Tax Act.
It’s necessary to apply for preliminary certification to EMNRD in consultation with the Economic Development Department (EDD). This is to certify that the production will be for advanced energy equipment. Once manufacturing begins, the applicant has 12 months to apply for final certification. If approved, EMNRD, again in consultation with EDD, will issue a certificate of eligibility listing the total amount of the tax credit.
Tax credits can be sold, exchanged or otherwise transferred, with notification to the department within 10 days. The credit must be claimed within one year of the issuance of the final certificate, although any balance remaining at the end of the taxpayer’s reporting period may be carried forward for up to five years.
The credit goes into effect on January 1, 2025 and applies to tax years starting January 1, 2025 and ending prior to January 1, 2033 (that is, the 2025-2032 tax years). The provisions of the statute applying to this tax credit will automatically repeal effective January 1, 2034.
4. SB 121: Solar Market Development Tax Credit Changes amends New Mexico’s solar market development income tax credit, allowing it to apply to businesses or agricultural enterprises owned by tribal entities, and raises the cap on annual aggregate amounts for certified credits.
The Solar Market Development Income Tax Credit was enacted in 2020. That credit applies to taxable years prior to January 1, 2032 for “a taxpayer… who, on or after March 1, 2020, purchases and installs a solar thermal system or a photovoltaic system in a residence, business or agricultural enterprise in New Mexico.” The amendment extends that language to include: “a federally recognized Indian nation, tribe or pueblo.” For purposes of this change, this section of the statute can be referred to as “”new solar market development income tax credit.”
The amendment also replaces a flat $12,000,000 per year cap on the total funds available for the credit to a much more generous allocation, as follows:
- for calendar years 2020 through 2023, for each calendar year an additional 20,000,000 in credits that may be certified. People who applied for the solar tax credit between 2020-23, qualified for it, but were not funded because the state ran out of money, may file for the credit. Similarly, if they were denied a certificate during those years, they can refile and try again. However, these people must file this tax year
- for calendar years 2024 and thereafter, $30,000,000
The credit is for 10% of the cost to purchase and install a solar thermal or photovoltaic system, with a maximum credit of $6000 per taxpayer per year. Applications to get a certification of eligibility have to be made to EMNRD and are taken in the order received. The Solar Tax Credit website contains further information and links to the electronic application form with instructions.
5. SB 232: Energy Storage Industrial Revenue Bonds adds “energy storage facilities” to the list of eligible recipients of state and county industrial revenue bonds acts, requires a payment-in-lieu-of-taxes to a school district if a government entity takes over an energy storage facility, and amended the Gross Receipts Tax (GRT) deduction statute to include energy storage facilities.
An energy storage facility is defined as: “a facility that uses mechanical, chemical, thermal, kinetic or other processes to store energy for release at a later time to integrate energy supply associated with renewable generation across the electric grid.” These are especially important components of solar and wind energy facilities to compensate for times when the sun isn’t shining or the wind isn’t blowing.
The change to the GRT provisions in the statute on industrial revenue bonds provides that: Receipts from selling energy storage equipment or related equipment (defined in the legislation) to a government for the purpose of installing an energy storage facility may be deducted from gross receipts prior to July 1, 2044.
The changes listed in the legislation take effect on July 1, 2024. They affect various statutes dealing with the Industrial Bond Act, the County Industrial Revenue Bond Act, and Taxation.