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Committee advances bill to bar property tax exemption for hospital real property after 2025
Summary
The House Health & Human Services Committee voted to give House Bill 46 a “due pass,” a measure that would remove real property from the Hospital Equipment Loan Act’s definition of exempted “health-related equipment,” making future hospital-owned structures subject to property tax beginning July 1, 2025.
House Health & Human Services Committee members voted to give House Bill 46 a due pass after an extended hearing on whether the law that allows hospitals to use the Hospital Equipment Loan Act as a tax abatement has expanded beyond its original intent.
The bill’s sponsor told the committee HB46 would “remove real property from the definition of health-related equipment,” so that buildings and structures purchased or financed after July 1, 2025, would not receive the existing property-tax exemption under the Hospital Equipment Loan Act. Damian Lara, Bernalillo County assessor, testified he and New Mexico Counties support the change as a correction of the statute’s original purpose.
The measure’s supporters said the exemption was originally intended for medical devices and equipment such as X-ray or MRI machines and not for buildings or parking garages. Lara told the committee he has seen a $30,000,000 parking garage in Bernalillo County treated as exempt under the current law and said continuing that treatment shifts tax burdens to other property owners.
Opponents including Drew Setter, a registered lobbyist for Hearing Health Services, said removing the exemption for real property could increase hospitals’ property tax bills and “strain hospital budgets,” potentially shifting costs to patients. Setter also said some hospitals have used the loan-and-bond process as a de facto tax abatement rather than to finance equipment, and he cited an estimate that Presbyterian Downtown Hospital could face roughly a $15,000,000 tax increase if real property were taxed.
Committee members pressed both sides on likely effects. Damian Lara said any hospital currently receiving an exemption would continue to receive it until the underlying bond expires, but bonds issued after July 1, 2025, would not cover real property. He said rural hospitals that use the council to finance expensive equipment would still be able to access exemptions for equipment only.
Members also debated who currently bears the cost of the exemption. Lara said the forgone property tax revenue is borne by other property owners in the county via yield-control and mill-rate adjustments; narrowing the tax base raises rates for everyone else. Some members worried hospitals would pass higher costs to patients or insurers; Lara replied hospitals can take federal tax depreciation on real property and that Medicaid, Medicare and insurers ultimately absorb parts of reimbursement changes.
Committee members referenced a fiscal impact report that lists roughly $2.9 billion in historical bond series tied to hospital equipment financing. Members asked for clearer data on how much of that total financed real property versus equipment, and whether for-profit entities use the council primarily as a tax-abatement tool.
After questions and public testimony, Representative Kates moved and Representative Ferrari seconded a motion for a due pass. On a roll call the committee recorded six yes votes and three no votes; the committee announced a due pass.
The bill as advanced is prospective and would not apply to real-property financing already issued under existing bonds.
