Tax‑expenditure report shows largest deductions remain food and health exceptions; members press on IRBs and data‑center incentives

The Taxation and Revenue Department presented its annual tax‑expenditure report to the Revenue Stabilization and Tax Policy Committee, detailing how the state foregoes revenue through exemptions, deductions and credits and highlighting data‑quality limits for some items.

Secretary Stephanie Chardonn Clark and Lucinda Sedo (TRD chief economist) summarized the report’s findings: FY25 tax expenditures totalled less than in pandemic years, citizen benefits remain the largest category, and the top single expenditure was the gross‑receipts deduction for food‑for‑home consumption. TRD reported 149 total expenditures of which 27 are listed as "arguable" and described ongoing efforts to improve reporting and transparency.

Sedo flagged new entries in the report: a childcare‑provider GRT deduction that registered about $13 million in its first year, and a clean‑car income tax credit that produced about $1.2 million in claims during its initial period. TRD also described improved uptake of the refundable child tax credit following an outreach mailing that increased claims by roughly $7 million.

Committee members raised concerns about incentives tied to industrial revenue bonds (IRBs) and the treatment of large proposed data‑center projects. Representative Lara Cadena told the committee that Dona Ana County had approved an IRB described in testimony as an unusually large commitment; members asked whether the department or LFC had economic analyses of expected construction spending, taxable components, and the extent to which GRT exemptions or local property‑tax arrangements would shift revenue. TRD said IRBs are locally approved and the department receives only notice; LFC said it has asked NMSU to compile an IRB inventory so the Legislature can better assess fiscal effects.

The committee also discussed whether manufacturing deductions might be claimed by national labs or by projects not intended when credits were drafted. TRD staff said prior analysis did not find Los Alamos disproportionately claiming the manufacturing deduction historically, but both TRD and LFC said they are watching for increased claims in future years and that legislation to carve out particular activities could be drafted.

What’s next: TRD offered to provide compilations of recommendations and to continue improving data reporting and separate reporting of certain deductions in future filings. LFC said it is developing dynamic‑scoring tools and an inventory that will help rank which tax expenditures are most likely to be cost‑effective for legislative action.