Senate committee advances tax package substitute after debate over business decoupling, housing GRT deduction and physician credits

The Senate Finance Committee on the morning of the hearing advanced a committee substitute for Senate Bill 151, a tax package that pairs revenue-raising changes to business tax treatment with targeted incentives for health care, housing and local news. After extended questioning and public testimony from business groups and housing advocates, the committee adopted an amendment shortening the affordable-housing GRT deduction’s sunset and voted 7–4 to move the substitute to the Senate floor.

Committee staff said the Senate portion of the package represents about $55 million in recurring tax capacity, with roughly the same amount expected from the House side, producing an overall recurring revenue estimate in the neighborhood of $110 million. Ismael Torres, chief economist, summarized the mechanics, saying the primary revenue increases come from decoupling certain federal business depreciation and interest provisions and by including certain foreign-sourced corporate income in New Mexico’s tax base. "The estimates are on the fiscal impact report page 1 about a 110,000,000," Torres said in explaining the scoring.

Supporters told the committee the measures will help spur affordable multifamily housing and stabilize local journalism. Roger Valdez of the Center for Housing Economics said the GRT deduction for affordable multifamily projects "is going to save millions of dollars for much needed affordable housing with very small impact on state and local GRT revenues," and noted the deduction is tied to the Affordable Housing Act’s requirements that qualifying projects reserve a high share of units as affordable.

Opponents warned the package will raise the cost of doing business in New Mexico. Terry Cole, president and CEO of the Greater Albuquerque Chamber of Commerce, urged a no vote and said the state should use surplus dollars for incentives rather than increase business tax burdens. "We respectfully urge a no vote on SB 151," Cole said. Ashley Wagner, vice president of government affairs for the New Mexico Oil and Gas Association, testified the bill "is a significant tax increase on investment" and warned that, by eliminating bonus depreciation and limiting interest deductions, it could weaken the state’s long‑term competitiveness.

Business coalitions and tax policy groups also flagged the inclusion of net controlled foreign corporation tested income (NCTI) in the state corporate base without a corresponding foreign tax credit, a change they said risks double taxation for multinational companies. Dylan Waits of the Council on State Taxation urged the committee to exclude NCTI or add an offseting credit.

Lawmakers pressed staff on how the housing GRT deduction would operate in practice, including whether contractors could claim nontaxable transaction certificates (NTTCs) for both materials and labor and whether savings would pass through to renters or purchasers. Secretary Stephanie Chardon Clark of the Taxation and Revenue Department told the committee that, in the current draft, the deduction does not include NTTC language but that an NTTC mechanism could be drafted; she also cautioned that imposing an administrative cap on a GRT deduction is difficult because GRT deductions are self‑claimed on periodic returns. "Absent a cap, a sunset is one way to self control that," she said.

Concerns about runaway costs led a senator to offer and the committee to adopt an amendment shortening the GRT deduction’s sunset from July 1, 2033 to July 1, 2029; the roll call on the amendment is recorded in the committee minutes. The committee then voted to give a "do pass" recommendation on the finance committee substitute as amended by a 7–4 margin and sent the substitute to the full Senate for floor consideration, where members may offer further amendments and the House will still weigh its portion of the package.

The committee also recorded several technical and clarifying requests: members asked staff to provide municipality‑level estimates of local GRT impact; to refine NTTC drafting; and to return with more precise corporate income tax distribution data once quarterly returns are posted. The hearing record notes the substitute will be transmitted to the floor and that additional amendments may be made in that chamber.

Next steps: the substitute proceeds to the Senate floor for further amendment and consideration. The House is expected to contribute the other half of the package’s tax capacity in its own measures, and conference or concurrence work will follow if both chambers pass differing packages.