HB 14 — Earned Income Tax Credit (New Mexico conference committee version)
Status: Vetoed (per header) | Introduced: 2025 session
Subject: Taxation — Individual and business tax changes; school/health/labor-related credits and excise taxes
Summary
- HB 14 is a multi-part tax package whose central change is repealing New Mexico’s Working Families Tax Credit (WFTC) and enacting an expanded New Mexico Earned Income Tax Credit (EITC). The bill also creates a refundable foster parent/guardian income tax credit, broadens a gross receipts tax (GRT) deduction for health‑care practitioner receipts to include coinsurance paid by patients, raises certain liquor excise taxes, and makes other revenue‑, tax‑expenditure and distribution changes. Several smaller new credits and programmatic items are included in committee versions.
Key provisions — EITC
- Replaces the WFTC with a state EITC, refundable, applied to tax years beginning 2025.
- Increases credit rates and raises income eligibility thresholds across family types (largest increases for adults without qualifying children). Examples (from bill tables): single filers with no children — eligibility raised from ~$17,640 (old WFTC) to $35,000; married with no children — $24,210 → $40,000. (See bill for full bracket tables.)
- Establishes a minimum credit of $100 for taxpayers with earned income under $25,000.
- Credit and phaseout amounts are indexed to inflation beginning tax year 2026; Taxation & Revenue Department must publish the credit tables in $50 income brackets.
- Refundability: amount in excess of liability is refundable; taxpayers must report credit amounts to TRD. Included in the state tax‑expenditure budget.
Key provisions — Foster parent & guardian credit
- Refundable credit for CYFD‑certified foster parents or guardians: $250 per month per child (must have been foster/guardian >50% of each month), up to $3,000 per taxpayer per year.
- Applicants receive a dated certificate of eligibility from Children, Youth and Families Department (CYFD) and CYFD must transmit certificates electronically to TRD. Applies to taxable years ending before Jan 1, 2031 (statutory sunset).
Key provisions — Health practitioner coinsurance / GRT
- Expands the GRT deduction available to health practitioners to permit deduction of coinsurance (in addition to copayments and deductibles) paid directly by insureds/enrollees for commercial contract services; sunsets extended (bill extends prior sunset to later date — see text). Requires reporting and inclusion in the tax‑expenditure budget.
Key provisions — Liquor excise tax and distributions
- Raises liquor excise tax rates by ~20% on beer, wine, spirits, cider, fortified wine (specific per‑unit increases in the bill).
- Changes certain distribution rules (removes one municipal distribution stream) and creates a Tribal Alcohol Harms Alleviation Fund (see bill for details). Effective July 1, 2025 for excise changes.
Fiscal impact (Legislative Finance Committee / LFC estimates)
- Expansion of EITC estimated to reduce recurring General Fund revenues by roughly $72 million in FY26 (projected to grow slightly thereafter).
- Foster parent/guardian credit estimated at roughly $8.8 million annually.
- The GRT coinsurance deduction estimated to reduce General Fund revenues by tens of millions (LFC figures show ~$31.3M FY26 with additional local government impacts).
- Liquor excise increases generate modest recurring revenue increases; distribution adjustments and local impacts are reflected in LFC fiscal notes.
- LFC and TRD note administrative work and implementation requirements (TRD for EITC tables, CYFD certification procedures, reports).
Who is affected
- Low‑ and moderate‑income working individuals and families (expanded eligibility and larger credits).
- Foster parents and court‑appointed/tribal guardians (new refundable credit).
- Health practitioners and entities receiving coinsurance payments (expanded GRT deduction).
- Consumers indirectly via liquor excise increases; local governments and tribal entities affected by distribution changes and new funds.
Timing, sunsets, and administrative notes
- EITC applies to tax years beginning 2025; foster parent credit applies through tax years ending prior to Jan 1, 2031 (statutory sunsets noted). Health practitioner deduction effective July 1, 2025. TRD must publish credit tables; CYFD to certify foster/guardian eligibility. Several parts of the bill are required to be listed in the state tax‑expenditure budget.
Sources / implementation documents
- Conference committee report, LFC fiscal notes and TRD analyses cited in committee reports provide the numerical tables, phaseout brackets, and the fiscal impact estimates summarized above. For exact credit rates, phaseout brackets, certification forms and effective dates, refer to the bill text and LFC/TRD fiscal notes.
