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SB 295

Income tax; modifying certain income tax rate for certain tax years. Effective date.

2025 Regular Session Introduced by Jim Grego

SB 295 expands health-care GRT deductions (private insurance, direct care, supplies) and requires Medicaid reimbursements to cover the GRT, risking large state revenue losses.

Coauthored by Representative Grego (principal House author)
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WeVote Research Nonpartisan
Bill Summary · SB 295

SB 295 — Gross Receipts Tax Changes (summary)

Status: Introduced; effective date stated as July 1, 2025 (per bill)
Subject areas: Taxation — Gross receipts tax (GRT); Health care finance; Medicaid reimbursement

Main purpose

SB 295 makes wide-ranging changes to New Mexico’s gross receipts tax (GRT) treatment of health‑care‑related transactions. The bill expands GRT deductions for many health‑care services and for sales of medical equipment/supplies to providers, clarifies/extends existing deductions for insured cost‑sharing, and requires Medicaid reimbursements to providers to include amounts equal to GRT they pay.

Key provisions

  • Expands the list of health‑care receipts deductible from taxable gross receipts to include (among other items):
    • Fee‑for‑service payments by private insurers (previously taxable in many cases);
    • Direct pay (self‑pay) health‑care services not contracted through insurers;
    • Dental services (applies to dentists and dental hygienists);
    • Home health care provided by licensed practitioners (when not already in managed‑care contracts);
    • Medical equipment, supplies, and drugs sold to providers for use in practice (new deduction);
    • Medicare coinsurance paid by private secondaries (moved under certain deductions).
  • Leaves Medicaid‑paid services generally taxable, but requires that providers who receive Medicaid reimbursement be reimbursed for the GRT they pay (so providers are effectively “made whole” for GRT on Medicaid receipts).
  • Retains existing treatment for certain items (e.g., hospital services remain taxable with current partial deduction rules; nursing homes are excluded from the new deduction).
  • Removes or modifies a sunset for deductions on copayments/deductibles paid by insured individuals and extends deductions to certain out‑of‑pocket patient payments.
  • Includes “hold harmless” language applying to several deductions (references existing statute 7‑9‑93).
  • Effective date: July 1, 2025.

Who is affected

  • Health‑care providers (hospitals, clinics, dentists, home‑health providers, suppliers): major impacts to tax liabilities and billing/reimbursement flows.
  • Insurers and managed‑care organizations: changes in tax treatment of contracted and fee‑for‑service payments.
  • Patients (direct‑pay): some services may become tax‑exempt at the point of sale, depending on provider and payment pathway.
  • State and local governments: reduced GRT revenue and increased administrative workload for implementing new deductions and Medicaid reimbursement rules.
  • Taxation and health agencies (Taxation & Revenue Dept., Health Care Authority): implementation, systems, and regulatory tasks.

Fiscal impact and timeline

  • The Legislative Finance Committee (LFC) — and the bill’s fiscal analysis — warn that the change creates a substantial, difficult‑to‑pinpoint revenue loss because of data gaps across payers and payment types.
  • Estimated state and local gross receipts revenue reductions are substantial: analyses show annual GRT revenue decreases in the tens of millions to over $100 million (varies by year and assumptions). The LFC describes the fiscal effect as “likely significant” and highly uncertain.
  • Implementation costs are also identified (systems and administration for HCA and Taxation & Revenue), though minor relative to revenue effects.
  • LFC explicitly recommends more study and adherence to tax‑expenditure vetting principles before enactment.

Procedural/other notes

  • Bill language creates or expands tax expenditures (deductions) that materially erode the GRT base; LFC flagged concerns about revenue volatility and the need for better data to estimate impacts accurately.
  • The bill also contains multiple carve‑outs and exceptions (e.g., exclusions for nursing homes, continued taxation of some Medicare/Medicaid categories) that will require careful rulemaking and guidance from state agencies.

Bottom line: SB 295 reclassifies many health‑care receipts as deductible from New Mexico’s GRT, reduces tax on many private and direct‑pay health transactions, requires Medicaid reimbursement of providers’ GRT, and—per fiscal analyses—would produce large, uncertain reductions in state and local tax revenue beginning FY 2026 if enacted.

Compiled from official sources — confirm details with the bill’s official record.

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