Bill
SB 298
SB 298 would grant a 10-year personal income tax exemption on income from health care services for listed NM practitioners, sunset Dec 31, 2034, with multi-year revenue loss.
Status
- Introduced: February 10, 2025
- Current procedural status: Action postponed indefinitely. (Not enacted.)
- If enacted as written, no explicit effective date is included; by statute it would take effect 90 days after adjournment (example date cited: June 20, 2025). The exemption would apply to tax years beginning January 1, 2025 and would sunset for taxable years ending December 31, 2034.
Purpose / Intent
- Provide a 10‑year personal income tax exemption for specified licensed health care practitioners on income earned from providing health care services in New Mexico, to improve provider retention, recruitment and access to care.
Key provisions
- Creates an income tax exemption (10 years) for income “derived from providing health care in New Mexico within the scope of the practitioner’s practice.”
- Professions specifically listed in the fiscal analysis:
1. Chiropractic physicians
2. Dentists
3. Dental hygienists
4. Acupuncturists
5. Optometrists
6. Physicians (MDs and DOs)
7. Physician assistants
8. Physical therapists
9. Podiatrists
10. Psychologists
- Applies to income from practice in New Mexico; the exemption sunsets after tax years ending Dec 31, 2034.
- The bill as drafted lacks definitions for “full‑time” practice, scope of “practice” (e.g., whether research/administration are included), and whether other doctoral‑level practitioners (e.g., pharmacists, advanced practice nurses) are eligible.
Who would be affected
- Primary: licensed practitioners in the listed professions who earn income from patient care in New Mexico. The Taxation & Revenue Department (TRD) estimated about 8,350 eligible practitioners.
- Secondary: New Mexico General Fund and state budget (reduced personal income tax receipts); potential effects on healthcare access if the exemption influences provider location/retention.
Fiscal and implementation impacts (per legislative fiscal analysis)
- Revenue loss (TRD estimates, recurring General Fund):
- FY 2026: ($65.4 million)
- FY 2027: ($68.3 million)
- FY 2028: ($70.8 million)
- FY 2029: ($73.6 million)
- TRD implementation cost: one‑time IT workload of ~220 hours (~$14.6k).
- Methodology: TRD used workforce counts from the 2024 Health Care Workforce Committee report and occupational wage statistics, applying tax rates to median incomes, and growth indexing; data gaps and confidentiality limited precision.
Policy considerations and concerns
- Potential benefits: could help recruit/retain clinicians, particularly if tax savings are meaningful; may be competitive relative to other states.
- Concerns raised by analysts:
- Large and uncertain fiscal cost; creates revenue volatility and reduces General Fund capacity.
- The exemption is broad and not targeted to underserved/rural areas where shortages are greatest.
- Administrative/definitional ambiguities (e.g., what constitutes full‑time practice, scope of exempted income).
- No current precedent in other states for a sector‑wide income‑tax exemption of this type.
- Suggestion to expand or clarify covered practitioner categories (e.g., pharmacists, DNPs) or add targeting provisions.
Bottom line
- SB 298 would provide a 10‑year state income tax exemption for specified health practitioners practicing in New Mexico, with an estimated multi‑year General Fund revenue loss measured in tens of millions annually. The bill was postponed indefinitely; if revived, its fiscal impact, targeting, and definitional gaps would be central issues for policymakers.
Compiled from official sources — confirm details with the bill’s official record.
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