Summary:

 House Bill 568 (HB 568) establishes the Home Fire Recovery Income Tax Credit, allowing taxpayers to claim a tax credit for site-built home expenditures incurred to replace homes destroyed by wildfires in 2021 through 2023. The credit is available for taxable years beginning on or after January 1, 2025, and expires on January 1, 2032. The credit is non-refundable but may be carried forward for up to three years. The tax credit amount is reduced by any compensation received under the federal Hermit’s Peak/Calf Canyon Fire Assistance Act.
 

Legislation Overview:

 House Bill 568 (HB 568) creates a new income tax credit for taxpayers who construct a new site-built home to replace a prior residence destroyed by wildfire in calendar years 2021 through 2023. To be eligible, the home must be built on the same property as the prior home, and the taxpayer must apply for certification of eligibility from the Construction Industries Division of the Regulation and Licensing Department. Applications for certification must be submitted no later than twelve months after the completion of construction, and the department will process applications in the order received.

To qualify, taxpayers must provide proof of wildfire destruction, proof of construction expenditures, and a sworn statement confirming project completion. Once certified, the taxpayer may claim the tax credit in the year specified on the certificate. The tax credit is equal to the total amount of qualified site-built home expenditures but is reduced by any compensation received under the Hermit’s Peak/Calf Canyon Fire Assistance Act for home construction or repair. The credit is non-refundable but can be carried forward for three consecutive taxable years if it exceeds the taxpayer’s liability. Married couples filing separately may each claim half of the credit that would have been available on a joint return. Business entities, such as partnerships and limited liability companies, may allocate the credit among their members in proportion to their ownership interest.

The Taxation and Revenue Department is required to compile an annual report on the tax credit’s usage, including the number of recipients and total credits claimed. The department must present this report to the Revenue Stabilization and Tax Policy Committee and the Legislative Finance Committee. The credit applies to taxable years beginning on or after January 1, 2025, and the program is automatically repealed on January 1, 2032.

Implications

HB 568 provides financial relief to homeowners affected by wildfires, assisting with rebuilding costs and encouraging site-built reconstruction rather than mobile or manufactured housing. By tying eligibility to wildfire destruction in 2021 through 2023, the bill specifically targets recent disaster victims rather than creating an ongoing tax incentive for home construction. The credit’s reduction by any federal assistance ensures that state funds do not duplicate federal compensation.

The non-refundable nature of the credit limits immediate financial relief for lower-income taxpayers who may not have sufficient tax liability to fully benefit from the credit in one year, although the three-year carryforward provision allows for future use. The cap on credit certification each year, based on the order of applications received, may disadvantage late applicants if the program reaches administrative or financial capacity limits.

The bill increases administrative responsibilities for the Construction Industries Division, which must certify eligibility, and for the Taxation and Revenue Department, which must track and report on credit usage. Ensuring accurate verification of wildfire-related destruction and construction expenditures may require additional state resources. The requirement for legislative reporting provides transparency on the program’s financial impact and effectiveness. 

Current Law:

 Under current law, there is no state income tax credit specifically designed for wildfire recovery or home rebuilding. Homeowners affected by wildfires may seek assistance through federal programs, such as the Hermit’s Peak/Calf Canyon Fire Assistance Act, but New Mexico does not currently provide a tax-based incentive for reconstruction. The existing tax code does not distinguish between site-built and manufactured housing for tax benefits.