Summary:

 House Bill 218 (HB 218) makes comprehensive changes to various taxation and revenue statutes, including updates to outdated provisions, amendments to the Metropolitan Redevelopment Code and the Tax Increment for Development Act to align with destination sourcing, and modifications to tax distribution procedures. The bill increases the threshold for quarterly or semiannual tax filings, grants the Taxation and Revenue Department authority to compromise asserted tax liabilities in cases of refund denials, and increases the public disclosure threshold for installment agreements, abatements, refunds, and credits. It also allows a completed return to serve as a claim for a tax refund and eliminates the requirement for attorney general approval for tax closing agreements exceeding twenty thousand dollars. HB 218 includes various amendments related to tax liens, electronic filing deadlines, oil and gas tax payments, and municipal and county tax distributions. The bill does not specify an effective date and will take effect ninety days after the legislative session ends on June 20, 2025, if passed. 

Legislation Overview:

 House Bill 218 (HB 218) introduces substantial changes to tax administration and revenue distribution laws in New Mexico. The bill removes outdated provisions across multiple sections of Chapter 7 of the New Mexico Statutes Annotated (NMSA) 1978, streamlining tax processes and enhancing administrative efficiencies. Key provisions include amendments to the Metropolitan Redevelopment Code and the Tax Increment for Development Act to conform with destination sourcing requirements, ensuring tax distribution aligns with business locations.
The bill revises tax distribution and transfer procedures to political subdivisions, increasing the tax liability threshold required for taxpayers to be eligible for quarterly or semiannual tax filings. It expands the authority of the Secretary of Taxation and Revenue to compromise tax liabilities when a refund or credit is denied, a power currently limited by law. Public disclosure thresholds for installment agreements, abatements, refunds, and credits are increased to enhance transparency. Additionally, it allows taxpayers to submit a completed tax return as a claim for a refund, eliminating additional procedural burdens.

HB 218 removes the requirement that tax closing agreements exceeding twenty thousand dollars receive prior attorney general approval, granting the Taxation and Revenue Department (TRD) sole authority over these agreements. It modifies provisions governing tax liens by allowing liens to be recorded without requiring notarization, aligning with modern digital filing practices. The bill also harmonizes electronic filing deadlines for all filers, including those submitting electronically.

Oil and gas tax provisions are updated, including the elimination of contingent rates for the petroleum products loading fee and streamlining advance payments for certain oil and gas taxes. The bill clarifies the application of oil production taxes on skim oil, ensuring consistency in tax treatment. Additionally, it amends the due date for workers' compensation fees to align with withholding tax deadlines.

The bill adjusts local option gross receipts and compensating tax rates, stipulating that changes take effect on July 1 following an election or adopted ordinance unless an emergency or unforeseen occurrence necessitates an earlier implementation. Amendments also affect property and gross receipts tax increments, refining the procedures for determining base gross receipts taxes in tax increment development districts and metropolitan redevelopment areas. New reporting requirements ensure accurate tax distributions and improve transparency in tax allocation.

Implications
HB 218 is expected to have significant fiscal and administrative impacts. By expanding the authority of the TRD secretary to compromise tax liabilities and by eliminating attorney general approval for closing agreements, the bill may expedite tax dispute resolutions and reduce backlog cases. However, these changes may raise concerns about reduced oversight of large tax settlements.

The increase in the tax liability threshold for quarterly and semiannual tax filers is likely to benefit small businesses by reducing administrative burdens. However, it may also result in delayed tax payments to the state. The elimination of contingent petroleum product loading fees and changes to oil and gas tax payment structures may affect revenue consistency in the energy sector. The bill’s removal of outdated municipal and county tax distribution formulas could streamline tax administration, though local governments may need to adjust to the new revenue distribution framework.

The alignment of workers' compensation fee due dates with withholding tax deadlines will simplify compliance for businesses but could create short-term administrative costs for payroll processors adjusting to the new requirements. Additionally, the bill’s authorization for tax liens to be recorded without notarization modernizes the process but may raise concerns about potential errors or fraudulent filings.

HB 218 repeals the following statutes:
1. 7-1-6.6 NMSA 1978 – Distribution to Game Protection Fund
2. 7-1-6.24 NMSA 1978 – Distribution to Substance Abuse Education Fund
3. 7-1-6.34 NMSA 1978 – Distribution to Conservation Planting Revolving Fund
4. 7-1-6.35 NMSA 1978 – Distribution of contributions to state political party
5. 7-1-6.48 NMSA 1978 – Distribution of contributions to Department of Health for amyotrophic lateral sclerosis research
6. 7-1-6.49 NMSA 1978 – Distribution of contributions to the state parks division
7. 7-1-6.50 NMSA 1978 – Distribution of contributions for national guard member and family assistance
8. 7-1-6.59 NMSA 1978 – Distributions to Vietnam veterans’ memorial operation, maintenance and improvement
9. 7-1-6.60 NMSA 1978 – Distribution of County Business Retention Gross Receipts Tax
10. 7-1-15.2 NMSA 1978 – Collection of Compensating Tax
11. 7-2-7.2 NMSA 1978 – 2005 tax rebate 
12. 7-2-7.3 NMSA 1978 – 2005 tax rebate exemption
13. 7-2-18.7 NMSA 1978 – 2000 property tax rebate
14. 7-2-18.11 NMSA 1978 – Job Mentorship Tax Credit
There were no claims on this credit in 2023 and 2024.
15. 7-2-18.14 NMSA 1978 – Solar Market Development Tax Credit
Required purchases had to have been made prior to 2017. The New Solar Market Development Credit remains in effect.
16. 7-2-18.19 NMSA 1978 – Sustainable Building Tax Credit
Required investments had to have been made prior to 2017. The 2021 Sustainable Building Tax Credit remains in effect.
17. 7-2-18.23 NMSA 1978 – 2007 refundable tax credit
18. 7-2-18.30 NMSA 1978 – Foster Youth Employment Income Tax Credit
Credit has never been claimed.
19. 7-2-23 NMSA 1978 – Optional designation of tax refund contribution for wildlife
20. 7-2-24.1 NMSA 1978 – Optional designation of tax refund contribution for tree plantings
21. 7-2-25 through 7-2-28 NMSA 1978 – Miscellaneous repeals related to contributions to Game Protection Fund, distribution to Statue of Liberty Fund, and findings and intent of legislature
22. 7-2-29 through 7-2-30.9 NMSA 1978 – Optional designation of tax refund contributions for Substance Abuse Education Fund, Amyotrophic Lateral Sclerosis Research Fund, state parks division, national guard member and family assistance, Vietnam Veterans Memorial, Veterans’ Enterprise Fund, Lottery Tuition Fund, Equine Shelter Rescue Fund, senior services, and Animal Care and Facility Fund
23. 7-2-30.11 NMSA 1978 – Optional designation of tax refund contributions for New Mexico Housing Trust Fund
24. 7-2-31 NMSA 1978 – Optional designation of tax refund contributions for state political party
25. 7-2A-14 NMSA 1978 – Corporate-supported childcare credit
Credit has not been claimed in the last three years.
26. 7-2A-17.1 NMSA 1978 – Job Mentorship Tax Credit
There were no claims on this credit in 2023 and 2024.
27. 7-2A-21 NMSA 1978 – 2015 Sustainable Building Tax Credit
Required investments had to have been made prior to 2017. The 2021 Sustainable Building Tax Credit remains in effect.
28. 7-2A-29 NMSA 1978 – Foster Youth Employment Corporate Income Tax Credit
Credit has never been claimed.
29. 7-2A-30 NMSA 1978 – Allows publicly traded companies subject to corporate income tax to claim a deduction over ten years to offset financial impacts from deferred tax liabilities or assets resulting from tax law changes made in 2019
30. 7-2D-1 through 7-2D-14 NMSA 1978 – Venture Capital Investments Act
31. 7-2F-1 NMSA 1978 – Film Production Tax Credit for photography commencing prior to 2016
32. 7-2F-2.1 NMSA 1978 – Additional definitions related to film production
33. 7-2F-6 through 7-2F-11 NMSA 1978 – Film and Television Tax Credit and related additional credits
Credits for productions starting after July 1, 2019, fall under the New Film Production Tax Credit, which remains in effect.
34. 7-2H-1 through 7-2H-4 NMSA 1978 – Native American Veterans’ Income Tax Settlement Fund
35. 7-9-10 NMSA 1978 – Agents for collection of compensating tax
36. 7-9-74 NMSA 1978 – Industry-specific (jewelry manufacture) Gross Receipts Tax deductions.
These receipts are now deductible under Section 7-9-46, which applies to the sale of tangible personal property to any manufacturer.
37. 7-9-79.2 NMSA 1978 – Biodiesel Blending Facility Tax Credit
No new claims in the last three years.
38. 7-9-118 NMSA 1978 – Food and beverage establishments deduction from Gross Receipts Tax in 2021
Deduction can no longer be claimed.
39. 7-9A-2.1 NMSA 1978 – 2005 review of Investment Credit by interim committee
40. 7-9F-12 NMSA 1978 – Department report to fiscal and economic impacts of Technology Jobs Tax Credit Act
41. 7-9J-1 through 7-9J-8 NMSA 1978 – Alternative Energy Product Manufacturers Tax Credit Act
Credit is underused. 
42. 7-13-10 NMSA 1978 – Validation of pledges of distribution of Gasoline Tax to local governments

Additionally:
7-1-6.66 NMSA 1978, Hold-harmless provision for food and beverage has a delayed repeal effective January 1, 2028. 

Current Law:

 Under current law, tax administration procedures are governed by a complex framework that includes multiple outdated provisions. Tax distributions to municipalities and counties are subject to rigid formulas that may not reflect current economic conditions. The Taxation and Revenue Department’s ability to compromise tax liabilities is limited, requiring attorney general approval for settlements exceeding $20,000. Additionally, tax liens require notarization before being recorded.

Quarterly or semiannual tax filing eligibility is currently restricted to taxpayers with liabilities below a lower threshold than proposed in HB 218. Petroleum product loading fees are subject to contingent rate adjustments, and oil and gas tax structures have not been streamlined as proposed in the bill. Workers’ compensation fees have separate due dates from withholding taxes, adding to administrative complexity for businesses.
HB 218 proposes a broad modernization of these statutes, updating tax distribution, filing, and administration procedures to align with contemporary business practices and digital tax filing systems. 

Amendments:

 Amended March 12, 2025 in STBTC

STBTCa/HB 218: The Senate Tax, Business, and Transportation Committee The Senate Tax, Business and Transportation Committee made several amendments to HB 218, which focused on various tax-related provisions. One significant change was the increase in the amount and extension of the time period during which the Taxation and Revenue Department (TRD) may set tax reporting and payment intervals. The amendment removed provisions that clarified the application of certain oil production taxes on skim oil. Additionally, language related to tax increment development districts was modified to provide an alternative method for determining gross receipts tax revenue calculations, allowing the most recent twelve-month period of available data to be used upon approval by TRD.

Further changes include extending the maximum allowable reporting period from six months to one year. Various textual clarifications and formatting modifications were also made, such as striking commas, adjusting phrasing, and refining definitions. Specific references to “oil, sediment oil, and skim oil” were removed from several sections, and multiple statutory provisions were deleted entirely, including Sections 121 and 122 of the original bill. The amendment also revised the effective date provisions, specifying that different sections of the bill would take effect on either July 1, 2025, or January 1, 2026, depending on their content.

These amendments refine the bill’s structure, eliminate redundant or outdated provisions, and provide more flexibility in tax reporting and administration. The removal of skim oil-related taxation provisions suggests a shift in regulatory focus, potentially easing tax burdens in the oil and gas sector. Additionally, the changes to the tax increment development district provisions enhance local government flexibility in calculating and managing gross receipts tax revenue. Overall, the amendments clarify administrative processes and refine the bill’s implementation timeline while maintaining its core objectives.

Implications

By extending the allowable tax reporting period from six months to one year, the amendments provide greater flexibility for businesses and taxpayers who may benefit from less frequent reporting requirements. This change reduces administrative burdens on businesses, particularly smaller entities that may not have the resources to manage frequent tax filings. However, this adjustment may delay revenue collection for the state, potentially affecting cash flow management for tax-funded programs.

The removal of taxation provisions on skim oil, slop oil, and sediment oil simplifies the tax structure related to oil and gas production. While this reduces tax complexity for operators in the industry, it could also lead to potential revenue losses for the state, depending on the volume of these byproducts in the market. The change suggests a shift away from taxing certain lower-value petroleum byproducts, possibly reflecting industry concerns over compliance costs and administrative inefficiencies associated with taxing these substances.

The modification of tax increment development district (TIDD) provisions provides greater flexibility for local governments in calculating gross receipts tax revenue for financing development projects. By allowing municipalities to use the most recent twelve-month period of available revenue data—rather than a fixed base year—this change ensures that local governments can better align revenue projections with actual economic conditions. This adjustment may encourage greater use of TIDDs to fund infrastructure and economic development projects, as it provides more predictable and potentially higher revenue projections to support bond financing. However, it also increases dependence on discretionary approval by TRD, adding an additional layer of regulatory oversight that could slow down the approval process for some projects.

The revisions to the bill’s effective dates ensure that different provisions take effect in a staggered manner, allowing state agencies and taxpayers time to adjust to the new policies. This phased implementation reduces potential disruptions to tax administration and compliance but may also delay the realization of expected fiscal benefits from certain tax policy changes.

Overall, the amendments to HB 218 reduce regulatory burdens for businesses, increase flexibility for local governments, and simplify oil and gas tax policy. However, they may also impact state revenue collection timelines and create new administrative complexities in areas where regulatory approvals are required. The changes suggest an effort to balance economic development incentives with sound fiscal management, but their long-term effectiveness will depend on implementation efficiency and revenue stability in the affected sectors.