Summary:

 Senate Bill 296 (SB 296) establishes a Physician Income Tax Credit for licensed physicians, osteopathic physicians, and dentists who have completed a medical residency and practice full-time in New Mexico. Eligible physicians may claim a tax credit of $50,000 per year for up to five consecutive years if they maintain an outstanding balance on student loans taken to fund their medical education. The Higher Education Department will certify eligibility for the credit, and any unused portion of the credit exceeding the taxpayer’s liability will be refunded. SB 296 applies to taxable years beginning on or after January 1, 2025. 

Legislation Overview:

 Senate Bill 296 (SB 296) introduces a new income tax credit to incentivize physicians to practice in New Mexico by providing financial relief on student loans. The bill allows eligible physicians, osteopathic physicians, and dentists who practice full-time in the state and who still have outstanding medical education loans to claim a $50,000 tax credit per year for up to five consecutive years. To qualify, a physician must meet the minimum threshold of 1,584 practice hours per taxable year. The Higher Education Department (HED) will oversee the certification of eligible physicians and will issue certificates indicating the tax credit amount and years for which the taxpayer qualifies. The department will also submit these certifications to the Taxation and Revenue Department at agreed-upon intervals. 

The tax credit is refundable, meaning if a physician’s tax liability is lower than the credit amount in a given year, the remaining portion will be refunded to the taxpayer. The credit will be included in the Tax Expenditure Budget, ensuring that its fiscal impact is tracked. Physicians must claim the credit within three taxable years following the year in which they receive certification from the HED. SB 296 applies to taxable years beginning on or after January 1, 2025.

Implications  
SB 296 is expected to have a significant fiscal impact by reducing the state’s income tax revenue. The refundable nature of the credit ensures that physicians with lower tax liabilities will still receive the full benefit, increasing state expenditures. If fully utilized, each qualifying physician could receive up to $250,000 over five years. The total fiscal impact depends on the number of eligible physicians who apply and are certified. The inclusion of the credit in the Tax Expenditure Budget ensures ongoing fiscal oversight. Administrative costs will arise for the Higher Education Department and the Taxation and Revenue Department, which must certify eligibility, process refunds, and track the credit’s utilization.
 

Current Law:

 Under current law, no tax credit exists specifically for physicians with student loan debt. The state does offer certain loan repayment programs for healthcare professionals through the Higher Education Department, but these programs are distinct from tax credits. The existing Income Tax Act does not provide targeted relief for physicians or dentists based on student loan obligations.