Rep. Derrick Lente, D-Sandia Pueblo
Chair
House Taxation and Revenue Committee

By Esteban Candelaria and Nathan Brown
The Santa Fe New Mexican

A bipartisan committee of House members and senators struck a deal late Friday night to preserve an expanded tax credit for working New Mexicans while nixing a tax hike on oil and gas producers.

The conference committee of three lawmakers from each chamber voted 5-1 around 9:30 p.m. to approve the agreement, with Rep. Mark Duncan, R-Kirtland, opposed. The revised version of House Bill 14 needs to pass the full House and Senate before the Legislature adjourns for the year at noon today. The House hoped to vote on the bill Friday night, said Rep. Derrick Lente, D-Sandia Pueblo, the chair of the House Taxation and Revenue Committee.

The bill’s main provision, to replace the state’s Working Families Tax Credit with a new Earned Income Tax Credit, survived the conference committee and will, if the bill passes, increase the break for low-income families and expand it to an estimated 101,000 new people.

“It would extinguish the state tax liability for those who are making minimum wage all the way to those families of three that are making upwards of $70,000,” said Lente, one of the six members of the conference committee, a group of lawmakers tasked with reaching a compromise between the conflicting versions of the bill.

As well as nixing an additional 0.28% oil and gas surtax, the compromise gets rid of most of the additional tax credits the Senate added to the bill. It does preserve a new tax credit for foster parents and guardians and a gross receipts tax deduction for health care practitioners. 

The bill would now cost $113 million. To make up for that, it would raise the state’s liquor excise tax by 20%, incorporating a bill originally introduced by Senate Minority Leader Bill Sharer, R-Farmington. The committee amended it to steer the money into a new tribal alcohol harms alleviation fund.

“That’s why it’s revenue-neutral,” Lente said.

The liquor tax hike would take effect in the 2026 fiscal year, which starts on July 1, while the new tax credits would take effect in the 2027 fiscal year, Lente said.

Duncan expressed concern about the cost of the package.

“There’s not an item on this list that wasn’t good,” Duncan said. “They’re all good, every one of them. The problem I have with this is we had to take $171 million out of reserves just to balance our budget this year. Now we’re going to take another $113 million out.”

Rep. Cristina Parajón, D-Albuquerque, said she was disappointed the oil and gas surtax didn’t make it but she was happy about the liquor tax distribution was set up, which she said would benefit “the communities that are suffering the most harm right now” from alcohol abuse.

The oil and gas tax hike, which representatives said was intended to pay for the entire package, was stricken by the Senate on Thursday, leaving lawmakers fumbling to come up with the money to pay for HB 14. The late-night compromise comes after the conference committee, which consisted of four Democrats and two Republicans, met Friday morning but failed to reach an agreement, with the House Democrats holding out to keep the oil and gas surtax.

“If the Senate is saying that there’s no appetite whatsoever for holding oil and gas accountable, or at least responsible for helping us fund and provide benefits, then I can understand that,” Lente said Friday morning.

In an interview Friday evening before the conference committee’s second meeting, Sharer, who presented the amendment to cut the oil and gas surtax, said removing that provision was the product of days of negotiations, and that he has always worked well with the governor, Lt. Gov. Howie Morales and Senate Majority Leader Peter Wirth, D-Santa Fe.

“Really, we just said we can’t have this. So then it was a discussion,” he said.

The original Senate version HB 14 would have implemented an array of additional tax breaks, including for search and rescue personnel, firefighters, and employers of local journalists. Lawmakers said Friday night that all the proposed tax credits were good and they hope to bring them back.

“We’ve got our hopes and dreams of what we get to look at next year,” Sen. Carrie Hamblen, D-Las Cruces said.

Lawmakers did reach an agreement Friday morning on two of the changes to the package the House disliked: the liquor tax increase and a proposal to temporarily exempt gaming establishments in wildfire disaster areas from the state’s gaming tax.

The House disliked funneling revenue for the liquor tax to the state’s general fund; the panel voted instead to funnel it to the new tribal fund, which Hamblen said was “much more appropriate”.

Lente referred to the gaming tax exemption as bad tax policy that would create “a really unfair, unbalanced approach in terms of how we are going to deal with any private entity in this state when acts of fire, flood or other damage takes place.”

A majority of senators on the panel ceded on that measure, though Republicans voted against removing it from the tax package, arguing it was necessary to support areas like Ruidoso, which was devastated by the South Fork and Salt fires and subsequent flooding last year.

“This is a driving thing here, the racetrack there that helps all of Ruidoso, whether it’s the tribal gaming, the town of Ruidoso, the outskirts of Ruidoso,” Sen. Joshua Sanchez, R-Bosque said.

New Mexican reporter Daniel J. Chacón contributed to this report.