HOUSE BILL 538
57th legislature - STATE OF NEW MEXICO - first session, 2025
INTRODUCED BY
Meredith A. Dixon and Nathan P. Small and Mark Duncan
and William E. Sharer
AN ACT
RELATING TO TAXATION; CREATING THE INDUSTRIAL DECARBONIZATION PRODUCTION CORPORATE INCOME TAX CREDIT; CREATING THE INDUSTRIAL DECARBONIZATION INVESTMENT CORPORATE INCOME TAX CREDIT.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF NEW MEXICO:
SECTION 1. A new section of the Corporate Income and Franchise Tax Act is enacted to read:
"[NEW MATERIAL] INDUSTRIAL DECARBONIZATION PRODUCTION CORPORATE INCOME TAX CREDIT.--
A. Prior to taxable year 2031, a taxpayer that owns or operates a qualified industrial facility and reduces the net carbon dioxide equivalent emissions of the product produced by the facility to at least forty percent below the industrial benchmark of a comparable product in the same product category may claim a tax credit against the taxpayer's tax liability imposed pursuant to the Corporate Income and Franchise Tax Act in an amount provided in Subsection B of this section. The tax credit provided in this section may be referred to as the "industrial decarbonization production corporate income tax credit".
B. The industrial decarbonization production corporate income tax credit shall be in an amount equal to eighty-five dollars ($85.00) per metric ton of net carbon dioxide equivalent that is reduced below the industrial benchmark in a taxable year, up to a maximum of ten million dollars ($10,000,000) per qualified industrial facility per taxable year; provided that if the department of energy determines that a qualified industrial facility has a high likelihood of creating new jobs, bringing significant new investment to the state and reducing the net carbon dioxide equivalent emissions of the product produced by the facility to at least fifty percent below the industrial benchmark of a comparable product in the same product category, that department may certify up to fifteen million dollars ($15,000,000) per facility per taxable year.
C. A taxpayer that seeks to claim the tax credit provided by this section shall apply for certification of eligibility from the department of environment on forms and in the manner prescribed by that department. The application shall include evidence that the taxpayer owns or operates a qualified industrial facility and reduces the net carbon dioxide equivalent emissions of the product produced by the facility to at least forty percent below the industrial benchmark of carbon dioxide equivalent emissions of a comparable product in the same product category. The evidence shall include:
(1) a life cycle assessment of the facility's production prepared and documented in conformance with the requirements of Section 45Q of the Internal Revenue Code, as that section may be amended or renumbered, and standards of the international organization for standardization;
(2) an industrial benchmark of carbon dioxide equivalent emissions of a comparable product in the same product category as the taxpayer's product; and
(3) any other evidence required by the department of environment.
D. If the department of environment determines that a taxpayer meets the requirements to claim a tax credit
pursuant to this section, that department shall issue to the
taxpayer a dated certificate of eligibility providing the
amount of the tax credit for which the taxpayer is eligible and
the taxable year in which the credit may be claimed. The department of environment shall provide the taxation and revenue department with the certificates of eligibility issued pursuant to this subsection in an electronic format at regularly agreed-upon intervals.
E. A taxpayer shall not be eligible to claim the industrial decarbonization production corporate income tax credit if the taxpayer claims in the same taxable year for the same facility a federal carbon dioxide sequestration tax credit pursuant to Section 45Q of the Internal Revenue Code, as that section may be amended or renumbered.
F. The total annual aggregate amount of industrial decarbonization production corporate income tax credits that may be certified in a calendar year is thirty million dollars ($30,000,000) in 2026, fifty million dollars ($50,000,000) in 2027 and one hundred million dollars ($100,000,000) in each year thereafter. Completed applications shall be considered in the order received. The department of environment shall publish on the department of environment's website on a regular basis the number of industrial decarbonization production corporate income tax credits that have been certified in each calendar year.
G. To receive a tax credit provided by this section, a taxpayer shall claim the credit on forms and in the manner prescribed by the department within twelve months following the calendar year in which the certificate of eligibility was issued.
H. A certificate of eligibility issued pursuant to this section may either be submitted by the taxpayer with that taxpayer's return or be sold, exchanged or otherwise transferred to another taxpayer for the full value of the credit. The parties to such a transaction shall notify the department of the sale, exchange or transfer within ten days of the sale, exchange or transfer in a format prescribed by the department.
I. That portion of an industrial decarbonization production corporate income tax credit that exceeds a taxpayer's tax liability in the taxable year in which the tax credit is claimed shall not be refunded but may be carried forward for three consecutive taxable years.
J. The credit provided by this section shall be included in the tax expenditure budget pursuant to Section 7-1-84 NMSA 1978, including the total annual aggregate cost of the credit.
K. As used in this section:
(1) "industrial benchmark" means the average carbon dioxide equivalent emissions on a per unit basis of a product system from a federally recognized and used metric, such as the greenhouse gases, regulated emissions and energy use in technologies life cycle assessment suite of models;
(2) "qualified industrial facility" means an industrial facility located in New Mexico that produces:
(a) concrete, cement, asphalt, iron, steel, glass, hydrogen or a critical mineral as designated by the United States department of the interior; or
(b) a product through refinement; and
(3) "refinement" means a chemical or physical process to remove impurities from a substance or form."
SECTION 2. A new section of the Corporate Income and Franchise Tax Act is enacted to read:
"[NEW MATERIAL] INDUSTRIAL DECARBONIZATION INVESTMENT CORPORATE INCOME TAX CREDIT.--
A. Prior to taxable year 2031, a taxpayer that owns or operates a qualified industrial facility that makes qualified expenditures for the facility may claim a tax credit against the taxpayer's tax liability imposed pursuant to the Corporate Income and Franchise Tax Act in an amount provided in Subsection B of this section. The tax credit provided in this section may be referred to as the "industrial decarbonization investment corporate income tax credit".
B. The industrial decarbonization investment corporate income tax credit shall be in an amount equal to the lesser of ten percent of the cost of qualified expenditures made by the taxpayer in a taxable year for a qualified industrial facility or five million dollars ($5,000,000) per facility; provided that if the department of environment determines a qualified industrial facility has a high likelihood of creating new jobs, bringing significant new investment to the state and reducing the net carbon dioxide equivalent emissions of the product produced by the facility to at least fifty percent below the industrial benchmark of a comparable product in the same product category, that department may certify up to seven million five hundred thousand dollars ($7,500,000) per facility per taxable year.
C. A taxpayer that seeks to claim the tax credit
provided by this section shall, within twelve months of claiming an industrial decarbonization production corporate income tax credit provided pursuant to Section 1 of this 2025 act, apply for certification from the department of environment on forms and in the manner prescribed by that department. An application for certification shall include information required by the department of environment to determine eligibility for the tax credit, including evidence that the taxpayer is a qualified industrial facility, substantiating qualified expenditures and that the equipment purchased with the qualified expenditures was installed and a certificate of eligibility for an industrial decarbonization production corporate income tax credit provided for the same taxpayer and facility pursuant to Section 1 of this 2025 act.
D. If the department of environment determines that a taxpayer meets the requirements of this section, that department shall issue to the taxpayer a dated certificate of eligibility providing the amount of the tax credit for which the taxpayer is eligible and the taxable year in which the credit may be claimed. Only one certificate of eligibility shall be issued for all activities performed at a qualified industrial facility, regardless of ownership of the facility. The department of environment shall provide the taxation and revenue department with the certificates of eligibility issued pursuant to this subsection in an electronic format at regularly agreed-upon intervals.
E. The total annual aggregate amount of industrial decarbonization investment corporate income tax credits that may be certified in a calendar year is thirty million dollars ($30,000,000) in 2026, fifty million dollars ($50,000,000) in 2027 and one hundred million dollars ($100,000,000) in each year thereafter. Completed applications shall be considered in the order received. The department of environment shall publish on the department of environment's website on a regular basis the number of industrial decarbonization investment corporate income tax credits that have been certified in each calendar year.
F. To receive a tax credit provided by this section, a taxpayer shall claim the credit on forms and in the manner prescribed by the department within twelve months following the calendar year in which the certificate of eligibility was issued.
G. A certificate of eligibility issued pursuant to this section may either be submitted by the taxpayer with that taxpayer's return or be sold, exchanged or otherwise transferred to another taxpayer for the full value of the credit. The parties to such a transaction shall notify the department of the sale, exchange or transfer within ten days of the sale, exchange or transfer in a format prescribed by the department.
H. That portion of an industrial decarbonization investment corporate income tax credit that exceeds a taxpayer's tax liability in the taxable year in which the tax credit is claimed shall not be refunded but may be carried forward for three consecutive taxable years.
I. The credit provided by this section shall be included in the tax expenditure budget pursuant to Section 7-1-84 NMSA 1978, including the total annual aggregate cost of the credit.
J. As used in this section:
(1) "industrial benchmark" means the typical carbon dioxide equivalent emissions of a product system from a federally recognized and used metric, such as the greenhouse gases, regulated emissions, and energy use in technologies life cycle assessment suite of models;
(2) "qualified expenditure" means an expenditure made on or after January 1, 2025 and prior to January 1, 2031 for the purchase of that portion of the costs of equipment dedicated to and necessary for producing a qualified industrial facility's product in a way that reduces the product's net carbon dioxide equivalent emissions;
(3) "qualified industrial facility" means an industrial facility located in New Mexico that produces:
(a) concrete, cement, asphalt, iron, steel, glass, hydrogen or a critical mineral as designated by the United States department of the interior; or
(b) a product through refinement; and
(4) "refinement" means a chemical or physical process to remove impurities from a substance or form."
SECTION 3. DELAYED REPEAL.--Sections 1 and 2 of this act are repealed effective January 1, 2033.
SECTION 4. APPLICABILITY.--The provisions of this act apply to taxable years beginning on or after January 1, 2025.
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