Fiscal impact reports (FIRs) are prepared by the Legislative Finance Committee (LFC) for standing finance
committees of the Legislature. LFC does not assume responsibility for the accuracy of these reports if they
are used for other purposes.
F I S C A L I M P A C T R E P O R T
SPONSOR Vincent/Terrazas/Dow
LAST UPDATED
ORIGINAL DATE 02
/05/2025
SHORT TITLE Backup Power Generation Tax Credit
BILL
NUMBER House Bill 176
ANALYST Faubion
REVENUE*
(dollars in thousands)
Type FY25 FY26 FY27 FY28 FY29
Recurring or
Nonrecurring
Fund
Affected
PIT $0.0
Up to
($5,000.0)
Up to
($5,000.0)
Up to
($5,000.0)
Up to
($5,000.0)
Recurring General Fund
Parentheses ( ) indicate revenue decreases.
*Amounts reflect most recent analysis of this legislation.
ESTIMATED ADDITIONAL OPERATING BUDGET IMPACT*
(dollars in thousands)
Agency/Program
FY25 FY26 FY27
3 Year
Total Cost
Recurring or
Nonrecurring
Fund
Affected
EMNRD $75.0 $0.0 $0.0 $75.0 Nonrecurring General Fund
EMNRD $75.0 $75.0 $75.0 $225.0 Recurring General Fund
TRD
Indeterminate
but minimal
Indeterminate
but minimal
$0.0
Indeterminate
but minimal
Nonrecurring General Fund
Total $150.0 $75.0 $75.0 $300.0 Recurring General Fund
Parentheses ( ) indicate expenditure decreases.
*Amounts reflect most recent analysis of this legislation.
Relates to House Bill 51.
Sources of Information
LFC Files
Agency Analysis Received From
Energy, Minerals, and Natural Resources Department (EMNRD)
Agency Analysis was Solicited but Not Received From
Taxation and Revenue Department
SUMMARY
Synopsis of House Bill 176
This bill establishes a backup power generator personal income tax credit for New Mexico
taxpayers who purchase and permanently install a backup power generator on or after March 1,
2025. The credit provides a 50 percent credit of the total purchase and installation costs of the
generator. The credit is refundable if it exceeds the taxpayer’s tax liability for the year in which it House Bill 176 – Page 2
is claimed.
The credit is capped at $5 million annually for all applicants combined. Taxpayers must apply
for certification of eligibility from the Energy, Minerals and Natural Resources Department
(EMNRD), which will issue certificates stating the amount of credit allowed and the taxable year
in which it can be claimed. Only one credit will be certified per taxpayer, with special provisions
for business entities and married individuals filing separately.
This bill does not contain an effective date and, as a result, would go into effect 90 days after the
Legislature adjourns, or June 20, 2025, if enacted. The provisions of this act apply to taxable
years 2025 through 2034.
FISCAL IMPLICATIONS
This bill creates or expands a tax expenditure. Estimating the cost of tax expenditures is difficult.
Confidentiality requirements surrounding certain taxpayer information create uncertainty, and
analysts must frequently interpret third-party data sources. The statutory criteria for a tax
expenditure may be ambiguous, further complicating the initial cost estimate of the fiscal impact.
Once a tax expenditure has been approved, information constraints continue to create challenges
in tracking the real costs (and benefits) of tax expenditures.
Because of the annual cap on the aggregate amount of credit awards, the general fund revenue
loss of this bill is up to $5 million per year. The costs could be less if total approved claims are
lower than the cap.
The bill will require EMNRD to complete a new rule and set up a new application process,
including online web application design and development, verification of eligibility for the
credit, issuing certificates to approved taxpayers, tracking credit distribution and ensuring
compliance with the $5 million cap.
This process will require modifications to existing systems and additional resources in the initial
stages of implementation. EMNRD would need one additional FTE, and initial IT funds to meet
these administrative needs. There will be a moderate fiscal impact on EMNRD as the department
will be responsible for certifying eligibility and tracking the distribution of credits. At least one
new FTE is expected to be needed, plus EMNRD IT will need to cover initial design of the
online application and maintenance.
SIGNIFICANT ISSUES
EMNRD notes this bill could improve energy resilience for households in New Mexico by
incentivizing backup power generation systems. Such backup power could help individuals
maintain essential activities during power outages, such as food storage, medical care (e.g.,
power-operated home medical equipment), and communication. This is especially important in
communities vulnerable to severe weather or natural disasters, where prolonged outages can
hinder these and other essential activities. New Mexico has experienced numerous such power
outages lasting several days and disrupting public health, safety, and the economy. Outages can
complicate emergency response and recovery efforts, especially in rural areas where power
restoration can take much longer. Backup generators play a vital role in keeping essential House Bill 176 – Page 3
services running with the electricity people need to stay safe.
EMNRD reports the cost of a whole-house generator in New Mexico typically ranges from
$5,500 to $10.5 thousand, including installation fees, depending on the generator's size and
complexity. With $5 million allocated annually for the tax credit, the funding could potentially
help 1,000 households per year (assuming an average cost of $10 thousand per generator) over a
10-year period. However, this credit helps only households that can afford the initial costs and
then wait for a tax credit months later.
EMNRD comments that the bill’s current definition of “back-up power generator” is broad. For
instance, many New Mexicans either have or plan to install solar, storage, or solar-plus-storage
systems. Some of these systems can automatically “island” and activate power savings, thus
potentially meeting the definition of a back-up power generator under this bill. However, it is
unclear whether these systems would be eligible for multiple tax credits, including this credit, the
existing new solar market development tax credit, and the proposed energy storage tax credit.
The Legislature may wish to consider adding minimum and maximum requirements around
power (wattage) and duration, to ensure adequate power while disallowing neighborhood- or
community-scale “backup generators.” It may also be prudent to place a cap on the credit per
claim to limit oversized claims or larger-capacity systems using up much of the $5 million cap.
Providing tax credits for backup power generation systems would likely benefit higher-income
households disproportionately because these systems—such as whole-home generators or solar
batteries—require significant upfront investment. Wealthier homeowners are more likely to have
the disposable income to afford these systems even with partial subsidies, while lower-income
households may struggle to cover the remaining costs despite the tax incentives.
PERFORMANCE IMPLICATIONS
The LFC tax policy of accountability is met with the bill’s requirement to report annually in the
tax expenditure budget regarding the data compiled from the reports from taxpayers taking the
credit.
CONFLICT, DUPLICATION, COMPANIONSHIP, RELATIONSHIP
This bill relates to House Bill 51, an incentive for behind-the-meter battery energy storage,
which can also serve as back-up power for a household during an outage event.
OTHER SUBSTANT IVE ISSUES
In assessing all tax legislation, LFC staff considers whether the proposal is aligned with
committee-adopted tax policy principles. Those five principles:
Adequacy: Revenue should be adequate to fund needed government services.
Efficiency: Tax base should be as broad as possible and avoid excess reliance on one tax.
Equity: Different taxpayers should be treated fairly.
Simplicity: Collection should be simple and easily understood.
Accountability: Preferences should be easy to monitor and evaluate
House Bill 176 – Page 4
In addition, staff reviews whether the bill meets principles specific to tax expenditures. Those
policies and how this bill addresses those issues:
Tax Expenditure Policy Principle Met? Comments
Vetted: The proposed new or expanded tax expenditure was vetted
through interim legislative committees, such as LFC and the Revenue
Stabilization and Tax Policy Committee, to review fiscal, legal, and
general policy parameters.
?
No record of an
interim committee
hearing can be
found.
Targeted: The tax expenditure has a clearly stated purpose, long-term
goals, and measurable annual targets designed to mark progress toward
the goals.
There are no stated
purposes, goals, or
targets.
Clearly stated purpose
Long-term goals
Measurable targets
Transparent: The tax expenditure requires at least annual reporting by
the recipients, the Taxation and Revenue Department, and other relevant
agencies
The credit must be
reported publicly in
the TER.
The credit does
have an expiration
date.
Accountable: The required reporting allows for analysis by members of
the public to determine progress toward annual targets and determination
of effectiveness and efficiency. The tax expenditure is set to expire unless
legislative action is taken to review the tax expenditure and extend the
expiration date.
Public analysis
Expiration date
Effective: The tax expenditure fulfills the stated purpose. If the tax
expenditure is designed to alter behavior – for example, economic
development incentives intended to increase economic growth – there are
indicators the recipients would not have performed the desired actions
“but for” the existence of the tax expenditure.
?
There are no stated
purposes, goals, or
targets with which to
measure
effectiveness or
efficiency.
Fulfills stated purpose
Passes “but for” test
Efficient: The tax expenditure is the most cost-effective way to achieve
the desired results.
?
Key: Met Not Met ? Unclear
JF/hj/SL2