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 Gonzales
/Thompson/Analya/Lundstrom
LAST UPDATED
ORIGINAL DATE 02/19/25
SHORT TITLE Health Care Preceptor Tax Credit
BILL
NUMBER House Bill 396
ANALYST Graeser
REVENUE*
(dollars in thousands)
Type FY25 FY26 FY27 FY28 FY29
Recurring or
Nonrecurring
Fund
Affected
PIT $0 ($2,700.0) ($2,700. 0) ($2,700.0) ($2,700.0) Recurring General Fund
Parentheses ( ) indicate revenue decreases.
*Amounts reflect the most recent analysis of this legislation.
Sources of Information
LFC Files
FIRs for Senate Bill 138 (2020), Senate Bill 62 (2021) and Senate Bill 173 (2022).
Agency Analysis Received From List all agencies responding.
Agency Analysis was Solicited but Not Received From
Department of Health (DOH)
Burrell College of Osteopathic Medicine (BCOM)
Health Care Authority (HCA)
Taxation and Revenue Department (TRD)
SUMMARY
Synopsis of House Bill 395
House Bill 395 (HB395) provides a $1,000 personal income tax credit for licensed healthcare
professionals on staff at a New Mexico college or university who mentor or function as preceptor
to graduate students studying to become healthcare professionals. These mentorships must
exceed four weeks in duration and must be unpaid.
Unlike previous versions of this proposal, which were limited to five preceptor tax credits in a
tax year, this version is not limited. However, this version requires the preceptor to be unpaid for
their mentorship services.
This bill:
Allows a preceptor employed by any accredited New Mexico institution of higher
education, and who has performed a preceptorship of not less than four weeks in New
Mexico, to apply for, and use a credit against the taxpayer's tax liability;
Provides up to $1,000 credit for an unlimited number of preceptorships performed in the
taxable year in which the credit is claimed; House Bill 396 – Page 2
Requires the taxpayer apply to the department on forms and in the manner prescribed by
the department. The application shall include a certification made by the institution for
which the taxpayer is employed and for which the preceptorship was performed;
Allows any unused portion of the tax credit to be carried forward until the credit is
exhausted;
Requires the Taxation and Revenue Department (TRD) to include the costs and coverage
in the annual tax expenditure report required by 7-1-84 NMSA 1978;
Defines “eligible professional degree” as a degree or certificate that fulfills a requirement
to practice as a medical doctor, osteopathic physician, advanced practice nurse, physician
assistant, dentist, pharmacist, psychologist or social worker;
Defines “preceptor” to mean an individual licensed as a medical doctor, osteopathic
physician, advanced practice nurse, physician assistant, dentist, pharmacist, psychologist
or social worker; and
Defines “preceptorship” to mean an uncompensated period of supervised clinical training
during which a preceptor provides a program of personalized instruction, training, and
supervision to an eligible graduate student to enable the student to obtain an eligible
professional degree.
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 are applicable to tax taxable
years beginning on or after January 1, 2025
FISCAL IMPLICATIONS
This bill creates or expands a tax expenditure with a cost that is difficult to determine but likely
significant. LFC has serious concerns about the substantial risk to state revenues from tax
expenditures and the increase in revenue volatility from erosion of the revenue base. The
committee recommends the bill adhere to the LFC tax expenditure policy principles for vetting,
targeting, and reporting or action be postponed until the implications can be more fully studied.
The 2022 analysis for SB173, which was limited to five preceptorships and based on graduate
enrollment leading to eligible degrees, was estimated to negatively impact the general fund by
$2.7 million, although the actual cost will depend on take up. (See “Significant Issues.”)
SIGNIFICANT ISSUES
Currently, faculty at University of New Mexico, Health Sciences Center (UNM-HSC), New
Mexico State University’s college of nursing and Burrell College of Osteopathic Medicine are
expected to mentor graduate students and are compensated for this preceptorship as part of their
regular salary. One possible interpretation of the provisions of this bill is a change in this
practice. If faculty were no longer paid for the preceptorships but were compensated at $1,000
per student mentored through the proposed tax credit, this would, in effect, allow the state to pick
up a small part of the costs of a medical education.
This preceptorship proposal was introduced in 2020, 2021, and 2022.
PERFORMANCE IMPLICATIONS
The LFC tax policy of accountability is met with the bill’s requirement to include the costs and
coverage in the annual Tax Expenditure Report required by 7-1-84 NMSA 1978. House Bill 396 – Page 3
ADMINISTRATIVE IMPLICATIONS
TRD would have to include this tax credit in its annual update effort.
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
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.
?
Previously
introduced in 2020,
2021 and 2022.
Targeted: The tax expenditure has a clearly stated purpose, long-term
goals, and measurable annual targets designed to mark progress toward
the
goals.
Not clear what the
purpose of this
preceptorship is.
Clearly stated purpose X
Long-term goals X
Measurable targets X
Transparent: The tax expenditure requires at least annual reporting by
the recipients, the Taxation and Revenue Department, and other relevant
agencies.
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 X
Expiration date X
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.
No purpose stated
nor can one be
inferred.
Fulfills stated purpose X
Passes “but for” test X
Efficient: The tax expenditure is the most cost-effective way to achieve
the desired results.
?
Key: Met Not Met ? Unclear
LG/rl/SD/hg