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 Sariñana
LAST UPDATED
ORIGINAL DATE 1/24/25
SHORT TITLE Energy Storage System Income Tax Credit
BILL
NUMBER House Bill 51
ANALYST Graeser
REVENUE*
(dollars in thousands)
Type FY25 FY26 FY27 FY28 FY29
Recurring or
Nonrecurring
Fund
Affected
$0
($1,000 -
$6,000)
($1,000 -
$6,000)
($6,000) ($6,000) Recurring General F und
Parentheses ( ) indicate revenue decreases.
*Amounts reflect the 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 $150.0 $150.0 $150.0 $450.0 Recurring General Fund
TRD $41.1 Nonrecurring General Fund
Total $150.0 $191.1 $150.0 $491.1 General Fund
Parentheses ( ) indicate expenditure decreases.
*Amounts reflect the most recent analysis of this legislation.
Sources of Information
LFC Files
Agency Analysis Received From
Taxation and Revenue Department (TRD) Energy, Minerals & Natural Resources Department (EMNRD)
SUMMARY
Synopsis of House Bill 51
House Bill 51 (HB51) enacts the energy storage system income tax and corporate income tax
credits. Both credits are for taxpayers who purchase and install an energy storage system on the
taxpayer's residential, commercial, industrial, or agricultural property in New Mexico. The
energy storage system income tax credit is 40 percent of the purchase and installation costs of the
certified system to a maximum amount of $6,000 for a system installed on residential property
and $150 thousand for a system installed on a commercial, industrial, or agricultural property.
The aggregate maximum amount of credits that may be certified across income and corporate House Bill 51 – Page 2
income tax for any calendar year is $6 million.
EMNRD is required to certify systems eligible for the credits and maintain a website to inform
the public when each year’s cap has been reached. In line with established practice, when the cap
has been reached in a year, EMNRD will issue a certificate of eligibility for the next taxable year
certifications are available. Once granted, the credits are not refundable but may be carried over
for up to five years.
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 the bill are applicable to
taxable years beginning January 1, 2025. The provisions sunset for installations after December
31, 2029.
FISCAL IMPLICATIONS
This bill creates a tax expenditure with a cost that is difficult to determine, although capped at $6
million a year from tax years 2025 to 2029. 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 Legislature has considered this proposal each year beginning with the 2021
session.
The fiscal impact of the provisions of this bill simply reflects the $6 million cap along with
refundability of the tax credit. With a maximum credit of $150 thousand for agricultural and
commercial installations and $6,000 for residential installations, 20 commercial systems and 500
residential systems would consume the credit. It is unknown whether these are appropriate
targets.
While acknowledging the $6 million cap, TRD expects the credit to be less than the cap in the
first two years. EMNRD similarly expects a reasonably slow start. “Since this market is still in
its early stages, the fiscal impact is expected to be under $6 million in the first two years.
However, starting in fiscal year 2028 and onwards, it is anticipated that the market will
experience higher adoption and the cap will be reached.”
Administration of the act would trigger costs for TRD and EMNRD, with the certification
process likely to necessitate significant work force at EMNRD. EMNRD cites a recurring cost of
$150 thousand to implement HB51, while TRD cites a one-time cost of $41 thousand in FY26
for systems set-up and testing.
SIGNIFICANT ISSUES
TRD offers concern about the proliferation of tax incentives:
Tax incentives can support specific industries or promote desired social and economic
actions, but the proliferation of more tax incentives has two primary effects. First, it
creates special treatment and exceptions within the tax code, resulting in an expansion of
tax expenditures and potentially narrowing the tax base. This, in turn, has a negative
impact on the general fund, affecting overall revenue; Second, it imposes a heavier
compliance burden on both taxpayers and TRD. The proliferation of tax incentives and the
subsequent complexity they introduce do not align with the principles of sound tax policy. House Bill 51 – Page 3
While tax incentives can serve a purpose, it is crucial to strike a balance that ensures
fairness, simplicity, and effectiveness in the tax system.
However, TRD also realizes that Energy Storage will be required for the state to achieve 100
percent renewable electrical energy by 2040.
Energy storage is vital to building a modernized electric grid in New Mexico and is
critical for the state’s energy transition as energy storage systems are a critical component
to growth in renewable energy generation. Energy storage supports electricity demand
when production is not available; solar energy, for example, cannot be generated at night.
Energy storage also supports the electricity grid to store excess power in periods of low
electricity demand and releasing power when electricity demand is high. In 2023, New
Mexico ranked in the top 10 states for battery storage capacity (see graph on next page).
EMNRD notes:
HB51 incentivizes the adoption of distributed energy storage systems, which is crucial
for balancing the sustainability, affordability, reliability, and resiliency of New Mexico’s
electricity grid. Currently New Mexico incentivizes rooftop solar via tax credits but has
no complementary incentive for technology (such as distributed energy storage) that can
be deployed to better manage the grid impact of these systems that prioritizes efficiency
and ratepayer affordability.
ENMRD also notes that the nonrefundable status of the tax credit may create issues, stating
“[refundable tax credits] create a better benefit to the taxpayer and reduces administrative
work. If this tax credit remains nonrefundable, EMNRD may need to seek an FTE to
administer the credit.”
EMNRD states that HB51 complements the New Solar Market Development Tax Credit
(NSMDTC), as distributed energy storage systems balance the grid impact of distributed solar
generation. If a battery storage system has already been certified through NSMDTC then the
applicant should be limited in any claim on the same system for this energy storage tax credit.
ENMRD identifies an issue with the size of energy storage system income tax credit:
While battery prices have been declining and should continue to decline in coming years,
the $6,000 tax credit cap is unlikely to meet this bill’s objective of covering 40 percent of
energy storage costs before the incentive sunsets in 2030, due to average distributed
storage system sizes likely increasing as utilities adopt time-of-use pricing (as stipulated
in recent New Mexico Public Regulatory Commission dockets
1
) in the late 2020s.
Moreover, given the possible repeal of federal energy storage tax incentives, plus
possible tariffs on battery exporters, cost declines could be less dramatic than previously
anticipated. Raising the credit cap to $7,500 might better align the cap with the bill’s
objectives.
Costs and Tax Coverage Differences for Three Battery Systems at $6,000 and $7,500
Credit Caps
System Cost
2024 2025 2026 2027 2028 2029 2030
Small Energy Storage System (5 kW) $18,610 $17,668 $17,125 $16,639 $16,213 $15,797 $15,419
Average Energy Storage System (7 kW) (most
likely)
$26,054 $24,736 $23,975 $23,295 $22,699 $22,116 $21,586 House Bill 51 – Page 4
ADMINISTRATIVE IMPLICATIONS
EMNRD’s Energy Conservation and Management Division will be required to develop and adopt
rules, establish the program certification, and administrate the certification processes. EMNRD
estimates this will require an additional FTE (if the credit remains nonrefundable), and a quarter
of an FTE to develop the online portal. In addition, EMNRD, possibly through the division’s IT,
would need to design an online application portal. Depending on the complexity of the final
language of the law, this can likely be achieved with existing staff, as ENMRDS is increasingly
able to automate transactions.
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.
This proposal was first
introduced in 2021 and
has been thoroughly
debated
Targeted: The tax expenditure has a clearly stated purpose, long-term goals,
and measurable annual targets designed to mark progress toward the goals.
The cap and sunset, with
the requirement for
annual Tax Expenditure
reporting may address
goals and 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
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
Large Energy Storage System (10 kW) $37,220 $35,337 $34,251 $33,279 $32,427 $31,594 $30,837
Tax Credit Coverage
2024 2025 2026 2027 2028 2029 2030
Small Battery Coverage (w/ 6k Tax Credit) 32% 34% 35% 36% 37% 38%
Medium Battery Coverage (w/ 6k Tax Credit) 23% 24% 25% 26% 26% 27%
Large Battery Coverage (w/ 6k Tax Credit) 16% 17% 18% 18% 19% 19%
2024 2025 2026 2027 2028 2029 2030
Small Battery Coverage (w/ 7.5k Tax Credit 40% 42% 44% 45% 46% 47%
Medium Battery Coverage (w/ 7.5k Tax Credit) 29% 30% 31% 32% 33% 34%
Large Battery Coverage (w/ 7.5k Tax Credit) 20% 21% 22% 23% 23% 24%
Source: National Renewable Energy Laboratory’s 2024 Annual Technology Baseline House Bill 51 – Page 5
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.
The $11K + cost for a
residential system will
not be popular without
the 30% + 40% tax
credits.
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
LG/rl/SL2