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 Henry
/Dow/Martinez/Romero
LAST UPDATED
ORIGINAL DATE 02/22/25
SHORT TITLE Retail Center Renovation Tax Credit
BILL
NUMBER House Bill 511
ANALYST Graeser
REVENUE*
(dollars in thousands)
Type FY25 FY26 FY27 FY28 FY29
Recurring or
Nonrecurring
Fund
Affected
Corporate
Income Tax
$0
Up to
($15,000.0)
Up to
($15,000.0)
Up to
($15,000.0)
Up to
($20,000.0)
Recurring General Fund
Parentheses ( ) indicate revenue decreases.
*Amounts reflect most recent analysis of this legislation.
Relates to House Bill 472
Sources of Information
LFC Files
Agency Analysis was Solicited but Not Received From
Taxation and Revenue Department (TRD) Mortgage Finance Agency (MFA) New Mexico Counties (NMC) Municipal League (NMML) Department of Finance and Administration / Local Government Division (DFA/LGD)
Economic Development Department (EDD)
Energy, Minerals and Natural Resources Department (EMNRD)
SUMMARY
Synopsis of House Bill 511
House Bill 511 (HB511) proposes an income tax credit and a companion corporate income tax
credit to be known as the “retail center renovation income tax credit." The credit would be
available to a taxpayer that renovates a retail strip mall or other retail property in New Mexico.
The credit is 10 percent of the cost of the renovation cost. The credit is limited to $1.5 million
per project per year. Aggregate credits are limited to $15 million per year,
A taxpayer seeking to utilize the credit would request approval by the Economic Development
Department (EDD). Within one year of the project’s completion, the taxpayer would submit
documentation to EDD showing that at least 50 percent of the square footage of the retail
property had been renovated. An eligible “retail center” establishment contains at least three
retail or restaurant businesses. The renovation may include conversion of a retail center into a House Bill 511 – Page 2
mixed-use development with a combination of commercial, office, or residential spaces or
adaptive reuse of a retail center into multifamily residential housing.
The taxpayer cannot stack credits pursuant to this bill or with the federal new markets tax credit
in section 45D of the Internal Revenue Code, which allows a tax credit for 39 percent of an
investment in a qualified low-income community project organization.
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 tax
years beginning January 1, 2025. Projects must be completed by December 31, 2034, to be
eligible for the credit. The tax credit is repealed effective December 31, 2035.
FISCAL IMPLICATIONS
Each project is limited to a credit of $1.5 million, representing renovation expenses of $15
million. Therefore, 10 or more projects would be creditable annually. LFC has no information on
plans, but the recent increase in metropolitan redevelopment areas/agencies (MRAs) may be
correlated with this request.
Los Alamos has designated the East Downtown MRA focusing on revitalizing neglected areas,
while the White Rock Town Center MRA addresses inadequate housing and aging infrastructure.
These initiatives use public resources to support private projects.
1
Santa Fe has designated the
midtown campus area as an MRA.
2
The city of Albuquerque Metropolitan Redevelopment
Agency (MRA) oversees 22 redevelopment areas, each with unique plans that help spur
reinvestment by incentivizing development and updating infrastructure.
3
Farmington has
designated the Historic Downtown, Civic Center Neighborhood, the Healthcare Hub and the
Animas Area as MRAs.
4
However, the bill does not mention MRAs but would allow any project to be creditable.
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.
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.
1
https://www.losalamosnm.us/Government/Departments-and-Divisions/Community-Development/Planning-
Division/Metropolitan-Redevelopment-Areas
2
https://santafenm.gov/community-development/midtown-district-santa-fe
3
https://www.cabq.gov/mra/redevelopment-areas
4
https://www.fmtn.org/1170/Metropolitan-Redevelopment-Area House Bill 511 – Page 3
SIGNIFICANT ISSUES
As mentioned in the “Fiscal Implications” section, this credit is not focused. If this were one tool
to aid metropolitan redevelopment areas, that could potentially justify the use of taxpayer dollars
to create private profit.
PERFORMANCE IMPLICATIONS
The LFC tax policy of accountability is met with the bill’s requirement to include this tax
expenditure in the annual tax expenditure report required by 7-1-84 NMSA 1978 that includes
data compiled from the reports from taxpayers taking the credit and other information to
determine whether the credit is meeting its purpose. In this case, however, the purpose is not
stated and the provisions could be abused.
ADMINISTRATIVE IMPLICATIONS
TRD would incur modest IT costs in adding a new credit to the personal income tax and
corporate income tax returns. With 10 to 30 approvals a year, the recurring costs would be
moderate.
EDD has no experience approving this type of tax credit or renovation project. This review will
be updated when EDD responds.
Conflict, Duplication, Companionship, Relationship
This bill relates to House Bill 472, which creates a tax credit for abandoned building renovations.
TECHNICAL ISSUES
This tax credit is not tied to economic development and provides for public funds to pay for
private development. The remedy may be to restrict the credit to projects in metropolitan
redevelopment areas. This would ensure the tax credit, while a benefit to private developers,
provides the public good of economic development.
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:
House Bill 511 – Page 4
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.
X
Targeted: The tax expenditure has a clearly stated purpose, long-term
goals, and measurable annual targets designed to mark progress toward
the goals.
Purpose not tied to
economic
development
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
Required by 7-1-84
NMSA 1978
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
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
established.
Fulfills stated purpose X
Passes “but for” test X
Efficient: The tax expenditure is the most cost-effective way to achieve
the desired results.
X
Key: Met Not Met ? Unclear
LG/hj/hg