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 Townsend
/Ramos/Block
LAST UPDATED
ORIGINAL DATE 02/16/25
SHORT TITLE Payments in Lieu of Taxes for Property
BILL
NUMBER Senate Bill 348
ANALYST Graeser
APPROPRIATION
(dollars in thousands)
Estimated Revenue Recurring or
Nonrecurring
Fund
Affected FY22 FY23 FY24 FY25 FY26
Unknown Source of Appropriation Recurring General F und
Continuing appropriation authority granted Recurring
Payments in Lieu of
Taxes Fund
Note: the bill requires payments in lieu of taxes but does not establish a source of funding for these payments. The
title of the bill properly includes the words, “MAKING AN APPROPRIATION” and provides for disposition of the funds
in case there is an appropriation from the general fund or other state funds to the payments in lieu of taxes fund.
ESTIMATED ADDITIONAL OPERATING BUDGET IMPACT*
(dollars in thousands)
Agency/Program FY25 FY26 FY27
3 Year
Total Cost
Recurring or
Nonrecurring
Fund
Affected
TRD
$0 $2.3 $5.6 $7.9 Nonrecurring General Fund
$0 $97.0 $97.0 $194.0 Recurring General Fund
Total $0 $99.3 $102.6 $201.9 General Fund
Parentheses ( ) indicate expenditure decreases.
*Amounts reflect most recent analysis of this legislation.
Sources of Information
LFC FIR for 2022 Senate Bill 186, Payments in Lieu of Taxes
LFC Files
Agency Analysis Received From Taxation and Revenue Department (TRD)
Agency Analysis was Solicited but Not Received From
Department of Finance and Administration/Local Government Division (DFA)
SUMMARY
Synopsis of Senate Bill 348
Senate Bill 348 (SB348) provides for annual payments in lieu of tax to be made by state agencies
when an agency acquires fee simple ownership of real property by purchase or eminent domain.
The payments would be made to any political subdivision that imposed and received the
revenues of property tax on that real property prior to the state’s acquisition. The payments
would be required every year the state owns the property. It requires the Property Tax Division
(PTD) of the Taxation and Revenue Department (TRD) to promulgate rules to specify how the
payments in lieu of taxes will be paid. The bill also creates the payments in lieu of taxes fund, Senate Bill 348 – Page 2
which will be administered by TRD.
If the Legislature fails to appropriate funds into the payments in lieu of taxes fund, no payments
would be made that year. No PILT would be required for state issued general obligation bonds.
Land or other property acquired by the Department of Transportation would be exempt.
Land acquired by gift or trade would not be subject to the requirement.
The effective date of this bill is July 1, 2025. The PILT would be required the calendar year
(Property Tax Year) following any property acquisition.
FISCAL IMPLICATIONS
The fiscal impact of the provisions of this bill are likely zero:
(1) The state rarely purchases or condemns land through eminent domain. Far more
frequently, the state will trade one property for another. The specific language in the bill
requires purchase or eminent domain.
(2) Even if the bill were to pass and land were purchased subject to the PILT, the legislature
would have to appropriate funds into the payments in lieu of taxes fund.
(3) As TRD points out below, PILTs could be found to be a tax on the state and therefore
prohibited by the New Mexico Constitution.
The bill does not specify where appropriations to the payments in lieu of taxes fund will come
from or how much the appropriations would be. The bill may assume the appropriations to the
fund would be automatic as state purchase of land arise; however, there is no language in the bill
that would establish such continuing appropriations.
Appropriations of state funds can only be made by the Legislature in the annual General
Appropriation Act or in special acts that designate a source of funds, a destination of the funds
(the payments in lieu of taxes fund and thence to the counties, municipalities, school districts and
special districts), the amount of the appropriation (uncertain here), and control of the funds
(TRD).
The Legislature sometimes passes its appropriation authority to state agencies that deal with
dedicated and earmarked funds. However, there is no funding source mentioned in this bill.
Hence, the only means of funding the requirements of this bill would be an annual special
appropriation in the General Appropriation Act. As there is no earmarked revenue language in
the bill, the Legislature would have to decide to appropriate funds to the payments in lieu of
taxes fund each year for the state to execute the payments.
TRD notes a modest impact on systems and noted the a department would need one new FTE:
The bill will require TRD’s Property Tax Division (PTD) to create a method for the State to
report when it is acquiring property that is subject to the payment in lieu of taxes, and for a
determination of how much property tax has been lost by the relevant political subdivision
or subdivisions that would otherwise be receiving the revenue. TRD will bear the cost of
administering the new fund. TRD’s PTD estimates the need for an additional FTE at a pay-
band 70, state assessed supervisor, to manage the effort.
The Administrative Services Division (ASD) estimates that it will require 40 hours to
establish the fund and coordinate with the PTD at a pay-band level 80, and another 10 hours
per month of FTE effort at pay-band level 70. Senate Bill 348 – Page 3
SIGNIFICANT ISSUES
TRD provides policy comments:
The payment in lieu of tax is a tax on the State and, therefore, may be unconstitutional under
Article VIII, Section 3 of the New Mexico Constitution. While the bill does not directly tax
the property of the state, it is specifically a payment in lieu of taxation and could be
interpreted as a tax on state property, especially as the amount of the payment in lieu of taxes
is tied directly to the tax revenue the political subdivision would have received, had property
taxes been imposed on the property.
All governmental entities in New Mexico have the potential to reduce one another’s property
tax base by owning property and taking that property off the tax rolls. This bill only penalizes
the state, not counties, municipalities, school districts, hospital districts or others for their
contribution to reduced property tax base through property acquisition. The Industrial
Revenue Bond Act and the County Industrial Revenue Bond Act similarly allow counties and
municipalities to unilaterally reduce the property tax base, while the state does not have
access to these instruments.
The bill does not provide for any required transfers by the state due to acquiring real property
to be offset by increased property taxes if the state disposes of real property through sale or
donation that renders the property taxable. It would seem fairer if the state’s contributions to
the fund reflected both acquisitions and dispositions of real property.
PERFORMANCE IMPLICATIONS
The LFC tax policy of accountability is not met because TRD is not required in the bill to report
annually to an interim legislative committee regarding the data compiled from the reports from
agencies making these PILT payments. TRD now publishes property tax information in the
annual Tax Expenditure Report and provides access to the abstracts submitted by county
assessors.
CONFLICT, DUPLICATION, COMPANIONSHIP, RELATIONSHIP
Relates to 2022 Senate Bill 186, Payment in Lieu of Taxes for Property
TECHNICAL ISSUES
TRD also notes the amount of the payment in lieu of taxes, or a formula for computing that
amount, is not included in the language of the bill. The bill appears to assume that the amount of
the payment should be the amount of lost tax revenue. If that is the intent, this should be made
explicit in the bill.
LFC staff note Section 1 (B) requires a state agency to remit the PILT to the payments in lieu of
taxes fund the amount of the previous year’s property tax liability for the property. This
instruction works for the first year following acquisition but the property tax liability once the
state owns the property is zero.
LG/sgs/SD/SL2