RENAME GEOTHERMAL TAX CREDITS

SB0163

SENATE BILL 163

57th legislature - STATE OF NEW MEXICO - second session, 2026

INTRODUCED BY

Anthony L. Thornton
and
Patricia Roybal Caballero

and
Mark B. Murphy
and
Heather Berghmans

AN ACT

RELATING TO TAXATION; RENAMING THE GEOTHERMAL ELECTRICITY
GENERATION INCOME AND CORPORATE INCOME TAX CREDITS TO THE
GEOTHERMAL ENERGY PRODUCTION INCOME AND CORPORATE INCOME TAX
CREDITS; CREATING A TAX CREDIT SCHEDULE BASED ON THE AMOUNT PER
KILOWATT-HOUR OF GEOTHERMAL ENERGY PRODUCED FOR CREDITS.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF NEW MEXICO:

SECTION 1.
Section 7-2-18.38 NMSA 1978 (being Laws 2024,
Chapter 67, Section 33, as amended) is amended to read:

"7-2-18.38. GEOTHERMAL [
ELECTRICITY GENERATION
]
ENERGY
PRODUCTION
INCOME TAX CREDIT.--

A. For taxable years ending prior to January 1,
[
2032
]
2036
, a taxpayer who is not a dependent of another
individual and who holds an interest in a geothermal
[
electricity generation
]
energy production
facility may apply
for, and the department may allow, a credit against the
taxpayer's tax liability imposed pursuant to the Income Tax
Act. The tax credit provided by this section may be referred
to as the "geothermal [
electricity generation
]
energy
production
income tax credit".

[
B. The amount of a tax credit allowed pursuant to

this section shall be an amount equal to one and one-half cents
($0.015) per kilowatt-hour of electricity generated in New
Mexico in a taxable year by the geothermal electricity
generation facility in which the taxpayer holds an interest.
]

B. The amount of credit shall be at the following
amounts; provided that the total amount of credits claimed for
a single geothermal energy production facility in a taxable
year shall be limited to the first two hundred thousand
megawatt-hours of geothermal energy produced by the geothermal
energy production facility in that taxable year:

(1) one and one-half cents ($.015) per
kilowatt-hour in the first taxable year in which the geothermal
energy production facility produces geothermal energy using a
geothermal energy resource;

(2) two cents ($.02) per kilowatt-hour in the
second taxable year in which the geothermal energy production
facility produces geothermal energy using a geothermal energy
resource;

(3) two and one-half cents ($.025) per
kilowatt-hour in the third taxable year in which the geothermal
energy production facility produces geothermal energy using a
geothermal energy resource;

(4) three cents ($.03) per kilowatt-hour in
the fourth taxable year in which the geothermal energy
production facility produces geothermal energy using a
geothermal energy resource;

(5) three and one-half cents ($.035) per
kilowatt-hour in the fifth taxable year in which the geothermal
energy production facility produces geothermal energy using a
geothermal energy resource;

(6) four cents ($.04) per kilowatt-hour in the
sixth taxable year in which the geothermal energy production
facility produces geothermal energy using a geothermal energy
resource;

(7) three and one-half cents ($.035) per
kilowatt-hour in the seventh taxable year in which the
geothermal energy production facility produces geothermal
energy using a geothermal energy resource;

(8) three cents ($.03) per kilowatt-hour in
the eighth taxable year in which the geothermal energy
production facility produces geothermal energy using a
geothermal energy resource;

(9) two and one-half cents ($.025) per
kilowatt-hour in the ninth taxable year in which the geothermal
energy production facility produces geothermal energy using a
geothermal energy resource; and

(10) two cents ($.02) per kilowatt-hour in the
tenth taxable year in which the geothermal energy production
facility produces geothermal energy using a geothermal energy
resource.

C.
Subject to the limitation provided in Subsection
D of this section
, a taxpayer shall apply for certification of
eligibility for the credit provided by this section from the
energy, minerals and natural resources department on forms and
in the manner prescribed by that department. [
The total annual
aggregate amount of credits that may be certified for
geothermal electricity generation income tax credits and
geothermal electricity generation corporate income tax credits
in any calendar year is five million dollars ($5,000,000).
]
Completed applications shall be considered in the order
received. Applications for certification received after this
limitation has been met in a calendar year shall not be
approved for that calendar year, but shall be considered for
certification in the following calendar year. [
The application
shall include proof that the taxpayer is eligible for
certification, including that the geothermal electricity
generation facility that produced the energy for which the
taxpayer is claiming credit, the geothermal resources used by
the geothermal electricity generation facility and the
taxpayer's interest in the geothermal electricity generation
facility are in accordance with the definitions set forth in
this section.
] For taxpayers approved to receive the credit,
the energy, minerals and natural resources department shall
issue a certificate of eligibility stating the amount of credit
to which the taxpayer is entitled and the taxable year in which
the credit may be claimed. The certificate of eligibility
shall be numbered for identification and declare the date of
issuance and the amount of the tax credit allowed.
The energy,
minerals and natural resources department shall provide the
department with the certificates of eligibility issued pursuant
to this subsection in an electronic format at regularly agreed-upon intervals.

D. The total annual aggregate amount of credits
that may be certified for geothermal energy production income
tax credits and geothermal energy production corporate income
tax credits in a calendar year is fifty-five million dollars
($55,000,000); provided that eleven million dollars
($11,000,000) of the total annual aggregate amount shall be
reserved for applications submitted by tribal businesses and
small businesses. If the total aggregate amount pursuant to
this section is not met in a calendar year, the difference may
be added to the total annual aggregate amount allowed for the
following calendar year.

E. A certificate of eligibility for the tax credit
may be sold, exchanged or otherwise transferred to another
taxpayer for the full value of the credit. The parties to such
a transaction shall notify the department of the sale, exchange
or transfer within ten days of the sale, exchange or transfer
in an electronic format prescribed by the department.

[
D.
]
F.
A taxpayer may claim a geothermal
[
electricity generation
]
energy production
income tax credit
for the taxable year in which [
electricity was generated
]

geothermal energy was produced
in New Mexico by a geothermal
[
electricity generation
]
energy production
facility in which
the taxpayer holds an interest. To receive the credit provided
by this section, a taxpayer shall apply to the department on
forms and in the manner prescribed by the department. The
application shall include a certificate of eligibility issued
pursuant to Subsection C of this section.

[
E.
]
G.
That portion of a credit that exceeds a
taxpayer's tax liability in the taxable year in which the
credit is claimed
shall not be refunded but
may be carried
forward for up to three consecutive years.

[
F.
]
H.
Married individuals filing separate returns
for a taxable year for which they could have filed a joint
return may each claim only one-half of the credit that would
have been claimed on a joint return.

[
G.
]
I.
A taxpayer may be allocated the right to
claim a credit provided by this section in proportion to the
taxpayer's ownership interest if the taxpayer owns an interest
in a business entity that is taxed for federal income tax
purposes as a partnership or limited liability company and that
business entity has met all of the requirements to be eligible
for the credit. The total credit claimed by all members of the
partnership or limited liability company shall not exceed the
maximum amount of the credit allowed pursuant to this section.

[
H. A taxpayer allowed a tax credit pursuant to
this section shall report the amount of the credit to the
department in a manner required by the department.

I.
]
J.
The tax credit provided by this section
shall be included in the tax expenditure budget pursuant to
Section 7-1-84 NMSA 1978, including the annual aggregate cost
of the tax credit.

[
J.
]
K.
As used in this section:

(1) "geothermal [
electricity generation
]

energy production
facility" means a facility located in New
Mexico that [
generates electricity
]
produces and delivers
electricity or thermal energy
from geothermal resources
for
industrial, commercial or residential use
and:

(a) for new facilities, begins
construction on or after January 1, 2025; or

(b) for existing facilities, on or after
January 1, 2025, increases the amount of [
electricity
generated
]
geothermal energy produced
from geothermal resources
the facility [
generated
]
produced
prior to that date by at
least one hundred percent;

(2) "geothermal resources" means the natural
heat of the earth in excess of two hundred fifty degrees
Fahrenheit or the energy, in whatever form, below the surface
of the earth present in, resulting from, created by or that may
be extracted from this natural heat in excess of two hundred
fifty degrees Fahrenheit and all minerals in solution or other
products obtained from naturally heated fluids, brines,
associated gases and steam, in whatever form, found below the
surface of the earth, but excluding oil, hydrocarbon gas and
other hydrocarbon substances and excluding the heating and
cooling capacity of the earth not resulting from the natural
heat of the earth in excess of two hundred fifty degrees
Fahrenheit as may be used for the heating and cooling of
buildings through an on-site geoexchange heat pump or similar
on-site system; [
and
]

(3) "interest in a geothermal [
electricity
generation
]
energy production
facility" means title to a
geothermal [
electricity generation
]
energy production
facility;
a leasehold interest in such facility; an ownership interest in
a business or entity that is taxed for federal income tax
purposes as a partnership that holds title to or a leasehold
interest in such facility; or an ownership interest, through
one or more intermediate entities that are each taxed for
federal income tax purposes as a partnership, in a business
that holds title to or a leasehold interest in such facility;

(4) "kilowatt-hour of geothermal energy"
means:

(a) one kilowatt-hour of electricity
generated; or

(b) one kilowatt-hour of net thermal
energy transferred to a purchaser or end user at the point of
sale or end-use, as measured at a customer delivery point using
calibrated metering equipment that determines thermal energy
based on measured flow and measured supply-and-return
temperature differential, in accordance with generally accepted
industry practice;

(5) "small business" means a business located
in New Mexico that employs fifty or fewer full-time employees;
and

(6) "tribal business" means a business located
in New Mexico that is owned and operated by an Indian nation,
tribe or pueblo or a member of an Indian nation, tribe or
pueblo
."

SECTION 2.
Section 7-2A-24.1 NMSA 1978 (being Laws 2024,
Chapter 67, Section 34, as amended) is amended to read:

"7-2A-24.1. GEOTHERMAL [
ELECTRICITY GENERATION
]
ENERGY
PRODUCTION
CORPORATE INCOME TAX CREDIT.--

A. For taxable years ending prior to January 1,
[
2032
]
2036
, a taxpayer that holds an interest in a geothermal
[
electricity generation
]
energy production
facility may apply
for, and the department may allow, a credit against the
taxpayer's tax liability imposed pursuant to the Corporate
Income and Franchise Tax Act. The tax credit provided by this
section may be referred to as the "geothermal [
electricity
generation
]
energy production
corporate income tax credit".

[
B. The amount of a tax credit allowed pursuant to

this section shall be an amount equal to one and one-half cents
($0.015) per kilowatt-hour of electricity generated in New
Mexico in a taxable year by the geothermal electricity
generation facility in which the taxpayer holds an interest.
]

B. The amount of credit shall be at the following
amounts; provided that the total amount of credits claimed for
a single geothermal energy production facility in a taxable
year shall be limited to the first two hundred thousand
megawatt-hours of geothermal energy produced by the geothermal
energy production facility in that taxable year:

(1) one and one-half cents ($.015) per
kilowatt-hour in the first taxable year in which the geothermal
energy production facility produces geothermal energy using a
geothermal energy resource;

(2) two cents ($.02) per kilowatt-hour in the
second taxable year in which the geothermal energy production
facility produces geothermal energy using a geothermal energy
resource;

(3) two and one-half cents ($.025) per
kilowatt-hour in the third taxable year in which the geothermal
energy production facility produces geothermal energy using a
geothermal energy resource;

(4) three cents ($.03) per kilowatt-hour in
the fourth taxable year in which the geothermal energy
production facility produces geothermal energy using a
geothermal energy resource;

(5) three and one-half cents ($.035) per
kilowatt-hour in the fifth taxable year in which the geothermal
energy production facility produces geothermal energy using a
geothermal energy resource
;

(6) four cents ($.04) per kilowatt-hour in the
sixth taxable year in which the geothermal energy production
facility produces geothermal energy using a geothermal energy
resource
;

(7) three and one-half cents ($.035) per
kilowatt-hour in the seventh taxable year in which the
geothermal energy production facility produces geothermal
energy using a geothermal energy resource;

(8) three cents ($.03) per kilowatt-hour in
the eighth taxable year in which the geothermal energy
production facility produces geothermal energy using a
geothermal energy resource;

(9) two and one-half cents ($.025) per
kilowatt-hour in the ninth taxable year in which the geothermal
energy production facility produces geothermal energy using a
geothermal energy resource; and

(10) two cents ($.02) per kilowatt-hour in the
tenth taxable year in which the geothermal energy production
facility produces geothermal energy using a geothermal energy
resource.

C.
Subject to the limitation provided in Subsection
D of this section
, a taxpayer shall apply for certification of
eligibility for the credit provided by this section from the
energy, minerals and natural resources department on forms and
in the manner prescribed by that department. [
The total annual
aggregate amount of geothermal electricity generation corporate
income tax credits and geothermal electricity generation income
tax credits that may be certified in any calendar year is five
million dollars ($5,000,000).
] Completed applications shall be
considered in the order received. Applications for
certification received after this limitation has been met in a
calendar year shall not be approved for that calendar year, but
shall be considered for certification in the following calendar
year. [
The application shall include proof that the taxpayer
is eligible for certification, including that the geothermal
electricity generation facility that produced the energy for
which the taxpayer is claiming credit, the geothermal resources
used by the geothermal electricity generation facility and the
taxpayer's interest in the geothermal electricity generation
facility are in accordance with the definitions set forth in
this section.
] For taxpayers approved to receive the credit,
the energy, minerals and natural resources department shall
issue a certificate of eligibility stating the amount of credit
to which the taxpayer is entitled and the taxable year in which
the credit may be claimed. The certificate of eligibility
shall be numbered for identification and declare the date of
issuance and the amount of the tax credit allowed.
The energy,
minerals and natural resources department shall provide the
department with the certificates of eligibility issued pursuant
to this subsection in an electronic format at regularly agreed-upon intervals.

D. The total annual aggregate amount of credits
that may be certified for geothermal energy production income
tax credits and geothermal energy production corporate income
tax credits in a calendar year is fifty-five million dollars
($55,000,000); provided that eleven million dollars
($11,000,000) of the total annual aggregate amount shall be
reserved for applications submitted by tribal businesses and
small businesses. If the total aggregate amount pursuant to
this section is not met in a calendar year, the difference may
be added to the total annual aggregate amount allowed for the
following calendar year.

E. A certificate of eligibility for the tax credit
may be sold, exchanged or otherwise transferred to another
taxpayer for the full value of the credit. The parties to such
a transaction shall notify the department of the sale, exchange
or transfer within ten days of the sale, exchange or transfer
in an electronic format prescribed by the department.

[
D.
]
F.
A taxpayer may claim a geothermal
[
electricity generation
]
energy production
corporate income tax
credit for the taxable year in which [
electricity was
generated
]
geothermal energy was produced
in New Mexico by a
geothermal [
electricity generation
]
energy production
facility
in which the taxpayer holds an interest. To receive the credit
provided by this section, a taxpayer shall apply to the
department on forms and in the manner prescribed by the
department. The application shall include a certificate of
eligibility issued pursuant to Subsection C of this section.

[
E.
]
G.
That portion of a credit that exceeds a
taxpayer's tax liability in the taxable year in which the
credit is claimed
shall not be refunded but
may be carried
forward for up to three consecutive years.

[
F. A taxpayer allowed a tax credit pursuant to
this section shall report the amount of the credit to the
department in a manner required by that department.

G.
]
H.
The tax credit provided by this section
shall be included in the tax expenditure budget pursuant to
Section 7-1-84 NMSA 1978, including the annual aggregate cost
of the tax credit.

[
H.
]
I.
As used in this section:

(1) "geothermal [
electricity generation
]

energy production
facility" means a facility located in New
Mexico that [
generates electricity
]
produces and delivers
electricity or thermal energy
from geothermal resources
for
industrial, commercial or residential use
and:

(a) for new facilities, begins
construction on or after January 1, 2025; or

(b) for existing facilities, on or after
January 1, 2025, increases the amount of [
electricity
generated
]
geothermal energy produced
from geothermal resources
the facility [
generated
]
produced
prior to that date by at
least one hundred percent;

(2) "geothermal resources" means the natural
heat of the earth in excess of two hundred fifty degrees
Fahrenheit or the energy, in whatever form, below the surface
of the earth present in, resulting from, created by or that may
be extracted from this natural heat in excess of two hundred
fifty degrees Fahrenheit and all minerals in solution or other
products obtained from naturally heated fluids, brines,
associated gases and steam, in whatever form, found below the
surface of the earth, but excluding oil, hydrocarbon gas and
other hydrocarbon substances and excluding the heating and
cooling capacity of the earth not resulting from the natural
heat of the earth in excess of two hundred fifty degrees
Fahrenheit as may be used for the heating and cooling of
buildings through an on-site geoexchange heat pump or similar
on-site system; [
and
]

(3) "interest in a geothermal [
electricity
generation
]
energy production
facility" means title to a
geothermal [
electricity generation
]
energy production
facility;
a leasehold interest in such facility; an ownership interest in
a business or entity that is taxed for federal income tax
purposes as a partnership that holds title to or a leasehold
interest in such facility; or an ownership interest, through
one or more intermediate entities that are each taxed for
federal income tax purposes as a partnership, in a business
that holds title to or a leasehold interest in such facility;

(4) "kilowatt-hour of geothermal energy"
means:

(a) one kilowatt-hour of electricity
generated; or

(b) one kilowatt-hour of net thermal
energy transferred to a purchaser or end user at the point of
sale or end-use, as measured at a customer delivery point using
calibrated metering equipment that determines thermal energy
based on measured flow and measured supply-and-return
temperature differential, in accordance with generally accepted
industry practice;

(5) "small business" means a business located
in New Mexico that employs fifty or fewer full-time employees;
and

(6) "tribal business" means a business located
in New Mexico that is owned and operated by an Indian nation,
tribe or pueblo or a member of an Indian nation, tribe or
pueblo
."

SECTION 3.
APPLICABILITY.--The provisions of this act
apply to taxable years beginning on or after January 1, 2026.

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