New Mexico addresses OBBBA in annual tax bill

Executive summary

On March 11, 2026, New Mexico Gov. Michelle Lujan Grisham signed Senate Bill 151, decoupling the state’s tax code from several major provisions of the One Big Beautiful Bill Act (P.L. 119-21, OBBBA) in future tax years. The bill decouples New Mexico from federal bonus depreciation provisions under sections 168(k) and 168(n), modifies its conformity to section 163(j) and adds the federal Net CFC tested income (NCTI) into the state corporate income tax base. Senate Bill 151 also creates a new gross receipts tax (GRT) deduction for certain construction materials and establishes several new and expanded incentives.

OBBBA conformity

Senate Bill 151 decouples New Mexico from the federal bonus provisions under section 168(k), which provides 100% bonus depreciation for certain qualified property acquired and placed in service after Jan. 19, 2025, as well as section 168(n), which allows 100% expensing of certain qualified production property. The bill requires taxpayers to add back to New Mexico corporate taxable income any deduction included in federal taxable income under sections 168(k) and 168(n) in excess of the amount allowed under sections 168(a) through 168(j). These changes are effective for tax years beginning on or after Jan. 1, 2027. Prior to Senate Bill 151, New Mexico conformed to federal bonus depreciation rules under section 168(k), including the amendments as enacted under the Tax Cuts and Jobs Act (115-97, TCJA).

In addition, the bill decouples New Mexico from the additional interest deduction allowed federally as a result of changes to section 163(j)(8)(A) made by section 70303 of P.L. 119–21. Consequently, New Mexico will require that taxpayers determine ‘adjusted taxable income’ for purposes of the business interest deduction limitation under section 163(j) using earnings before interest and taxes (EBIT) rather than earnings before interest, taxes, and depreciation and amortization (EBITDA). This change, also effective for tax years beginning on or after Jan. 1, 2027, will result in greater limitations on the deduction of business interest expense for many New Mexico taxpayers, compared to what is allowed federally. The bill further clarifies that any additional business interest deduction disallowed in the current year as a result of differences between New Mexico and federal law may be carried forward indefinitely in accordance with section 163(j)(2).

Finally, Senate Bill 151 eliminates New Mexico’s deduction for NCTI under section 951A, effective for tax years beginning on or after Jan. 1, 2027. Because NCTI will be included in the state corporate income tax base, the law provides that the apportionment factors must include the factors of a controlled foreign corporation (CFC) to the extent the income of the CFC is included in the tax base.

GRT changes

Senate Bill 151 creates a new GRT deduction for receipts from the sale of construction materials and labor used in developing affordable multifamily residential housing projects, effective July 1, 2027. Qualifying grantees under the Affordable Housing Act may claim the deduction on materials and labor sold prior to July 1, 2030. The materials must be used in certain multifamily housing projects.

New and amended credits and incentives

Senate Bill 151 adds or amends certain New Mexico credits and incentives, including the following:

• Establishes a physician income tax credit of $10,000 for qualified physicians. The credit is nonrefundable, but may be carried forward up to three years, effective Jan. 1, 2027.
• Establishes a local journalist personal and corporate income tax credit allowing a credit up to 30% of qualified annual wages. The refundable credit is capped at $4 million per year and is effective Jan. 1, 2027.
• Establishes a local news printer personal and corporate income tax credit allowing qualified printers to claim a credit based on certain wages. The credit is capped at $10,000 for a qualified employee working an average of at least 20 hours per week and $5,000 for a qualified employee working fewer than 20 hours per week, capped at an aggregate amount of $1 million annually, effective Jan. 1, 2027.
• Extends the high-wage job tax credit an additional ten years, allowing jobs created before July 1, 2036 to be eligible for the credit.