Eligible geothermal producers could claim New Mexico energy tax credits

Eligible taxpayers could apply for individual or corporate income tax credits based on geothermal electricity or delivered heat. Owners, leaseholders, and eligible partnership investors must hold an interest in a New Mexico facility delivering geothermal electricity or heat for industrial, commercial, or residential use. Individual applicants cannot be another person's dependent. New facilities must begin construction on or after January 1, 2025. Existing facilities must at least double their output compared with production before that date, on or after that date. Eligible resources involve underground natural heat above 250 degrees Fahrenheit. Oil, hydrocarbon fuels, and ground-source heat pumps that do not use that heat are excluded. Rates would rise by half a cent per kilowatt-hour each year from 1.5 cents in production year one to 4 cents in year six. They would then fall by half a cent each year to 2 cents in year ten. Applicants need approval from the Energy, Minerals and Natural Resources Department and an eligibility certificate to claim credits. Delivered heat must be measured at the customer's delivery point with calibrated equipment. The proposal would apply to tax years beginning on or after January 1, 2026. Credits would cover only tax years ending before January 1, 2036.

The state would set a shared $55 million annual limit on individual and corporate geothermal tax credit approvals. The reserved $11 million would cover applications from eligible small businesses and tribal businesses. Small businesses must be in New Mexico and employ 50 or fewer full-time workers. Tribal businesses must be in New Mexico and owned and operated by an Indian nation, tribe, pueblo, or one of their members. Completed applications would be considered in the order received. These rules would apply to tax years beginning on or after January 1, 2026. Applications received after the annual limit is reached would be considered the following calendar year.

Taxpayers could sell, exchange, or transfer an approved credit certificate to another taxpayer for its full value. These rules would cover approved individual and corporate geothermal energy tax credits. Both parties must notify the state tax department electronically within 10 days of the sale, exchange, or transfer. Credit amounts above the taxpayer's tax bill would not be refunded. The unused amount could be carried forward for up to three consecutive years. These rules would apply to tax years beginning on or after January 1, 2026.