2007 New Mexico Legislative Summary

The New Mexico Legislative Session was highly productive for renewable energy interests of all shapes and sizes. In particular, several very important policies and tax incentives were passed by the New Mexico Legislature. The Interwest Energy Alliance supported these bills, which our lobbying team of Drew Setter and Mari Anixter successfully helped advance through the legislative process. The following is a summary of our key bills of interest, written by Drew and Mari.

HB 188, the Renewable Energy Transmission Authority (RETA) was signed into law by Governor Bill Richardson on March 5th. The act creates RETA, a quasi-governmental agency, to facilitate the transmission and use of renewable energy. The act requires that a minimum of 30 percent of the power transmitted over the new transmission lines comes from renewable sources. At the outset of the legislature, extensive negotiation took place between proponents of the bill and utility firms that want the requirement to be for capacity rather than power. In the end, advocates of renewable energy won the day and replaced the term “electric capacity” with “electric power.”

SB 418, the Renewable Portfolio Standard, was signed into law by Governor Bill Richardson, also on March 5th. The act requires utilities to produce more of their electricity from renewable sources. The act set the target of 20% by 2020. This program supports distributed (rooftop) systems as well as utility-scale. Such standards are the primary driver of renewable energy development in the US today. Again, this took a great deal of late night meetings between the Administration, utility interests, and the advocacy community.

HB 996, Solar Energy Systems Gross Receipts, creates a gross receipts tax deduction for receipts from the sale and installation of solar energy systems. The bill defines a solar energy system as an installation to provide space heat, hot water or electricity to the property in which it is installed and is 1) an installation that utilizes solar panels that are not also windows, 2) dark-colored water tank exposed to sunlight, or 3) a non-vented trombe wall. The deduction will be effective from July 1, 2007 until June 30, 2017, when it will sunset.

In the end, HB 996 was included in SB 463, the Renewable Energy Production Tax Credit, along with several other important pieces of renewable energy tax incentives. Several of these incentives include:

Renewable Energy Production Tax Credit amends the existing renewable energy production credit in the corporate income tax act and includes the credit in the income tax act. The existing credit of one cent per kilowatt hour (kWh) of electricity produced by renewable energy sources is limited to wind and biomass energy sources while a new more expansive credit is allowed for electricity produced by solar energy sources. The solar credit is phased in from $.015 centers per kWh in year one to $.040 in year six and then back down to $0.020 over the next four years. The solar credit is allowed for the first 200,000 megawatt hours (mWh) and for only ten years of qualified electricity generation. The Act also expands the definition of biomass to match the definition used for the gross receipts tax and lowers the size of electric generating plant to 1 megawatt (MW) from the current 10 MW. The bill sets the total eligible electricity generated by all plants at 2 million MWh plus an additional 500 thousand MWh for solar power. The effective date is January 1, 2008
Alternative Energy Product Tax Credit provides a credit against combined reporting taxes (gross receipts, compensating and withholding) for manufacturing alternative energy products. Alternative energy products are defined:
Alternative energy vehicle
Fuel cell system
Renewable energy system or component of an alternative energy vehicle
Fuel cell system or renewable energy system or components for integrated gasification
Combined cycle coal facilities
Equipment related to sequestration of carbon from integrated gasification combined cycle plants

The credit is for qualified expenditures after July 1, 2007, and cannot exceed five percent of the taxpayer’s qualified expenditures. To be eligible, the taxpayer must show that they have hired an additional full time employee from the previous year for each $500 thousand of qualified expenditures up to $30 million and an additional full time job for each $1 million of qualified expenditures above $30 million. The jobs are net new jobs not just new jobs. For a taxpayer that has $10 million in qualified expenditures, it would need to show that they have hired 20 full-time employees over last year ($10,000,000 ÷ $500,000 = 20) to qualify for the $500 thousand credit; if the taxpayer has $40 million in qualified expenditures, it would need to show at least 70 fulltime employees (60 for the first $30 million and 10 for the balance) to receive a $2 million credit.

Additionally, SB 463, which came to be known as the “Renewable Energy Omnibus Tax Bill” included other provisions including incentives for biodiesel production, sustainable building incentives (using LEED standards as a basis), and water conservation credits for use by agricultural production.