Legislation that would establish income tax credit for New Mexicans looking to buy electric vehicles (EV) passed its first hurdles in the House and Senate over the weekend. The two versions of the bill are similar but do differ in key ways.

The proposals would create personal income tax credits for New Mexico residents who purchase or lease plug-in hybrid vehicles or 100 percent battery electric vehicles, beginning January 1, 2020. The bills provide a $2,500 tax credit for residents whose annual income is above $50,000; but the tax credit jumps to $5,000 for residents who make less than $50,000 as well as for married couples filing separately who make less than $37,500 or married couples filing jointly that make less than $75,000 per year.

The EV tax credits have an annual cap of $10 million. The House version of the bill contains a roll-over provision to ensure that taxpayers who are denied the credit after the $10 million threshold is reached would be prioritized to receive a credit in the following year. The Senate version of the bill does not include the roll-over provision.

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The proposals would also establish a $300 income tax credit for the acquisition of a residential electric vehicle charging unit. That tax credit is capped at $1 million annually with no roll-over provision in both versions of the bill.

In the House bill, all purchases must be completed by January 2029 to be eligible for the tax credits. The Senate version ends the tax credit in January 2025.

Registration fees are another key difference between the two bills. The House version of the bill would impose a $50 registration fee for 100 percent EVs and a $20 registration fee for plug-in hybrid vehicles. The Senate version of the bill would double registration fees to $100 for electric vehicles and $50 for plug-in hybrids.

House committee debate

House bill sponsors Rep. Jim Trujillo, D-Santa Fe, and Rep. Micaela Lara Cadena, D-Mesilla, presented HB 217 to the House Energy, Environment and Natural Resources Committee on Saturday. Other sponsors of the bill include Albuquerque Democratic Reps. Javier Martinez and Marian Matthews.

The measure passed the committee 8-5 along party lines.

The legislation will provide incentives for New Mexicans to purchase EVs and install home charging units, Trujillo told the House committee.

“These tax credits are needed to foster the EV market in New Mexico, and provide economic and environmental benefits to New Mexicans,” he added.

Trujillo said the bill’s provisions are designed to benefit low-income New Mexicans. In addition to the $5,000 available to low-income residents, the bill would also limit the type of EVs and plug-ins that would be eligible for the tax credit, “to ensure that these tax credits aren’t going to people buying luxury vehicles,” Trujillo said. The tax credit is only available for EVs with a manufacturer suggested retail price of up to $48,000.

Cadena emphasized those provisions, too.

“For those of us who understand what we’re facing in climate change, it’s really important that we think about those that will be most impacted in future years, and give New Mexicans of many income levels opportunities to be part of changing vehicles markets,” Cadena said.

“Hopefully, 2020 is the year we can continue to advance this legislation in a way that’s meaningful,” she said.

There have been four other iterations of the bill introduced to the Legislature since 2014.

“This bill has been around in various forms for a few years. I think it’s been quite improved over that period of time,” said Noah Long, senior attorney at the National Resources Defense Council. Long, who is a board member of the New Mexico Renewable Energy Transmission Authority (RETA), stood as an expert witness for the bill.

Long pointed to the additional registration fees.

“This addresses a concern that has been raised over the years, which is that electric vehicles — because they’re all electric — they don’t pay a gas tax,” Long said.

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He added that a report from consulting firm MJ Bradley and Associates found that New Mexico could realize more than $5 billion in net benefits if the EV market in the state can reach 10 percent of new car sales by 2030.

“The bulk of that goes to drivers, from savings in maintenance and lower gas costs from these more efficient vehicles,” Long said. Other benefits include improvements to air quality and better utilization of the electric system in the state, he added.

There was broad support for the bill among the public who attended the weekend hearing. The hearing room was packed, and a group of half a dozen people waited outside for their chance to voice support for the bill.

The Republicans on the committee raised concerns about the state meddling in the market, and argued the tax credit wouldn’t have a meaningful environmental impact.

Jim Townsend, R-Artesia, called into question the price cap for eligible vehicles.

“I understand what you’re trying to do. But I don’t think New Mexicans should be picking winners and losers in the market of new car manufacturers when they come to New Mexico,” Townsend said. “Limiting one over the other is just not fair.”

James Strickler, R-Farmington, said he didn’t think the tax credit would help low-income residents purchase EVs.

“The big drawback of these cars is that they cost too much. The high-income earners have a shot at this. The low-income folks in my area — I don’t know if this is going to get them over the top, to be honest,” Strickler said. “I think these vehicles in 10 years will come down where they can compete with conventional vehicles. I’m not sure this will accomplish the goals you’ve set out.”

He added that the state doesn’t currently have that many electric cars.

“That’s the difference between your philosophy and my philosophy. I believe we’re heading straight to global warming,” Trujillo responded. “I am trying to encourage low-income people to buy electric cars to help us with that problem. I think the more we transfer our transportation from gasoline to electric, the better off we are,” Trujillo said.

“Almost every manufacturer now has electric vehicles either on the market or coming on the market, and some of them are much lower cost. The new Nissan Leafs are in the $20,000 range,” Long added. “This tax credit is meaningful in that regard.”

Rep. Larry Scott, R-Hobbs, was also critical of the bill’s intended impacts. He argued a nominal increase in EVs in the state wouldn’t translate into much of an environmental benefit to the other residents who would be subsidizing the purchase of EVs with taxpayer money.

“The math indicates the environmental consequences of this $10 million a year mean nothing. That is my concern,” Scott said. “There’s 349,000 other drivers out there that will derive no benefit from this policy. This policy does nothing for the environment.”

Rep. Andrea Romero, D-Santa Fe, pushed back against Scott’s arguments. She pointed to an emissions reductions calculation that Scott had earlier mentioned.

“The aim of this legislation is to do whatever we can to take steps to reduce carbon emissions,” she said. “I don’t think it’s fair to calculate it as a ‘nothing’ statement. I think there’s some value in any reduction that we’re trying to achieve at this point.”

Rep. Joanne Ferrary, D-Las Cruces, told the committee about a constituent whose daughter lives in Denver, Colorado.

“Her daughter is on her third Nissan Leaf, because of the credits she’s gotten from Colorado and the federal tax credits,” Ferrary said. “Her son, who’s a teacher in Santa Fe with two kids, would really like to get his first Leaf. I think it’s important that we do this for New Mexico, to get things started.”

The bill passed 8-5 along party lines. It heads to the House Taxation & Revenue Committee next.

Senate side

The Senate version of the bill, SB 2, is sponsored by Sens. Pat Woods, a Republican from Broadview, and Bill Tallman, an Albuquerque Democrat. It passed the Senate Corporations and Transportation Committee 6-2, with Republican Sens. Bill Sharer of Farmington and Greg Fulfer of Jal voting against it.

“Electric cars are the future,” Tallman told members of the Senate Corporations and Transportation Committee on Monday.

“A lot of experts are predicting that within 12 years the electric will outsell internal combustion engines,” he added, pointing to plans from carmakers such as Volkswagen, Volvo and Mercedes to phase out internal combustion engines from their respective car lines in the coming years.

Tallman also said the bill would help New Mexico catch up to its neighbors in EVs and EV charging infrastructure. He pointed to Colorado, which has 2,300 charging units.

“We only have 259,” Tallman said. “Does New Mexico want to be the state ranked 50th in charging stations per capita? I don’t think so.”

Sarah Cottrell Propst, Cabinet Secretary for the Energy, Minerals and Natural Resources Department, said her department supports the bill. 

“Electric vehicles reduce emissions, and they save money each year on fuel for the drivers,” she said. “We think that with this modest 5-year incentive we can get a lot more vehicles on the road, get those adoption rates up, make sure the dealers are stocking electric vehicles for our folks to consider buying. We’ve seen across the country that states with tax incentives have seen more success in doing that.”

Cottrell Propst said the department estimates 2,000 to 4,000 residents could be eligible for the tax credit each year.

Sen. Michael Padilla, D-Albuquerque, questioned the logic behind what he considered high registration fees.

“I’m confused why we would have a credit and then charge a fee,” he said. He later attempted to move a “friendly” amendment to the bill to lower the registration fees to $65 for EVs and $35 for plug-in hybrids. But the two sponsors declined to move forward with the amendment.

Woods told the committee the funds derived from the additional registration fees would be split between the state highway fund and local road funds.

Republicans Fulfer and Sharer raised concerns about the potential environmental impact of the tax credit, and echoed earlier arguments that the state shouldn’t intervene in the market.

“I am concerned about why we need this wealth transfer to make these cars economic,” Sharer said.

But Woods argued that the bill will also help the state’s grid infrastructure.

“This will smooth out the highs and the lows, it’ll actually make electricity cheaper for consumers,” he said.

Sharer ultimately voted against the bill, but said he’s not opposed to electric cars.

“I know they’re coming. I think they’re great,” he said. “What I am opposed to is the wealth transfer.”  

The bill passed the committee 6-2. It heads to the Senate Finance Committee next.