HB 106

                                1  HOUSE BILL 106
                                2     57TH LEGISLATURE - STATE OF NEW MEXICO - SECOND SESSION, 2026
                                3  INTRODUCED BY
                                4  Mark Duncan and Luis M. Terrazas
                                5
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                                10  AN ACT
                                11   RELATING TO TAXATION; CREATING THE HOME-BASED CHILD CARE INCOME
                                12   TAX CREDIT.
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                                14   BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF NEW MEXICO:
                                15        SECTION 1.    A new section of the Income Tax Act is enacted
                                16   to read:
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                                17        "[NEW MATERIAL] HOME-BASED CHILD CARE INCOME TAX CREDIT.--
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                                18  A.   A taxpayer who files an individual New Mexico
                                19   income tax return, is not a dependent of another individual and
                                20   does not enroll the taxpayer's dependent child in a state-
                                21   funded or private child care facility or a state-funded or
                                22   private pre-kindergarten program may claim a credit against the
                                23   taxpayer's tax liability imposed pursuant to the provisions of
                                24   the Income Tax Act.    The credit authorized pursuant to this
                                25   section may be referred to as the "home-based child care income
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                                1    tax credit".
                                2  B.   Except as provided in Subsection D of this
                                3    section, the amount of credit shall be in the amount of one
                                4    thousand dollars ($1,000) per month for each month the
                                5    dependent child is not eligible to enroll in public school.
                                6  C.   A taxpayer shall apply for certification of
                                7    eligibility for the tax credit from the early childhood
                                8    education and care department on forms and in the manner
                                9    prescribed by that department.    Except as provided by
                                10   Subsection F of this section, only one tax credit shall be
                                11   certified per dependent child not enrolled in a state-funded or
                                12   private pre-kindergarten program per month.    The early
                                13   childhood education and care department may issue rules
                                14   governing the procedure for administering the provisions of
                                15   this subsection.    The early childhood education and care
                                16   department shall provide the department with the certificates
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                                17   of eligibility issued pursuant to this subsection in an
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                                18   electronic format at regularly agreed-upon intervals.
                                19  D.   For the 2027 taxable year and each subsequent
                                20   taxable year, the amount of credit provided in Subsection B of
                                21   this section shall be adjusted to account for inflation.       The
                                22   department shall make the adjustment by multiplying the credit
                                23   amount by a fraction, the numerator of which is the consumer
                                24   price index ending during the prior taxable year and the
                                25   denominator of which is the consumer price index ending in tax
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                                1    year 2025.    The result of the multiplication shall be rounded
                                2    down to the nearest one dollar ($1.00), except that if the
                                3    result would be an amount less than the corresponding amount
                                4    for the preceding taxable year, then an adjustment shall not be
                                5    made.
                                6  E.   That portion of the home-based child care income
                                7    tax credit claimed by a taxpayer that exceeds the taxpayer's
                                8    income tax liability in the taxable year in which the home-
                                9    based child care income tax credit is claimed shall be refunded
                                10   to the taxpayer.
                                11  F.   Married individuals who file separate returns
                                12   for a taxable year in which they could have filed a joint
                                13   return may each claim only one-half of the home-based child
                                14   care income tax credit provided in this section that would have
                                15   been allowed on a joint return.
                                16  G.   The credit provided by this section shall be
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                                17   included in the tax expenditure budget pursuant to Section
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                                18   7-1-84 NMSA 1978, including the total annual aggregate cost of
                                19   the credit.
                                20  H.   As used in this section, "dependent child" means
                                21   a child who:
                                22  (1)   is a "dependent" as defined by Section 152
                                23   of the Internal Revenue Code of 1986, as that section may be
                                24   amended or renumbered, but also includes any minor child or
                                25   stepchild of the taxpayer who would be a dependent for federal
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                                1    income tax purposes if the public assistance contributing to
                                2    the support of the child or stepchild was considered to have
                                3    been contributed by the taxpayer; and
                                4  (2)   is age five or younger."
                                5  SECTION 2.    APPLICABILITY.--The provisions of this act
                                6    apply to taxable years beginning on or after January 1, 2026.
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