1. A. As used in this section:

   1. (1) "fractional interest" means a tangible interest in real property, except for mineral property as defined in Section 7-36-22 NMSA 1978, that is less than the total of the interests existing in the property, but "fractional interest" does not include those property interests described in Sections 7-36-3, 7-36-3.1 and 7-36-3.2 NMSA 1978 nor does it include the lessee's interest under a lease when the term of the lease is more than seventy-five years;
   2. (2) "exempt entity" means any person whose real property is exempt from taxation under the constitution of New Mexico or the Enabling Act (36 Stat. 557, as amended) by reason of ownership;
   3. (3) "exempt property" means property that is exempt from property taxation pursuant to Article 8, Section 3 of the constitution of New Mexico by reason of use;

   4. (4) "improvements" includes surface and subsurface structures, fixtures, transmission lines, pipelines and other works, but "improvements" does not include:

      1. (a) that property either included or specifically excluded under the terms "property used in connection with mineral property" under Section 7-36-23 NMSA 1978, "property used in connection with potash mineral property" under Section 7-36-24 NMSA 1978 and "property used in connection with uranium mineral property" under Section 7-36-25 NMSA 1978;
      2. (b) a dwelling occupied by a low-income resident in a housing project authorized under the provisions of the Municipal Housing Law [Chapter 3, Article 45 NMSA 1978]; and
      3. (c) those property interests described in Sections 7-36-3, 7-36-3.1 and 7-36-3.2 NMSA 1978;
   5. (5) "nonexempt entity" means any person that is not an exempt entity; and
   6. (6) "nonexempt property" means property that is not exempt property.

2. B. Fractional interests of nonexempt entities in real property of exempt entities are exempt from property taxation under the Property Tax Code [Articles 35 through 38 of Chapter 7 NMSA 1978], but this exemption shall not apply to the following property:

   1. (1) improvements of land of an exempt entity if the improvements are owned or leased by a nonexempt entity; these improvements are subject to valuation for property taxation purposes and to property taxation to be paid by the nonexempt entity; provided, however, that improvements, including leasehold interest in the improvements, are exempt if the improvements are:

      1. (a) electric transmission and interconnected storage facilities and all related structures, properties and supporting infrastructure that have been acquired by the New Mexico renewable energy transmission authority and qualify as an eligible facility pursuant to the New Mexico Renewable Energy Transmission Authority Act [Chapter 62, Article 16A NMSA 1978]; and
      2. (b) leased by the New Mexico renewable energy transmission authority to a nonexempt entity to construct, operate or assist the authority in constructing or operating the eligible facility; and
   2. (2) property interests of nonexempt entities held under equitable title in the property of exempt entities.

3. C. When fractional interests are created in property:

   1. (1) fractional interests that are nonexempt property shall be reported to the appropriate valuation authority by the fractional interest owners for valuation for property tax purposes if the owner is a nonexempt entity; and
   2. (2) except for fractional interests owned by the United States, an Indian nation, tribe or pueblo, the state of New Mexico or a political subdivision of the state, fractional interests that are owned by a nonexempt entity but are claimed to be exempt property shall be reported by the owner to the appropriate valuation authority for a determination of exemption status and valuation if determined to be nonexempt property.
4. D. Fractional interests that are nonexempt property shall be valued by the applicable method of valuation pursuant to the Property Tax Code, and if fractional interests that are exempt property have been created, the value of the remaining nonexempt fractional interests shall be determined in the property tax year following the creation of the interests as the value of the property in the property tax year immediately prior to the year in which creation of the fractional interests occurred, increased or decreased by the value directly attributable to the creation of the fractional interests that are exempt property. For subsequent property tax years, the nonexempt fractional interests shall be valued pursuant to the applicable methods of valuation.

History: 1953 Comp., § 72-29-2.2, enacted by Laws 1976, ch. 61, § 1; 1977, ch. 285, § 1; 1985, ch. 109, § 3; 1985, ch. 225, § 6; 1995, ch. 12, § 8; 1998, ch. 49, § 1; 2025, ch. 104, § 1.

ANNOTATIONS

Cross references. — For constitutional provision as to tax exempt property, see N.M. Const., art. VIII, § 3.

For constitutional provision as to head of family and veteran exemption, see N.M. Const., art. VIII, § 5.

For the Enabling Act, see the New Mexico Territorial Laws and Treaties on NMOneSource.com.

The 2025 amendment, effective June 20, 2025, provided that improvements on land owned by the New Mexico renewable energy authority are exempt from property tax, with certain conditions; in Subsection B, Paragraph B(1), in the introductory clause, after the semicolon, added "provided, however, that improvements, including leasehold interest in the improvements, are exempt if the improvements are", and added Subparagraphs B(1)(a) and B(1)(b).

Applicability. — Laws 2025, ch. 104, § 2 provided that the provisions of Laws 2025, ch. 104 apply to the 2026 and subsequent property tax years.

The 1998 amendment, effective May 20, 1998, in the section heading, inserted "taxation and valuation of fractional interests"; added new Paragraphs A(3) and A(6) and redesignated the remaining Paragraphs in Subsection A accordingly; substituted "subject" for "hereby subjected" in Paragraph B(1); and added a new Subsection C.

The 1995 amendment, effective June 16, 1995, designated the existing introductory language as Subsection A and redesignated former Subsections A through D as Paragraphs A(1) through A(4); deleted "and Sections 7-36-5 and 7-36-6 NMSA 1978" following "section" in the introductory phrase of Subsection A; inserted references to Section 7-36-3.2 in Paragraph A(1) and Subparagraph A(3)(c); added Subsection B; and made related stylistic changes.

Constitutional. — Constitutional guarantees of equal protection and uniform taxation are not violated by the provision of this section for a 75-year limitation on leases qualifying for exemption. Welch v. Sandoval Cnty. Valuation Protests Bd., 1997-NMCA-086, 123 N.M. 722, 945 P.2d 452, cert. denied, 123 N.M. 627, 944 P.2d 275.

License, not constituting interest in real property, does not meet definition of "fractional interest" set forth in Subsection A of this section. Cutter Flying Serv., Inc. v. Property Tax Dep't, 1977-NMCA-105, 91 N.M. 215, 572 P.2d 943.

"Term of the lease" means the original term; thus, where a lease had an original term of more than 75 years but had less than 75 years remaining, the leasehold was not a "fractional interest" under Paragraph A(1). Welch v. Sandoval Cnty. Valuation Protests Bd., 1997-NMCA-086, 123 N.M. 722, 945 P.2d 452, cert. denied, 123 N.M. 627, 944 P.2d 275.

"Real property" is generally understood to mean a parcel of land together with all structures, fixtures and improvements upon it. Cutter Flying Serv., Inc. v. Property Tax Dep't, 1977-NMCA-105, 91 N.M. 215, 572 P.2d 943.