The proposed bill establishes a new income tax credit for foster parents and guardians in New Mexico, referred to as the "foster parent and guardian income tax credit." Eligible taxpayers, who are residents and not dependents of another individual, can claim a credit of $500 for each month they serve as a foster parent or guardian, with a maximum annual credit of $6,000. To qualify, the taxpayer must be a foster parent or guardian for more than fifty percent of the month in question. The bill outlines the application process for certification of eligibility through the children, youth and families department, which will issue a certificate detailing the amount of credit and the taxable years applicable.

Additionally, the bill stipulates that any portion of the tax credit exceeding the taxpayer's income tax liability will be refunded. It also includes provisions for married individuals filing separately, limiting their claim to half of the credit they would have received if filing jointly. The credit will be included in the tax expenditure budget, and the provisions of this act will apply to taxable years beginning on or after January 1, 2026.