Can a New Mexico hospital that financed its building through the Hospital Equipment Loan Council claim a property tax exemption on the land and the building, or only on the equipment?

Plain-English summary

The Hospital Equipment Loan Act lets a state-created Council issue revenue bonds and lease "health-related equipment" to participating hospitals. The Council technically owns the equipment until the hospital pays off the bonds. The Act tries to give that property a property-tax exemption by treating the Council as "the state" for one narrow constitutional purpose, while telling the rest of state law to treat the Council as separate from the state.

Representative Eleanor Chávez asked county assessors' question directly: when a private hospital uses HELA financing for buildings (not just equipment), can it claim a property-tax exemption on the land and the structures? The Attorney General said no, at least not on an ownership theory.

Article VIII, Section 3 of the New Mexico Constitution is a closed list. It exempts property of the United States, the state, counties, towns, cities, school districts, other municipal corporations, public libraries, community ditches, churches not used for commercial purposes, property used for educational or charitable purposes, certain cemeteries, and state and local bonds. The Legislature can add personal property exemptions by a three-fourths vote, but it cannot expand the list of entities whose real property is exempt by ownership. El Castillo Retirement Residences v. Martinez, 2017-NMSC-026, controls.

The opinion holds that the HELA Council is not "the state" for Article VIII, Section 3 purposes. The same statute that calls the Council a state agency for tax purposes elsewhere says it is separate from the state, that its bonds are not state debt, and that it is not subject to state agency control. The AG concludes the Legislature cannot have it both ways: a body that is statutorily separate from the state cannot be re-labeled "the state" just to capture a constitutional property-tax exemption.

The opinion leaves open one path. Article VIII, Section 3 also exempts "property used for educational or charitable purposes." Whether a particular HELA-financed hospital building qualifies for the use-based exemption is a fact-driven question for the county assessor, applying the case-by-case test from Pecos River Open Spaces, Inc. v. Cnty. of San Miguel, 2013-NMCA-029.

What this means for you

If you are a New Mexico county assessor

When you receive a property-tax exemption claim from a HELA-financed hospital that asserts the Council's ownership makes the real property exempt, you have a basis to deny the ownership-theory exemption under this opinion. Document the denial citing AGO 2025-13 and El Castillo Retirement Residences.

That is not the end of the analysis. The hospital can still seek a use-based exemption under Article VIII, Section 3 (charitable use or educational use). Pecos River and El Castillo together require a flexible, fact-specific inquiry into how the property is actually used. The hospital carries the burden of proof.

If you are a hospital administrator or CFO at a HELA-financed hospital

Re-evaluate your property-tax position. If you have been assuming a Council-ownership property-tax exemption for HELA-financed buildings, this opinion undercuts that position. You may face back-tax exposure if a county assessor revisits prior years.

If you want to hold an exemption, switch the theory. Build the case for charitable or educational use under Article VIII, Section 3. That requires concrete evidence: who you serve, charity care levels, the proportion of the property used for charitable purposes, alignment with the legal test for charitable use under New Mexico case law. Talk with bond counsel and tax counsel about whether your operations meet that test.

If you are bond counsel or a hospital finance attorney

The opinion changes the credit-marketing posture for HELA bonds that have been pitched on the basis of a real-property tax exemption. Going forward, the exemption story has to rest on use, not ownership. Disclose the change and update offering documents and continuing-disclosure summaries accordingly.

The opinion expressly does not overrule the use-based exemption avenue. Coordinate with hospital management to document use patterns over time, since the use-based test is fact-driven and a snapshot today may not control five years from now.

If you are a New Mexico legislator

The Constitution constrains you. The El Castillo line of cases makes clear that the Legislature cannot expand the entity list in Article VIII, Section 3. If the policy goal is to keep HELA-financed hospital real property off the property-tax rolls, the cleaner path is constitutional amendment. A statutory designation that names the Council as "the state" only for tax purposes will not survive scrutiny.

If you advise a hospital finance organization in another state

Watch for similar "designate as state agency for tax exemption only" provisions in your state's hospital-finance authorities. New Mexico is not unique in trying this drafting move. The El Castillo principle (Legislature cannot redefine the constitutional exemption categories) has analogs in many states.

Common questions

Q: Can the hospital still claim a property-tax exemption on the equipment HELA financed?
A: The opinion focuses on real property (land and buildings). The Constitution permits legislative exemptions for personal property by a three-fourths vote of each chamber. Equipment is generally personal property, and the AG's analysis does not unwind the exemption for equipment.

Q: What about charitable use?
A: That avenue remains open. If the hospital can show under New Mexico case law that the property is used for a charitable purpose, the use-based exemption in Article VIII, Section 3 can apply. The county assessor decides on the facts of each property.

Q: Why can't the Legislature just call the Council a state agency?
A: It already did, and then in the same statute it also said the Council is separate from the state. The AG read the two provisions together and concluded the Council is not in fact the state. Even if the Legislature had been more consistent, El Castillo says the Constitution's entity list cannot be expanded by statute.

Q: Is this a change in the law?
A: It is the AG's first formal opinion on the HELA tax exemption. Counties have been unsure how to handle it. The opinion gives them a clear framework to deny ownership-based exemptions and consider use-based ones.

Q: Does this affect public hospitals (county or municipal)?
A: No. Public hospitals are owned by counties or municipalities, which are themselves listed in Article VIII, Section 3. Their real property remains exempt by ownership independent of HELA financing.

Q: What about back taxes?
A: The opinion does not address back-tax exposure. That is a question for the county assessor and the hospital under New Mexico's tax-protest and assessment-correction procedures.

Background and statutory framework

The Hospital Equipment Loan Act was enacted in 1983 to lower hospital financing costs by letting the Hospital Equipment Loan Council issue revenue bonds and own equipment that hospitals lease until the bonds are paid off. Section 58-23-2 declares the public-purpose findings; Section 58-23-3(F) defines "health-related equipment" broadly to include any real or personal property the Council determines is needed for medical care, treatment, or research.

Section 58-23-5 establishes the Council and contains the conflicting designations: subsection (A) says the Council is "separate and apart from the state," subsection (D) says the Council is "a state agency and instrumentality for the purposes of Article 8, Section 3 of the constitution of New Mexico," and the same subsection adds that no use of the terms "state agency" or "instrumentality" elsewhere in state law refers to the Council unless the Council is specifically named.

Section 58-23-29 provides the property-tax exemption: property acquired or held by the Council, and all health-related equipment financed with HELA bond proceeds, is "exempt from property taxation for as long as the participating health facility remains liable" under the lease/financing arrangement, up to 30 years from the bond date.

Article VIII, Section 3 of the New Mexico Constitution lists the property-tax exempt categories. The list is "specific" and "self-executing," not a delegation to the Legislature. State v. Bd. of Trs. of Las Vegas, 1922-NMSC-029, 28 N.M. 237. CAVU Co. v. Martinez, 2014-NMSC-029, ¶ 15.

El Castillo Retirement Residences v. Martinez, 2017-NMSC-026, holds that the Legislature cannot redefine the constitutional exemption categories. Statutory exemptions "may not be interpreted or applied to grant exemptions that are not authorized by Article VIII, Section 3." That principle is fatal to HELA Section 58-23-5(D)'s attempt to declare the Council "the state" for tax purposes only.

Use-based exemptions under Article VIII, Section 3 are evaluated case by case. Pecos River Open Spaces, Inc. v. Cnty. of San Miguel, 2013-NMCA-029, places the burden on the taxpayer to prove charitable use, and El Castillo at ¶ 31 describes the test as "a flexible inquiry allowing fact-specific determinations informed by history and policy considerations."

Citations and references

Constitution and statutes:
- N.M. Const. art. VIII, § 3
- NMSA 1978, §§ 58-23-1 to -32 (Hospital Equipment Loan Act)
- NMSA 1978, § 8-5-2(D)

Cases:
- El Castillo Ret. Residences v. Martinez, 2017-NMSC-026
- CAVU Co. v. Martinez, 2014-NMSC-029
- Pecos River Open Spaces, Inc. v. Cnty. of San Miguel, 2013-NMCA-029
- State v. Bd. of Trs. of Las Vegas, 1922-NMSC-029, 28 N.M. 237
- Sims v. Vosburg, 1939-NMSC-026, 43 N.M. 255

Source

• Landing page: https://nmdoj.gov/publication/opinion/2025-13-opinion-hospital-equipment-loan-act-real-property-tax-exemption/
• Original PDF: https://nmdoj.gov/wp-content/uploads/AG-Opinion-2025-13-Hospital-Equipment-Loan-Act-Real-Property-Tax-Exemption.pdf

Original opinion text

December 23, 2025
OPINION
OF
RAÚL TORREZ
Attorney General

Opinion No. 2025-13

To:

Representative Eleanor Chávez

Re:

Attorney General Opinion – Hospital Equipment Loan Act Real Property Tax Exemption
Question

Does the Hospital Loan Equipment Act's (HELA), NMSA 1978, §§ 58-23-1 to -32 (1983, as
amended through 2006), tax exemption for real property comply with Article VIII, Section 3 of
the New Mexico State Constitution?
Answer
No. Because the New Mexico Hospital Equipment Loan Council (Council) does not appear to
constitute one of the governmental entities the New Mexico Constitution specifically exempts
from property taxation, the Legislature's attempt to designate the Council as "the state" for the
sole purpose of obtaining a constitutional tax exemption is impermissible.
Background
HELA was enacted in response to the high costs of acquiring and financing health-related
equipment, which are "necessarily passed on to patients receiving medical care from the health-care providers, resulting in higher medical bills, increased health insurance premiums and higher
[M]edicare and [M]edicaid payments[.]" Section 58-23-2(B). To address these issues, HELA
establishes "a program to facilitate and enable the investment of private capital for the purpose of
financing health-related equipment at interest rates lower than those available in the conventional
credit markets[.]" Section 58-23-2(C).
The financing program created under HELA is administered by the Council. The Council
constitutes "a governmental instrumentality . . . for the performance of essential public functions,"

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and is governed by a five-member board of directors, who are appointed by the Governor, with the
advice and consent of the Senate. Section 58-23-5(A), (B). Despite the establishment of the
Council as a governmental instrumentality, HELA expressly states that the Council is not
considered a state agency or instrumentality. Section 58-23-5. However, HELA also provides that
the Council "is a state agency and instrumentality for the purposes of Article 8, Section 3 of the
constitution of New Mexico." Section 58-23-5(D) (emphasis added). This section of the
Constitution exempts property owned by certain governmental entities from taxation.
HELA allows the Council to issue revenue bonds on behalf of hospitals and other health facilities
throughout the state to pay for or finance "all or any part of the cost of health-related equipment[.]"
Section 58-23-15. "Health-related equipment" is "any real or personal property, instrument,
service or operational necessity that is found and determined by the [C]ouncil to be needed, directly
or indirectly, for medical care, treatment or research or other equipment as otherwise might be
needed to operate the health facility." Section 58-23-3(F).
During the term of the bonds, the Council retains ownership of the health-related equipment and
enters into a lease or similar arrangement with the health facility for the use of the property. See §
58-23-11(L), (M) (authorizing the Council to acquire health-related equipment and to "lease as
lessor" and "sell for installment payments" health-related equipment). When the bonds mature, the
health facility pays any remaining amount necessary to purchase the property and assumes
ownership.
HELA provides that property acquired or held by the Council and "[a]ll health-related equipment
purchased, acquired, leased, financed or refinanced with the proceeds of bonds issued" pursuant
to HELA is "exempt from property taxation for as long as the participating health facility remains
liable for any amount under any lease, loan or other agreement securing the bonds, but not to
exceed thirty years from the date the bonds were issued for the health-related equipment." Section
58-23-29(A), (B).
The request letter explains that various private hospitals in the state have obtained financing
pursuant to HELA for the construction of hospitals, have claimed property-tax exemptions for real
property, i.e., land and buildings, and that county assessors are unclear as to whether the claimed
exemptions are valid.
Analysis
In answering a question about the application of property taxes, we are guided by the general
principle that "[a]ll tangible property in New Mexico is subject to taxation . . . and should be taxed,
unless specifically exempted by the constitution or by its authority." Sims v. Vosburg, 1939-NMSC-026, ¶ 4, 43 N.M. 255. The New Mexico Constitution exempts the following from property
taxation:

[t]he property of the United States, the state and all counties, towns, cities and
school districts and other municipal corporations, public libraries, community
ditches and all laterals thereof, all church property not used for commercial
purposes, all property used for educational or charitable purposes, all cemeteries
not used or held for private or corporate profit and all bonds of the state of New
Mexico, and of the counties, municipalities and districts thereof[.]
N.M. Const. art. VIII, § 3. This constitutional provision is written "not in general terms, but
specifically states the property which is exempt." State v. Bd. of Trs. of Las Vegas, 1922-NMSC-029, ¶ 4, 28 N.M. 237.
Article VIII, Section 3 additionally provides that a supermajority of the Legislature may authorize
additional property tax exemptions for personal property. N.M. Const. art. VIII, § 3 ("Exemptions
of personal property from ad valorem taxation may be provided by law if approved by a three-fourths majority vote of all the members elected to each house of the legislature."). "But no
constitutional authority has been granted for the Legislature to exempt real property by statute."
El Castillo Ret. Residences v. Martinez, 2017-NMSC-026, ¶ 30 (emphasis added). Because the
Legislature may not exempt real property by statute, the property tax exemption at issue in HELA
may only lawfully extend to real property if a constitutional exemption applies. See id. (explaining
that statutory exemptions from property taxation "may not be interpreted or applied to grant
exemptions that are not authorized by Article VIII, Section 3").
Accordingly, real property owned by the Council is constitutionally exempt from property taxation
if the Council is one of the governmental entities named in Article VIII, Section 3. HELA purports
to designate the Council as such, providing that the Council "is a state agency and instrumentality
for the purposes of Article 8, Section 3 of the constitution of New Mexico." Section 58-23-5(D);
see N.M. Const. art. VIII, § 3 (providing that property of "the state" is exempt from taxation).
At the same time, however, HELA expressly describes the Council as "separate and apart from the
state." Section 58-23-5(A). HELA then repeats and elaborates:
The [C]ouncil shall be separate and apart from the state and shall not be subject to
the supervision or control of any board, bureau, department or agency of the state
except as specifically provided in the Hospital Equipment Loan Act. In order to
effectuate the separation of the state from the [C]ouncil, no use of the terms 'state
agency' or 'instrumentality' in any other law of the state shall be deemed to refer to
the council unless the [C]ouncil is specifically referred to therein . . . .
Section 58-23-5(D). HELA further instructs that bonds issued by the Council shall not "constitute
a debt, liability or general obligation of this state or a pledge of the faith and credit of this state[.]"
Section 58-23-21.

These provisions indicate that the Council is not an arm, agency, or instrumentality of the state.
We are not at liberty to ignore this plain, express statutory language. See Cordova v. Wolfel, 1995-NMSC-061, ¶ 10, 120 N.M. 557 (explaining the general principle that "we cannot ignore [a]
statute's plain language"); see also United Rentals Nw., Inc. v. Yearout Mech., Inc., 2010-NMSC-030, ¶ 9, 148 N.M. 426 ("The first guiding principle in statutory construction dictates that we look
to the wording of the statute and attempt to apply the plain meaning rule, recognizing that when a
statute contains language which is clear and unambiguous, we must give effect to that language
and refrain from further statutory interpretation." (alteration, internal quotation marks, and citation
omitted)); City of Deming v. Deming Firefighters Loc. 4521, 2007-NMCA-069, ¶ 23, 141 N.M.
686 ("We . . . do not give effect to legislative intent by reading a statute in a way that would render
it meaningless.").
We are also guided by the principle that statutes "must be interpreted and applied in harmony with
constitutionally imposed limitations." El Castillo Ret. Residences, 2017-NMSC-026, ¶ 25; cf.
Bounds v. State ex rel. D'Antonio, 2013-NMSC-037, ¶ 11 (providing that courts "will give effect
to the legislative intent unless it clearly appears to be in conflict with the Constitution" (internal
quotation marks and citation omitted)). The New Mexico Supreme Court has explained that the
constitutional provision at issue here "operates as a limit on the Legislature's power to redefine
categories of property which will be exempt from taxation." El Castillo Ret. Residences, 2017-NMSC-026, ¶ 29. HELA's attempt to designate the Council as "the state" for tax purposes, but not
for any other purpose, is contrary to this directive.
Accordingly, although the Council is established as "a governmental instrumentality," Section 58-23-5(A), we cannot say it is "the state" for purposes of a constitutional tax exemption without
disregarding HELA's plain language that the Council is "separate and apart from the state." Section
58-23-5(A).
Moreover, considering its statewide reach and primary functions, it does not appear that the
Council qualifies as one of the "other municipal corporations" contemplated by Article VIII,
Section 3. See EUGENE MCQUILLIN, THE LAW OF MUNICIPAL CORPORATIONS § 2:9 (3d ed.)
(explaining that "a test as to whether an organization is a municipal corporation is whether it has
the power of local government"). Nor does the Council fall into any of the other categories of
governmental entities whose property is constitutionally exempt from taxation. See N.M. Const.
art. VIII, § 3; Bd. of Trs. of Las Vegas, 1922-NMSC-029, ¶ 4 (explaining that this constitutional
provision is not written "in general terms" but rather "specifically states the property which is
exempt").
Article VIII, Section 3 "does not merely define a field of exemption, within which the legislative
power may operate from time to time at its discretion. It is affirmative and self-executing." CAVU
Co. v. Martinez, 2014-NMSC-029, ¶ 15 (internal quotation marks and citation omitted). Thus,
while the Legislature may permissibly establish a governmental entity that constitutes one of those
listed in Article VIII, Section 3, it may not declare that the constitutional tax exemption applies to
an entity that does not amount to one of those listed entities. See El Castillo Ret. Residences, 2017-NMSC-026, ¶ 30 (explaining that statutory exemptions from property taxation "may not be
interpreted or applied to grant exemptions that are not authorized by Article VIII, Section 3").
We conclude that HELA's attempt designate the Council as a state agency solely for purposes of a
constitutional property tax exemption amounts to an impermissible attempt "to redefine categories
of property which will be exempt from taxation." El Castillo Ret. Residences, 2017-NMSC-026,
¶ 29.
This conclusion does not entirely foreclose the possibility that HELA's tax exemption may
properly encompass real property. In addition to constitutional property tax exemptions based on
ownership of property, the Constitution also exempts from taxation property that is used for
educational or charitable purposes. N.M. Const. art. VIII, § 3; see Church of the Holy Faith, Inc.
v. State Tax Comm'n, 1935-NMSC-060, ¶¶ 19-20, 39 N.M. 403 (distinguishing between
constitutional property tax exemptions based on ownership and those based on use).
Whether such exemptions may properly be applied to the types of real property at issue here is a
fact-based determination that exceeds the scope of this opinion. See El Castillo Ret. Residences,
2017-NMSC-026, ¶ 31 (explaining that assessing whether a property's use qualifies for a
constitutional tax exemption "is not a mechanical test of eligibility for exemption but instead
requires a flexible inquiry allowing fact-specific determinations informed by history and policy
considerations" and that "the interpretation of these limits may vary depending upon the particular
property and use at issue" (internal citation omitted)); Pecos River Open Spaces, Inc. v. Cnty. of
San Miguel, 2013-NMCA-029, ¶ 8 (stating that it is a taxpayer's burden to prove an exemption
based on charitable use and that "[t]he determination of whether the land is used for a charitable
purpose necessarily depends on the uses being made of each property which it is claimed comes
within the exemption. Except to the extent that the facts as to use are so nearly alike as to logically
compel like results, no case can be said to constitute a controlling precedent for another case in
this area" (alteration, internal quotation marks, and citation omitted)); NMSA 1978, § 8-5-2(D)
(1975) (providing that attorney general opinions address questions of law).
Conclusion
The Council does not constitute one of the governmental entities listed in Article VIII, Section 3.
Accordingly, real property owned by the Council is not constitutionally exempt from taxation
based on ownership, and the Legislature may not grant tax exemptions from real property beyond
those authorized by the Constitution. This conclusion does not preclude the possibility that the
types of real property discussed herein are constitutionally exempt from taxation based on use of
the property.

Please note that this opinion is a public document and is not protected by the attorney-client
privilege. It will be published on our website and made available to the general public.

RAÚL TORREZ
ATTORNEY GENERAL
/s/ Ellen Venegas
Ellen Venegas
Senior Solicitor General