Los Lunas Just Approved $600 Million in Tax-Exempt Bonds. Here's Who Actually Owes Tax on That Growth
On Sept. 17, the Los Lunas Village Council signed off on two things in the same meeting: more housing, and more time for a $600 million battery storage project to get built. The company gets a tax break written into the deal. The electricians, welders, and subcontractors who actually build it don't, and that gap is exactly how a good year turns into an IRS balance the following spring.
What the Village Actually Approved
At its Sept. 17 meeting, the Los Lunas Village Council voted unanimously to accept the final plat and public infrastructure for phase 2 of the Fiesta Del Norte subdivision, adding another 156 residential lots to a village that's been adding people faster than almost anywhere else in New Mexico. In the same meeting, the council approved a resolution extending a lease deadline through 2027 for 9th Street Energy Storage, LLC, which is planning a $600 million battery storage facility, with the vote made contingent on the fire chief signing off on safety clearances around the site, according to the Valencia County News-Bulletin's report on the meeting.
It isn't the village's first time structuring a deal like this. The council separately authorized up to $600 million in industrial revenue bonds for another battery storage developer, esVolta, for a project sited on a 22-acre parcel next to the Meta data center and a PNM substation. The village's own bond attorney described the benefit at that meeting as mainly Gross Receipts Tax relief, largely on compensating tax, plus an abatement of real and personal property tax, while stressing that the village itself isn't lending its credit or taking on any of the project's debt.
What an Industrial Revenue Bond Actually Exempts
An industrial revenue bond works by having the village technically hold title to a company's project property for the term of the bond, while the company leases it back and makes payments that cover the debt. The village isn't on the hook for that debt and isn't handing over cash. What the arrangement buys the company is an exemption from certain state and local taxes on that specific project property, principally compensating tax and property tax, for as long as the bond term runs.
None of that reaches the individual. It's an exemption tied to a company's project assets, not a shield around anyone's paycheck or 1099 income. The crews who pour the foundation, run the conduit, and commission the equipment on a project like this owe the same federal and New Mexico tax on what they earn as anyone else working in the state, regardless of what tax treatment the anchor company negotiated for its building.
The Pattern Already Running Next Door
Valencia County doesn't have to guess what this looks like once it's running. Pacific Fusion opened a manufacturing build center in the Los Morros Business Park, and the hiring and subcontracting that came with it is the same pattern a battery storage build will bring: a wave of electro-mechanical technicians, fabrication subcontractors, and trades crews, a meaningful share of them paid on a 1099 rather than a W-2. No employer withholding comes out of a 1099 payment. The responsibility for setting money aside and sending it to the IRS and to New Mexico's Taxation and Revenue Department on a quarterly schedule sits entirely with the person who got paid.
That's a very different situation from a W-2 construction job, where the employer is the one filing payroll tax deposits and the risk of a surprise balance is much lower. A subcontractor or small crew owner who's used to steady 1099 work from one or two of these builds, but hasn't adjusted their estimated payments to match a bigger year, is a familiar setup for an unpleasant number next April.
Where the Growth Becomes an IRS or TRD Problem
Skip the quarterly estimates and the liability doesn't disappear, it just arrives all at once at filing time, usually with an underpayment penalty attached. If the balance is bigger than what you can pay in full, that's when a Notice of Federal Tax Lien becomes possible, and if it goes unaddressed long enough, a bank levy. We wrote recently about how TRD's own lien and levy authority works on the state side, and the short version is that New Mexico doesn't need a courtroom to act, just an assessment and a demand, with a limited window to protest before that window closes for good.
The same risk runs the other direction for the small outfits doing the hiring, not just the individuals getting paid. A subcontracting business that brings on a crew to meet a project deadline and treats them as 1099 when the work actually looks like employment can end up facing a payroll tax and Trust Fund Recovery Penalty problem of its own once the IRS or TRD takes a closer look at how the crew was actually classified and paid.
What to Do Before a Notice Shows Up
If you're picking up steady subcontract work tied to any of the growth happening around Los Lunas right now, set aside a percentage of every payment for taxes before it's spent, and make the quarterly estimated payments on both your federal and New Mexico returns rather than waiting for one number at filing time. If you're already behind, the options don't disappear just because the balance is bigger than expected. An installment agreement spreads what you owe into payments you can actually make, and for a balance that's genuinely out of reach relative to your income and assets, an Offer in Compromise may settle it for less than the full amount. The point where this gets harder to fix is after a lien or levy is already in place, not before.
Our team includes people who spent years on the collection side of the IRS before moving to the taxpayer's side of the table, and we handle both the federal and New Mexico state side of a case like this in one engagement, entirely by phone.
Frequently Asked Questions
Does the village's tax-exempt bond deal mean work on the project is tax-free for me too?
No. An industrial revenue bond exempts the company's project property, equipment and compensating tax while the village technically holds title during the bond term. It has nothing to do with the personal income tax or New Mexico Gross Receipts Tax owed by the electricians, welders, and other subcontractors who build and staff the project. Their earnings are taxed exactly the same as any other income.
I'm a subcontractor working on a project like this. Do I need to make estimated tax payments?
If you're paid on a 1099 with no withholding, yes, in almost every case. The IRS expects quarterly estimated payments on income that isn't already being withheld, and New Mexico expects the same on your state return. Skip them and the balance lands as one lump sum at filing time, often with an underpayment penalty on top.
What's the difference between the village's bonds and the Gross Receipts Tax I owe as a contractor?
The bonds exempt a specific company's project property from certain state and local taxes for a set term. Gross Receipts Tax is a separate, ongoing obligation the Taxation and Revenue Department collects from New Mexico businesses on their own receipts, monthly, quarterly, or semiannually depending on volume. One company's incentive deal doesn't change what any other business in the county owes TRD.
What happens if I fall behind on estimated taxes while this work ramps up?
Unpaid federal tax can lead to a Notice of Federal Tax Lien and eventually a bank levy. Unpaid state tax follows a similar path through TRD, which has its own lien and levy authority under New Mexico law. The earlier you address a growing balance, through an installment agreement, an Offer in Compromise, or simply getting current on estimates, the fewer collection actions you'll have to unwind.
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