The payments total more than $825,000 but fall short of the $1.2 million allocated for refunds, the New Mexico Taxation and Revenue Department reported.
A 2008 law established a settlement fund to compensate American Indian veterans who paid state taxes when they were on active duty. The Legislature the following year allocated dollars for that fund.
As many as 7,000 American Indians stand to receive refunds of personal income taxes withheld from their paychecks between 1977 and 2004. The refunds apply only to veterans whose permanent residence was on tribal land during the time they served.
A veteran's widow or dependents also can be eligible for the tax refund.
Taxes were withheld because of an omission in paperwork, the state Taxation and Revenue Department previously said. The department failed to provide instructions for income tax withholding or documents to declare exemption, Rick Homans, cabinet secretary for the taxation department under former Gov. Bill Richardson, said during a 2008 interview.
"The state and federal government had an obligation to provide instruction to Native Americans who were going into the military," Homans previously said. "They should have been given instructions, told which forms to fill out to make sure no state income taxes were taken out of their paychecks. That never happened."
Federal law was amended in 1976 to require the Department of Defense to withhold state income taxes from military pay. New Mexico entered into the agreement in July 1977, but American Indians who live on tribal land are exempt.
The state deployed an exemption certificate in 2002 and a year later provided employers with instructions for W-4 forms. A three-year statute of limitations, however, prohibited veterans from filing for refunds.
A March 2008 bill changed that, opening the door for thousands of American Indians to seek refunds on their personal income taxes. The bill created a settlement fund in the state treasury to pay back taxes and for the state Veterans Services department to determine the number of American Indian veterans owed refunds and the amount owed.
Refunds likely are between $200 and $7,000, according to early estimates. Veterans who file claims must be found to have lived on reservation land at the time they served in the armed forces.
Each case is being looked at individually.
A spokesman for the state Taxation and Revenue Department did not respond to requests for comment Tuesday.
For more information, visit the department's website at tax.newmexico.gov.