NEW MEXICO ECONOMIC
DEVELOPMENT DEPARTMENT

Competitive Business Climate

Improvements to New Mexico’s tax climate have been recognized by Kiplinger, Ernst & Young, and the Tax Foundation.

New Mexico's Industry-Specific Tax Incentives

Advanced Energy Deduction & Advanced Energy Tax Credit

Advanced Energy Deduction & Advanced Energy Tax Credit

Administered by NM Taxation & Revenue Department

Receipts from selling or leasing tangible personal property or services that are eligible generation plant costs to a person that holds an interest in a qualified generating facility are deductible from gross receipts and compensating tax. In addition, a taxpayer who holds an interest in a qualified generating facility in New Mexico that files a corporate income tax return may claim a credit for 6% of the eligible generation plant costs of a qualified facility.

Aircraft Deduction

Aircraft Deduction

Administered by NM Taxation & Revenue Department

  • Receipts from selling aircraft parts or maintenance services for aircraft or aircraft parts
  • Receipts of an aircraft manufacturer from selling aircraft flight support, pilot training, or maintenance training services
  • Receipts from the sale of or from maintaining, refurbishing, remodeling, or otherwise modifying a commercial or military carrier over 10,000 pounds gross landing weight
  • 50% of gross receipts from selling other aircraft
  • 55% of the receipts from selling jet fuel for use in turboprop or jet engines until June 30, 2017; 40% after June 30, 2017
Alternative Energy Product Manufacturer’s Tax Credit

Alternative Energy Product Manufacturer’s Tax Credit

Administered by NM Taxation & Revenue Department

A tax credit for up to 5% of qualified expenditures for manufacturing equipment used in a manufacturing operation that produces alternative energy products.  To be eligible to claim a credit, the taxpayer must employ personnel to perform production tasks in conjunction with manufacturing equipment not previously existing at the site.  Additionally, the manufacturer must employ at least one new full-time employee in addition to the number of full-time employees employed one year prior to the day on which the taxpayer applies for the credit for every:

  • $500,000, or a portion of that amount, of qualified expenditures claimed by the taxpayer in a tax year in the same application, up to a value of $30 million, and
  • $1 million, or a portion of that amount, of qualified expenditures claimed by the taxpayer in a tax year in the same application, over $30 million. The manufacturer must be approved prior to claiming any tax credit.
Angel Investment Credit

Angel Investment Credit

A taxpayer who files a New Mexico income tax return and who is a “qualified investor” may take a tax credit of up to $62,500 (25% of a qualified investment) for an investment made in each of up to five New Mexico companies that are engaging in qualified research, as defined by the Internal Revenue Code, or manufacturing. The taxpayer may claim the angel investment credit for one qualified investment per investment round. Any portion of the tax credit remaining unused at the end of the taxpayer’s taxable year may be carried forward for five consecutive years.

Biodiesel Blending Facility Tax Credit

Biodiesel Blending Facility Tax Credit

Administered by NM Taxation & Revenue Department

An operator of a refinery in New Mexico, any person who blends special fuel in New Mexico, or the owner of special fuel stored at a pipeline terminal in New Mexico, who installs biodiesel blending equipment for the purpose of establishing or expanding in a facility to produce blended biodiesel fuel is eligible to claim a credit against gross receipts tax or compensating tax. A certificate of eligibility must be obtained from the Energy, Minerals, and Natural Resources Department to apply for this credit.

The credit is equal to 30% of the purchase cost of the equipment plus 30% of the cost of installing that equipment. The credit cannot exceed $50,000 with respect to equipment installed at any one facility. The credit may be applied against the taxpayer’s gross receipts tax liability or compensating tax liability. The credit may be carried forward for 4 years from the date of the certificate of eligibility.

Biomass-Related Equipment & Materials Deduction

Administered by NM Taxation & Revenue Department

The value of equipment such as a boiler, turbine-generator, storage facility, feedstock processor, interconnection transformer, or biomass material used for bio-power, bio-fuels, or bio-based products may be deducted in computing the compensating tax due.

Consumables Gross Receipts Tax Deduction for Manufacturers

Consumables Gross Receipts Tax Deduction for Manufacturers

A seller may deduct receipts from sales to a manufacturer of tangible personal property that becomes an ingredient or component part of a manufactured product.

For the purposes of this deduction, “consumable” is defined as tangible personal property that is incorporated into, destroyed, depleted, or transformed in the process of manufacturing a product, including electricity, fuels, water, manufacturing aids and supplies, chemicals, gases, repair parts, spares, and other tangibles used to manufacture a product. 

FYI-275: Deductions for Certain Sales to Manufacturers

Film Post-Production Services Tax Credit

Film Post-Production Tax Credits

A film production company that meets the requirements of the Film Production Tax Credit Act may apply for, and the taxation and revenue department may allow, a tax credit in an amount equal to twenty-five to thirty-five percent of qualified spends made in New Mexico.

Learn more on the New Mexico Film Office Incentives web page.

High Wage Jobs Tax Credit

High Wage Jobs Tax Credit

Administered by NM Taxation & Revenue DepartmentPlease Note:  Changes were made to the High Wage Jobs Tax Credit in the recent 2019 Legislative Session.  These changes are reflected below, but do not become effective until July 1, 2019.  Questions should be directed to the Taxation & Revenue Department.

A taxpayer who is an eligible employer may apply for and receive a tax credit for each new high-wage economic-base job. The credit amount equals 8 1/2% of the wages and benefits paid for each new economic-base job created, up to $12,750 per job.

Qualified jobs: 

  • Pays at least $40,000/year in a community with a population of less than 60,000
  • Pays at least $60,000/year in a community with a population of 60,000 or more
  • Occupied for at least 44 weeks by the employee

Qualified employers:

Qualified employers can take the credit for 4 years. The credit may only be claimed for up to 1 year after the end of the 3 qualifying periods. The credit can be applied to the state portion of the gross receipts tax, compensating tax, and withholding tax. Any excess credit will be refunded to the taxpayer. The credit shall not exceed $12,750 per year, per job.

Qualified employees:

Investment Tax Credit for Manufacturers

Investment Tax Credit for Manufacturers

Administered by NM Taxation & Revenue Department

Manufacturers may take a credit against gross receipts, compensating or withholding taxes equal to 5.125% of the value of qualified equipment when the following employment conditions are met:

  • For every $500,000 of equipment, 1 employee must be added up to $30 million; and
  • For amounts exceeding $30 million, one employee must be added for each $1 million of equipment

The credit may (also) be claimed for equipment acquired under an IRB. This is a double benefit because no gross receipts or compensating tax was paid on the purchase or importation of the equipment.

The manufacturer simply reduces its tax payment to the state (by as much as 85% per reporting period) until the amount of investment credit is exhausted. There also are provisions for issuing a refund when the credit balance falls under $500,000. The credit does not apply against local gross receipts taxes.

Locomotive Fuel Gross Receipts & Compensating Tax Deduction

Locomotive Fuel Gross Receipts & Compensating Tax Deduction

Administered by NM Taxation & Revenue Department

Receipts from the sale of fuel to a common carrier to be loaded or used in a locomotive engine are deductible from gross receipt tax due.

The value of the fuel to be loaded or used by a common carrier in a locomotive engine is deductible when computing the compensating tax due.

“Locomotive engine” is defined as a wheeled vehicle consisting of a self-propelled engine that is used to draw trains along railway tracks. To be eligible, the fuel sold must be used or loaded by a common carrier that:

  1. After July 1, 2011, made a capital investment of $100 million or more in new construction or renovations at the railroad locomotive refueling facility in which the fuel is loaded or used; or
  2. On or after July 1, 2012, made a capital investment of $50 million or more in new railroad infrastructure improvements, including railroad facilities, track, signals, and supporting railroad network, located in New Mexico; provided that the new railroad infrastructure improvements are not required by a regulatory agency to correct problems, such as regular or preventive maintenance, specifically identified by that agency as requiring necessary corrective action.
Military Acquisition Program Tax Deduction

Military Acquisition Program Tax Deduction

Administered by NM Taxation & Revenue Department

Receipts from transformational acquisition programs performing research and development, testing, and evaluation at New Mexico major range and test facility bases pursuant to contracts entered into with the U. S. Department of Defense may be deducted from gross receipts.

Renewable Energy Production Tax Credit

Renewable Energy Production Tax Credit

A corporate or personal taxpayer who owns a qualified energy generator is eligible for a tax credit in an amount equal to 1 cent per kilowatt hour of electricity produced by the qualified energy generator using a qualified energy resource in the tax year. A variable rate of credit is added for electricity produced using solar energy.

Renewable Energy Production Tax Credit Claim Form

The rate starts at 1.5 cents in the first year of operation and increases in increments of .5 cents each of the next five years, to a maximum of four cents, and then will decline by .5 cents per year in the next four years to 2 cents in the tenth year of operation. The 1 cent per kilowatt hour rate applies for all other qualified energy generation facilities. The facility must generate a minimum of one megawatt. The total amount of electricity that can qualify for the corporate and individual income tax credits is 2 million megawatts for wind and biomass with an additional 500,000 megawatt hours allowed for solar-generated power.

Rural Jobs Tax Credit

Rural Jobs Tax Credit

Administered by NM Taxation & Revenue Department

This credit can be applied to taxes due on (state) gross receipts, corporate income, or personal income tax. Rural New Mexico is defined as any part of the state other than Los Alamos County; certain municipalities: Albuquerque, Rio Rancho, Farmington, Las Cruces, Roswell, and Santa Fe; and a 10-mile zone around those select municipalities.

Company eligibility:

  • Companies that manufacture or produce a product in New Mexico
  • Non-retail service companies that export a substantial percentage of services out of state (50% or more revenues and/or customer base)
  • Certain green industries

The rural area is divided into 2 tiers:

  • Tier 2 = Non-metro area municipalities that exceed 15,000 in population: Alamogordo, Carlsbad, Clovis, Gallup, and Hobbs
  • Tier 1 = Everywhere else in a rural area

The maximum tax credit amount with respect to each qualifying job is equal to:

  • Tier 1: 25% of the first $16,000 in wages paid for the qualifying job (may be taken at $1,000 per year for 4 years)
  • Tier 2: 12.5% of the first $16,000 in wages paid for the qualifying job (may be taken at $1,000 per year for 2 years)

A qualifying job is a job filled by an eligible employee for 48 weeks in a 12-month qualifying period.

The credit may be carried forward for up to 3 years.

Rural Software Development Gross Receipts Tax Deduction

Rural Software Development Gross Receipts Tax Deduction

Administered by NM Taxation & Revenue Department

Tax Allowance

Receipts from the sale of software development services may be deducted from gross receipts tax when the service is performed in a rural area. Software development services include custom software design and development and web site design and development, but does not include software implementation or support services.

Single Sales Factor

Single Sales Factor

For the purposes of apportioning income, “manufacturing” excludes construction, farming, power generation, and processing natural resources including hydrocarbons.

In addition, in taxable years that begin on or after January 1, 2015, corporate headquarters operations may elect to have business income apportioned to New Mexico subject to a single sales factor apportionment methodology. 

Spaceport-Related Activities Gross Receipts Tax Deductions

There are 4 separate deductions connected with the operation of a spaceport in New Mexico.

  • Receipts from launching, operating, or recovering space vehicles or payloads
  • Receipts from preparing a payload in New Mexico
  • Receipts from operating a spaceport in New Mexico
  • Receipts from the provision of research, development, testing, and evaluation services for the United States Air Force Operationally Responsive Space Program

“Space” is defined as any location beyond altitudes of 60,000 feet above mean sea level. “Payload” means a system, subsystem or other mechanical structure designed and constructed to perform a function in space. “Space operations” is defined as the process of commanding and controlling payloads in space. “Spaceport” is defined as the installation and related facilities used for the launching, landing, operating, recovering, servicing, and monitoring of vehicles capable of entering or returning from space.

Technology Jobs and Research and Development Tax Credit

Technology Jobs and Research and Development Tax Credit

The purpose of the credit is to provide a favorable tax climate for technology-based businesses engaging in research, development and experimentation and to promote increased employment and higher wages in those fields in New Mexico.

A taxpayer conducting qualified research at a qualified facility and making qualified expenditures of no more than $5 million in New Mexico is eligible to claim the basic technology jobs and research and development tax credit of 5% against the taxpayer’s compensating tax, withholding tax or gross receipts tax, excluding local option gross receipts tax. The tax credit will double to 10% for expenditures in facilities located in rural New Mexico. The approved basic credit may be carried forward for a period of up to three years.

That same taxpayer may apply for an additional tax credit of 5% against the taxpayer’s income tax or corporate income tax liability. The credit will double to 10% for taxpayers located in rural New Mexico. To qualify for the additional credit the taxpayer must increase the annual payroll expense $75,000 for every $1 million in qualified expenditures claimed. The taxpayer may not claim an amount that exceeds the taxpayer’s personal or corporate income for that reporting period. The additional credit may be carried forward for a period of up to three years.

For a qualified research and development small business, which is defined as having no more than 50 employees, they too, can claim the basic credit and the same rules apply to them. The qualified research and development small business can also claim the additional credit with the same rules. The qualified research and development small business can be refunded if the approved amount exceeds the taxpayer’s income tax liability or corporate income tax liability:

  • Less than $3 million, the excess will be refunded.
  • $3 million to less than $4 million, two-thirds of the excess will be refunded.
  • $4 million to $5 million, one-third of the excess will be refunded.
Technology Readiness Gross Receipts Initiative

Technology Readiness Gross Receipts Initiative

TGRG was initially a pilot program. A bill passed by the state legislature in March 2022 has made this into a five-year initiative. The program helps companies that have existing licenses or work agreements with Sandia or Los Alamos National Laboratories take their technologies to market with up to $150,000 in financial assistance.

Read the press release.

Web Hosting Gross Receipts Tax Deduction

Web Hosting Gross Receipts Tax Deduction

Administered by NM Taxation & Revenue Department

Receipts from hosting World Wide Web sites may be deducted from gross receipts. Hosting means storing information on computers attached to the Internet.