NEW MEXICO ECONOMIC DEVELOPMENT DEPARTMENT
Improvements to New Mexico’s tax climate have been recognized by Kiplinger, Ernst & Young, and the Tax Foundation.
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.
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:
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.
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.
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.
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
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.
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 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.
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:
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.
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:
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.
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.
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.
The rural area is divided into 2 tiers:
The maximum tax credit amount with respect to each qualifying job is equal to:
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.
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.
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.
There are 4 separate deductions connected with the operation of a spaceport in New Mexico.
“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.
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:
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.
Receipts from hosting World Wide Web sites may be deducted from gross receipts. Hosting means storing information on computers attached to the Internet.
New Mexico EconomicDevelopment DepartmentJoseph M. Montoya Building1100 S. St. Francis DriveSanta Fe, NM 87505-4147
Mailing Address:New Mexico EconomicDevelopment DepartmentP.O. Box 20003Santa Fe, NM 87504-5003
Main number: (505) 827-0300 (se habla español)Fax: (505) 827-0328
The mission of the New Mexico Economic Development Department is to Improve the lives of New Mexico families by increasing economic opportunities and providing a place for businesses to thrive.
Translate this site:
New Mexico Economic Development Department. All Rights Reserved.