New Mexico Tax Incentives
Tax incentives are offered by the State of New Mexico to qualifying projects.
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 six percent (6%) of the eligible generation plant costs of a qualified facility.
Alternative Energy Product Manufacturer’s Tax Credit
Manufacturers of certain alternative energy products may receive a tax credit not to exceed five percent (5%) of qualified expenditures for purchase of manufacturing equipment used in the manufacturing operation. This credit is designed to stimulate the development of new alternative energy manufacturing facilities.
Biodiesel Blending Facility Tax Credit
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 four years from the date of the certificate of eligibility.
Biomass-Related Equipment and Materials Deduction
The value of equipment such as a boiler, turbine-generator, storage facility, feed-stock 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.
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 one cent (.01) 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. The rate starts at 1.5 cents in the first year of operation and increases in increments of ½ cent each of the next five years, to a maximum of four cents, and then will decline by 1/2 cent per year in the next four years to two cents in the tenth year of operation. The one 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 two million megawatts for wind and biomass with an additional 500,000 megawatt hours allowed for solar-generated power.
Manufacturers may take a tax credit of 5.125 percent of the value of qualified equipment and other property used in their operation. The credit can be applied against compensating, gross receipts or withholding tax up to 85% of the total. Any remaining available credit may be claimed in subsequent reporting periods.
Technology Jobs Tax Credit
A taxpayer who conducts qualified research and development at a facility in New Mexico is allowed a basic tax credit equal to four percent (4%) of qualified expenditures, and an additional four percent (4%) credit toward income tax liability by raising its in-state payroll $75,000 for every $1 million in qualified expenditures claimed. The tax credit doubles for expenditures in facilities located in rural New Mexico (as defined for this tax credit as anywhere outside Rio Rancho or more than 3 miles outside Bernalillo, Doña Ana, San Juan or Santa Fe counties).
Corporate Income Tax ReductionThe corporate income tax act is amended to reduce the top corporate tax rate from its present law 7.6% to 5.9% over five years. The reduction begins in 2014, with a rate reduction to 7.3% followed by 6.9% in 2015 and 6.6% in 2016. In 2017, the top bracket is collapsed into the middle bracket (presently 6.4%), with a 6.2% rate. For tax years 2018 and following, the top bracket of two becomes 5.9%. The bottom 4.8% bracket remains the same.
Rural Jobs Tax Credit Single Sales Factor for Manufacturers Small Business R&D Tax Credit Child Care Corporate Income Tax Credit Financial Management Tax Credit
This credit gives companies who hire employees at salaries of $28K or higher in rural areas, and $40K or higher in urban communities, tax credits equal to ten percent of the combined salary and benefits package for the year in which the job is created, and for the three following qualifying periods. New wage thresholds of $40,000 for rural and $60,000 for urban take effect July 1, 2015.
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.
New Mexico will provide a phased-in election (over five years), for manufacturers to utilize a single sales factor income apportionment methodology. The present law double weighted sales factor with its “strings” is replaced in 2014 by the more straightforward election, which becomes triple weighted in 2015, multiplied by seven (over ten with the property and payroll factors times 1.5) in 2016, by eight (over 10) in 2017, and 100% weighted in 2018.
A qualified small R&D business is eligible for a credit equal to the sum of all gross receipts taxes, compensating taxes or withholding taxes due to the state for up to three years.
Corporations providing or paying for licensed child care services for employees’ children under 12 years of age may deduct 30% of eligible expenses from their corporate income tax liability for the taxable year in which the expenses occur. For a company operating a value-added day care center for its employees, this credit reduces the cost to provide this benefit to employees. The corporate income tax credit is 30% of eligible costs up to $30,000 in any taxable year. Unused credit amounts may be carried forward for three years.
Receipts from fees received for performing management or investment advisory services for a related mutual fund, hedge fund or real estate investment trust may be deducted from gross receipts.
Rural Jobs Tax Credit
Single Sales Factor for Manufacturers
Small Business R&D Tax Credit
Child Care Corporate Income Tax Credit
Financial Management Tax Credit
Incentive information provided by the New Mexico Partnership