Basic Business Taxes | Business Incentives

The State of New Mexico and the Albuquerque metro area have a favorable tax environment and aggressive incentives to promote the relocation and expansion of business.

Basic Business Taxes

Franchise Tax: $50/annually

Corporate Income Taxes:

• Net income of $500,000 or less: 4.8%
  
• Net income of $500,001-$1,000,000: $24,000 + 6.4% in excess
  
• Net income of $1,000,001 or more: $56,000 + 7.6% in excess

Note: Apportionment is 3-factor formula. However, manufacturers can calculate using a 4-factor formula (double-weighted sales).

Gross Receipts Tax/Compensating Taxes (Sales & Use Taxes):

• New Mexico Gross Receipts/Compensating Tax: 5%
  
• Albuquerque Metro Area: 5.8125% - 7.4375%

Note: Numerous exemptions apply to reduce/eliminate gross receipts and compensating tax.

Property Taxes

• Assessment Rate: 33.3%
• Mill Levy Rate Albuquerque Metro Area: 0.046805
• Property Tax Formula: Property value x 33% x mill levy rate

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Business Incentives

The Albuquerque metro area and the State of New Mexico provide aggressive incentives to reduce the overall cost of business. Some of the most significant incentive programs include:

• Double Weighted Sales Option
• Technology Jobs Tax Credit
• Manufacturing Investment Tax Credit
• Industrial Revenue Bond (property tax & GRT abatement)
• High Wage Jobs Tax Credit
• Job Training Incentive Program
• Alternative Energy Product Manufacturer's Tax Credit
• Out-of-State Tuition Waiver and Lottery Scholarships
• NM Film Incentives

For a complete list of business incentives offered by the State of New Mexico please visit the Incentives & Assistance portfolio.


Double Weighted Sales
Companies can elect to double weight the sales, in which a corporation takes the New Mexico portion of plant, payroll, sales and sales (counting the sales twice) and uses a divisor of four.

Technology Jobs Tax Credit
Qualified New Mexico facilities may take a credit equal to 4% (8% in rural areas) of expenditures related to qualified research for land, buildings, equipment, computer software and upgrades, consultants, technical books and manuals, test materials, costs associated with patents, payroll, and labor. The credit may be taken against gross receipts tax, compensating tax or state payroll tax, and may be carried forward.

An additional 4% (8% total urban, 16% total rural) may be applied against state income tax if base payroll expenses increase by at least $75,000 per $1,000,000 of expenditures claimed. The credit may be carried forward.

Assume a company in Albuquerque plans to spend $10,000,000 in qualified expenditures:

*Expenditures may include land, buildings, equipment, computer software and upgrades, consultants, technical books and manuals, test materials, costs associated with patents, payroll, and labor.

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Manufacturing Investment Tax Credit
New Mexico tax law provides for a credit equal to five percent of the value of qualified equipment and other property used directly and exclusively in a manufacturing operation. The credit can be applied against compensating or gross receipts tax or withholding tax due. Gross receipts tax acts very much like a sales tax; the city rate is 6.875 percent. Compensating, or use, tax applies to purchases made out of state and totals 5.0 percent.

The credit is limited to 85% of the sum of the taxpayer's gross receipts tax, compensating tax, and withholding tax due for the reporting period. Any remaining available credit may be claimed in subsequent operating periods.

Criteria
Must meet criteria for new jobs added:

• For Claims $0 - $30,000,000: 1 new worker employed for each $500,000 in qualified equipment
  
• For Claims Over $30,000,000: 1 new worker employed for each $1 million in qualified equipment

Credit is available through 6/30/2011.

Industrial Revenue Bonds
Significant property tax and compensating tax exemptions can occur through the use of an Industrial Revenue Bond (IRB). An IRB is a loan from the bond purchaser to a company where the loan proceeds and repayment flows through a governmental issuer. Instead of purchasing a facility directly, companies can enter into a lease with the issuer, provided the company will lease the facility from the issuer and, at end of lease, purchase the facility from the issuer for a nominal amount. In Albuquerque, the maximum life of an IRB is 20 years.

IRB's can also be used when a developer is involved. A separate series of bonds is issued to finance the developer's real estate and building costs, and the tax savings of the IRB can flow through to the ultimate user through a sublease.

The benefit of remaining property tax exemptions can be passed on to the new owner or flow though a lease in event of a sale or lease to a new user, under certain qualifying conditions. City council must vote to induce an IRB, and the community does not lend its credit to an IRB. The company must secure its own purchaser of IRBs or the company can purchase its own IRB.

Assume company invests $10,000,000 in Albuquerque: $5,000,000 in land and building, and $5,000,000 in equipment purchased out of state:

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High Wage Job Tax Credit
The High Wage Jobs Tax Credit provides businesses with a tax credit equal to ten percent of the combined value of salaries and benefits for each net new job paying a salary of at least $40,000 per year in the Albuquerque metropolitan area and other communities larger than 40,000 in population. The value of the credit cannot exceed $12,000 per job. Qualified employers can take the credit for four years. The credit can be applied against the modified combined tax liability of a taxpayer, including the state portion of gross receipts tax, compensating tax and withholding tax.

Eligible jobs are those created by qualified employers after July 1, 2004 and prior to July 1, 2015.

In New Mexico, companies located in communities smaller than 40,000 persons are eligible for a tax credit equal to ten percent of the wages and benefits paid for each new job created paying at least $28,000 annually.

Job Training Incentive Program
The New Mexico Job Training Incentive Program is a highly flexible state program to provide on-the-job training. Customized training may be provided by post-secondary educational institutions, company trainers, or outside trainers.

The state will reimburse

• 50% of trainees' wages up to 1,040 hours in urban areas and 60% in rural areas
• 100% of classroom training costs provided by New Mexico post-secondary education institutions (e.g. Albuquerque Technical Vocational Institute)
• 50% of trainees' travel and per diem for out-of-state training
• 50% of company or outside trainers' travel and per diem when using out-of-state trainers

Conditions

• Maximum wage reimbursement is tied to hours required to learn the job and the hourly wage
• Applicants must be New Mexico residents for at least one year in their lifetime
• Trainees must be guaranteed full-time year-round employment upon successful completion of training
• "Hands-on" or production jobs qualify; technical jobs such as engineering generally qualify; support, administrative, and sales positions are limited to 10% of total jobs that qualify for funding
• Re-training does not qualify for assistance
• Companies can apply for subsequent assistance if they have maintained hiring levels that exceed the peak employment as established by the initial application
• Reimbursement is subject to availability of funds and approval by the Job Training Incentive Program Board

Assume a company hires three types of workers at different wage rates and different training time schedules.

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Alternative Energy Product Manufacturer's Tax Credit
Provides a for a credit equal to 5% of the value of qualified equipment and other property used directly and exclusively in a manufacturing operation that makes components or systems for alternative energy products. The credit can be applied against compensating, gross receipts tax or withholding tax due. Any remaining credit can be carried forward for up to five years.

Criteria
Must meet criteria for new jobs added:

• For Claims $0 - $30,000,000: 1 new worker employed for each $500,000 in qualified equipment
  
• For Claims Over $30,000,000: 1 new worker employed for each $1 million in qualified equipment

Out-of-State Tuition Waiver and Lottery Funded Scholarships
UNM and CNM will make in-state resident tuition rates available to relocating employees and their families who qualify for admission.

In addition, all resident New Mexican high school seniors with at least a 2.5 GPA are eligible for a New Mexico Lottery Scholarship which pays for students to attend a state college tuition free. The scholarship is funded by a New Mexico Lottery Program in which 100 percent of lottery net proceeds goes to the Lottery Tuition Fund.

New Mexico State Film Incentive Program
The state offers a 25% production expenditure rebate (including New Mexico labor) that are subject to taxation by the State of NM. The refund is not a credit. There is no mimimum expense requirement and no cap. In addition, the rebate is available to commercial audiovisual product including feature films, television, national and regional commercials, video games and documentaries.

State Film Investment Loan Program
New Mexico offers a loan with participation in lieu of interest for up to 15 million per project (which can represent 100% of the budget) for qualifying feature film or television productions. Terms are negotiated. The following conditions apply to meet qualification: The budget must be least $1 million and a guarantor for the principal loan and distribution agreement must be in place. Additionally, 85% of film must be shot in New Mexico with 60% of the below-the-line payroll must be allocated to New Mexican residents.

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