New Mexico Governor Susana Martinez signed into law legislation to improve New Mexico’s tax incentive toolbox for economic development. House Bill 2, passed during a special session of the New Mexico Legislature and signed by the Governor on June 15, 2015, amends several existing New Mexico tax laws and creates additional tax incentives aimed at spurring job creation across a more diverse group of industries with a focus on small businesses and the technology sector. Key tax incentive changes include:
- Angel Investment Credits
- Increases the annual aggregate credit amount to $2MM
- Increases the maximum credit from $25K to $65K; additionally the number of individual investments that can be made per investor is increased from two per tax year to five
- The credit can be taken against a taxpayer’s income tax liability and is eligible for a five-year credit carry-forward
- These changes apply to taxable years beginning on January 1, 2015 through December 31, 2026
- Gross Receipts Tax Deduction
- Restores five-year deduction period for trade-support companies that locate within 20 miles of the southern border zone during July 1, 2003 but before July 1, 2013 or on or after July 1, 2015 but before July 1, 2021
- Receipts derived from business activities and operations of a trade-support company may be deducted from the taxpayer’s gross receipts
- These changes are effective on July 1, 2015
- Single Sales Apportionment for Corporate Income
- Headquarter operations have the option to utilize single-sales income apportionment which will be fully phased in by the taxable year beginning January 2016
- The effective date of the provisions of this act apply to business income earned during taxable years beginning on January 1, 2015
- Gross Receipts and Compensating Tax Act
- Creates a deduction from receipts for sales made to the United States Department of Defense for contractors providing qualified research and development services and qualified directed energy and satellite-related inputs, limited to contracts made on or after January 1, 2016 and before January 1, 2021
- Technology Jobs Tax Credit and Research and Development Tax Credit
- Combines the two existing “Technology Jobs Tax Credit” and the “Small Business Research and Development Tax Credit”
- Broadens participation eligibility by increasing the employment maximum definition of a small business from 25 to 50 employees, as well as by removing the restriction that qualified research expenditures be at least 20% of total expenditures
- “Basic Credit” can be taken against the taxpayer’s compensating tax, withholding tax, or gross receipts tax, excluding local option gross receipts tax, provided that no taxpayer claim a credit that exceeds the sum due
- “Additional Credit” can be taken against the taxpayer’s income tax or corporate income tax liability, provided that no taxpayer claim a credit that exceeds the sum due
- The “Additional Credit” may be refundable to small businesses which do not employ more than 50 unemployment insurance eligible positions, and do not have qualified expenditures more than $5MM in the taxable year for which an additional credit is claimed
- It is effective July 1, 2015
TECHNICAL INFORMATION CONTACTS:
Sharon Welhouse
Principal
Ryan
512.476.0022
sharon.welhouse@ryan.com
Melissa Munoz
Manager
Ryan
505.503.4987
melissa.munoz@ryan.com