New Mexico offers a broad range of business incentives to encourage relocation of new businesses and expansion of existing businesses. They range from bonds and funding sources to training programs and tax credits.
Expansion Management Magazine said in 2002, "Albuquerque has a gold mine of incentives… The city offers industrial revenue bonds, an investment tax credit, a job training program, no inventory taxes and a technology jobs tax credit."
The two primary incentives are:
- Industrial Revenue Bonds (IRBs). The City of Albuquerque can issue industrial revenue bonds to finance economic-based industry projects (defined as exporting a majority of goods and services out of state). This includes construction or renovation of manufacturing plants, research and development facilities, corporate headquarters and certain other facilities, and purchase of land and equipment. Because the project is owned, technically, by the government entity and leased to the company, it’s exempt for up to 20 years from property taxes on land, buildings, and equipment. Equipment purchased with bond proceeds is exempt from gross receipts or compensating taxes. The City does not provide any direct financing; the company is responsible for securing its own financing. For more information see IRBs Explained (Also see Tax Exemption Related to IRBs.)
- Job Training Incentive Program. This highly flexible incentive reimburses economic-base companies (those selling a majority of goods or services out of state) the cost of classroom and on-the-job-training for newly created jobs in expanding or relocating businesses for up to six months. The program reimburses 50 to 70 percent of employee wages and required travel expenses. It also pays 100 percent of classroom training costs and on-the-job training provided by New Mexico institutions and part of the per-diem and travel costs of outside trainers. Job applicants must be New Mexico residents or have lived here for at least a year in the past.
Funding mechanisms include:
- Direct Investment. A unique program of the State Investment Council is direct investment in New Mexico-based companies with the potential to create or add high-wage jobs, as long as a qualified co-investor, such as a venture-capital fund, also invests. The state can also invest in out-of-state companies that move to New Mexico. The state can’t own more than half of a company, and no more than 10 percent of the program’s funds can be invested in any one company.
- Business bonds. The state can invest up to $20 million in an American company’s bonds, notes or debentures issued to create or expand a business in New Mexico. For information see Sun Mountain Capital or the State Investment Council .
- Market Rate Real Estate Investments: If a financial institution agrees to maintain a significant share of an existing first mortgage, the State Investment Council can become a participant in that mortgage.
- Venture Capital Investment Program. The state can invest up to $15 million in qualified New Mexico-based venture capital funds.
- Metropolitan Redevelopment Bonds. The City can issue bonds to finance business expansions (including land, buildings and equipment) in designated Metropolitan Redevelopment Areas. The city does not provide the financing or credit; the applicant is responsible for securing financing. MRBs provide a property-tax abatement for up to seven years on the value of net improvements to the property. For information, contact the Metropolitan Redevelopment Agency at 924-3335.
- Tax Increment Financing (TIF). This allows a property owner, or group of owners, to form a Tax Increment District, with approval of the City. The district can then bond against the increase in taxes to pay for streets and other infrastructure to serve the TIF District.
There are a variety of loan programs to help companies buy land and buildings and support expansion. See Finding Loans and Investments.
New Mexico has no inventory tax, and it provides a number of tax breaks for business, including:
- Tax Exemption Related to IRBs. Initial purchases of
equipment using the proceeds of an Industrial Revenue Bond are not subject to the state’s gross receipts tax or compensating tax.
- Manufacturing Investment Tax Credit. Manufacturers can take a credit of 5 percent of the cost of qualified manufacturing equipment if they have hired one new worker for each $500,000 to $1 million in equipment, depending on the claim. The credit applies against gross receipts, compensating or withholding taxes and can be used with equipment purchased with IRB proceeds. The manufacturer simply reduces its payment of the taxes up to 85% per reporting period until the amount of investment credit is exhausted. (The credit doesn’t apply against local gross receipts taxes.)
- Technology Jobs Tax Credit. A company can take a credit of 4 percent of technological research costs against gross receipts, compensating or payroll taxes, and the credits can be carried forward. Costs can include buildings, land, payroll, software, consultants and equipment. The company can use an additional equal credit for increasing its payroll by at least $75,000 over the year previous to applying for the credit and for each $1 million in qualified expenditures.
- Double-Weighted Sales Factor. This is a favorable way to calculate New Mexico corporate income tax liability, especially for companies with investment in plant and payroll in New Mexico but substantial product sales outside New Mexico. It allows a company or group of companies filing together with income from New Mexico and outside the state to apportion the income based on a formula. New Mexico taxes total corporate income times the average proportion of corporate sales, payroll and property in in the state. Sales, payroll and property have equal weight in the formula, or 33 percent each. Through 2010 manufacturers can use a modified formula, in which sales is 50 percent and the other two factors are to 25 percent each (hence the name “double-weighted sales factor").
- Research and Development Gross Receipts Tax Deduction. Services exported from the state, including R&D services, are exempt from gross receipts taxation.
- Research and Development Small Business Tax Credit. Businesses in which R&D is at least 20 percent of expenditures can take an exemption from the state’s portion of gross receipts and compensating taxes and a credit to offset withholding taxes for a period of three years.
- High-Wage Jobs Tax Credit. Eligible employers can take a credit of 10 percent of wages and benefits for new employees earning at least $40,000 in economic base jobs. The credit, up to $12,000 per eligible employee (New Mexicans not related to the employer or shareholders with more than half the equity) for up to four years, is against state gross receipts, compensating, withholding tax and associated taxes but not local gross-receipts taxes. “Economic base" means that more than half of sales are to buyers outside New Mexico. The company must be expanding and must also be eligible for in-plant training assistance.
- Child Care Income Tax Credit. Employers can take a corporate income tax credit for employees’ childcare services they provide or pay for. The credit applies to dependent children under 12. Companies can deduct 30 percent of eligible expenses from corporate income taxes.
- Telemarketing Gross Receipts Tax Exemption. This exempts WATS and private communication service from both the gross receipts tax and the interstate telecommunications gross receipts tax on telemarketing operations.
- Aerospace Tax Deductions. New Mexico offers three deductions for the aerospace industry. Under the Research and Development Tax Deduction, aerospace R&D services for the U.S. Air Force or to an intermediary for resale to the Air Force are deductible. The Aircraft Manufacturing Tax Deduction provides a gross receipts tax exemption to an aircraft manufacturer selling a plane. Aerospace companies can also use the Aircraft Refurbishing or Remodeling Tax Deduction from gross receipts taxes for maintaining, refurbishing or modifying commercial or military aircraft over 10,000 pounds gross landing weight.
- Renewable Energy Production Credit. A qualified energy generator can earn one cent per kilowatt-hour for the first 400,000 megawatt-hours of electricity for ten years. Qualified energy generators are New Mexico operations producing at least ten megawatts from biomass, solar, wind or fluidized bed technology and selling to an unrelated person.
- Distilling and Brewing Preferential Tax Rate. Microbreweries producing less than 5,000 barrels of beer annually and small wineries producing less than 560,000 liters of wine per year qualify for a lower Liquor Excise Tax rate. Small wineries pay 10 cents per liter on the first 80,000 liters and 20 cents after that instead of the usual 45 cents. Small brewers pay 8 cents a gallon instead of 41 cents.
- Film Production Tax Rebate. The state offers a 25 percent tax rebate on production expenditures subject to taxation by the state.
- Angel Investment Tax Credit. The credit is 25 percent of a qualifying investment, up to $25,000. An investor may claim credit for up to 2 investments per year and invest in the same business for 3 years.
- Advanced Energy Manufacturers Tax Credit. For renewable energy manufacturing, there is a credit equal to 5 percent of the value of qualified manufacturing equipment.