505-891-4305 info@sea-nm.com 1201 Rio Rancho Blvd Suite C

Incentives

The state of New Mexico and Sandoval County along with its communities offer competitive and unique incentives to job creators to help reduce the overall cost of doing business. Use the accordions below to discover the incentives and tax credits available.

Incentives to Reduce Capital Expenditures

Discretionary state incentive that can be used towards land, building or infrastructure.  Amount is determined on a project by project basis. The state of New Mexico just increases its LEDA amount for the FY17 (July 1,2016 through June 30,2017)  of $50 million.

Requirements:

  • Demonstration of Financial Soundness and Readiness to Proceed;
  • A signed Release/Authorization Form, including certification that the Qualified Entity is current with all New Mexico and Federal obligations;
  • Project Scope of Work, including use of requested funds;
  • 3 years Financial Statements and/or Pro Forma, along with appropriate documentation (purchase agreements of land, loan approval, term sheets, infrastructure order, etc.);
  • Funding Sources and uses;
  • Job creation and salary/benefit information;
  • Project Capital Investment; and
  • Completed Economic Impact data sheet.
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Significant real and personal property tax abatement 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 the lease, purchase the facility from the issuer for a nominal amount.

IRBs can also be used when a developer is involved. A separate series of bonds are 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 the remaining property tax exemptions can be passed on to the new owner or flow through a lease in the event of a sale or lease to a new user under certain qualifying conditions. City Council or County Commission 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.

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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.

The deduction is phased in as follows:

  • 20% of receipts received in calendar 2013
  • 40% in 2014
  • 60% in 2015
  • 80% in 2016
  • 100% of receipts after January 1, 2017

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.

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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:

  • For every $500,000 of equipment, 1 employee must be added up to $30 million; and
  • For amounts exceeding $30 million, 1 employee must be added for each $1 million of equipment

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.

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Incentives to Reduce Hiring Costs

Highly flexible state program to provide classroom and on-the-job training for qualified employees of qualified employers. Customized training may be provided by post-secondary educational institutions, company trainers, or outside trainers.

The state will provide a CASH reimbursement for:

  • Up to 50 percent of trainees’ wages up to 1,040 hours for companies located in urban areas and up to 65 percent of trainees’ wages up to 1,040 hours for companies located in rural area.
  • Companies may receive an additional wage reimbursement of 5 percent for an eligible high-wage job.
  • Companies may receive an additional 5 percent reimbursement for one of the three following conditions, provided the entry wage is at least the minimum rate for the Job Zone.
  • Classroom training costs provided by New Mexico post-secondary educational institutions, ($35 per hour for instructors’ time capped at $1,000 per employee).

Company Eligibility

  • Must be a new or expanding company in New Mexico that manufactures/produces a product or a non-retail service company that generates more than 50 percent of its revenue from outside the state.
  • Contract-based customer service centers must provide evidence of a minimum 5-year lease or purchase of a facility in New Mexico.
  • Contract-based customer centers must offer employees and their dependents health insurance coverage and must contribute at least 50 percent of the premium for health care insurance for those employees who choose to enroll.
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Provides businesses with a tax credit equal to 10 percent of salaries for each net new job paying a net taxable wage of at least $60,000 per year in the Albuquerque metropolitan area and other communities larger than 40,000 in population. Companies located in communities with a population less than 40,000 are eligible for the same tax credit for each net new job paying a net taxable wage of at least $40,000. Qualified employers can take the credit for four years. The refundable credit can be applied against the modified combined tax liability of the taxpayer, including the state portion of the gross receipts tax, compensating tax and withholding tax. Excludes the local portion of the gross receipts tax.

Conditions

  • Net taxable wages include: hourly wage, bonus, salary, vacation, sick/holiday time.
  • Company must generate more than 50 percent of its sales or non-retail services produced or performed in New Mexico to customers outside the state; and must be eligible for the Job Training Incentive Program; and is a manufacturer or qualified non-retail service entity.
  • Employer must be growing in employment greater than the year before.
  • Eligible employees cannot be relatives of the qualified employer or own more than 50 percent of the company.
  • Jobs must be occupied by an eligible employee for 48 weeks.
  • The credit will not exceed $12,000 per eligible employee in each qualifying period.
  • Any taxpayor that ceases operations, loses eligibility to claim the credit, or reduces its full-time employees in New Mexico by more than 5 percent, must wait at least 5 calendar years before submitting a new application for the credit.
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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.

Company eligibility:

  • Companies that manufacture or produce a product in New Mexico
  • Non-retail service companies that export a substantial percentage of services out of state (50% or more revenues and/or customer base)
  • Certain green industries

25% of the first $16,000 in wages paid for the qualifying job (may be taken at $1,000 per year for 4 years), and the credit may be carried forward for up to 3 years.

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Qualified New Mexico facilities may take a credit equal to 5 percent (10 percent in rural areas) of expenditures related to qualified research for payroll, land buildings, equipment. computer software and upgrades, consultants and contractors performing work in New Mexico, technical books, manuals and test materials. The credit may be taken against compensating tax, gross receipts tax (excluding the local options portion of the gross receipts tax), and withholding tax. The credit may be carried forward for up to three years.

An additional 5 percent (10 percent in rural areas) 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.

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Incentives to Reduce Taxes

Effective in taxable year starting January 1, 2018, businesses engaged in manufacturing and regional headquarter operations may choose to take part in single sales factor apportionment for calculation of their corporate income tax liability.

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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.

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Rural Software Development Gross Receipts Tax Deduction

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 website design and development but does not include software implementation or support services.  A rural area is defined as any, not within the municipal boundaries of the cities of Albuquerque, Las Cruces, Rio Rancho and Santa Fe. These cities are not eligible for this deduction.

Web Hosting Gross Receipts Tax Deduction

Receipts from hosting World Wide Web sites may be deducted from gross receipts. Hosting means storing information on computers attached to the internet.

Technology Jobs and Research and Development Tax Credit

A taxpayer that employs no more than 50 employees, has qualified expenditures of no more than $5 million, and who conducts qualified research and development at a facility in New Mexico is allowed a basic tax credit equal to 5% of qualified expenditures, and an additional 5% 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 a three-mile radius of an incorporated municipality with a population of 30,000 or more.

The taxpayer claims the credit within 1 year following the end of the year in which the expenditure was made. The credit amount is applied against the taxpayer’s state gross receipts, compensating, and withholding liabilities until the credit is exhausted.

Eligible Uses

  1. Expenditures: Includes a wide range of non-reimbursed expenses such as payroll, consultants, and contractors performing work in New Mexico, software, equipment, technical manuals, rent, and operating expenses of facilities.
  2. Research: Must be technological in nature and constitute elements of a process of experimentation leading to new or improved function, performance, or reliability (not cosmetic, style).
  3. Facility: A building or group, with land and machinery, equipment and other real or personal property used in connection with the operation of the facility; excludes national labs.
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Financial Management Tax Credit

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

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Agricultural Business Tax Deductions and Exemptions

  • Feed for livestock, including the baling wire or twine used to contain the feed, fish raised for human consumption, poultry or animals raised for hides or pelts and seeds, roots, bulbs, plants, soil conditioners, fertilizers, insecticides, germicides, insects, fungicides, weedicides and water for irrigation.
  • Warehousing, threshing, cleaning, harvesting, growing, cultivating or processing agricultural products including ginning cotton and testing and transporting milk.
  • Feeding, pasturing, penning, handling or training livestock and, for agribusinesses, selling livestock, live poultry and unprocessed agricultural products, hides and pelts.
  • Fifty percent (50%) of receipts from selling agricultural implements, farm tractors or vehicles.
  • Receipts from sales of veterinary medical services, medicine or medical supplies used in the medical treatment of cattle if the sale is made to one of the following:
    • A person engaged in the business of ranching or farming, including dairy farmers.
    • A veterinarian who is providing veterinary medical services, medicine or medical supplies in the treatment of cattle owned by a person engaged in the ranching or farming business.

Beer and Wine Producers 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 preferential tax rate. The Liquor Excise Tax Act imposes taxes on beer, wine, and spirituous liquors. The basic tax rate for wine is 45 cents per liter. Wine produced by a small vintner carries a tax of 10 cents per liter on the first 80,000 liters and 20 cents on production over that level up to 560,000 liters. The basic tax rate for beer produced by a brewery is 41 cents; beer produced by a microbrewery (producing less than 5,000 barrels annually) is taxed at 8 cents per gallon.

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Aircraft Deductions

  • Receipts from selling aircraft parts or maintenance services for aircraft or aircraft parts; Receipts of an aircraft manufacturer from selling; Aircraft flight support, pilot training or maintenance training services.
  • Receipts from the sale of or from maintaining, refurbishing, remodeling or otherwise modifying a commercial or military carrier over 10,000 pounds gross landing weight.
  • Fifty percent (50%) of gross receipts from selling other aircraft.
  • Fifty-five percent (55%) of the receipts from selling jet fuel for use in turboprop or jet engines until June 30, 2017; forty percent (40%) after June 30, 2017.

Military Acquisition Program Tax Deduction

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.

Research and Development Tax Deduction

Aerospace services are the research and development services sold or for resale to an organization for resale by the organization to the U.S. Air Force. When R&D services are sold to Phillips Laboratory for resale to the Air Force, the seller’s receipts are deductible. If the R&D services are sold to an intermediary for resale to Phillips Laboratory for resale to the Air Force, those receipts are also deductible.

Space Gross Receipts Tax Deductions

There are four separate deductions connected with the operation of a spaceport in New Mexico. The four deductions are:

  • Receipts from launching, operating or recovering space vehicles or payloads
  • Receipts from preparing a payload in New Mexico
  • Receipts from operating a spaceport in New Mexico
  • Receipts from the provision of research, development, testing and evaluation services for the United States Air Force Operationally Responsive Space Program

Directed Energy and Satellites

Receipts from the sale of qualified research and development services and qualified directed energy and satellite-related inputs to the Department of Defense may be deducted from gross receipts.

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Advanced Energy Deduction and Advanced Energy Tax Credit

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.

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 ½ 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

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Local Incentives

Similar to LEDA, the Sandoval County Economic Development fund is available to offset costs in needed infrastructure or other expenses to help businesses locate here or expand.

The County and the County’s Economic Development Department has designed and implement a systematic, transparent approach to prioritizing projects that meet the over-arching goals of the County for financial evaluation and structuring. These provide guidance for funding on project impact qualifications, application review criteria, and concentration factors.

Projects are considered based on the following goals:

• “County” Impact and Support
Impact to unincorporated or rural areas of the County
• Increased Wages and Job Creation
• Wealth Creation and Capital Investment
• Environmentally Sustainable Outcomes
• Financial Soundness and Readiness to Proceed.

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Sandoval County is willing to issue IRBs up to $50 billion.

Significant real and personal property tax abatement 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 the lease, purchase the facility from the issuer for a nominal amount.

IRBs can also be used when a developer is involved. A separate series of bonds are 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 the remaining property tax exemptions can be passed on to the new owner or flow through a lease in the event of a sale or lease to a new user under certain qualifying conditions. City Council or County Commission 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.

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A developer/retailer pays for the cost of public infrastructure improvements (roads, drainage, water and wastewater lines, etc.) for a project, and in return the city refunds a percentage of the yearly applicable gross receipts tax revenues it receives that are directly attributed to the retail sales of the project/business back to the developer up to a maximum number of years; or the city may reimburse impact fees where the reimbursement thereof is instrumental in bringing the retail or targeted commercial businesses to the city.

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A TIDD issues bonds to finance public infrastructure improvements (streets, water, wastewater, drainage). The TIDD bonds are secured by a dedication of certain municipal, county, and/or state-shared gross receipts tax that are generated in the TIDD. The length of time and amount of gross receipts tax dedication that occurs varies by individual TIDDs.

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A PID provides financing based on levying property taxes on land within a PID, imposing special levies based on benefit to property, front footage, acreage, cost of improvements (or other factors apart from assessed valuation), or by providing for use charges of improvements or revenue-producing projects or facilities. PID taxes, levies and charges may be pledged to pay debt service on bonds issued by a PID. PID bonds are obligations solely of the PID issuing the bonds.

PIDs are authorized to finance various infrastructure and improvements (water and sewer systems, streets, gas and telecommunications systems, parks, public buildings, libraries, school facilities, equipment) and related costs of operation and administration.

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Contact Us

SANDOVAL ECONOMIC ALLIANCE

1201 Rio Rancho Blvd Suite C
Rio Rancho, NM 87124

 

Phone: (505) 891-4305
Email: info@sea-nm.com

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