This credit has two parts: a basic credit and an additional credit, each equal to 4% of the qualified expenditures on qualified research at a qualified facility. The credit amount 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, Dona Ana, San Juan or Santa Fe counties).
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.
Rates and Terms
1. Basic credit: The taxpayer claims the credit within one 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.
2. Additional credit: A taxpayer earns the additional credit by increasing its payroll. The annual payroll must increase by at least $75,000 over the base period and by at least $75,000 for each $1 million in qualified expenditures (equivalent to $40,000 in credit) it wishes to claim. The base period floats; it is defined as the 12-month period ending on the day one year prior to the day the taxpayer applies for the additional credit. The base period payroll amount is also to be adjusted for inflation so that merely keeping up with the inflation will not earn any credit. The credit is not refundable, but excess credit amounts may be carried forward.