Local governments may authorize industrial revenue bonds to enable a corporation to access property and compensating tax abatements. A lease agreement allows a corporation to take normal depreciation and a deduction of interest on the bonds. A purchaser of the bonds must be identified by the corporation, and the industrial revenue bond inducement and property tax abatement must be negotiated with the local government. Proceeds from the sale of the bonds may be used to purchase land, construct and equip a facility.

Property Tax Abatement

Land, buildings and equipment associated with an eligible project are exempt from ad valorem tax for as long as the bonds are outstanding, up to 30 years.

Compensating Tax Abatement

Furniture, fixtures and equipment purchased with industrial revenue bond proceeds for an eligible project are exempt from gross receipts tax if purchased in the state and compensating tax if purchased out of state.

Also referred to as the Baa Program, the State of New Mexico Investment Council is authorized to invest up to $20 million in a debt instrument rated Baa or better, or secured by a letter of credit from an institution rated A or better. Proceeds may be used to purchase land, building and equipment. The yield on the investment is set at the treasury yield for a comparable maturity plus 50 to 100 basis points, depending on the financial condition of the borrower and the nature of the investment.

 

In New Mexico Real Property-Related 
Business Loans

The State of New Mexico Investment Council is authorized to invest in participations of up to 80% in a loan by a financial institution to a start-up, expanding or relocating corporation.

Eligible uses of the funds include the purchase of land and attached buildings, and refinancing existing debt if the loan is for expansion purposes. Loan amounts may range from $500,000 to $2,000,000. Loan maturities are not less than five years or more than 15 years.

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A tax credit in an amount equal to the gross receipts tax rate or the compensating tax rate is applied to the value of capital equipment purchased specifically for use in an eligible call center in New Mexico. The total value over three years of the capital equipment purchased must total at least $250,000 if the call center is located in a rural community and $1 million if the call center is not located in a rural community.

 

Interstate Telecommunications

Gross Receipts Tax Exemption

An exemption of the receipts from the provision of wide-area telephone service (WATS) and private communications service from the interstate telecommunications gross receipts tax of 4.25%. Wide-area telephone service means a telephone service that entitles a subscriber to either make or receive large volumes of communications to or from persons in specified geographical areas. Private communications services are defined as dedicated service for individual customers entitled to exclusive or priority use of communication channels between a location within New Mexico and one or more locations outside the state.

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Intrastate Transportation and Services in Interstate Commerce

Receipts of a public distribution warehouse center from handling, storage, finished goods mixing, physical distribution, drayage or packaging of property or any other accessorial services on property that has moved or will move in interstate or foreign commerce, including subsequent or related intrastate transportation of that property by a carrier provided or contracted for by the distribution warehouse center, may be deducted from gross receipts. This deduction is available for both in-house and contract handling.

A credit against corporate income tax is allowed for certain child care services provided or paid for by a employer for employees' children for 30% of eligible costs, up to $30,000. Unused credit amounts may be carried forward for three years.

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Personal and corporate tax credits are provided for a corporation that employs long-term family assistance recipients, i.e. New Mexico Works Act, TANF or AFDC in high unemployment counties and piggybacks on the federal credit. The refundable tax credit amounts to 17.5% of the first $10,000 paid in the second year's wages, assuming that 50% or more of the eligible employee's wages for that tax year were paid by the qualified employer.

 

For Certain Medical and Health Care Services

A gross receipts tax deduction is provided to a corporation for receipts from payments received by board certified doctors and osteopaths from the federal government for provision of certain services to Medicare beneficiaries. This deduction is phased in over three years.

 

Rate Reduction

The unemployment compensation rates for a corporation are determined through an economic model taking into account the contributions paid, benefit changes, unemployment compensation account balances, average annual taxable payroll and reserve ratios.

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Industrial Development Training Program (In-Plant)

The Industrial Development Training Program provides training funds to a corporation or institution to prepare New Mexico residents for full-time employment. Training costs are reimbursed at up to 75% (50% in a metropolitan area) of the wage rate per hour paid to the trainee. When classroom training is conducted by a public training institution, 100% of the training cost is reimbursed to the institution.

 

The Job Training Partnership Act provides funds for job training to a corporation to prepare employees, both youth and adult, for productive employment. Training costs are reimbursed at up to 50% of the costs associated with hiring and training JTPA eligible employees.

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Community Development Block Grant Program (CDBG):

A grant may be provided to a local government to finance infrastructure improvements; acquisition of land, building, machinery and equipment; construction of facilities; and working capital. The maximum loan is $400,000. The interest rate and term are negotiable. There are matching requirements and a percentage of low to moderate income employees must be hired.

Community Development Revolving Loan Fund:

The New Mexico Economic Development Department may provide a loan to a local government on behalf of a corporation. Eligible activities include infrastructure improvements; acquisition of land, building, machinery and equipment; and construction of facilities. The maximum loan is $250,000 with no minimum. The interest rate is fixed at one half the Treasury bond equivalent rate and the maximum term is 10 years. The funds must be used only to improve publicly-owned property.

New Mexico Finance Authority:

The New Mexico Finance Authority may provide financing to a local government on behalf of a corporation for infrastructure projects including, but not limited to: buildings, water sewage and waste disposal systems, streets; municipal utilities and parking facilities. There are no limits on loan amounts. Interest rates are tied to bond market rates and average 6%. The maximum term is 20 years.

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New Mexico offers a corporation three options for reporting corporate income tax that are known as the "ladder".

Separate Corporate Entity. Under this method of reporting, the corporation files with New Mexico as though the corporate entity filed as a separate entity for federal purposes, regardless of how the corporation actually did file for federal purposes.

A corporation filing as a separate entity with New Mexico must submit a copy of its federal Form 1120 or other applicable form following all federal rules for determination of income. If a corporation is included in a federal consolidated return, it must submit a pro-forma 1120 separate return following all appropriate rules for the determination of federal income.

Combination of Domestic Unitary Corporations. Two or more corporations engaged in a unitary business may elect to report the combined income of all members of the unitary business whether or not the unitary business filed a federal consolidated return.

Unitary corporations means two or more integrated corporations that are more than 50% owned and controlled by the same person and for which at least one of the following conditions exists:

1. There is unity of operations evidenced by central purchasing, advertising, accounting or other centralized services;

2. There is a centralized management or executive force and centralized system of operation; or

3. The operations of the corporations are dependent on or contribute property or services to one another individually or as a group.

A domestic unitary group of corporations that reports using the combination method must prepare and submit a simulated federal return using the appropriate federal Form 1120 or other applicable form following all federal rules for consolidation except those rules relating to ownership. All unitary corporations must be included in the return, including those not engaged in business in New Mexico.

Federal Consolidated Group. A corporation filing a federal consolidated return may elect to report the income of all the affiliated corporations included on the federal return.

A consolidated group includes a parent corporation and its subsidiaries, even corporations that are non-unitary. If the taxpayer elects to file a consolidated New Mexico income tax return, it must be filed on the same basis as the federal consolidated return, applying property, payroll, and sales factors to the total consolidated group including the non-unitary corporations.

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