Are R&D Tax Credits Available in New Mexico?

Are R&D Tax Credits Available in New Mexico?

Yes. The state of New Mexico provides Research and Development (R&D) Tax Credit to qualified small business taxpayers conducting research in New Mexico. Here is a summary of the credit:

• A “basic” technology jobs and research and development credit is available for qualified expenditures made by a taxpayer conducting qualified research at a qualified facility.
• However, an "additional" credit is also available for a taxpayer that is eligible for the basic credit and that (1) increases its annual payroll expense at a qualified facility by at least $75,000 over its base payroll expense (the increase may not have been used previously to qualify for the additional credit), and (2) increases its annual payroll expense by at least $75,000 for every $1 million in qualified expenditures it claims in a tax year.
• A “qualified research and development small business” is a taxpayer that:
  • Employed no more than 50 employees
  • Had total qualified expenditures of no more than $5 million in the tax year for which an additional credit is claimed
• Like the "basic" credit, the additional credit is equal to 5% of the amount of qualified expenditures made by a taxpayer conducting qualified research at a qualified facility. This amount is doubled for taxpayers who conduct qualified research in a rural area.
• Taxpayers may apply for approval of an additional credit within one year following the end of the tax year in which the qualified expenditure was made. For example, if X makes qualified expenditures from January 1 through October 30, 2024, X must submit an application for approval by no later than December 31, 2025.
• After 2014, unused credits can be carried forward three years.
• The additional credit is generally not refundable, but excess credits for a “qualified research and development small business” may be refunded as follows:
  • If the excess credit is less than $3 million, then all of the excess will be refunded to the taxpayer.
  • If the excess credit is at least $3 million but less than $4 million, then 2/3 of the excess credit will be refunded to the taxpayer.
  • If the excess credit is between $4 million and $5 million, then 1/3 of the excess credit will be refunded to the taxpayer.
• A taxpayer claiming a basic or additional credit must file annual reports with the New Mexico Taxation and Revenue Department (TRD). The reports must be submitted on or before June 30 of the year following a calendar year in which the taxpayer claims a basic or additional credit, and by June 30 of each of the two succeeding years. The reports must contain information describing the taxpayer's business operations in New Mexico.