New Mexico R&D Tax Credit Benefits and Eligibility

New Mexico and the Research and Development (R&D) Tax Credit

State Credit Name: Taxpayer Credit for Certain Research Activities

Expiration Date: Indefinite

Who Can Apply? Corporations only. New Jersey S-Corporation’s credits are limited to its New Jersey corporation tax liability and pass-through of the credit to the shareholders is not allowed.

Credit Carry Forward: Unused credits can be carried forward 7 years. A taxpayer that has been granted the credit and basic payments have been made for research conducted in New Jersey in the fields of advanced computing, advanced materials, biotechnology, electronic device technology, environmental technology, and medical device technology is allowed to carry the credit forward 15 years.

The Technology Jobs Tax Credit states that a taxpayer may apply for approval of credit within one year following the end of the calendar year in which the qualified expenditure was made.
- Qualified Research: means research that is undertaken to discover information that is:
  - Technological in nature
  - Intended to be useful in the development of a new or improved business component of the taxpayer, and
  - Related to a new or improved function, performance, reliability or quality, but not related to style, taste, or cosmetic or season design factors.
- Qualified Facility: means a factory, mill, plant, refinery, warehouse, dairy, feedlot, building or complex of buildings located in New Mexico. These include the land on which the facility is located and all machinery, equipment and other real and tangible personal property located at or within the facility and used in connection with the operation of the facility. Any facility operated by the taxpayer for the United States is excluded.
- Qualified Expenditures: any expenditure or allocated portion of an expenditure connected to qualified research at a qualified facility.

Credit Carry Forward:

R&D Small Business Tax Credit: Offsets 50% of tax liability, so N/A
Technology Jobs Tax Credit: Unlimited carry forward

About the Credit:

R&D Small Business Tax Credit: Credit is equal to 50% of the sum of all gross receipts taxes, compensating taxes or withholding taxes due to the state or payable by the taxpayer.
Technology Jobs Tax Credit: Credit is equal to 4% (8% in rural areas) of expenditures related to qualified research for land, buildings, equipment, computer software and upgrades, consultants, technical books and manuals, test materials, costs associated with patents, payroll and labor. The credit may be taken against gross receipts tax, compensating tax or state payroll tax. An additional 4% credit may be applied against state income tax if base payroll expenses increase by at least $75,000 per $1 million of expenses claimed.
- The Basic Tax Credit may be applied against the taxpayer’s compensating tax, gross receipts tax, or withholding tax due to the state of New Mexico. No taxpayer may claim an amount of approved basic credit for any reporting period that exceeds the sum of the taxpayer’s gross receipts tax, compensating tax, and withholding tax due for that reporting period.
- The Additional Tax Credit may be applied against the taxpayer’s personal or corporate income tax. No taxpayer may claim an amount of additional credit for any reporting period that exceeds the amount of the taxpayer’s personal or corporate income tax due for that reporting period. A husband and wife may each claim only one-half the additional credit. A pass-through entity (PTE) approved for additional credit may pass the additional credit to its owners, partners or members using Form RPD-41368, Notice of Distribution of Technology Jobs Tax Credit. Any amount of credit not claimed for a reporting period may be claimed in subsequent reporting periods.
- Recapture – If the taxpayer or a successor in business of the taxpayer ceases operations in New Mexico for 180 consecutive days within a two-year period, any approved unclaimed credit shall be extinguished. Within 30 days after the 180 days, the taxpayer shall pay the tax against which an approved technology jobs tax credit was taken.

Notes: Both credits cannot be used together.

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Swanson Reed is one of the only companies in the United States to exclusively focus on R&D tax credit preparation. Swanson Reed’s office location at 1704 Llano St, Santa Fe, New Mexico provides R&D tax credit consulting and advisory services to Albuquerque, Las Cruces, Rio Rancho, Santa Fe and Roswell.

If you have any questions or need further assistance, please call or email our local New Mexico Partner on (505) 522-7768.
Feel free to book a quick teleconference with one of our New Mexico R&D tax credit specialists at a time that is convenient for you. Click here for more information about R&D tax credit management and implementation.

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New Mexico R&D Tax Credit Filing Instructions

To claim the Research and Development (R&D) tax credit in New Mexico, businesses must generally follow a two-step process. First, taxpayers need to apply for approval of the credit by filing Form RPD-41385, Application for Technology Jobs and Research and Development Tax Credit. This application must be submitted within one year following the end of the calendar year in which the qualified expenditures were made. Once approved, the actual credit is claimed by attaching Form RPD-41298, Research and Development Small Business Tax Credit Claim Form, to the taxpayer’s CRS-1 tax return. This claim must also be made within one year after the end of the report period to which the credit applies. The credit, officially known as the “Technology Jobs and Research and Development Tax Credit,” is available to qualified businesses engaging in R&D activities within the state, with specific criteria for eligible expenditures and business size. Taxpayers can typically apply and claim these credits online through the New Mexico Taxation and Revenue Department’s Taxpayer Access Point (TAP) or by mail.