New Mexico R&D Tax Credit: Quick Summary
The New Mexico Technology Jobs and Research and Development Tax Credit Act provides fiscal incentives to businesses engaging in qualified research within the state. This glossary defines key entities, statutory references (like NMSA §§ 7-9F and IRC Section 41), and calculation methods for both the Basic Credit (4%-8%) and Additional Credit based on payroll growth.
New Mexico Technology Jobs and R&D Tax Credit Glossary
This table provides definitions for key terms related to the New Mexico R&D Tax Credit, authored by Swanson Reed.
| Glossary Term | Definition |
|---|---|
| Technology Jobs and Research and Development Tax Credit Act | The statutory framework governing New Mexico’s incentives for qualified technological research and employment growth. |
| NMSA §§ 7-9F-1 to 7-9F-13 | The specific sections of New Mexico statutes codifying the regulations for the technology R&D tax credit. |
| Basic Credit | A tax credit equal to 4% of qualified expenditures (8% in rural areas) for eligible businesses. |
| Additional Credit | An extra 4% credit available when annual payroll expenses increase significantly over the base payroll. |
| Qualified Research Expenses (QREs) | Costs incurred for research activities that meet specific technological and experimental criteria under tax laws. |
| Qualified Expenditure | Eligible costs including wages, supplies, and computer rental fees directly related to qualified research activities. |
| Qualified Facility | A factory, mill, plant, or refinery located in New Mexico used for qualified research operations. |
| Qualified Research | Research undertaken to discover information that is technological in nature and intended for new products. |
| Internal Revenue Code (IRC) Section 41 | Federal tax code section defining qualified research activities adopted by New Mexico for credit calculations. |
| IRC Section 174 | Federal code section allowing deductions or amortization of research and experimental expenditures. |
| New or Improved Business Component | A product, process, software, or technique intended to be developed or improved through research. |
| Discovering Information | The process of obtaining knowledge that exceeds common trade understanding to resolve technical uncertainties. |
| Eliminating Uncertainty Test | Requirement that research must attempt to eliminate uncertainty regarding capability, method, or design. |
| Process of Experimentation Test | Requirement to evaluate alternatives through modeling, simulation, or systematic trial and error to resolve uncertainty. |
| Technological in Nature | Research relying on principles of physical or biological sciences, engineering, or computer science. |
| Permitted Purpose | Research conducted for a specific valid purpose like improving performance, reliability, or quality. |
| Wages for Employees Performing Research | Compensation paid to employees directly engaging in, supervising, or supporting qualified research activities. |
| Supplies and Materials (for research) | Tangible property used directly in the conduct of qualified research, excluding land or improvements. |
| Contract Research Expenses | Amounts paid to third parties to perform qualified research on behalf of the taxpayer. |
| Equipment and Software (for research) | Costs associated with computer software or equipment required to facilitate qualified research processes. |
| Operating Expenses Tied to Qualified Facility | Ongoing costs like rent, utilities, and maintenance specifically attributable to a qualified research facility. |
| Rural Area (Credit Doubling) | Designated zones outside major metropolitan counties where the basic credit rate doubles to 8%. |
| Bernalillo County (Exclusion) | A major metropolitan county excluded from the rural area definition for the doubled credit rate. |
| Doña Ana County (Exclusion) | A metropolitan county not classified as rural, limiting the basic credit rate to 4%. |
| Santa Fe County (Exclusion) | A specific county excluded from rural incentives, maintaining the standard basic credit rate. |
| Annual Payroll Expense | Total wages paid to employees in New Mexico during the taxable year for credit calculation. |
| Base Payroll Expense | The average annual payroll expense calculated over the three preceding taxable years. |
| Payroll Bonus Benchmark | The threshold where annual payroll exceeds base payroll by $75,000 to trigger additional credits. |
| Gross Receipts Tax (GRT) | A tax on the total gross receipts of a business, against which credits can be applied. |
| Compensating Tax | Tax levied on tangible property used in New Mexico but purchased from outside the state. |
| Withholding Tax | Taxes deducted from employee wages, against which the R&D credit can sometimes be applied. |
| Income Tax Liability (Corporate/Personal) | The total tax owed on income, which can be offset by the Technology Jobs R&D credit. |
| Nonrefundable Credit | A credit that can reduce tax liability to zero but cannot generate a cash refund. |
| Partially Refundable Credit | A credit mechanism allowing a portion of the excess credit to be refunded to the taxpayer. |
| Qualified R&D Small Business | A business with gross revenues under $5 million eligible for specific credit benefits. |
| Maximum Qualified Expenditure Cap ($5 million) | The limit on eligible expenses used to calculate the credit for small businesses. |
| Maximum Employee Count (50 employees) | The employment limit defining a small business for certain favorable credit provisions. |
| Credit Carry Forward | The ability to apply unused tax credits to future tax liabilities for a specified period. |
| Maximum Carry Forward Period (3 years) | The duration (three years) that unused R&D credits can be carried forward in New Mexico. |
| Application for Approval (Annual) | The mandatory yearly submission to the Taxation and Revenue Department to claim the credit. |
| Application Deadline (One year after tax year end) | The strict cutoff date for filing the credit application, one year post-tax year. |
| Taxpayer Access Point (TAP) | The online portal provided by New Mexico for filing returns and managing tax accounts. |
| Form RPD-41385 (Application) | The specific form used to apply for the New Mexico Technology Jobs and R&D Tax Credit. |
| Form RPD-41243 (Claim Form) | The form submitted to claim the approved R&D credit against specific tax liabilities. |
| Form RPD-41298 (Claim Form) | A claim form often used for reporting and tracking available investment credit balances. |
| Annual Reports (Post-Claim) | Required documentation submitted to verify ongoing compliance and credit utilization after claiming. |
| New Mexico Taxation and Revenue Department (TRD) | The state agency responsible for administering tax laws and processing R&D credit applications. |
| Affiliated Person | An entity or individual with a specific relationship to the taxpayer, impacting credit aggregation. |
| Local Option Gross Receipts Tax (Exclusion) | Local-level taxes that cannot be offset by the state-level Technology Jobs R&D credit. |
| Export-Based Industries | Businesses selling goods or services primarily outside New Mexico, often targeted for economic incentives. |
