Manufacturering and Processing Tax Credit
Category: Manufacturing and Technology, State Incentives
- Consumables Gross Receipts Tax Deduction for Manufacturers
- In the 2012 legislative session the New Mexico Legislature passed, and Governor Martinez signed into law, an expansion to the deduction for the sale of tangible personal property to manufacturers. A seller may deduct receipts from sales to a manufacturer of tangible personal property that becomes an ingredient or component part of a manufactured product.
- The deduction is 100% of receipts after January 1, 2017
- For the purposes of this deduction, “consumable” is defined as tangible personal property that is incorporated into, destroyed, depleted, or transformed in the process of manufacturing a product, including electricity, fuels, water, manufacturing aids and supplies, chemicals, gases, repair parts, spares, and other tangibles used to manufacture a product.
- Investment Tax Credit for Manufacturers
- Administered by NM Taxation & Revenue Department
- Manufacturers may take a credit against gross receipts, compensating or withholding taxes equal to 5.125% of the value of qualified equipment when the following employment conditions are met:
- For every $500,000 of equipment, 1 employee must be added up to $30 million; and
- For amounts exceeding $30 million, 1 employee must be added for each $1 million of equipment
- The credit may (also) be claimed for equipment acquired under an IRB. This is a double benefit because no gross receipts or compensating tax was paid on the purchase or importation of the equipment.
- The manufacturer simply reduces its tax payment to the state (by as much as 85% per reporting period) until the amount of investment credit is exhausted. There also are provisions for issuing a refund when the credit balance falls under $500,000. The credit does not apply against local gross receipts taxes.
- Single Sales Factor
- Beginning January 1, 2014, New Mexico will begin phasing in a single sales factor apportionment methodology for corporations whose principal business activity is manufacturing.
- For the purposes of apportioning income, “manufacturing” excludes construction, farming, power generation, and processing natural resources including hydrocarbons.
- In addition, in taxable years that begin on or after January 1, 2015, corporate headquarters operations may elect to have business income apportioned to New Mexico subject to a single sales factor apportionment methodology.
- Five-Year Policy Changes:
Year / Appointment
2014 Double-Weighted Sales
2015 Triple-Weighted Sales
2016 70% Sales
2017 80% Sales
2018 Single Sales Factor