2021 New Mexico Statutes
Chapter 7 - Taxation
Article 9F - Technology Jobs and Research and Development Tax Credit
Section 7-9F-3 - Definitions.

As used in the Technology Jobs and Research and Development Tax Credit Act:

A. "affiliate" means a person who directly or indirectly owns or controls, is owned or controlled by or is under common ownership or control with another person through ownership of voting securities or other ownership interests representing a majority of the total voting power of the entity;

B. "annual payroll expense" means the wages paid or payable to employees in the state by the taxpayer in the taxable year for which the taxpayer applies for an additional credit pursuant to the Technology Jobs and Research and Development Tax Credit Act;

C. "base payroll expense" means the wages paid or payable by the taxpayer in the taxable year prior to the taxable year for which the taxpayer applies for an additional credit pursuant to the Technology Jobs and Research and Development Tax Credit Act, adjusted for any increase from the preceding taxable year in the consumer price index for the United States for all items as published by the United States department of labor in the taxable year for which the additional credit is claimed. In a taxable year during which a taxpayer has been part of a business merger or acquisition or other change in business organization, the taxpayer's base payroll expense shall include the payroll expense of all entities included in the reorganization for all positions that are included in the business entity resulting from the reorganization;

D. "department" means the taxation and revenue department, the secretary of taxation and revenue or any employee of the department exercising authority lawfully delegated to that employee by the secretary;

E. "facility" means a factory, mill, plant, refinery, warehouse, dairy, feedlot, building or complex of buildings located within the state, including the land on which it is located and all machinery, equipment and other real and tangible personal property located at or within it and used in connection with its operation;

F. "local option gross receipts tax" means a tax authorized to be imposed by a county or municipality upon a taxpayer's gross receipts, as that term is defined in the Gross Receipts and Compensating Tax Act [Chapter 7, Article 9 NMSA 1978], and required to be collected by the department at the same time and in the same manner as the gross receipts tax;

G. "qualified expenditure" means an expenditure or an allocated portion of an expenditure by a taxpayer in connection with qualified research at a qualified facility, including expenditures for depletable land and rent paid or incurred for land, improvements, the allowable amount paid or incurred to operate or maintain a facility, buildings, equipment, computer software, computer software upgrades, consultants and contractors performing work in New Mexico, payroll, technical books and manuals and test materials, but not including any expenditure on property that is owned by a municipality or county in connection with an industrial revenue bond project, property for which the taxpayer has received any credit pursuant to the Investment Credit Act, property that was owned by the taxpayer or an affiliate before July 3, 2000 or research and development expenditures reimbursed by a person who is not an affiliate of the taxpayer. If a "qualified expenditure" is an allocation of an expenditure, the cost accounting methodology used for the allocation of the expenditure shall be the same cost accounting methodology used by the taxpayer in its other business activities;

H. "qualified facility" means a facility in New Mexico at which qualified research is conducted other than a facility operated by a taxpayer for the United States or any agency, department or instrumentality thereof;

I. "qualified research" means research:

(1) that is undertaken for the purpose of discovering information:

(a) that is technological in nature; and

(b) the application of which is intended to be useful in the development of a new or improved business component of the taxpayer; and

(2) substantially all of the activities of which constitute elements of a process of experimentation related to a new or improved function, performance, reliability or quality, but not related to style, taste or cosmetic or seasonal design factors;

J. "qualified research and development small business" means a taxpayer that:

(1) employed no more than fifty employees as determined by the number of employees for which the taxpayer was liable for unemployment insurance coverage in the taxable year for which an additional credit is claimed;

(2) had total qualified expenditures of no more than five million dollars ($5,000,000) in the taxable year for which an additional credit is claimed; and

(3) did not have more than fifty percent of its voting securities or other equity interest with the right to designate or elect the board of directors or other governing body of the business owned directly or indirectly by another business;

K. "rural area" means any area of the state other than the state fairgrounds, an incorporated municipality with a population of thirty thousand or more according to the most recent federal decennial census and any area within three miles of the external boundaries of an incorporated municipality with a population of thirty thousand or more according to the most recent federal decennial census;

L. "taxpayer" means any of the following persons, other than a federal, state or other governmental unit or subdivision or an agency, department, institution or instrumentality thereof:

(1) a person liable for payment of any tax;

(2) a person responsible for withholding and payment or collection and payment of any tax;

(3) a person to whom an assessment has been made if the assessment remains unabated or the assessed amount has not been paid; or

(4) for purposes of the additional credit against the taxpayer's income tax pursuant to the Technology Jobs and Research and Development Tax Credit Act and to the extent of their respective interest in that entity, the shareholders, members, partners or other owners of:

(a) a small business corporation that has elected to be treated as an S corporation for federal income tax purposes; or

(b) an entity treated as a partnership or disregarded entity for federal income tax purposes; and

M. "wages" means remuneration for services performed by an employee in New Mexico for an employer.

History: Laws 2000 (2nd S.S.), ch. 22, § 3; 2015 (1st S.S.), ch. 2, § 12; 2019, ch. 270, § 38; 2019, ch. 274, § 12.

Compiler's notes. — Laws 2019, ch. 270, § 38 and Laws 2019, ch. 274, § 12, both effective July 1, 2019, enacted almost identical amendments to this section, except that Laws 2019, ch. 270, § 38, in Subsection F, changed "the taxpayer's" to "a taxpayer's". Laws 2019, ch. 274, § 12 as the last act signed by the governor is set out above and incorporates both amendments. To view the session laws in their entirety, see the 2019 session laws on NMOneSource.com.

The 2019 amendment, effective July 1, 2019, revised the definition of "local option gross receipts tax" as used in the Technology Jobs and Research and Development Tax Credit Act; and in Subsection F, deleted "'local option gross receipts tax' includes the taxes imposed pursuant to the Municipal Local Option Gross Receipts Taxes Act, Supplemental Municipal Gross Receipts Tax Act, County Local Option Gross Receipts Taxes Act, Local Hospital Gross Receipts Tax Act, County Correctional Facility Gross Receipts Tax Act and such other acts as maybe enacted authorizing counties or municipalities to impose taxes on gross receipts, which taxes are to be collected by the department in the same time and in the same manner as it collects the gross receipts tax".

The 2015 (1st S.S.) amendment, effective January 1, 2016, amended and added certain definitions in the Technology Jobs and Research and Development Tax Credit Act; in the introductory sentence, after "Technology Jobs", added "and Research and Development"; in Subsection B, after "paid or payable", added "to employees in the state", after "taxpayer", deleted "for the one year period ending on the day" and added "in the taxable year for which", after "Technology Jobs", added "and Research and Development"; in Subsection C, after "payable by the taxpayer", deleted "for the one year period ending on the day one year prior to the day" and added "in the taxable year prior to the taxable year for which", after "Technology Jobs", added "and Research and Development", after "any increase", added "from the preceding taxable year", and after "department of labor", deleted "since that day" and added the remainder of the subsection; in Subsection E, after "land on which", deleted "the facility" and added "it", after "located at or within", deleted "the facility" and added "it", after "connection with", deleted "the" and added "its", and after "operation", deleted "of the facility"; added a new Subsection F and redesignated former Subsections F, G and H as Subsections G, H and I, respectively; in Subsection G, after "credit pursuant to the", deleted "Capital Equipment Tax Credit Act or the", after "an affiliate before", deleted "the effective date of the Technology Jobs Tax Credit Act" and added "July 3, 2000", and after "If", deleted "an" and added "a qualified"; added a new Subsection J and redesignated former Subsections I, J and K as Subsections K, L and M, respectively; in Subsection K, after "any area of the state other than", deleted "a class A county, a class B county that has a net taxable value for rate-setting purposes for any property tax year of more than three billion dollars ($3,000,000,000), the municipality of Rio Rancho and the area within three miles of the exterior boundaries of a class A county" and added the remainder of the subsection; in Paragraph (4) of Subsection L, after "Technology Jobs", added "and Research and Development"; and in Subsection M, after "remuneration", deleted "in cash or other form", and after "an employee", added "in New Mexico".

Applicability. — Laws 2015 (1st S.S.), ch. 2, § 25 provided that Laws 2015 (1st S.S.), ch. 2, § 12 apply to taxpayers that make a qualified expenditure beginning on or after January 1, 2015.

Time to apply for tax credit. — Because the provisions of this section, Sections 7-9F-6 and 7-9F-12 NMSA 1978 indicate a legislative concentration on annual reporting and annual payroll expense, these sections indicate no intention to provide a taxpayer an open-ended time to apply for a tax credit. Team Specialty Prods., Inc v. Taxation & Revenue Dep't., 2005-NMCA-020, 137 N.M. 50, 107 P.3d 4.