new mexico’s 25% tax credit
frequently asked questions

  • In a nutshell, tell me about the new rules for your tax credit.
    • A “rolling cap” of $50M per fiscal year;
    • Deferment payments for tax credits $2M and over;
    • Personal Income Tax (4.9%) for nonresident actors must be withheld and submitted upfront;
    • Productions must wait to file their credit claim after the close of their taxable year;
    • Productions must submit their tax credit package within one (1) year of final expenditure;
    • If your credit is over $5M, you’ll need an outside audit;
    • Qualified vendors must have a physical presence – and if they have employees, at least one of them needs to be a New Mexico resident;
    • Certain expenditures are limited (hotels: $150 per night; rental cars: $100 per day…)
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  • Tell me about your new “rolling cap” of $50M. What’s “rolling” about it?
    We can accrue unlimited tax credit amounts; however, any amounts over $50M will be “rolled over” until the next fiscal year.
  • When does your fiscal year begin? In other words, when is your “new pot of money” available?
    July 1 of each year.
  • Do I have to pre-qualify or “get in line”?
    No. The credit and “rolling cap” are based on first-come, first-served.
  • How can I be one of the first ones served?
    It all depends on when you file your credit claim and tax return (you file them together), and you can only do this after the close of your taxable year. As an example: if you’re approved by TRD in May, but your taxable year doesn’t end until August 31, you must wait until September 1 to cash in your credit claim and file your tax return.
  • Can you guarantee when I’ll get my credit?
    No. However, to provide guidance, the Film Office will post monthly the projected amount of credit claims per fiscal year, and TRD will post monthly the aggregate amount of actual credit claims.
  • Can you provide my investor with an approval letter?
    Since productions are not prequalified and the credit is based on first-come, first-served, productions will not receive an approval letter. It is simply a matter of: meet the criteria and you will receive a 25% tax credit, subject to the cap.
  • If you can’t provide me with a guarantee, how do I, or my investors, have assurance?
    It is simply a matter of: meet the criteria and you WILL receive a 25% tax credit, subject to the cap.
  • Deferment payments? What’s that all about?
    This is all based on the amount of your tax credit, not your budget. If your tax credit is less than $2M, you’ll be paid immediately upon authorization of payment by TRD.

    If your tax credit is between $2M - $5M, your credit will be divided into two (2) equal payments: the first payment to be paid immediately upon authorization of payment by TRD, and the second payment to be made twelve (12) months following the date of the first payment.

    If your tax credit is $5M or more, your credit will be divided into three (3) equal payments: : the first payment to be paid immediately upon authorization of payment by TRD, the second payment to be made twelve (12) months following the date of the first payment, and the third payment to be made twenty-four (24) months following the date of the first payment.

  • I’m already confused about the “super loan-out”/personal services business thing in order to qualify my nonresident actors. It sounds like it’s even more complicated now. Can you please explain in simple terms?
    Sure. In order for nonresident performing artists (actors & stunt performers) to qualify, two (2) things must happen:
    • The personal services business (aka “super loan-out”) must pay Gross Receipts Tax (GRT) in New Mexico on the portion of the payments qualifying for the credit; therefore, the personal service business must be registered to do business in New Mexico; and
    • The personal services business (aka “super loan-out”) must also deduct and remit Personal Income Tax (PIT) at the highest rate of 4.9% on the actors’ salaries or causes the PIT to be deducted and remitted.

    So, it’s actually pretty simple: The super loan-out pays GRT to the state and also withholds 4.9% PIT and remits that to the state, as well. The actors or their loan-outs will be able to file a New Mexico income tax return with their deductions in order to reclaim all or portions of the PIT.

    Here are four (4) ways to do this:
    1. Create a “super loan-out,” a secondary company, in a state outside of New Mexico. Register this “super loan-out” to do business in New Mexico and run all of the non-resident cast salaries (salaries only, no fringes) through this entity. New Mexico requires that the “super loan-out” pay a 5.125% gross receipts tax on these salaries; however this 5.125% is rebateable, so you would have a net profit of 21.15%. See example below. The non-resident actor loan-outs do NOT have to register their loan-outs to do biz in New Mexico!
    2. Many payroll companies can facilitate the “super loan-out” through their non-New Mexico offices, so check with your payroll company!
    3. You can use an existing New Mexico company as the “super loan-out,” bypassing the need to create a new company. However, you would then be subject to a higher GRT rate, currently 7% in Albuquerque or 8.1875% in Santa Fe.
    4. If you only have one or a few nonresident actors and they are willing to register their actor loan-outs in New Mexico, you can bypass the need for a “super loan-out.” The filing entity (the main production company claiming the credit) can directly pay the actor loan-outs; however, the actor loan-outs would be required to pay the 5.125% GRT and withhold and remit the PIT.
  • How did you get to the 21.15% for non-resident cast? (Example using #1 Scenario)
    Super loan-out registers to do business in NM
    Super loan-out pays Mr. Non-resident actor $100.00
    Super loan-out pays NM a 5.125% GRT on the $100.00
    (Remember that the super loan-out must also withhold and remit 4.9% PIT)
    Super loan-out has paid a total of $105.13
    Main production company/Filing Entity claims the 25% credit on $105.13 (the total invoice)
    Main production company/Filing Entity receives credit of $26.28
    Subtract the 5.125% GRT ($5.13) already paid and you have a net of $21.15 or 21.15%
  • Do the actors’ loan-outs need to register to do business in New Mexico?
    No. Unless you’re using Scenario #4 above.
  • Why can’t my production company act as the “super loan-out”?
    Simply because there wouldn’t be any transaction taking place, a requirement for the expenditure to be taxable and thus qualify for the credit.
  • What if I have a non-resident actor who doesn’t have a loan-out?
    They can still qualify as individuals. They just become “employees” of the super loan-out. Same applies, though: GRT must be paid and PIT must be withheld and remitted.
  • In another nutshell, what are the qualifications for feature films?
    Your production is intended for “reasonable commercial exploitation,” you pay all of your New Mexico obligations, and you give the State of New Mexico a credit. Oh, and you provide whatever information the Film Office requests of you.
  • When should I apply?
    Not until you’re greenlit, meaning you’re fully financed, and in prep.
  • Do nonresident crew qualify?
    No. However, their housing and per diem will.
  • Will nonresident ATL (above-the-line) qualify?
    Only actors and stunt performers – “performing artists.”
  • What about other nonresident ATL such as directors or producers?
    No, just actors and stunt performers.
  • Really, are you absolutely certain nonresident directors or producers don’t qualify?
    Yes, absolutely certain.
  • What about New Mexican ATL (above-the-line)?
    Yes, all ATL (above-the-line) New Mexico residents will qualify.
  • What determines New Mexico residency?
    The individual must consider New Mexico his/her primary residence, be domiciled here on the last day of the taxable year (December 31) and file a Resident or First-Year Resident tax return. And productions can check residency upfront through Tax & Rev, so beware nonresident crew: Falsely claiming to be a New Mexico resident will NOT get you a job!
  • Do fringes for New Mexico residents qualify?
    Yes. Employee fringe benefits paid to a payroll company qualify for the tax credit, including Pension, Health & Welfare, Holiday, Vacation. The following does not: SUI, FICA, FUI and Workers Compensation fee. Workers Compensation Insurance will qualify only if purchased through a New Mexico based agent. Fringes for non-resident crew members will not qualify.
  • Is it a rebate or a credit?
    Technically, New Mexico has a “refundable tax credit.” In other words, cash for the full amount – with no brokering required. TRD literally sends you a check or deposits the amount into your bank account.
  • Is the credit transferable or assignable?
    No.
  • Is the credit on the full amount or just the tax portion?
    The full amount. Example: you spend $95.00 and $5.00 on tax for a total of $100.00. You get $25.00 back.
  • Must I always pay tax in order for an expenditure to qualify?
    No, not in all cases will you be paying the tax. Example: you rent a home to be used as a location. The homeowner will not charge you tax; however, that location fee will qualify because now the homeowner must pay income tax on that amount. Remember, it’s anything that has a state tax attached.
  • I bought a 35mm Panavision camera. Will that qualify?
    No, that would be considered a fixed asset. Rentals of this camera would qualify.
  • Do commercials qualify?
    Yes, as long as they’re a regional or national broadcast. And we’ll require proof of media buys.
  • What do you consider a “regional commercial”?
    Airing in more than one state, but media buys must be for more than one state. If a local commercial happens to air in Texas because that cable company’s broadcast has “spill-over” across the border, that would NOT qualify. You must purchase media buys for more than one state.
  • Do video games qualify?
    Yes, but the filing entity claiming the credit must be an approved “film production company.”
  • Do student films qualify?
    Yes, as long as they’re intended for exhibition and commercial exploitation.
  • Do documentaries qualify?
    Yes. Same rules apply: intended for exhibition and commercial exploitation.
  • Do music videos qualify?
    As long as it is intended for commercial exploitation.
  • Do industrials or training videos qualify?
    No, unless they are intended for commercial exploitation – will they be distributed in the commercial marketplace? If their purpose is “in-house” (used to train employees, etc...) no, they will not qualify.
  • Do print ads qualify?
    No.
  • What about post-production?
    Yes, and stand-alone post also qualifies. So if you film in California, but decide to do your post in New Mexico, your post-production expenditures will qualify.
  • Will shipping qualify?
    Only packages sent from New Mexico will qualify.
  • Do financing fees qualify?
    No.
  • Can a non-profit organization claim the credit?
    No, because the mechanism for receiving the credit is filing a New Mexico tax return, and non-profits are tax exempt.
  • Do I have to spend a minimum amount in order to qualify?
    No.
  • Is there a per-project cap?
    No.
  • Any other caps other than the “rolling” $50M annual?
    Just on cast/talent. $20M cap, meaning a maximum credit of $5M on cast/talent per project.
  • Is there a certain percentage I must film in New Mexico in order to qualify?
    No. Even if you film one day in New Mexico, the expenditures for that one day will qualify.
  • Is there a certain percentage of New Mexico crew I must hire in order to qualify?
    No. But keep in mind since nonresident crew do not qualify, the more New Mexico crew members you hire, the greater the credit.
  • I will film most of my movie in New Mexico, but a few scenes take place in another state. If I take my New Mexico crew with me, do I get the credit on their salaries while they’re out of state?
    No.
  • I will film most of my movie in New Mexico, but a few scenes take place in another state. If I take my New Mexico equipment with me (which I paid for in full in New Mexico), do I get the credit on the full amount of the rental?
    No, just the amount when the equipment was used in New Mexico.
  • I’m using a New Mexico-based travel agency. Will a limo to LAX qualify if I book it through them?
    No.
  • Back to that non-resident director and producer thing…
    No, they s t i l l don’t qualify.
  • Must I register my production company in the State of New Mexico?
    No. TRD will use your Federal ID number (or social security #) to process the credit/return.
  • Must I use a New Mexico producer or production company in order to qualify?
    No.
  • Must I use a New Mexico bank?
    No.
  • Must I use a New Mexico payroll company in order for the crew to qualify?
    No.
  • What is the advantage of using a New Mexico payroll company?
    Their processing fee will qualify.
  • How do we receive our money?
    By filing your credit claim along with your New Mexico tax return.
  • How long does it take to get the credit?
    TRD performs audits based upon the order in which they are received, so they cannot predict a guaranteed timeframe. Other factors, such as size of credit, having “clean,” detailed ledgers, and providing TRD with documentation promptly when requested, will determine the length of the audit process. After you have signed off on the approved amount and filed your New Mexico tax return (step twelve below), it will take an additional 3 – 4 weeks to receive your credit.
  • It’s taking a long time to get my credit, and I really need the money. Can you help expedite the process?
    New Mexico has one of the fastest turnaround times in the country and TRD has a specialized four-person “Film Unit” to process film credits. You can contact Mary Ann Fernandez, Film Unit Supervisor: 505.827.0919 or maryann.fernandez@state.nm.us
  • Do I have to pay for the TRD audit?
    Not a penny. Only productions whose tax credits are $5M or more must get an outside audit from a CPA licensed to practice in New Mexico and attach the results to their application.
  • It seems too good to be true. Is it really that simple?
    Yes.
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