TITLE 3 TAXATION
CHAPTER 13 BUSINESS TAX CREDITS
PART 2 INVESTMENT TAX CREDIT
3.13.2.1 ISSUING AGENCY: Taxation and
Revenue Department
[3.13.2.1 NMAC - N,
4/28/2000]
3.13.2.2 SCOPE: This part applies
to all persons carrying on a manufacturing operation in New Mexico and to any
other person eligible to obtain the investment tax credit.
[3.13.2.2 NMAC - N,
4/28/2000]
3.13.2.3 STATUTORY AUTHORITY: Section
9-11-6.2 NMSA 1978.
[3.13.2.3 NMAC - N,
4/28/2000]
3.13.2.4 DURATION: Permanent.
[3.13.2.4 NMAC - N,
4/28/2000]
3.13.2.5 EFFECTIVE DATE: April 28,
2000, unless a later date is cited at the end of a section, in which case the
later date is the effective date.
[3.13.2.5 NMAC - N,
4/28/2000]
3.13.2.6 OBJECTIVE: The objective
of this part is to interpret, exemplify, implement and enforce the provisions
of the Investment Credit Act.
[3.13.2.6 NMAC - N,
4/28/2000]
3.13.2.7 DEFINITIONS; "SUBJECT TO
DEPRECIATION" DEFINED: For purposes of Section 7-9A-3 NMSA 1978, "subject to
depreciation" means the taxpayer's federal income tax return must include
a depreciation expense with respect to equipment for which an investment credit
is sought or claimed. Equipment depreciated under the accelerated cost recovery
system, I.R.C. Section 168, and property for which the taxpayer makes an
election under Internal Revenue Code Section 179 are "subject to
depreciation"
[3.13.2.7 NMAC - Rp 3 NMAC
13.6.7, 4/28/2000]
3.13.2.8 INDUSTRIAL REVENUE BONDS
A. Any equipment that is placed into
service on or after January 1, 1991, under the provisions of either the
Industrial Revenue Bond Act or the County Industrial Revenue Bond and that
otherwise meets the requirements of the Investment Credit Act is "qualified
equipment" for the purpose of the Investment Credit Act.
B. Tangible personal property placed
into service prior to January 1, 1991, under the provisions of either the
Industrial Revenue Bond Act or the County Industrial Revenue Bond Act is not
"equipment" for the purpose of the Investment Credit Act.
[3.13.2.8 NMAC - Rp 3 NMAC
13.6.8, 4/28/2000]
3.13.2.9 ITEMS NOT
"EQUIPMENT": Tangible personal property which is not a
machine, mechanism or tool, or a component or fitting thereof, is not
"equipment" for the purpose of the Investment Credit Act. Accordingly such items as furniture, shelving
and supplies are not "equipment". Equipment that is neither essential
to nor used in conjunction with the manufacturing plant will not qualify for
the investment credit, even if that equipment is physically located in the
plant. Nonqualifying equipment may include, but is not limited to: coffee
makers, kitchen equipment used in an employee cafeteria and televisions or
radios used in an employee lounge or in a reception area.
[3.13.2.9 NMAC - Rp 3 NMAC
13.6.9, 4/28/2000]
3.13.2.10 ITEMS WHICH MAY BE INCLUDED AS
"EQUIPMENT": The term "manufacturing operation" is defined as a plant
where personnel perform production tasks "in conjunction with equipment
not previously existing at the site" to produce goods. Equipment need not
be employed exclusively in the manufacturing process as long as the equipment
is physically located in the plant and is used in conjunction with the
production of goods. Therefore, equipment used in conjunction with the
production of goods may include, but is not limited to, such items as
manufacturing process equipment, lights, boilers, air conditioners, smoke
detectors and other equipment essential to maintaining the proper climate for
the manufacturing process, packaging equipment used to put the manufactured
product in marketable form, warehousing equipment and computers used to control
the manufacturing process or to inventory and schedule the shipping of
manufactured products.
[3.13.2.10 NMAC - Rp 3 NMAC
13.6.10, 4/28/2000]
3.13.2.11 EQUIVALENT OF ONE FULL-TIME
EMPLOYEE: To calculate the number of
full-time-equivalent employees, add the average weekly hours worked or expected
to be worked by all employees whose regular weekly work hours are or are
expected to be less than forty hours. Divide the total by 40 and round down to
the nearest whole number. The rounded number plus the number of employees who
work or are expected to work an average of 40 or more hours per week is the
number of full-time equivalent employees.
[3.13.2.11 NMAC - Rp 3 NMAC
13.7.8, 4/28/2000]
3.13.2.12 EMPLOYMENT INCREASE ESSENTIAL:
A. The investment credit is available
only to manufacturers who increase employment in the relevant periods.
Manufacturers who do not meet the employment requirement do not qualify for the
investment credit, regardless of the amount of equipment acquired.
B. Example:
(1) X is a manufacturer
who establishes a new manufacturing operation in New Mexico on August 1 of year
1. Prior to establishing this plant, X had no operations or employees in New
Mexico. Beginning with June 15 of year 1 through August 1, X hires 20 full-time
equivalent employees to work in that plant. On January 15 of year 2, X submits
an application for an investment credit with respect to equipment placed in the
new plant as of August 1. Since on January 15 of year 1 X had no employees in
New Mexico, X may count all 20 employees in meeting the employment requirement
for this application.
(2) X acquires and installs additional new
equipment during the period September 1 through December 15 of year 1, during
which time X hires two more full-time equivalent employees. Unfortunately sales
are below X's expectations and so in April of year 2 X lays off 3 full-time
employees. In August of year 2, X files a second application for an investment
credit with respect to the additional equipment. None of the 20 employees
counted in the first application may be counted for purposes of meeting the employment
requirement in the second application. Since X has in fact decreased employment
over the relevant time period, X does not meet the employment requirement and
X's application for a second credit will be denied.
[3.13.2.12 NMAC - N,
4/28/2000]
3.13.2.13 APPLICATION OF THE CREDIT: The credit
allowed by Section 7-9A-8 NMSA 1978 may not be applied against any local option
gross receipts tax imposed by a county or municipality.
[3.13.2.13 NMAC - Rp 3 NMAC
13.8.8, 4/28/2000]
3.13.2.14 CREDIT NOT TRANSFERABLE:
A. Any amount of investment credit
claimed and approved may be applied by the claimant only against the gross
receipts, compensating and withholding taxes owed by the claimant. The credit
amount may not be transferred to any other person, including an affiliate.
B. Example:
(1) Corporation T sets
up a manufacturing operation in New Mexico. T subsequently qualifies for
$50,000 in investment credit. After applying $13,000 to its own gross receipts,
compensating and withholding tax liabilities, T creates a subsidiary
corporation, S, to own and operate all of T's New Mexico business, including
the manufacturing operation. T may not transfer the $37,000 remaining
authorized investment credit to S nor may S apply any of the remaining tax
credit to S's gross receipts, compensating and withholding tax liability. T, to
the extent T still has gross receipts, compensating and withholding tax
obligations, may apply the $37,000 balance against those obligations.
(2) When two or more
corporations merge, the resultant corporation is a continuation of any
predecessor corporation. When a business organization changes its form, as for
example from a sole proprietorship to a corporation or from a corporation to a
limited liability company, so that the resultant entity is a successor in
business to the predecessor, the resultant entity shall be deemed a
continuation of the predecessor for investment credit purposes. In both cases,
since there is no transfer, the resultant entity may claim any amount of
approved but unclaimed investment credit held by a predecessor.
[3.13.2.14 NMAC - N,
4/28/2000]
3.13.2.15 REPORTING NUMBER OF EMPLOYEES -
ESTIMATES: To meet the employment requirement, the credit
claimant must report the number of full-time-equivalent employees employed on
the day the credit is applied for. This number is to be compared with the
number of full-time-equivalent employees on the same day in the prior year.
Because complete employee data may not be available for the day on which the
credit is applied for, a credit claimant may estimate the number of
full-time-equivalent employees employed on the day the credit is applied for,
provided that the claimant must provide the actual number of
full-time-equivalent employees within forty-five days from the end of the
calendar quarter in which the claim is applied for. The fact that an estimate
is used in the claim must be clearly indicated. The department may withhold
approval of the claim until the correct number is provided and will deny the
claim if the correct number is not provided.
[3.13.2.15 NMAC - N, 5/15/07]
3.13.2.16 WHEN CLAIM BARRED: If a taxpayer claims any amount of research
and development small business tax credit with respect to a reporting period, the
taxpayer may not claim any amount of approved investment credit with respect to
that same period. If for the same reporting period an amount of investment
credit is claimed in addition to any amount of research and development small
business tax credit, the amount of investment credit will be disallowed by the
department, which may result in an underpayment of tax. The taxpayer is not
barred from applying for approval of new or additional investment credit with
respect to qualified equipment purchased or introduced into New Mexico during
that reporting period.
[3.13.2.16 NMAC - N, 5/15/07]
HISTORY OF 3.13.2 NMAC:
Pre-NMAC History: The material in this part was derived from
that previously filed with the State Records Center:
R.D.-I.C. Regulation 3(C):1,
Regulations Pertaining to the Investment Credit Act Subsection C of Section
7-9A-3 NMSA 1978, 8/1/84.
R.D.-I.C. Regulation 6:1,
Regulations Pertaining to the Investment Credit Act Section 7-9A-6 NMSA 1978,
8/1/84.
R.D.-I.C. Regulation 7.1:1,
Regulations Pertaining to the Investment Credit Act Subsection C of Section
7-9A-7.1 NMSA 1978, 8/1/84.
R.D.-I.C. Regulation 8:1,
Regulations Pertaining to the Investment Credit Act Section 7-9A-8 NMSA 1978,
8/1/84.
TRD Rule IC-93, Regulations
Pertaining to the Investment Credit Act, 2/17/94.
History of Repealed Material:
3 NMAC 13.6, Qualified
Equipment - Repealed, 4/28/00.
3 NMAC 13.7, Employment
Requirements - Repealed, 4/28/00.
3 NMAC 13.8, Credit for Taxes
- Repealed, 4/28/00.
NMAC History:
3 NMAC 13.6, Qualified
Equipment, filed 9/3/96.
3 NMAC 13.7, Employment
Requirements, filed 9/3/96.
3 NMAC 13.8, Credit for
Taxes, filed 9/3/96.
3.13.2 NMAC, Investment Tax
Credit, filed 4/17/00.