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Tax Incentives
Technology Jobs Tax Credit
The Technology Jobs Tax Credit is commonly referred to as the Research
and Development Credit, the Credit Act is designed to provide a favorable
tax climate for technology-based businesses engaging in research and development.
Although the R&D Credit was first designed for research and development
companies, the new credit is available to any company that conducts some
aspect of research and development and is not limited to new or recently
relocated businesses.
The basic credit provided by the R&D is equal to 4% of the amount
of qualified expenditures made by a company conducting research within
its New Mexico Facilities. Qualifying businesses are also eligible to
claim additional tax credits if the company's annual payroll increases
by at least $75,000 over its base payroll expense. The respective company
must also have a $75,000 increase in its annual payroll expense for every
$1,000,000 in qualified expenditures claimed by the business in a taxable
year. Companies may claim the amount of the credit against its compensating
tax, gross receipts tax or withholding tax that may be due to the state.
The credit cannot exceed the tax normally due, but can be carried forward
into the next reporting period.
Investment Credit
New Mexico has an Investment Credit Act (7-9A-1) to augment its favorable
tax climate for manufacturing operations, and promote increased employment
in New Mexico. The investment credit provided for in the act is an amount
equal to the compensating tax rate (5% applied to the value of qualified
equipment). The taxpayer incorporating the qualified equipment into a
manufacturing operation in New Mexico, provided certain employment conditions
are met, may claim the credit. The value of qualified equipment is the
adjusted basis established for equipment under the applicable provisions
of the Internal Revenue Code.
The employment conditions are:
For the first $2 million of equipment, one employee must be added for
each $250,000 of equipment, for which the credit is claimed,
For amounts over $2 million and up $30 million, one employee must be added
for each $500,000 of equipment; and
For amounts exceeding $30 million, one employee must be added for each
$1 million of equipment.
A taxpayer must apply for the credit. Additional information on the credit
is provided with application forms, available from the NM Taxation and
Revenue Department. Once the department grants approval, the amount of
any available credit may be applied against the taxpayer's compensating
tax, gross receipts tax, (does not include county or municipal taxes)
or withholding tax due. The amount of investment credit claimed on any
CRS return is limited to 85% of CRS taxes due. On January 1 of any year
certain claimants may cash in their remaining approved credit.
Capital Equipment Tax Credit
This is an investment credit specifically for telephone call centers locating
or expanding in the rural part of New Mexico (defined as anywhere outside
Bernalillo, Dona Ana, San Juan or Santa Fe counties, or the city of Rio
Rancho). Qualifying equipment must be used for taking inbound calls or
recording or processing messages. Like the Investment Credit, the business
may apply for and receive approval of credits against any gross receipts,
compensating or withholding tax due. A new feature of this credit is that
some or all of it must be repaid if the center closes down or the equipment
is moved within 48 months of the approval of the credit.
Rural Job Tax Credit
Eligible employers may earn a credit for each qualifying job created after
July 1, 2000. The credit may be applied against the state taxes due on
the CRS return excluding local option gross receipts taxes or against
personal or corporate income tax.
Business Inventory
All sales at wholesale are deductible for purposes of gross receipts (sales)
tax. Business Inventories are exempt from all taxation until sold.
Goods-in-Transit
Property in transit through the state to a destination outside the state,
as well as property from outside the state, consigned to a warehouse for
delivery out of state, is exempt from all taxation.
Research and Development Gross Receipts Tax Deduction
Any service that is exported from the state, including research and development
services, are not charged gross receipts tax.
Corporate Child Care Tax Credit
A credit against corporate income tax is allowed for certain childcare
services provided or paid for by an employer for employee' children for
30% of eligible costs up to $30,000. Unused credit amounts may be carried
forward for three years.
Interstate WATS Tax Exemption
New Mexico law provides for an exemption from interstate telecommunications
gross receipts taxes (sales taxes) of 4.25% (WATS) and private communication
services. WATS services are defined as telephone services that entitles
a subscriber to either make or receive large volumes of communications
to or from persons in specific geographic areas. Private communications
services are defined as dedicated service for individual customers entitled
to exclusive or priority use of communication channels between a location
within New Mexico and one or more locations outside the state.
Source: New Mexico Taxation and Revenue Department, 505-827-0700
Welfare to Work and Work Opportunity Tax Credits
The taxpayer Relief Act of 1997 reauthorized the Work opportunity Tax
Credit (WOTC) and established a new Welfare-to-Work Tax Credit for hiring
long term welfare recipients, which will be administered under the WOTC
certification procedures established by the Small Business Job Protection
Act of 1996 (P.L. 104-188). Long-term welfare recipients can now earn
their employers a Welfare-to Work Tax Credit of up to $3,500 for their
first year of employment. Moreover, the number of new hires who can qualify
employers for these tax credits is unlimited.
What Welfare Recipients Qualify Employers For these Federal Tax
Credits?
"Long-term family assistance recipients" who can earn their
employers the Welfare-to-Work Tax Credit of up to $8,500 per new hire
are members of a family:
That received Aid to Families with Dependent Children (AFDC) or its
successor program, Temporary Assistance for Needy Families (TANF), for
at least 18 consecutive months before date of hire, or
Whose AFDC or TANF eligibility expired under federal or state law after
August 5, 1997,that received AFDC or TANF for a total of at least 18
months, beginning after August 5, 1997, who begin work any time after
December 31, 1997, and before May 1, 1999.
The Welfare-to-Work Tax Credit for new hires employed 400 or more hours
or 180 days is 35% of qualified wages for the first year of employment
and 50% for the second year; qualified wages are capped at $10,000 per
year. Other welfare recipients who can earn their employers the Work
Opportunity Tax Credit of up to $2,400 per new hire are members of a
family:
That received AFDC or TANF for a total of any 9 of the 18 months before
date of hire, Who begin work any time after September 30, 1997, and
before June 30, 1998.
The WOTC for new employed 400 or more hours is 40% of qualified wages
for the first year of employment; qualified wages are capped at $6,000.
The credit for those employed 120 to 400 hours is 25%.
What Steps Do Employers Need To Take To Earn These Tax Credits?
Employers must apply for and receive certification from their state employment
agency that their new hire belongs to one of the nine groups of job seekers
eligible for the Welfare-to-Work or Work Opportunity Tax Credit before
claiming it on their federal income tax return. To apply for certification
that a new hire qualifies for one of these tax credits, employers need
only complete two one-page forms:
IRS Form 8850, by the day the job offer is made, and
U.S. Department of Labor ETA 9061 (or ETA 9062 if their job applicant
has already been conditionally certified), and
Mail the signed IRS 8850 and ETA 9062 to their state employment agency
WOTC Coordinator; the IRS 8850 must be mailed to the State WOTC Coordinator
no later than 21 days after the new hire's start date.
To get IRS Form 8850 (Pre-Screening Notice and Certification Request
for the Work Opportunity and Welfare-to-Work Tax Credits), download it
from http://www.irs.ustreas.gov
or call IRS at 1-800-829-3676.
To get ETA 9061 (Individual Characteristics Form), download it from http://www.doleta.gov/wotc.htm
or call your state employment agencyWOTC Coordinator.
What Other New Hires Can Earn Employers The Work Opportunity Tax Credit?
18-24 year old members of a family receiving food stamps,
Veterans who are members of a family receiving food stamps,
Vocational rehabilitation referral,
18-24 year old residents of one of the 105 federally designated Empowerment
Zones and Enterprise Community (EZ/EC'S),
16-17 year old EZ/EC residents hired as Summer Youth employees
Low income ex-felons, and
Supplemental Security Income recipients - a new WOTC target group
Contact information:
WOTC WEBSITE:http://www.doleta.gov/wotc.htm
or call 202-219-9092.
For information on the tax related aspects of these tax credits, call
the IRS at 202-622-6060.
For information on the Department of Labor's Welfare to Work Grant Program,
visit its website:http://wtw.doleta.gov
or call 202-208-7281.
For information about EZ/EC's, visit their website: http://www.ezec.gov
or call 1-800-998-9999.
*Note: Employers may claim both the Welfare to Work and the Work Opportunity
tax credit for the same individual, but not in the same taxable year.
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