There are numerous Direct Incentives that the State of New Mexico offers.
Beer and Wine Producers Preferential Tax Rate (NM Taxation & Revenue Dept.)
New Mexico offers a preferential excise tax rate for microbreweries annually producing less than 5,000 barrels of beer and for small wineries producing less than 560,000 liters of wine.
The Liquor Excise Tax Act imposes taxes on beer, wine and spirituous liquors. The basic tax rate for beer produced by a brewery in New Mexico is 41 cents and the basic tax rate for wine is 45 cents per liter.
- Beer produced by a microbrewery is taxed at 8 cents per gallon.
- Wine produced by a small vintner carries a tax of 10 cents per liter on the first 80,000 liters, then 20 cents on production up to 560,000 liters.
Collateral Support Loan Participation Program (NM Finance Authority)
The New Mexico Finance Authority partners with banks to provide financial capital for businesses that are seeking to create or retain jobs. The Collateral Support Loan Participation Program lowers the interest rate charged to businesses by mitigating the bank’s risk by purchasing a portion of the bank’s loan and accepting a subordinated loan recovery position.
Program applications are submitted by the bank on the business’s behalf. The bank submits an application with the information that was used to determine the applicant’s creditworthiness (financial statements, appraisals, business plans, etc.), and the business must submit an Economic Disclosure form to identify business ownership.
Loan proceeds must be used for a business purpose, which includes start-up costs, working capital, equipment, inventory, franchise financing, acquiring real estate, and construction.
The amount of collateral support is determined by the business location, the term of the loan, and the collateral position offered. The New Mexico Finance Authority does not charge any fees to the borrower for this service.
To qualify, the business must:
- be located and authorized to operate in New Mexico,
- have no more than 500 employees, and
- meet a bank’s lending criteria with the exception of having adequate collateral.
Community Development Incentive Act (City of Portales and Roosevelt County)
Municipalities and counties may enact a resolution to exempt up to 100% of commercial personal property taxes at a new business facility, including some facility expansions, for up to 20 years. The only portion of business personal property tax that cannot be abated is the amount owed to the local school district.
A ‘new business facility’ means a facility that is employed in the operation of a revenue-producing enterprise. This includes any factory, mill, plant, refinery, warehouse, dairy, feedlot, building, or complex of buildings located within New Mexico, including the land on which the facility is located, and all machinery, equipment, and other real and tangible personal property located at or within the facility and used in connection with the revenue-producing enterprise.
The Community Development Incentive Act (CDIA) applies only to equipment and commercial personal property. This incentive is designed to give businesses an alternative to property tax abatement without using “tax abatement” Industrial Revenue Bonds (IRBs), particularly if the project is too small to warrant the time and expense associated with IRBs.
This commercial personal property tax exemption does not apply to replacement facilities or the acquisition of land or buildings. Unlike IRBs, this incentive does not provide relief from gross receipts tax on the purchase of equipment.
Industrial Revenue Bonds (NM Finance Authority & City of Portales)
New Mexico has two types of industrial revenue bonds (IRBs) available. One is the traditional “project financing IRB.” This is a mechanism that raises capital by issuing revenue bonds. New Mexico also offers a “tax abatement IRB”, which is used to reduce property, gross receipts, and compensating taxes on capital items such as land, buildings, furniture, furnishings, and equipment.
Project Financing IRBs
Although interest rates are lower with financing through IRBs, the issuance costs are substantial. Total issuance cost ranges from $35,000 to $75,000, depending on the complexity of the financing. The lending and approval process generally takes 3 to 6 months. A general rule-of-thumb is that this financing approach should not be used for projects of less than $5 million, though others place the figure as low as $2 million. Tax-exempt IRBs only apply to manufacturing facilities and must utilize bond counsel to ensure that Internal Revenue Service requirements are met.
Tax Abatement IRBs
The tax abatement IRB is fundamentally a tax subsidy, which may be one or a combination of a property tax exemption, a gross receipts tax deduction, an exemption of bond interest from New Mexico income taxation, and an exemption of bond interest from federal income taxation. An IRB of less than $10 million may also be exempt from federal taxation.
Incorporated local governments in New Mexico are authorized to acquire, own, lease, or sell capital items for the purpose of promoting the location or expansion of manufacturing, industrial, and commercial enterprises by issuing IRBs for terms of up to:
- 30 years for land and buildings, and
- the useful life of equipment, furniture and furnishings.
By state law, retail trade is excluded from participation with the City of Portales. But, Roosevelt County is allowed to issue tax abatement IRBs for retail trade.
Instead of “purchasing” a capital item directly, companies enter into either an installment sales agreement or a lease agreement whereby the local government “acquires” the project and then sells or leases the project to the business. Then, by acting as the local government’s agent, all capital items that are purchased with bond proceeds are exempt from gross receipts and compensating taxes. The company purchases the capital items from the local government for a nominal amount at the end of the lease.
The local government will normally negotiate a payment in lieu of property taxes and it may elect to shorten the term of the lease below the 30 year maximum. All local governments in Roosevelt County are willing to enter IRB agreements.
Job Training Incentive Program (JTIP) (NM Economic Development Dept.)
JTIP provides cash reimbursement for classroom training, customized training, or on-the-job training provided for new jobs or for training on new equipment. The jobs must be full-time and year-round. The trainee must be a new hire that has lived in New Mexico for at least one year and has not dropped out of high school within the 3 months prior to hire.
Eligibility for JTIP is determined by two factors – expansion of the workforce and the type of business. The qualified employment expansion may be at start-ups, companies relocating to New Mexico, early-stage manufacturers, or existing companies that are at or above their 2-year employment average and are creating new positions.
To qualify, companies must:
- manufacture a product in New Mexico,
- be considered a “green” industry, or
- be a non-retail service provider that receives over 50% of its revenue from customers outside of New Mexico.
- Businesses with locations in multiple states may also qualify if the company headquarters is located in New Mexico.
Each job is classified according to difficulty in order to determine the amount of time the program will provide reimbursement. Pay scales must meet a minimum wage requirement, dependent on the position’s classification.
Companies submit a written proposal that must be approved by the JTIP board of directors before hiring eligible employees. Any custom training must occur within the approved training period.
Maximum reimbursement in the City of Portales and Roosevelt County is 65% of wages for six (6) months.
Local Economic Development Act (LEDA) (NM Economic Development Dept. & City of Portales)
New Mexico allows businesses to benefit from LEDA assistance from both the state and the municipality. State LEDA assistance is administered by the NM Economic Development Department and is offered as a grant to the local government in order to stimulate economic development. State LEDA funds are limited to permanent infrastructure and improvements, which includes land and buildings.
The City of Portales offers LEDA funding collected at the local level as either grants or low-interest loans. The City’s LEDA funding may be used for broader purposes than are allowed through state LEDA funding.
All LEDA agreements, whether state or local, are negotiated on a case-by-case basis.
STEP-UP Job Training Program (NM Economic Development Dept.)
Since 2005, the NM Economic Development Department has supplemented JTIP with STEP-UP, a program that helps qualified companies train their existing workforce in new technologies or skills. STEP-UP can also be used to prepare an employee for advancement to earn a higher salary. Qualified activities are training associated with:
- the integration of a new technology into production,
- product line adjustments to keep up with market demands, or
- substantial changes in delivery processes.
To be qualify for STEP-UP, an existing New Mexico business must:
- meet JTIP eligibility requirements,
- have been in operation for at least 1 year prior to the STEP-UP application, and
- have at least one full-time employee.
The company is reimbursed for between 50% and 70% of total eligible costs, capped at $2,500 per trainee.