Eligible projects that fulfill the required obligations receive a 25% credit on the total qualifying transactions. Certain projects may also be eligible for an additional 5% on some or all direction production expenditures under the "Eligibility" link. Whereas the Film Office determines eligibility of the project and the corresponding percentage of credit, the NM Taxation & Revenue Department reviews the expenditures after production, to verify a transaction qualifies. The basic concept of this incentive is that the direct production and post production qualifying expenditures are subject to state taxation for services rendered in New Mexico. Examples of applicable state taxes are Gross Receipts Tax (for sales and services), Fuel Tax, Property Tax, and Personal Income Tax.
Any of the following “direct production expenditures” made in New Mexico qualify:
- Expenditures in New Mexico directly attributable to the production of a film or commercial audiovisual product;
- Expenditures subject to taxation by the State of New Mexico;
- Expenditures that are not claimed by another taxpayer for their film production tax credit;
- Expenditures that do not exceed the usual and customary cost of the goods and services acquired when purchased by unrelated parties; the Secretary of Taxation and Revenue Department (TRD) may determine the value of the goods or services when the buyer and seller are affiliated persons or the sale or purchase is not an arm’s length transaction;
- Wages or salaries, fringe benefits or fees for talent, management, and labor to a person who is a New Mexico resident;
- Resident employee fringe benefits paid to a payroll company including pension, health & welfare, holiday, vacation; workers compensation insurance will qualify only if purchased through a New Mexico based agent;
- Payment to a personal services business for the services of a nonresident performing artist (actors and on-camera stunt performers only) if the personal services business pays gross receipts tax in New Mexico on the portion of those payments qualifying for the tax credit and deducts and remits withheld income tax pursuant to Subsection I of Section 7-3A-3 NMSA 1978 or causes to be deducted and remitted income tax at the maximum rate in New Mexico on the portion of those payments qualifying for the tax credit.*
- Wages and per diem of directly hired, nonresident performing artist when withholding at the maximum rate (pursuant to the NM Withholding Income Tax Act, which is 4.9%) occurs from day one of service in NM.*
- Payment to a Production Services Vendor for labor services as applied to a limited number of pre-approved nonresident crew when there is a high level of production activity in-state and additional requirements are met.
- Nonresident per diem and allowannces.
- Payments to vendors that meet physical presence requirements.
*As applied to direct production expenditures for the services of performing artists, the film production tax credit authorized by this section shall not exceed five million dollars ($5,000,000) for services rendered by all lead resident and all nonresident performing artists in a production for which the film production tax credit is claimed - meaning collectively, actors’ salaries, including tax and fees, would not exceed $20 million at 25%.
CHART: Qualifying Expenditures for Individual Services
Any of the following examples of expenses qualify, when provided by a New Mexico vendor that has a physical presence in New Mexico [which includes employment by the vendor of a New Mexico resident(s) as that term is defined in the Income Tax Act]:
- Costs of the story and scenario to be used for a film;
- Costs of set construction and operations, wardrobe, accessories, and related services;
- Costs of photography, sound synchronization, lighting, and related services;
- Costs of editing and related services;
- Rental of facilities and equipment (including location fees);
- Leasing of vehicles: not including the chartering of aircraft for out-of-state transportation, however including New Mexico-based chartered aircraft for in-state transportation directly attributable to the production shall be considered a direct production expenditure provided that only the first one hundred dollars ($100) of the daily expense of leasing a vehicle for passenger transportation on roadways in the state may be claimed;
- Food and lodging: provided that only the first one hundred fifty dollars ($150) of lodging per individual per day is eligible to be claimed;
- Commercial airfare if purchased through a New Mexico-based travel agency or company for travel to and from New Mexico or within New Mexico that is directly attributable to the production: scouting expenditures prior to production may also qualify: review all sections on this page when making scouting arrangements;
- Insurance coverage and bonding if purchased through a NM-based insurance agent, broker or bonding agent;
- Post-production expenditures for services that are directly attributable to the production of a commercial film or audiovisual product, that are performed in New Mexico and that are subject to taxation by the State of New Mexico;
- Costs for a required external audit ($5 million dollars+ tax credit) by a CPA with physical presence licensed to practice in NM when services are rendered in-state;
- Other approved direct costs of producing a film in accordance with generally accepted entertainment industry practices.
The following does not qualify:
- The value of a gift greater than twenty-five dollars ($25.00);
- Artwork or jewelry except when a work of art or a piece of jewelry is used as set dressing or a prop in the film production (on-camera), then it will qualify for up to two thousand five hundred dollars ($2,500);
- Entertainment, amusement or recreation (this includes wrap parties);
- Non-resident ATL employees such as directors, producers and writers – however their per diem (including living/housing allowances) does;
- Relocation Fees;
- Non-resident crew members directly on production payroll – however their per diem (including living/housing allowance) does;
- Fringes (benefits) for (non-qualifying) nonresidents - (this includes nonresident actors/performers directly hired and on production payroll);
- SUI, FICA, FUI and Workers Compensation Assessment Tax;
- Chartering of New Mexico-based aircraft for out-of-state transportation (only New Mexico-based aircraft for in-state transportation will qualify);
- Purchases made on the Internet unless the seller is located in New Mexico and GRT applies;
- Payments made to the State or Federal Government: this would include permits and postage – the exception is public parking lots for which the public pays and still has access;
- Incoming FedEx or UPS packages - they will only qualify if they’re being sent from New Mexico;
- Purchases made on Native American tribal lands, including businesses like gas stations, restaurants, hotels, etc., located on these lands;
- Cell phone reimbursements when the billing address is outside of New Mexico;
- Expenditures incurred and paid by a third party and claimed by the qualified film production company will not qualify - only expenditures directly incurred and paid by the qualified film production company (approved and on file with the film office) to the vendor of the services or property will qualify;
- Expenditures made to Section 501 (c), non-profit organizations do not qualify because these organizations are tax exempt - these include Goodwill, Salvation Army, churches, museums, schools, etc.
TIP: It is not necessary to register the production company (filing entity) to do business in New Mexico. NM Tax & Rev Department will use your Federal ID number (or social security number if individual) to process the credit/return (creating a temporary business Id.). However, if the company has withholding obligations in New Mexico, they will need a CRS ID#. See FAQs.