GENERAL QUESTIONS
►Is it a rebate or a credit? NMFO
It’s actually a refund as New Mexico offers a “refundable tax credit” for film and television production. In other words, the production receives a cash refund (which some may refer to as a rebate) for the full qualifying amount, with no brokering required, when a state return is filed. The NM Tax & Revenue Department literally sends a check or deposits the amount into the filing entity’s bank account. If your company has a tax liability in New Mexico, the liability is offset by any approved credit amount.
►What is the percentage of credit your state offers? NMFO/ TRD
The refund amount is 25% as applied to each total qualifying expenditure; however, there is an extra 5% available for certain qualifying projects dependent upon their NM budgets: 1) for TV Series with an order of six episodes based and a minimum of $50K per episode OR 2) for projects that are deemed a “stand alone pilot” intended for series in New Mexico (if picked up) may also qualify OR 3) for projects (e.g. Features) that utilize the premises of a qualifying production facility or stages; OR 4) shooting in rural areas (located at least 60 miles of the exterior boundaries of certain counties, aka The SMZ). There is also a limited number of nonresident BTL crew that may qualify for a flat 15% (or an NMFO Director approved 20%) of your total NM BTL crew wages ($): through the Nonresident Crew Exceptions program.
►When should I apply? NMFO
To begin the incentive program process, the new registration form and all required documents must be submitted to NMFO at least 30-days before principal photography begins. See REGISTRATION FORMS
►When does your fiscal year begin? In other words, when is your “new pot of money” available? NMFO
The state’s fiscal year begins July 1st of each year and ends June 30. FY20, for instance, is July 1, 2019 through June 30, 2020.
►Will I have to pre-qualify prior to production? NMFO
NMFO will email the production a certification letter stating the certified refundable tax credit amount, determination if a CPA audit is needed and confirm the date of the last qualifying expenditure.
PROJECT QUALIFICATIONS
►What determines if a project qualifies? NMFO
If a project is considered a “commercial audiovisual product,” it is likely to qualify. Also defined as a “film” for the purposes of this incentive program, it must be commercially viable – that is available to the public to be viewed either through a media buy or direct purchase. The production or product must be able to be fixed on a medium, reproduced, and intended for commercial exploitation. The entity registering is then considered the “film production company,” and the qualifying expenditures are submitted after they are made as part of the refund process.
►What are some types of projects that qualify? NMFO
In addition to features, television, shorts, documentaries and commercials, other types of projects that may qualify are music videos, mobile apps, video games, virtual reality (VR), animation, internet commercials and webisodes. Elements and content development for websites or software do not.
►Must I register my production company in the State of New Mexico?
The production company needs to register with the Taxation and Revenue Department for a Customer Account only. This needs to be done prior to the Film Credit application being submitted. If you have any questions, please email TRD-FilmCredit@state.nm.us or call 505.795.1735.
►Must I use a New Mexico producer or production company in order to qualify? NMFO
No. However, a Federal Identification Employer Number (FEIN) would be required to file.
►Will I have to spend a minimum amount in order to qualify? NMFO
No—we have no minimum spend. However, the production must shoot at least one day of principal photography in New Mexico.
►Is there a certain percentage of New Mexico crew I must hire in order to qualify? NMFO
No. However, the more resident crew members hired, the higher your percentage of rebate on NM resident crew wages.
►Must I use a New Mexico bank? NMFO
No.
►Can I get a loan for my project from a local New Mexico bank? NMFO
Yes. Many local banks will loan to production companies against the incentive—depending on their own specific loan qualifications and approval processes.
►What are the basic qualifications for feature films? NMFO
In addition to the documents submitted to the NMFO (see the 5 PHASES section on nmfilm.com), the project must be intended for “reasonable commercial exploitation;” all of your New Mexico obligations must have been met (e.g. vendors, crew and actors paid); and, a state acknowledgement and logo must be included in the screen credit for all projects with a screen crawl (including television episodes) see “END CREDITS” section here in FAQs.
►Is there a map that specifically outlines which areas of New Mexico qualify for the rural 5% uplift? TRD
Yes! Here it is: MAP OF NM / RURAL AREAS OUTSIDE THE 60 MILE ZONE of ABQ/SANTA FE CORRIDOR
►What Television Projects qualify for the additional 5% credit? NMFO
For series that have been ordered by a network, and that order has at least 6 episodes to be shot in NM (which may include the pilot), and each episode has a NM budget of at least $50K each, then the production may qualify for a 30% credit on all qualifying direct production expenditures except nonresident performing artists. Note: the episode may not be fully shot in NM, but at least $50K of it applies to NM. Proof of order (e.g. a letter from the Network) must be provided to the Film Office along with a list of the applicable episode titles and NM budgets. This documentation is required with the NMFO project registration. Standalone pilots intended for series in New Mexico (if picked up) may also qualify for the additional 5%. Note: all episodes require a state acknowledgement and a state logo during the end crawl. see “END CREDITS” section here in FAQs.
►Do documentaries qualify? NMFO
Yes – the same rules apply as to other projects: the documentary must be intended for exhibition and commercial exploitation.
►Do commercials qualify? NMFO
Yes, as long as they’re a regional or national broadcast. Internet Commercials may also qualify. All commercials require proof of media buys and often a letter is needed from the client or ad agency explaining the relationship of the parties involved and an acknowledgement as to who will be claiming the credit.
►What do you consider a “regional commercial”? NMFO
Regional commercials air in more than one state and have media buys 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 and provide that information to the film office.
►What is a “media buy”? NMFO
The media buy is basically equivalent to purchasing “ad space.” For Regional Commercials, at least two different regions, where the commercial will air, must be purchased – in other words, not just in-state. For the internet, it may be the “space” (e.g. commercials that stream for :15 before Yahoo News). Videos streaming within a company’s own website would not qualify as there would be no “ad space” purchased.
►What other projects may qualify for the incentive program? NMFO
Content-based Mobile Apps and Video Game prototypes may qualify when they are commercially viable and are for public purchase or for download through a mobile platform. Only newly created elements qualify for subsequent versions. Software apps and bug fixes to the prototype do not qualify. (Nor do related licenses as they likely are vendor purchases that are not subject to state taxation.) Note: these projects are reviewed on a case by case basis.
►Do music videos qualify? NMFO
Yes, as all projects, as long as they’re intended for exhibition and commercial exploitation.
►Do industrials or training videos qualify? NMFO
No, unless they are intended for commercial exploitation – consider whether they will be distributed in the commercial marketplace. If their purpose is “in-house” (used to train employees, etc…) or for one client, then no, they will not qualify. If it is a product for public purchase and viewing, then it will likely qualify.
►Do student films qualify? NMFO
Yes, as long as they’re intended for exhibition and commercial exploitation and fall under a project type as listed on the website. Example: a short intended for submission to film festivals will qualify; however, trailers will not.
►Do print ads qualify? NMFO
No. In fact, no marketing or promotional expenses qualify. Print ads, screening costs, trailers, web design, etc., do not qualify as projects or as expenses.
►What are my obligations after production besides my tax application submission? NMFO
All qualifying projects must notify the Film Office once they’ve paid all their bills, send a list of locations where they shot in NM when applicable, submit post-accounting contact information as soon as it’s available, and acknowledge the State of New Mexico in any screen credits. Features and episodes also require a Logo in addition to an acknowledgement. Don’t forget additional eligibility requirements, like Media Buys or documents for the extra 5%, may be needed to be submitted if they did not come with the registration form. (Also, if your project has a poster, we’d love to display it in our office!) See How the NM Tax Credit Process Works for all details.
►What does NMFO have to report?
According to SB2 (as of 7/1/19): NMFO
“7-2F-4. REPORTING—ACCOUNTABILITY —
- The economic development department shall:
(1) collect data to be used in an econometric tool that objectively assesses the effectiveness of the credits provided by the Film Production Tax Credit Act;
(2) track the direct expenditures for the credits;
(3) with the support and assistance of the legislative finance committee staff and the taxation and revenue department, review and assess the analysis developed in Paragraph (1) of this subsection and create a report for presentation to the revenue stabilization and tax policy committee and the legislative finance committee that provides an objective assessment of the effectiveness of the credits; and
(4) report annually to the revenue stabilization and tax policy committee and the legislative finance committee on aggregate approved tax credits made pursuant to the Film Production Tax Credit Act and the past performance of and current outlook for the Film Production Tax Credit Act, including:
(a) the aggregate amount of credits paid subject to the aggregate amount allowed pursuant to Subsection B of Section 7-2F-12 NMSA 1978 in the prior fiscal year and the current amount of claims in the queue pursuant to Subsection C of Section 7-2F-12 NMSA 1978;
(b) the aggregate amount of approved credits paid in the prior fiscal year for expenditures by certain film production companies that are not subject to the aggregate amount of claims allowed pursuant to Section
7-2F-12 NMSA 1978;
(c) the number of applicants receiving the additional credit for television pilots and series pursuant to Section 7-2F-7 NMSA 1978;
(d) the number of applicants receiving the additional amount for expenditures made in certain areas of the state pursuant to Section 8 of this 2019 act;
(e) the aggregate amount of direct production expenditures and post production expenditures in New Mexico during the prior fiscal year, shown by county;
(f) the total number and wages of
New Mexico residents employed by film production companies in the prior fiscal year; and
(g) any other relevant information, as determined by the division.
- The division shall develop a form on which the taxpayer claiming a credit pursuant to the Film Production Tax Credit Act shall submit a report to accompany the taxpayer’s application for that credit.
- With respect to the production on which the application for a credit is based, the film production company shall report to the division at a minimum the following information:
(1) the total aggregate wages of the members of the New Mexico resident crew;
(2) the number of New Mexico residents employed;
(2) the number of New Mexico residents paid;
(4) the total number of hours worked by New Mexico residents;
(5) the total expenditures made in New Mexico that do not qualify for the credit;
(6) the aggregate wages paid to the members of the nonresident crew while working in New Mexico;
(7) the aggregate amount of direct production expenditures and postproduction expenditures in New Mexico in the prior fiscal year, shown by county; and
(8) other information deemed necessary by the division and economic development department to determine the effectiveness of the credit.
- For purposes of assessing the effectiveness of a credit, the inability of the economic development department to aggregate data due to sample size shall not relieve the department of the requirement to report all relevant data to the legislature. The division shall provide notice to a film production company applying for a credit that information provided to the division may be revealed by the department in reports to the legislature.”
►Does New Mexico require end credits to get the incentive?
Yes. Please refer to SB2 (as of 7/1/19): NMFO
END CREDITS:
- A production for which the new film production tax credit is claimed pursuant to Paragraph (1) of Subsection B of this section shall contain an acknowledgment to the state of New Mexico. Unless otherwise agreed upon in writing by the film production company and the division, the acknowledgment shall be in the end screen credits that the production was filmed in New Mexico and a three-second static or animated state logo provided by the division shall be included and embedded in the following:
(1) end screen credits before the below-the-line crew crawl for the life of the project of long-form narrative film productions; and
(2) body of the program for the life of television episodes, the placement of which shall be:
(a) in the opening sequence;
(b) as a bumper into or out of a commercial break; or
(c) in a prominent position in each single project’s end credits with no less than a half screen exposure, but not covering content.
►What are some common film definitions in the state of New Mexico? Please refer to SB2 (as of 7/1/19):
DEFINITIONS:
SECTION 4. Section 7-2F-2 NMSA 1978 (being Laws 2003, Chapter 127, Section 2, as amended) is amended to read:
“7-2F-2. DEFINITIONS — As used in the Film Production Tax Credit Act:
- “affiliated person” means a person who directly or indirectly owns or controls, is owned or controlled by or is under common ownership or control with another person through ownership of voting securities or other ownership interests representing a majority of the total voting power of the entity;
- “background artist” means a person who is not a performing artist but is a person of atmospheric business whose work includes atmospheric noise, normal actions, gestures and facial expressions of that person’s assignment; or a person of atmospheric business whose work includes special abilities that are not stunts; or a substitute for another actor, whether photographed as a double or acting as a stand-in;
- “below-the-line crew” means a person in a position that is off-camera and who provides technical services during the physical production of a film. “Below-the-line crew” does not include a person who is a writer, director, producer or background artist or performing artist for the film;
- “commercial audiovisual product” means a film or a video game intended for commercial exploitation;
- “direct production expenditure” means a transaction that is subject to taxation in New Mexico and is certified pursuant to Subsection A of 7-2F-12 NMSA 1978:
(1) including an expenditure for:
(a) payment of wages, fringe benefits or fees for talent, management or labor to a person who is a New Mexico resident;
(b) payment for standard industry craft inventory when provided by a below-the-line crew that is a New Mexico resident in addition to its below-the-line crew services;
(c) payment for wages and per diem for a performing artist who is not a New Mexico resident and who is directly employed by the film production company; provided that the film production company deducts and remits, or causes to be deducted and remitted, income tax from the first day of services rendered in New Mexico at the maximum rate pursuant to the Withholding Tax Act;
(d) payment to a personal services business for the services of a performing artist if: 1) the personal services business pays gross receipts tax in New Mexico on the portion of those payments qualifying for the tax credit; and 2) the film production company deducts and remits, or causes to be deducted and remitted, income tax at the maximum rate in New Mexico pursuant to Subsection H of Section 7-3A-3 NMSA 1978 on the portion of those payments qualifying for the tax credit paid to a personal services business where the performing artist is a full or part owner of that business or subcontracts with a personal services business where the performing artist is a full or part owner of that business; and
(e) any of the following provided by a vendor: 1) the story and scenario to be used for a film;
(2) set construction and operations, wardrobe, accessories and related services; 3) photography, sound synchronization, lighting and related services; 4) editing and related services; 5) rental of facilities and equipment; 6) the first one hundred fifty dollars ($150) of the daily expense of leasing of vehicles, not including the chartering of aircraft for out-of-state transportation; however, New Mexico-based chartered aircraft for in-state transportation directly attributable to the production shall be considered a direct production expenditure; 7) food; 8) the first three hundred dollars ($300) of lodging per individual, per day; 9) commercial airfare if purchased through a New Mexico-based travel agency or travel company for travel to and from New Mexico or within New Mexico that is directly attributable to the production; 10) insurance coverage and bonding if purchased through a New Mexico-based insurance agent, broker or bonding agent; 11) subcontracted goods and services from businesses; provided that the ordinary course of business of the vendor procuring the goods and services from the subcontractor directly relates to standard film industry goods and services; and 12) other direct costs of producing a film in accordance with generally accepted entertainment industry practice; and does not include an expenditure for:
(a) a gift with a value greater than one hundred dollars ($100);
(b) artwork or jewelry, except that a work of art or a piece of jewelry may be a direct production expenditure if: 1) it is used in the film production; and 2) the expenditure is less than two thousand five hundred dollars ($2,500);
(c) entertainment, amusement or
(d) subcontracted goods or services provided by a vendor when the subcontractors providing those goods or services to the vendor are not subject to state taxation, such as equipment and locations provided by the military, government and organizations that demonstrate to the taxation and revenue department that they have been granted exemption from the federal income tax by the United States commissioner of internal revenue as organizations described in Section 501(c)(3) of the United States Internal Revenue Code of 1986, as amended or renumbered;
(e) subcontracted services provided by a vendor when the subcontracted services are provided by a person who is below-the-line crew and is not a New Mexico resident;
(f) hidden or other indirect service fees, costs, commissions or other remuneration received by third parties and that are not directly paid by the film production company or expressly enumerated on a film production company’s filing to claim a new film production tax credit;
(g) wages for a person who is not a New Mexico resident and who falsely claims to be a New Mexico resident. The wages of such person shall not be considered an eligible expense for two years from the date in which the person is determined by the taxation and revenue department as having made a false claim, regardless of whether the person becomes a New Mexico resident within that time frame; or
(h) which the film production company receives funding pursuant to Section 21-19-7.1 NMSA 1978;
- “division” means the New Mexico film division of the economic development department;
- “federal new markets tax credit program” means the tax credit program codified as Section 45D of the United States Internal Revenue Code of 1986, as amended;
- “film” means a single medium or multimedia program, including television programs but excluding advertising messages other than national or regional advertising messages intended for exhibition, that:
(1) is fixed on film, a digital medium, videotape, computer disc, laser disc or other similar delivery medium;
(2) can be viewed or reproduced;
(3) is not intended to and does not violate a provision of Chapter 30, Article 37 NMSA 1978; and
(4) is intended for reasonable commercial exploitation for the delivery medium used;
- “film production company” means a person that produces one or more films or commercial audiovisual products or any part of a film or commercial audiovisual product;
- “fiscal year” means the state fiscal year beginning on July 1;
- “New Mexico resident” means an individual who is domiciled in this state during any part of the taxable year or an individual who is physically present in this state for one hundred eighty-five days or more during the taxable year; but any individual, other than someone who was physically present in the state for one hundred eighty-five days or more during the taxable year and who, on or before the last day of the taxable year, changed the individual’s place of abode to a place without this state with the bona fide intention of continuing actually to abide permanently without this state is not a resident for the purposes of the Film Production Tax Credit Act for periods after that change of abode;
- “performing artist” means an actor, on-camera stunt person, puppeteer, pilot who is a stunt person or actor, specialty foreground performer or narrator; and who speaks a line of dialogue, is identified with the product or reacts to narration as assigned. “Performing artist” does not include a background artist;
- “personal services business” means a business organization, with or without physical presence, that receives payments pursuant to the Film Production Tax Credit Act for the services of a performing artist;
- “physical presence” means a physical address in New Mexico from which a vendor conducts business, stores inventory or otherwise creates, assembles or offers for sale the product purchased or leased by a film production company and the vendor or an employee of the vendor is a resident;
- “postproduction expenditure” means an expenditure, certified pursuant to Subsection A of Section 7-2F-12 NMSA 1978, for editing, Foley recording, automatic dialogue replacement, sound editing, special effects, including computer-generated imagery or other effects, scoring and music editing, beginning and end credits, negative cutting, soundtrack production, dubbing, subtitling or addition of sound or visual effects; but not including an expenditure for advertising, marketing, distribution or expense payments;
- “principal photography” means the production of a film during which the main visual elements are created;
- “qualified production facility” means a building, or complex of buildings, building improvements and associated back-lot facilities in which films are or are intended to be regularly produced and that contain at least one:
(1) sound stage with contiguous floor space of at least seven thousand square feet and a ceiling height of no less than eighteen feet; or
(2) standing set that includes at least one interior, and at least five exteriors, built or re-purposed for film production use on a continual basis and is located on at least fifty acres of contiguous space designated for film production use; and
- “vendor” means a person who sells or leases goods or services that are related to standard industry craft inventory, who has a physical presence in New Mexico and is subject to gross receipts tax pursuant to the Gross Receipts and Compensating Tax Act or income tax pursuant to the Income Tax Act or corporate income tax pursuant to the Corporate Income and Franchise Tax Act but excludes a personal services business and services provided by nonresidents hired or subcontracted if the tasks and responsibilities are associated with the standard industry job position of director, writer or producer.”
