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What is the New Mexico film tax credit?
As a powerful incentive for production companies, New Mexico provides a fully refundable tax credit. This means that the state commits to reimbursing production companies for the full amount of their tax credit.
If your production qualifies for a film tax credit in New Mexico, you will get back dollar for dollar what you spend in the state, aligned with the credit percentage that you qualify for.
And it’s a better time than ever to film in New Mexico. In July 2023, New Mexico updated their film tax credit program, increasing the amount of incentives available to production companies.
The Land of Enchantment now has one of the largest film tax credits in the country; productions can qualify for a 25-40% film tax credit in New Mexico.
The New Mexico film tax credit is as flexible as it is sizable. Unlike some states, the film tax credit in New Mexico does not have a project cap. This means that there is virtually no ceiling on the amount of money that can be awarded to any particular project. This lack of limitation provides production companies with ample freedom to execute projects without constraints.
The New Mexico film tax credit also does not have a minimum spend requirement, meaning that productions are not expected to hit a certain threshold of in-state spending to qualify for film incentives in New Mexico. This allows filmmakers ample latitude to bring their visions to life.
The program’s annual cap, set at $120 million for the fiscal year 2024, represents the total allocation for film tax credits within the fiscal year. This cap ensures that blockbuster productions and indie films alike find a welcoming home in the Land of Enchantment.
Production companies engaging in production or post-production in the state of New Mexico are eligible for a New Mexico film tax credit. Qualifying production types include:
By and large, each of these production types must go through the same application process and meet the same criteria to qualify for New Mexico film incentives, but we will take a more in-depth look at the application process in just a second.
First, let’s take a look at how much your next production stands to gain by filming in New Mexico.
Qualified expenditures encompass direct production and post-production spend made within the state of New Mexico. These expenditures must be subject to taxation by the state to qualify for the film tax credit in New Mexico.
Qualified expenditures can be broken down into two categories: wages paid to cast and crew and physical production expenses such as rental fees for equipment and facilities and goods purchased within the state.
There are also specific expenditures that can qualify your production for additional uplift bonuses, raising your total tax credit as high as 40%.
Up first, the wages your production pays to cast and crew. The New Mexico film tax credit breaks these down into four categories, including:
Productions that are awarded a New Mexico film tax credit can get a 25% credit for each above the line resident that the production employs. This means that the production will receive back 25% of the in-state wages they pay each above the line resident in the form of a tax credit after filing a New Mexico state tax return.
Productions will also receive a 25% tax credit for every above-the-line nonresident they employ. However, above-the-line non-residents who work behind the camera—like writers, producers, and directors—do not qualify for the film tax credit in New Mexico.
In order for your production to receive the tax credit, all nonresident actors paid via W2 or loan-out must have a New Mexico state income tax withholding of 5.9%.
Additionally, in order for nonresident actors who have a loan-out to qualify for the base 25% tax credit, Gross Receipts Tax must be paid on the loan-out corporation’s behalf. In order to do this, you must utilize what is called a Super Loan Out (SLO).
Below-the-line residents
Productions awarded New Mexico film incentives will also receive a 25% base credit for each below-the-line resident the production employs on all wages paid while the resident is working in state.
Finally, under a program called the Nonresident Below-the-Line-Crew Exemption program, productions can receive a tax credit equal to 15% of wages paid to below-the-line non-resident crew.
The below-the-line non-resident credit is capped at 15% of the production’s total New Mexico budget for below-the-line crew wages. There are also limits to the number of below-the-line crew positions which qualify for the tax credit based on the project’s budget.
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