2023 New Mexico Statutes › Chapter 7 - Taxation › Article 2 - Income Tax General Provisions › Section 7-2-18.17 - Angel investment credit.

A. A taxpayer who files a New Mexico income tax return, is not a dependent of another taxpayer, is an accredited investor and makes a qualified investment may apply for, and the department may allow, a claim for a credit in an amount not to exceed twenty-five percent of the qualified investment; provided that a credit for each qualified investment shall not exceed sixty-two thousand five hundred dollars ($62,500). The tax credit provided in this section shall be known as the "angel investment credit".
B. A taxpayer may claim the angel investment credit:
(1) for not more than one qualified investment per investment round;
(2) for qualified investments in no more than five qualified businesses per taxable year; and
(3) for a qualified investment made on or before December 31, 2025.
C. A taxpayer may apply for an angel investment credit by submitting a completed application to the taxation and revenue department on forms and in a manner required by the department no later than one year following the end of the calendar year in which the qualified investment is made. A taxpayer shall not apply for more than one credit for the same qualified investment in the same investment round.
D. Except as provided in Subsection J of this section, a taxpayer shall claim the angel investment credit no later than one year following the date the completed application for the credit is approved by the department.
E. Applications and all subsequent materials submitted to the taxation and revenue department related to the application shall also be submitted to the economic development department.
F. The taxation and revenue department shall allow a maximum annual aggregate of two million dollars ($2,000,000) in angel investment credits per calendar year. Completed applications shall be considered in the order received. Applications for credits that would have been allowed but for the limit imposed by this subsection shall be allowed in subsequent calendar years.
G. The taxation and revenue department shall report annually to the revenue stabilization and tax policy committee and the legislative finance committee on the utilization and effectiveness of the angel investment credit. The report shall include, at a minimum: the number of accredited investors determined to be eligible for the credit in the previous year; the names of those investors; the amount of credit for which each investor was determined to be eligible; and the number and names of the businesses determined to be qualified businesses for purposes of an investment by an accredited investor.
H. A taxpayer who otherwise qualifies for and claims a credit pursuant to this section for a qualified investment made by a partnership or other business association of which the taxpayer is a member may claim a credit only in proportion to the taxpayer's interest in the partnership or business association.
I. Married individuals who file separate returns for a taxable year in which they could have filed a joint return may each claim one-half of the credit that would have been allowed on a joint return.
J. The angel investment credit may only be deducted from the taxpayer's income tax liability. Any portion of the tax credit provided by this section that remains unused at the end of the taxpayer's taxable year may be carried forward for five consecutive years.
K. As used in this section:
(1) "accredited investor" means a person who is an accredited investor within the meaning of Rule 501 issued by the federal securities and exchange commission pursuant to the federal Securities Act of 1933, as amended;
(2) "business" means a corporation, general partnership, limited partnership, limited liability company or other similar entity, but excludes an entity that is a government or a nonprofit organization designated as such by the federal government or any state;
(3) "equity" means common or preferred stock of a corporation, a partnership interest in a limited partnership or a membership interest in a limited liability company, including debt subject to an option in favor of the creditor to convert the debt into common or preferred stock, a partnership interest or a membership interest;
(4) "investment round" means an offer and sale of securities and all other offers and sales of securities that would be integrated with such offer and sale of securities under Regulation D issued by the federal securities and exchange commission pursuant to the federal Securities Act of 1933, as amended;
(5) "manufacturing" means combining or processing components or materials to increase their value for sale in the ordinary course of business, but does not include:
(a) construction;
(b) farming;
(c) processing natural resources, including hydrocarbons; or
(d) preparing meals for immediate consumption, on- or off-premises;
(6) "qualified business" means a business that:
(a) maintains its principal place of business and employs a majority of its full-time employees, if any, in New Mexico and a majority of its tangible assets, if any, are located in New Mexico;
(b) engages in qualified research or manufacturing activities in New Mexico;
(c) is not primarily engaged in or is not primarily organized as any of the following types of businesses: credit or finance services, including banks, savings and loan associations, credit unions, small loan companies or title loan companies; financial brokering or investment; professional services, including accounting, legal services, engineering and any other service the practice of which requires a license; insurance; real estate; construction or construction contracting; consulting or brokering; mining; wholesale or retail trade; providing utility service, including water, sewerage, electricity, natural gas, propane or butane; publishing, including publishing newspapers or other periodicals; broadcasting; or providing internet operating services;
(d) has not issued securities registered pursuant to Section 6 of the federal Securities Act of 1933, as amended; has not issued securities traded on a national securities exchange; is not subject to reporting requirements of the federal Securities Exchange Act of 1934, as amended; and is not registered pursuant to the federal Investment Company Act of 1940, as amended, at the time of the investment;
(e) has one hundred or fewer employees calculated on a full-time-equivalent basis in the taxable year in which the investment was made; and
(f) has not had gross revenues in excess of five million dollars ($5,000,000) in any fiscal year ending on or before the date of the investment;
(7) "qualified investment" means a cash investment in a qualified business for equity, but does not include an investment by a taxpayer if the taxpayer, a member of the taxpayer's immediate family or an entity affiliated with the taxpayer receives compensation from the qualified business in exchange for services provided to the qualified business within one year of investment in the qualified business; and
(8) "qualified research" means "qualified research" as defined by Section 41 of the Internal Revenue Code.
History:
Laws 2007, ch. 172, § 1; 2012, ch. 38, § 1; 2015 (1st S.S.), ch. 2, § 2; 2020, ch. 28, § 1.
ANNOTATIONS
Repeals.
— Laws 2012, ch. 38, § 2 repealed Laws 2007, ch. 172, § 24, which provided for the repeal of the angel investment credit on January 1, 2013.
Compiler's notes.
— Laws 2007, ch. 172, § 23, effective April 2, 2007, provided that in taxable years 2013 through 2015 a taxpayer may carry forward amounts resulting from angel investment credits claimed and approved for qualified investments made in calendar year 2009, 2010 or 2011.
Cross references.
— For Section 6 of the federal Securities Act of 1933,
see
15 U.S.C. § 77f.
For the federal Securities Exchange Act of 1934,
see
15 U.S.C. § 78a et seq.
For the federal Investment Company Act of 1940,
see
15 U.S.C. § 80a-1 et seq.
For Section 41 of the Internal Revenue Code of 1986,
see
26 U.S.C.S. § 41.
The 2020 amendment,
effective May 20, 2020, transferred review and approval of angel investment credits from the economic development department to the taxation and revenue department, and required application materials for the tax credit to continue to be sent to the economic development department; in Subsection A, after "qualified investment may", added "apply for, and the department may allow, a", and after "claim", added "for"; in Subsection B, added new paragraph designations "(1)" and "(2)"; deleted subsection designation "C" and, from former Subsection C, the language "A taxpayer may claim the angel investment credit no later than one year following the end of the calendar year in which the qualified investment was made; provided that a claim for the credit may not be made or allowed with respect to any" and added "and", added new paragraph designation "(3)", and in Paragraph B(3), added "for a qualified", and after "investment made", deleted "after" and added "on or before"; deleted former Subsections D and E and added new Subsections C through F, and redesignated former Subsection F as Subsection G; in Subsection G, after the first occurrence of "The", deleted "economic development" and added "taxation and revenue", after "annually to the", added "revenue stabilization and tax policy committee and the", after "accredited investors", deleted "to whom certificates of eligibility were issued by the economic development department" and added "determined to be eligible for the credit", after "names of the businesses", deleted "that the economic development department had", and deleted "The report shall also include an evaluation of the success of the angel investment credit as an incubator of new businesses in New Mexico and the continued viability and operation in New Mexico of businesses in which investments eligible for the angel investment credit have been made."; and deleted former Subsection G.
Applicability.
— Laws 2020, ch. 28, § 2 provided that the provisions of Laws 2020, ch. 28, § 1 apply to applications for an angel investment credit for qualified investments made on or after January 1, 2019.
The 2015 (1st S.S.) amendment,
effective September 6, 2015, increased the maximum amount of an angel investment credit, changed the number of angel investment credits a taxpayer may claim, extended the angel investment credit until the year 2025, and limited the total amount of angel investment credits that may be approved by the economic development department; in Subsection A, after "not to exceed twenty-five percent of", deleted "not more than one hundred thousand dollars ($100,000) of", after "the qualified investment;", added "provided that a credit for each qualified investment shall not exceed sixty-two thousand five hundred dollars ($62,500)"; in Subsection B, after "for not more than", deleted "two" and added "one", after "qualified", deleted "investments in a taxable year; provided that each investment is in a different qualified business" and added "investment per investment round", after "qualified investments", deleted "made in the same qualified business or successor of that business for not more than three taxable years. The angel investment credit shall not exceed twenty-five thousand dollars ($25,000) for each qualified investment by the taxpayer" and added "in no more than five qualified businesses per taxable year"; in Subsection C, deleted "2016" and added "2025"; in Subsection D, added "Completed" preceding "applications shall be considered"; in Subsection E, after "in any calendar year will not exceed", deleted "seven hundred fifty thousand dollars ($750,000)" and added "two million dollars ($2,000,000)", after "in the order that", deleted "the" and added "completed"; in Subsection F, after "certificates of eligibility were issued by the", added "economic development", and after "the businesses that the", added "economic development"; in Subsection H, after "the taxpayer's interest in the partnership or business association.", deleted "The total credit claimed in the aggregate by all members of the partnership or business association in a taxable year with respect to a qualified investment shall not exceed twenty-five thousand dollars ($25,000)"; in Subsection J, after "may be carried forward for", deleted "three" and added "five"; in Subsection K, deleted former Paragraph (4) and added a new Paragraph (4); in Subparagraph K(6)(a), after "principal place of business", added "and employs a majority of its full-time employees, if any", and after "New Mexico", added "and a majority of its tangible assets, if any, are located in New Mexico"; in Subparagraph K(6)(b), after "engages in", deleted "high-technology" and added "qualified"; in Subparagraph K(6)(e), after "full-time-equivalent basis", deleted "at the time of the investment" and added "in the taxable year in which the investment was made"; and added Paragraph (8) of Subsection K.
Applicability.
— Laws 2015 (1st S.S.), ch. 2, § 25 provided that the provisions of Laws 2015 (1st S.S.), ch. 2, §§ 2 through 7 and 17 apply to taxable years beginning on or after January 1, 2015.
The 2012 amendment,
effective May 16, 2012, extended the angel investment credit for five years, and in Subsection C, after "December 31", changed "2011" to "2016".