2023 New Mexico Statutes › Chapter 7 - Taxation › Article 2F - Film Production Tax Credit › Section 7-2F-1 - Film production tax credit; film production companies that commence principal photography prior to January 1, 2016.

A. The tax credit created by this section may be referred to as the "film production tax credit".
B. Except as otherwise provided in this section, an eligible film production company may apply for, and the taxation and revenue department may allow, subject to the limitation in this section, a tax credit in an amount equal to twenty-five percent of:
(1) direct production expenditures made in New Mexico that:
(a) are directly attributable to the production in New Mexico of a film or commercial audiovisual product;
(b) are subject to taxation by the state of New Mexico;
(c) exclude direct production expenditures for which another taxpayer claims the film production tax credit; and
(d) do not exceed the usual and customary cost of the goods or services acquired when purchased by unrelated parties. The secretary of taxation and revenue may determine the value of the goods or services for purposes of this section when the buyer and seller are affiliated persons or the sale or purchase is not an arm's length transaction; and
(2) postproduction expenditures made in New Mexico that:
(a) are directly attributable to the production of a commercial film or audiovisual product;
(b) are for services performed in New Mexico;
(c) are subject to taxation by the state of New Mexico;
(d) exclude postproduction expenditures for which another taxpayer claims the film production tax credit; and
(e) do not exceed the usual and customary cost of the goods or services acquired when purchased by unrelated parties. The secretary of taxation and revenue may determine the value of the goods or services for purposes of this section when the buyer and seller are affiliated persons or the sale or purchase is not an arm's length transaction.
C. In addition to the percentage applied pursuant to Subsection B of this section, another five percent shall be applied in calculating the amount of the film production tax credit to direct production expenditures:
(1) on a standalone pilot intended for series television in New Mexico or on series television productions intended for commercial distribution with an order for at least six episodes in a single season; provided that the New Mexico budget for each of those six episodes is fifty thousand dollars ($50,000) or more; or
(2) on a production with a total New Mexico budget of the following amounts; provided that the expenditures are directly attributable and paid to a New Mexico resident who is hired as industry crew, or who is hired as a producer, writer or director working directly with the physical production and has filed a New Mexico income tax return as a resident in the two previous taxable years:
(a) not more than thirty million dollars ($30,000,000) that shoots at least ten principal photography days in New Mexico at a qualified production facility; provided that a film production company in principal photography on or after April 10, 2015 shall: 1) shoot at least seven of those days at a sound stage that is a qualified production facility and the remaining number of required days, if any, at a standing set that is a qualified production facility; and 2) for each of the ten days, include industry crew working on the premises of those facilities for a minimum of eight hours within a twenty-four-hour period; or
(b) thirty million dollars ($30,000,000) or more that shoots at least fifteen principal photography days in New Mexico at a qualified production facility; provided that a film production company in principal photography on or after April 10, 2015 shall: 1) shoot at least ten of those days at a sound stage that is a qualified production facility and the remaining number of required days, if any, at a standing set that is a qualified production facility; and 2) for each day of the fifteen days, include industry crew working on the premises of the facility for a minimum of eight hours within a twenty-four-hour period.
D. With respect to expenditures attributable to a production for which the film production company receives a tax credit pursuant to the federal new markets tax credit program, the percentage to be applied in calculating the film production tax credit is twenty percent.
E. A claim for film production tax credits shall be filed as part of a return filed pursuant to the Income Tax Act [Chapter 7, Article 2 NMSA 1978] or the Corporate Income and Franchise Tax Act [Chapter 7, Article 2A NMSA 1978]. The date a credit claim is received by the taxation and revenue department shall determine the order that a credit claim is authorized for payment by the department.
F. Except as otherwise provided in this section and Section 10 of this 2019 act, credit claims authorized for payment pursuant to the Film Production Tax Credit Act shall be paid pursuant to provisions of the Tax Administration Act [Chapter 7, Article 1 NMSA 1978] to the taxpayer as follows:
(1) a credit claim amount of less than two million dollars ($2,000,000) per taxable year shall be paid immediately upon authorization for payment of the credit claim;
(2) a credit claim amount of two million dollars ($2,000,000) or more but less than five million dollars ($5,000,000) per taxable year shall be divided into two equal payments, with the first payment to be made immediately upon authorization of the payment of the credit claim and the second payment to be made twelve months following the date of the first payment; and
(3) a credit claim amount of five million dollars ($5,000,000) or more per taxable year shall be divided into three equal payments, with the first payment to be made immediately upon authorization of payment of the credit claim, the second payment to be made twelve months following the date of the first payment and the third payment to be made twenty-four months following the date of the first payment.
G. For a fiscal year in which the amount of total credit claims authorized for payment is less than the aggregate amount of credit claims that may be authorized for payment pursuant to Section 7-2F-12 NMSA 1978, the next scheduled payments for credit claims authorized for payment pursuant to Subsection F of this section shall be accelerated for payment for that fiscal year and shall be paid to a taxpayer pursuant to the Tax Administration Act and in the order in which outstanding payments are scheduled in the queue established pursuant to Section 7-2F-12 NMSA 1978; provided that the total credit claims authorized for payment shall not exceed the aggregate amount of credit claims that may be authorized for payment pursuant to this section. If a partial payment is made pursuant to this subsection, the difference owed shall retain its original position in the queue.
H. Any amount of a credit claim that is carried forward pursuant to Subsection F of this section shall be subject to the limit on the aggregate amount of credit claims that may be authorized for payment pursuant to Section 7-2F-12 NMSA 1978.
I. A credit claim shall only be considered received by the taxation and revenue department if the credit claim is made on a complete return filed after the close of the taxable year. All direct production expenditures and postproduction expenditures incurred during the taxable year by a film production company shall be submitted as part of the same income tax return and paid pursuant to this section. A credit claim shall not be divided and submitted with multiple returns or in multiple years.
J. For purposes of determining the payment of credit claims pursuant to this section, the secretary of taxation and revenue may require that credit claims of affiliated persons be combined into one claim if necessary to accurately reflect closely integrated activities of affiliated persons.
K. The film production tax credit shall not be claimed with respect to direct production expenditures or postproduction expenditures for which the film production company has delivered a nontaxable transaction certificate pursuant to Section 7-9-86 NMSA 1978.
L. A production for which the 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 in the end screen credits that the production was filmed in New Mexico, and a state logo provided by the division shall be included and embedded in the end screen credits of long-form narrative film productions and television episodes, unless otherwise agreed upon in writing by the film production company and the division.
M. To be eligible for the film production tax credit, a film production company shall submit to the division information required by the division to demonstrate conformity with the requirements of the Film Production Tax Credit Act, including detailed information on each direct production expenditure and each postproduction expenditure. A film production company shall make reasonable efforts, as determined by the division, to contract with a specialized vendor that provides goods and services, inventory or services directly related to that vendor's ordinary course of business. A film production company shall provide to the division a projection of the film production tax credit claim the film production company plans to submit in the fiscal year. In addition, the film production company shall agree in writing:
(1) to pay all obligations the film production company has incurred in New Mexico;
(2) to post a notice at completion of principal photography on the website of the division that:
(a) contains production company information, including the name of the production, the address of the production company and contact information that includes a working phone number, fax number and email address for both the local production office and the permanent production office to notify the public of the need to file creditor claims against the film production company; and
(b) remains posted on the website until all financial obligations incurred in the state by the film production company have been paid;
(3) that outstanding obligations are not waived should a creditor fail to file;
(4) to delay filing of a claim for the film production tax credit until the division delivers written notification to the taxation and revenue department that the film production company has fulfilled all requirements for the credit; and
(5) to submit a completed application for the film production tax credit and supporting documentation to the division within one year of making the final expenditures in New Mexico that were incurred for the registered project and that are included in the credit claim.
N. The division shall determine the eligibility of the company and shall report this information to the taxation and revenue department in a manner and at times the economic development department and the taxation and revenue department shall agree upon. The division shall also post on its website all information provided by the film production company that does not reveal revenue, income or other information that may jeopardize the confidentiality of income tax returns, including that the division shall report quarterly the projected amount of credit claims for the fiscal year.
O. To provide guidance to film production companies regarding the amount of credit capacity remaining in the fiscal year, the taxation and revenue department shall post monthly on that department's website the aggregate amount of credits claimed and processed for the fiscal year.
P. To receive a film production tax credit, a film production company shall apply to the taxation and revenue department on forms and in the manner the department may prescribe. The application shall include a certification of the amount of direct production expenditures or postproduction expenditures made in New Mexico with respect to the film production for which the film production company is seeking the film production tax credit; provided that for the film production tax credit, the application shall be submitted within one year of the date of the last direct production expenditure in New Mexico or the last postproduction expenditure in New Mexico. If the amount of the requested tax credit exceeds five million dollars ($5,000,000), the application shall also include the results of an audit, conducted by a certified public accountant licensed to practice in New Mexico, verifying that the expenditures have been made in compliance with the requirements of this section. If the requirements of this section have been complied with, the taxation and revenue department shall approve the film production tax credit and issue a document granting the tax credit.
Q. The film production company may apply all or a portion of the film production tax credit granted against personal income tax liability or corporate income tax liability. If the amount of the film production tax credit claimed exceeds the film production company's tax liability for the taxable year in which the credit is being claimed, the excess shall be refunded.
R. That amount of a film production tax credit for total payments as applied to direct production expenditures for the services of performing artists shall not exceed five million dollars ($5,000,000) for services rendered by nonresident performing artists and featured resident principal performing artists in a production. This limitation shall not apply to the services of background artists and resident performing artists who are not cast in industry standard featured principal performer roles.
S. As used in this section, "direct production expenditure" means a transaction that is subject to taxation in New Mexico:
(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 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 [Chapter 7, Article 3 NMSA 1978];
(c) 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
(d) 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) 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; 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 as a direct production expenditure; 7) food or lodging; provided that only the first one hundred fifty dollars ($150) of lodging per individual per day is eligible to be claimed as a direct production expenditure; 8) 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; 9) insurance coverage and bonding if purchased through a New Mexico-based insurance agent, broker or bonding agent; 10) services for an external audit upon submission of an application for a film production tax credit by an accounting firm that submits the application pursuant to this section; and 11) other direct costs of producing a film in accordance with generally accepted entertainment industry practice; and
(2) does not include an expenditure for:
(a) a gift with a value greater than twenty-five dollars ($25.00);
(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 recreation;
(d) subcontracted goods or services provided by a vendor when subcontractors are not subject to state taxation, such as equipment and locations provided by the military, government and religious organizations; or
(e) a service provided by a person who is not a New Mexico resident and employed in an industry crew position, excluding a performing artist, where it is the standard entertainment industry practice for the film production company to employ a person for that industry crew position, except when the person who is not a New Mexico resident is hired or subcontracted by a vendor; and when the film production company, as determined by the division and when applicable in consultation with industry, provides: 1) reasonable efforts to hire resident crew; and 2) financial or promotional contributions toward education or workforce development efforts in New Mexico, including at least one of the following: a payment to a New Mexico public education institution that administers at least one industry-recognized film or multimedia program, as determined by the division, in an amount equal to two and one-half percent of payments made to nonresidents in approved positions employed by the vendor; promotion of the New Mexico film industry by directors, actors or executive producers affiliated with the production company's project through social media that is managed by the state; radio interviews facilitated by the division; enhanced screen credit acknowledgments; or related events that are facilitated, conducted or sponsored by the division.
T. As used in this section, "film production company" means a person that produces one or more films or any part of a film and that commences principal photography prior to January 1, 2016.
U. As used in this section, "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 [Chapter 7, Article 9 NMSA 1978] and income tax pursuant to the Income Tax Act [Chapter 7, Article 2 NMSA 1978] or corporate income tax pursuant to the Corporate Income and Franchise Tax Act [Chapter 7, Article 2A NMSA 1978] but excludes a personal services business and services provided by nonresidents hired or subcontracted if the tasks and responsibilities are associated with:
(1) the standard industry job position of:
(a) a director;
(b) a writer;
(c) a producer;
(d) an associate producer;
(e) a co-producer;
(f) an executive producer;
(g) a production supervisor;
(h) a director of photography;
(i) a motion picture driver whose sole responsibility is driving;
(j) a production or personal assistant;
(k) a designer;
(l) a still photographer; or
(m) a carpenter and utility technician at an entry level; and
(2) nonstandard industry job positions and personal support services.
History:
Laws 2002, ch. 36, § 1; 2003, ch. 127, § 1; 2005, ch. 104, § 9; 2006, ch. 78, § 1; 2007, ch. 172, § 3; 2011, ch. 165, § 1; 2011, ch. 177, § 2; 2013, ch. 160, § 5; 2015, ch. 143, § 1; 2019, ch. 87, § 3.
ANNOTATIONS
The 2019 amendment,
effective June 14, 2019, removed the provision which provided that the aggregate amount of claims for a credit provided by the Film Production Tax Credit Act that may be authorized for payment in any fiscal year is fifty million dollars ($50,000,000); in Subsection E, deleted "or an information return filed by a pass-through entity", and after "authorized for payment by the department", deleted the remainder of the subsection, which related to the aggregate amount of claims for a credit provided by the Film Production Tax Credit Act that may be authorized for payment in any fiscal year; deleted former Subsection F and redesignated former Subsections G through V as Subsection F through U, respectively; in Subsection F, added "and Section 10 of this 2019 act"; in Subsection G, added "7-2F-12 NMSA 1978", and deleted "Subsections E and G of this section" and added "Section 7-2F-12 NMSA 1978"; in Subsection H, deleted "Subsections E and F of this section in the fiscal year in which that amount is paid" and added "Section 7-2F-12 NMSA 1978"; in Subsection P, deleted "subject to the provisions of Subsection E of this section"; and in Subsection S, Paragraph S(1), deleted "except as provided in Paragraph (2) of this subsection".
Temporary provisions.
— Laws 2019, ch. 87, § 10 provided that:
A. In addition to the aggregate amount of claims that may be paid pursuant to Section 7-2F-12 NMSA 1978, a claim for a tax credit approved by the taxation and revenue department pursuant to the Film Production Tax Credit Act shall be paid:
(1) prior to July 1, 2019; provided that the aggregate amount of claims for credits that may be authorized for payment pursuant to this subsection does not exceed one hundred million dollars ($100,000,000); and
(2) on or after July 1, 2019, but prior to July 1, 2020; provided that the aggregate amount of claims for credits that may be authorized for payment pursuant to this subsection does not exceed ninety-five million dollars ($95,000,000) and that the claim meets the requirements of the Film Production Tax Credit Act; provided further that, if the fiscal year 2019 general fund revenues estimated by the consensus revenue estimating group presented to the legislative finance committee in August 2019 exceeds the fiscal year 2019 general fund revenues forecasted by the consensus revenue estimating group in February 2019 by at least thirty million dollars ($30,000,000), then the ninety-five million dollar ($95,000,000) threshold shall be increased to one hundred twenty-five million dollars ($125,000,000).
B. A claim that exceeds the authorized amounts to be paid as provided in this section shall be paid in accordance with the applicable provisions of the Film Production Tax Credit Act, as those provisions were in effect on the date the claim was approved.
The 2015 amendment,
effective June 19, 2015, provided that the film production tax credit only applies to film production companies that commence principal photography prior to January 1, 2016, amended the requirements for receiving the film production tax credit, and defined direct production expenditure, film production company and vendor; in the catchline, added "film production companies that commence principal photography prior to January 1, 2016"; in Subsection A, after "'film production tax credit'", designated the remainder of the subsection as Subsection B; in new Subsection B, added "Except as otherwise provided in this section", after "in an amount equal to", deleted "the percentage specified in Subsection B of this section" and added "twenty-five percent"; deleted former Subsection B; in Paragraph (1) of Subsection C, added "on a standalone pilot intended for series television in New Mexico or", after "provided that the", added "New Mexico", after "budget", deleted "per episode" and added "for each of those six episodes"; in Paragraph (2) of Subsection C, deleted "that" and added "on a production with a total New Mexico budget of the following amounts; provided that the expenditures", after "directly attributable", deleted "to the wages and fringe benefits" and added "and", after "New Mexico resident", deleted "directly employed in an industry crew position, excluding a performing artist, on a production with a total budget of" and added "who is hired as industry crew, or who is hired as a producer, writer or director working directly with the physical production and has filed a New Mexico income tax return as a resident in the two previous taxable years"; in Subparagraph C(2)(a), after "photography days", added "in New Mexico", after "production facility", deleted "in New Mexico", after the semicolon, added the remainder of the subparagraph up to the semicolon; in Subparagraph C(2)(b), after "photography days", added "in New Mexico", after "production facility", deleted "in New Mexico", after the semicolon, added the remainder of the subparagraph; in Subsection E, after "aggregate amount of", deleted "the film production tax credit", after "claims", added "for a credit provided by the Film Production Tax Credit Act", and after "front of a queue of", deleted "film production tax"; in Subsection H, after the first occurrence of "aggregate amount of", deleted "the film production tax", after the second occurrence of "aggregate amount of", deleted "the film production tax"; in Subsection M, after "contain an acknowledgment", added "to the state of New Mexico", after "the division shall be included", added "and embedded", and after "narrative film productions", added "and television episodes"; in the introductory paragraph of Subsection N, after "to contract with a", added "specialized", and after "provides goods", added "and services"; in Paragraph (5) of Subsection N, after "New Mexico", added "that were incurred for the registered project and"; in Subsection O, after "division shall report", deleted "monthly" and added "quarterly"; in Subsection S, added "That amount of a film production tax credit for total payments", after "performing artists", deleted "the film production tax credit authorized by this section", after "services rendered by", deleted "all" and added "nonresident performing artists and featured resident principal", after "artists in production", deleted "for which the film production tax credit is claimed" and added the remainder of the section; and added new Subsections T, U and V.
The 2013 amendment,
effective June 14, 2013, increased the film production tax credit for certain direct production expenditures; allowed a maximum of ten million dollars of unclaimed film production tax credits to be carried forward for three fiscal years; provided for accelerated payments of future scheduled payments of film production tax credits; in Subsection B, at the beginning of the sentence, after "Except as", added "otherwise", after "provided in", deleted "Subsections G and P of"; added Subsection C; in Subsection E, in the first sentence, after "Franchise Tax Act", added the remainder of the sentence and in the third sentence, at the beginning of the sentence, added "Except as otherwise provided in this section"; added Subsection F; in Subsection G, at the beginning of the sentence, added "Except as otherwise provided in this section"; added Subsection H; in Subsection I, after "forward pursuant to Subsection", deleted "E" and added "G" and after "payment pursuant to", deleted "Subsection D" and added "Subsections E and F"; in Subsection J, after "claim is made on a complete", deleted "tax" and after "complete return filed", deleted "timely"; in Subsection K, after "claims pursuant to", deleted "Subsection E of"; in Subsection M, at the beginning of the sentence, deletes "A long-form narrative film", after "contain an acknowledgment", added "in the end screen credits", and after "filmed in New Mexico", added the remainder of the sentence; and in Subsection N, added the second sentence.
Applicability.
— Laws 2013, ch. 160, § 14 provided that Laws 2013, ch. 160, § 5 applies to direct production expenditures and postproduction expenditures made on or after April 15, 2013.
The 2011 amendment,
effective July 1, 2011, in Subsection A, provided that direct production expenditures and postproduction expenditures may not exceed the cost of goods and services in an arm's length transaction; added Subsections D through H to limit the amount of the film production tax credit that may be paid in a year and to provide for the filing and payment of credit claims; in Subsection K, required film production companies to provide information about expenditures and a projection of the credit the company plans to claim in the fiscal year; in Subsection L, required the film division to post non-confidential information provided by film production companies on the division's website; added Subsection M to require the department to post on its website the aggregate amount of credits claimed and processed for the fiscal year; and in Subsection N, imposed a one-year limitation on the filing of credit claims and required the filing of an audit for claims that exceed five million dollars.
The 2007 amendment,
effective July 1, 2007, added Subparagraph (d) of Paragraph (2) of Subsection A; increased the tax credit percentage to twenty-five percent; provided that for expenditures for which a company receives a tax credit pursuant to the federal new markets tax credit program, the film production tax credit is twenty percent; and added Subsection J.
The 2006 amendment,
effective May 17, 2006, in Subsection A deleted the provision that the tax credit shall be "fifteen percent" and provided that the tax credit shall equal the percentage specified in Subsection B; added a new Subsection B, which provided that except as provided in Subsection C, the percentage shall be 20% and for taxable years beginning prior to January 1, 2009, an additional 5%; and added a new Subsection C, which provided that the additional 5% shall not be available for productions which receive a tax credit pursuant to federal law.
The 2005 amendment,
effective June 17, 2005, provided in Subsection A(1) and (2) that the tax credit may be based on direct production expenditures for commercial audiovisual production and postproduction expenditures made in New Mexico that are attributable to production on a commercial film or audiovisual product, for services performed in New Mexico and subject to taxation by the state; provided in Subsection B that the tax credit shall not be claimed for direct production expenses or postproduction expenses for which the film company has delivered a nontaxable transaction certificate; and provided in Subsection D that to be eligible for the tax credit, the film company must agree in writing to the conditions stated in Subsection D(1) through (4).
The 2003 amendment,
effective June 20, 2003, in Subsection A, substituted "in an amount equal to" for "for" following "a tax credit", inserted "that are" following "of a film and"; deleted former Subsection D relating to the definitions of "direct production expenditure", "film" and "film production company"; redesignated Subsections E to G as Subsections D to F; and deleted "by the document" following "tax credit granted" in present Subsection F.