New film production tax credit
For film production companies that commence principal photography prior to January 1, 2016, and on or after July 1, 2019, a credit for 25% of direct production and direct post production expenditures made in New Mexico that are subject to taxation by the state of New Mexico and directly attributable to the production of a film or commercial audiovisual product is available. An additional 5% credit may be added for television pilots or series productions subject to certain requirements. For film production companies commencing principle photography on or after July 1, 2019, the additional 5% credit is also allowed for production expenditures in areas more than 60 miles from Bernalillo or Santa Fe counties. Direct production expenditures include the payment of wages for talent, management, or labor for a person who is a New Mexico resident and to a performing artist who is not a resident provided that the film production company withholds New Mexico income tax at the maximum rate. The credit covers postproduction expenditures directly attributable only to services performed in New Mexico and subject to taxation here.
Excluded from the credit are costs the film production company has already delivered nontaxable transaction certificates under Section 7-9-86 and expenditures for which another taxpayer claims the film production tax credit. Chartering of aircraft for out-of-state transportation does not qualify for the credit, except New Mexico-based chartered aircraft for in-state transportation directly attributable to the production. Expenditures cannot exceed the usual cost of the goods or services acquired when purchased by unrelated parties and TRD may determine the value of costs when the buyer and seller are affiliated. Certain types of “luxury” expenditures are not eligible for the credit. An outside audit of expenditures may be required under certain circumstances.
The credit offered for expenditures for which a film production company receives a new markets tax credit from the federal government is 20%. A limit of $5 million per year is established for credit claimed on services of performing artists in connection with one production. For vendor payments to be eligible for credit, a vendor must employ New Mexico residents as that term is defined in the Income Tax Act.
For film production companies commencing principle photography on or after July 1, 2019, a tax credit of 15% for the services of below-the-line crew who are not New Mexico residents is allowed when not more than 15%, or in some cases 20%, of the total budget of below-the-line crew are nonresidents. The film production company makes financial or promotional contributions toward educational or workforce development efforts in New Mexico as determined by the New Mexico Film office.