TECHNOLOGY JOBS R&D TAX CREDIT EXPANSION

HB0027

HOUSE BILL 27

57th legislature - STATE OF NEW MEXICO - second session, 2026

INTRODUCED BY

Meredith A. Dixon
and
Michael Padilla
and
Joshua N. Hernandez

and
Linda Serrato
and
Nicole Tobiassen

AN ACT

RELATING TO TAXATION; EXPANDING THE DEFINITION OF "QUALIFIED
EXPENDITURE" IN THE TECHNOLOGY JOBS AND RESEARCH AND
DEVELOPMENT TAX CREDIT ACT TO INCLUDE EXPENDITURES FOR PROPERTY
THAT IS OWNED BY A MUNICIPALITY OR COUNTY IN CONNECTION WITH AN
INDUSTRIAL REVENUE BOND PROJECT.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF NEW MEXICO:

SECTION 1.
Section 7-9F-3 NMSA 1978 (being Laws 2000 (2nd
S.S.), Chapter 22, Section 3, as amended by Laws 2019, Chapter
270, Section 38 and by Laws 2019, Chapter 274, Section 12) is
amended to read:

"7-9F-3. DEFINITIONS.--As used in the Technology Jobs and
Research and Development Tax Credit Act:

A. "affiliate" 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;

B. "annual payroll expense" means the wages paid or
payable to employees in the state by the taxpayer in the
taxable year for which the taxpayer applies for an additional
credit pursuant to the Technology Jobs and Research and
Development Tax Credit Act;

C. "base payroll expense" means the wages paid or
payable by the taxpayer in the taxable year prior to the
taxable year for which the taxpayer applies for an additional
credit pursuant to the Technology Jobs and Research and
Development Tax Credit Act, adjusted for any increase from the
preceding taxable year in the consumer price index for the
United States for all items as published by the United States
department of labor in the taxable year for which the
additional credit is claimed. In a taxable year during which a
taxpayer has been part of a business merger or acquisition or
other change in business organization, the taxpayer's base
payroll expense shall include the payroll expense of all
entities included in the reorganization for all positions that
are included in the business entity resulting from the
reorganization;

D. "department" means the taxation and revenue
department, the secretary of taxation and revenue or any
employee of the department exercising authority lawfully
delegated to that employee by the secretary;

E. "facility" means a factory, mill, plant,
refinery, warehouse, dairy, feedlot, building or complex of
buildings located within the state, including the land on which
it is located and all machinery, equipment and other real and
tangible personal property located at or within it and used in
connection with its operation;

F. "local option gross receipts tax" means a tax
authorized to be imposed by a county or municipality upon a
taxpayer's gross receipts, as that term is defined in the Gross
Receipts and Compensating Tax Act, and required to be collected
by the department at the same time and in the same manner as
the gross receipts tax;

G. "qualified expenditure" means an expenditure or
an allocated portion of an expenditure by a taxpayer in
connection with qualified research at a qualified facility,
including expenditures for depletable land and rent paid or
incurred for land, improvements, the allowable amount paid or
incurred to operate or maintain a facility, buildings,
equipment, computer software, computer software upgrades,
consultants and contractors performing work in New Mexico,
payroll, technical books and manuals and test materials, but
not including any expenditure [
on property that is owned by a
municipality or county in connection with an industrial revenue
bond project
]
for
property for which the taxpayer has received
any credit pursuant to the Investment Credit Act, property that
was owned by the taxpayer or an affiliate before July 3, 2000
or research and development expenditures reimbursed by a person
who is not an affiliate of the taxpayer. If a "qualified
expenditure" is an allocation of an expenditure, the cost
accounting methodology used for the allocation of the
expenditure shall be the same cost accounting methodology used
by the taxpayer in its other business activities;

H. "qualified facility" means a facility in New
Mexico at which qualified research is conducted. [
other than
]

"Qualified facility" does not mean
a facility operated by a
taxpayer for the United States or any agency, department or
instrumentality thereof,
a facility in New Mexico designated as
a national laboratory by an act of congress or a research
facility in New Mexico that is owned by the state
;

I. "qualified research" means research:

(1) that is undertaken for the purpose of
discovering information:

(a) that is technological in nature; and

(b) the application of which is intended
to be useful in the development of a new or improved business
component of the taxpayer; and

(2) substantially all of the activities of
which constitute elements of a process of experimentation
related to a new or improved function, performance, reliability
or quality, but not related to style, taste or cosmetic or
seasonal design factors;

J. "qualified research and development small
business" means a taxpayer that:

(1) employed no more than fifty employees as
determined by the number of employees for which the taxpayer
was liable for unemployment insurance coverage in the taxable
year for which an additional credit is claimed;

(2) had total qualified expenditures of no
more than five million dollars ($5,000,000) in the taxable year
for which an additional credit is claimed; and

(3) did not have more than fifty percent of
its voting securities or other equity interest with the right
to designate or elect the board of directors or other governing
body of the business owned directly or indirectly by another
business;

K. "rural area" means any area of the state other
than the state fairgrounds, an incorporated municipality with a
population of thirty thousand or more according to the most
recent federal decennial census and any area within three miles
of the external boundaries of an incorporated municipality with
a population of thirty thousand or more according to the most
recent federal decennial census;

L. "taxpayer" means any of the following persons,
other than a federal, state or other governmental unit or
subdivision or an agency, department, institution or
instrumentality thereof:

(1) a person liable for payment of any tax;

(2) a person responsible for withholding and
payment or collection and payment of any tax;

(3) a person to whom an assessment has been
made if the assessment remains unabated or the assessed amount
has not been paid; or

(4) for purposes of the additional credit
against the taxpayer's income tax pursuant to the Technology
Jobs and Research and Development Tax Credit Act and to the
extent of their respective interest in that entity, the
shareholders, members, partners or other owners of:

(a) a small business corporation that
has elected to be treated as an S corporation for federal
income tax purposes; or

(b) an entity treated as a partnership
or disregarded entity for federal income tax purposes; and

M. "wages" means remuneration for services
performed by an employee in New Mexico for an employer."

SECTION 2.
Section 7-9F-9.1 NMSA 1978 (being Laws 2015
(1st S.S.), Chapter 2, Section 17) is amended to read:

"7-9F-9.1. CLAIMING THE ADDITIONAL CREDIT.--

A. A taxpayer may apply for approval of an
additional credit pursuant to the Technology Jobs and Research
and Development Tax Credit Act within one year following the
end of the taxable year in which the qualified expenditure was
made.

B. A taxpayer that has applied for and been granted

approval for an additional credit by the department pursuant to
the Technology Jobs and Research and Development Tax Credit Act
may claim the amount of the approved additional credit against
the taxpayer's income tax or corporate income tax liability.
Except as provided in Subsection C of this section, no taxpayer
may claim an amount of approved additional credit for a taxable
year in which the additional credit is being claimed that
exceeds the amount of the taxpayer's income tax or corporate
income tax due for that taxable year.

C. If a taxpayer is a qualified research and
development small business and the amount of approved
additional credit for the taxable year in which the additional
credit is being claimed exceeds the taxpayer's income tax
liability or corporate income tax liability, the excess shall
be refunded to the taxpayer pursuant to Paragraphs (1) through
(3) of this subsection. If the taxpayer's total qualified
expenditures for the taxable year for which the claim is made
is:

(1) less than three million dollars
($3,000,000), the excess additional credit shall be refunded to
the taxpayer;

(2) greater than or equal to three million
dollars ($3,000,000) and less than four million dollars
($4,000,000), two-thirds of the excess additional credit shall
be refunded to the taxpayer; and

(3) greater than or equal to four million
dollars ($4,000,000) and less than or equal to five million
dollars ($5,000,000), one-third of the excess additional credit
shall be refunded to the taxpayer.

D. Any amount of approved additional credit not
claimed against the taxpayer's income tax or corporate income
tax due for a taxable year or refunded to the taxpayer may be
claimed in subsequent reporting periods for a period of up to
[
three
]
ten
years from the date of the original claim.

E. Married individuals filing separate returns for
a taxable year for which they could have filed a joint return
may each claim only one-half of the additional credit that
would have been claimed on a joint return."

SECTION 3.
A new section of the Technology Jobs and
Research and Development Tax Credit Act, Section 7-9F-9.2 NMSA
1978, is enacted to read:

"7-9F-9.2. [
NEW MATERIAL
] TRANSFERABILITY OF
CREDITS.--The tax credits provided pursuant to the Technology
Jobs and Research and Development Tax Credit Act may be sold,
exchanged or otherwise transferred to another taxpayer for the
full value of the credit. The parties to such a transaction
shall notify the department of the sale, exchange or transfer
within ten days of the sale, exchange or transfer."

SECTION 4.
APPLICABILITY.--The provisions of this act
apply to taxable years beginning on or after January 1, 2026.

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