New Mexico’s 25% Tax Rebate Frequently Asked Questions

• What qualifies?
  Any New Mexico direct production expenditure that has a New Mexico state tax attached.


• In a nutshell, what are the qualifications for feature films?
  The script is not obscene, you pay all of your New Mexico obligations, and you give the State of New Mexico a credit.


• Do I have to pre-qualify or “get in line”?
  No.


• When should I apply?
  Not until you’re greenlit, meaning you’re fully financed, and in prep.


• Will non-resident crew qualify?
  No. However, their housing and per diem will.


• Will non-resident ATL (above-the-line) qualify?
  Only actors and stunt performers – “performing artists.”


• What about other non-resident ATL such as directors or producers?
  Nope, just actors and stunt performers.


• Really, are you absolutely certain non-resident directors or producers don’t qualify?
  Yup, absolutely certain.


• What about New Mexican ATL (above-the-line)?
  Yes, all ATL (above-the-line) New Mexico residents will qualify.


• I’m confused about the non-resident actor “super loan-out” thing I’ve been hearing about. Please explain. Sure. In order for non-resident performing artists/actors (cast & stunt performers only) to qualify, two things must happen:
A transaction with a New Mexico entity must occur, triggering a New Mexico tax, a requirement in order for the expenditure to qualify. In other words, a Gross Receipts Tax (GRT) must be paid on all qualifying non-resident cast, so basically, all nonresident cast must be paid through a “New Mexico entity,” also called a “super loan-out” for this purpose.
The non-resident actors must agree to file a New Mexico personal income tax return in order for their salaries to qualify.

Here are four (4) ways to do this:


1. Create a “super loan-out,” a secondary company, in a state outside of New Mexico. Register this “super loan-out” to do business in New Mexico and run all of the non-resident cast salaries (salaries only, no fringes) through this entity. New Mexico requires that the “super loan-out” pay a 5.125% gross receipts tax on these salaries; however this 5.125% is rebateable, so you would have a net profit of 21.15%. See example below. The non-resident actor loan-outs do NOT have to register their loan-outs to do biz in New Mexico!
2. Many payroll companies can facilitate the “super loan-out” through their non-New Mexico offices, so check with your payroll company!
3. You can use an existing New Mexico company as the “super loan-out,” bypassing the need to create a new company. However, you would then be subject to a higher GRT rate, currently 7% in Albuquerque or 8.1875% in Santa Fe.
4. If you only have one or a few non-resident actors and they are willing to register their actor loan-outs in New Mexico, you can bypass the need for a “super loan-out.” The filing entity (the main production company claiming the rebate) can directly pay the actor loan-outs; however, the actor loan-outs would be required to pay the 5.125% GRT and the actors themselves must still file a NM personal income tax return.


• How did you get to the 21.15% for non-resident cast? (Example using #1 Scenario)
  
  Super loan-out registers to do business in NM
  Super loan-out pays Mr. Non-resident actor $100.00
  Super loan-out pays NM a 5.125% GRT on the $100.00
  Super loan-out has paid a total of $105.13
  Main production company/Filing Entity claims the 25% rebate on $105.13 (the total invoice)
  Main production company/Filing Entity receives rebate of $26.28
  Subtract the 5.125% GRT ($5.13) already paid and you have a net of $21.15 or 21.15%
• Why can’t my production company act as the “super loan-out”?
  Simply because there wouldn’t be any transaction taking place, a requirement for the expenditure to be taxable and thus qualify for the rebate.


• What if I have a non-resident actor who doesn’t have a loan-out?
  They can still qualify as individuals. They just become “employees” of the super loan-out. Same applies, though: GRT must be paid and the non-resident actor must file a New Mexico personal income tax return.


• What determines New Mexico residency?
  The individual must consider New Mexico his/her primary residence, be domiciled here on the last day of the taxable year (December 31) and file a Resident or First-Year Resident tax return.


• Do fringes for New Mexico residents qualify?
  Employee fringe benefits paid to a payroll company qualify for the tax rebate, including Pension, Health & Welfare, Holiday, Vacation. The following does not: SUI, FICA, FUI and Workers Compensation fee. Workers Compensation Insurance will qualify only if purchased through a New Mexico based agent. Fringes for non-resident crew members will not qualify.


• Is it a credit or a rebate?
  Technically, New Mexico has a “refundable tax credit.” In other words, cash for the full amount – with no brokering required. TRD literally sends you a check or deposits the amount into your bank account.


• Is the rebate transferable or assignable?
  No.


• Is the rebate on the full amount or just the tax portion?
  The full amount. Example: you spend $95.00 and $5.00 on tax for a total of $100.00. You get $25.00 back.


• Must I always pay tax in order for an expenditure to qualify?
  No, not in all cases will you be paying the tax. Example: you rent a home to be used as a location. The homeowner will not charge you tax; however, that location fee will qualify because now the homeowner must pay income tax on that amount. Remember, it’s anything that has a state tax attached.


• I bought a 35mm Panavision camera. Will that qualify?
  No, this would be considered a fixed asset. Rentals of this camera would qualify.


• Do commercials qualify?
  Yes, as long as they’re a regional or national broadcast. And we’ll require proof of media buys.


• What do you consider a “regional commercial”?
  Airing in more than one state, but media buys must be for more than one state. If a local commercial happens to air in Texas because that cable company’s broadcast has “spill-over” across the border, that would NOT qualify. You must purchase media buys for more than one state.


• Do video games qualify?
  Yes, but the filing entity claiming the rebate must be an approved “film production company.”
• Do student films qualify?
  Yes, as long as they’re intended for exhibition and commercial exploitation.


• Do documentaries qualify?
  Yes. Same rules apply: intended for exhibition and commercial exploitation.


• Do music videos qualify?
  As long as it is intended for commercial exploitation.


• Do industrials or training videos qualify?
  No, unless they are intended for commercial exploitation – will they be distributed in the commercial marketplace? If their purpose is “in-house” (used to train employees, etc...) no, they will not qualify.


• Do print ads qualify?
  No.


• What about post-production?
  Yes, and stand-alone post also qualifies. So if you film in California, but decide to do your post in New Mexico, your post-production expenditures will qualify.


• Will shipping qualify?
  Only packages sent from New Mexico will qualify.


• Do financing fees qualify?
  No.


• Can a non-profit organization claim the rebate?
  No, sorry, because the mechanism for receiving the rebate is filing a New Mexico tax return, and non-profits are tax exempt.


• Do I have to spend a minimum amount in order to qualify?
  No.


• Is there a cap on New Mexico expenditures?
  No. The more you spend, the more you get back.


• Is there an annual cap/allocated fund?
  No.


• Any caps?
  Just on cast/talent. $20M cap, meaning a maximum rebate of $5M on cast/talent per project.


• Is there a certain percentage I must film in New Mexico in order to qualify?
  No. Even if you film one day in New Mexico, the expenditures for that one day will qualify.


• Is there a certain percentage of New Mexico crew I must hire in order to qualify?
  No. But keep in mind since non-resident crew do not qualify, the more New Mexico crew members you hire, the greater the rebate.


• I will film most of my movie in New Mexico, but a few scenes take place in another state. If I take my New Mexico crew with me, do I get the rebate on their salaries while they’re out of state?
  No.


• I will film most of my movie in New Mexico, but a few scenes take place in another state. If I take my New Mexico equipment with me (which I paid for in full in New Mexico), do I get the rebate on the full amount of the rental?
  No, just the amount when the equipment was used in New Mexico.


• I’m using a New Mexico-based travel agency. Will a limo to LAX qualify if I book it through them?
  No.
• Back to that non-resident director and producer thing…
  Nope, they still don’t qualify.


• Must I register my production company in the State of New Mexico?
  No. TRD will use your Federal ID number (or social security #) to process the rebate/return.


• Must I use a New Mexico producer or production company in order to qualify?
  No.


• Must I use a New Mexico bank?
  No.


• Must I use a New Mexico payroll company in order for the crew to qualify?
  No.


• What is the advantage of using a New Mexico payroll company?
  Their processing fee will qualify.


• How do we receive our money?
  By filing a New Mexico tax return. We understand that you are not making money in the state, so you are basically just filing a “dummy” return.


• How long does it take to get the rebate?
  Depending upon the amount of submissions (TRD performs audits based upon the order in which they are received) TRD projects that the average audit process will take approximately sixty (60) – seventy-five (75) days to complete; however, it is imperative to provide TRD with any documentation immediately upon request in order to stay within this timeframe. Please note this projection is not guaranteed by TRD though they make every effort to stay within this timeframe. Once you’ve returned the approved amount and filed your tax return, it’s takes an additional 3 – 4 weeks to receive your rebate.


• It’s taking a long time to get my rebate, and I really need the money. Can you help expedite the process?
  New Mexico has one of the fastest turnaround times in the country and TRD has a specialized 5-person “Film Unit” to process film rebates. You can contact Mary Ann Fernandez, Film Unit Supervisor: 505.827.0919 or maryann.fernandez@state.nm.us


• Do I have to pay for the audit?
  Not a penny.


• It seems too good to be true. Is it really that simple?
  Yup.


• Are you guys really as cool as you seem?
  Yes.