New Mexico Angel Tax Credit
One of the benefits that the New Mexico Angels offer is the State of New Mexico Angel Investment Credit. In 2015, we were able to extend the benefits of the tax credit. A summary of the bill can be found below and the full bill text is at the bottom of the page.
This tax credit allows for a New Mexico accredited investor (must file a NM income tax return) to take a tax credit (not refund) of 25% of their investment, up to $62,500 per investment, limited to 5 investments per taxable year on qualified angel investments (see Company section below for requirements). Any unused portion of the credit can be carried forward for five consecutive years.
- Credit can only be claimed on one qualified investment per company per round in the investment year.
- Credit is non-refundable
- Carry-forward period is 5 years
- Claims will be paid by NM TRD on a first-come, first-served basis. If the total claims in a year exceed the $2 million cap, unpaid claims will be granted priority for the following year.
- The bill sunsets December 31, 2024.
When companies present for investment, we will let you know if the investment is applicable for the tax credit.
If your investment qualifies for the credit, fill out the following documents: Investor Tax Credit Application
The investment company should provide you with the needed information.
If your company received Angel funding and fits the criteria, fill out the following documents (note: section B must be filled out for each individual investor):
Criteria required to qualify – see Section K #5 and #6 of HB 002 Below
- A majority of employment and a majority of the investment must be located in New Mexico.
- Company must be engaged in “qualified research” as defined in Section 41 of the Internal Revenue Code or manufacturing
For more information visit: https://gonm.biz/why-new-mexico/competitive-business-climate/incentives/angel-investment-credit
Read the Full Angel Investment Tax Credit Bill
HB 002 – AS PASSED IN SPECIAL SESSION JUNE 17, 2015
SECTION 2. Section 7-2-18.17 NMSA 1978 (being Laws 2007, Chapter 172, Section 1, as amended) is amended to read:
“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 claim 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 for not more than one qualified investment per investment round. A taxpayer may claim the angel investment credit for qualified investments in no more than five qualified businesses per taxable year.
C. 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 investment made after December 31, 2025.
D. A taxpayer shall apply for certification of eligibility for the angel investment credit from the economic development department. Completed applications shall be considered in the order received. If the economic development department determines that the taxpayer is an accredited investor and the investment is a qualified investment, it shall issue a certificate of eligibility to the taxpayer, subject to the limitation in Subsection E of this section. The certificate shall be dated and shall include a calculation of the amount of the angel investment credit for which the taxpayer is eligible. The economic development department may issue rules governing the procedure for administering the provisions of this subsection.
E. The economic development department may issue a certificate of eligibility pursuant to Subsection D of this section only if the total amount of angel investment credits represented by certificates of eligibility issued by the economic development department in any calendar year will not exceed two million dollars ($2,000,000). If the applications for certificates of eligibility for angel investment credits represent an aggregate amount exceeding two million dollars ($2,000,000) for any calendar year, certificates shall be issued in the order that completed applications were received. The excess applications that would have been certified, but for the limit imposed by this subsection, shall be certified, subject to the same limit, in subsequent calendar years.
F. The economic development department shall report annually to 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 to whom certificates of eligibility were issued by the economic development department in the previous year; the names of those investors; the amount of angel investment credit for which each investor was certified eligible; and the number and names of the businesses that the economic development department has determined are qualified businesses for purposes of an investment by an accredited investor. 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 of the continued viability and operation in New Mexico of businesses in which investments eligible for the angel investment credit have been made.
G. To claim the angel investment credit, the taxpayer must provide to the taxation and revenue department a certificate of eligibility issued by the economic development department pursuant to Subsection D of this section and any other information the taxation and revenue department may require to determine the amount of the tax credit due the taxpayer. If the requirements of this section have been complied with, the taxation and revenue department shall approve the claim for the credit.
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. A husband and wife 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:
(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;
– real estate;
– construction or construction contracting;
– consulting or brokering;
– wholesale or retail trade;
– providing utility service, including water, sewerage, electricity, natural gas, propane or butane;
– publishing, including publishing newspapers or other periodicals;
– 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
(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.”