How to Complete and File New Mexico Form CIT-1: Filing and Payments

New Mexico Form CIT-1 is the annual corporate income and franchise tax return filed with the state Taxation and Revenue Department. Calendar-year corporations owe it by April 15; fiscal-year filers owe it by the 15th day of the fourth month after their tax year ends. The return starts from federal taxable income, applies New Mexico adjustments, apportions income if the corporation operates in more than one state, and calculates tax at a flat 5.9 percent, plus a separate $50 franchise tax.¹²

Who Has to File

Two separate tests each pull a corporation into CIT-1. The income tax reaches any corporation, wherever incorporated, that does business in, into, or from New Mexico or earns income from property or employment in the state. The franchise tax reaches every domestic or foreign corporation that holds or exercises a corporate franchise in New Mexico, whether or not it is actively operating.³

If either test applies and the corporation is not specifically exempt under the Corporate Income and Franchise Tax Act, CIT-1 is required. The $50 franchise tax by itself creates the filing obligation, so a corporation with no New Mexico income still files.⁴ Organizations exempt from federal income tax under the relevant Internal Revenue Code provisions are generally also exempt here.

Corporations that belong to a unitary group cannot file CIT-1 as standalone entities. For tax years beginning on or after January 1, 2020, unitary members file a combined return. Worldwide combined reporting is the default; the group may elect water’s-edge or consolidated filing on its first original return for those years.⁵ The group names one member as the principal corporation, and a related corporation that the combined return properly excludes still files its own separate return.

What to Have Ready

Pull these together before you open the form:

The completed federal return (Form 1120). New Mexico starts from federal taxable income. For unitary members, each corporation computes its base income as though it were a separate domestic entity for federal purposes.
Federal Employer Identification Number.
New Mexico Business Tax Identification Number (formerly the CRS ID). Register with the department first if you don’t have one.
For multistate corporations, the dollar values of property, payroll, and sales inside New Mexico and everywhere the corporation operates.
Last year’s CIT-1, useful for net operating loss carryforwards and confirming any estimated-payment credits.

Filling Out the Return

Identification and Tax Period

Enter the corporation’s legal name, FEIN, New Mexico Business Tax Identification Number, mailing address, and the beginning and ending dates of the tax year. Update the address here if it has changed; the department mails notices to whatever address is on the most recent return.

Start With Federal Taxable Income

Enter federal taxable income from Form 1120 (or the equivalent line of the federal combined return for a unitary group). Then apply New Mexico additions, which pick up income items the federal return excluded but New Mexico taxes, such as interest on out-of-state municipal bonds. Apply New Mexico subtractions for items the state doesn’t tax or allows as extra deductions. The result is New Mexico base income.

Apportionment If You Operate in More Than One State

Corporations that operate only in New Mexico report 100 percent of base income and skip this step. Multistate corporations apportion.

The default is a three-factor formula: the average of the property, payroll, and sales factors, each comparing New Mexico activity to activity everywhere.⁶ Two categories of corporations may instead elect single-sales-factor apportionment, which typically produces a lower tax when property and workforce sit in New Mexico but customers do not:

Manufacturers and computer-processing operations, when 80 percent or more of the New Mexico numerators of the property and payroll factors are used in manufacturing or operating a computer-processing facility.
Corporations with their headquarters in New Mexico.

If the corporation belongs to a filing group, the election applies to the whole group.⁶ Multiply base income by the resulting apportionment percentage to get the income actually taxable by New Mexico.

Calculating the Tax

Multiply the apportioned (or total) taxable income by 0.059 for the corporate income tax.¹ Add the $50 franchise tax, which applies for each taxable year or any fraction of a year.² Subtract any credits and any estimated payments you made during the year. What’s left is the balance due, or the overpayment you can refund or apply to next year.

Quarterly Estimated Payments

If your tax after credits reaches $5,000 or more for the current year, you owe quarterly estimated payments. Each installment is 25 percent of the estimated annual tax, due on the 15th day of the 4th, 6th, 9th, and 12th months of the tax year.⁷ For a calendar-year filer, that lands on April 15, June 15, September 15, and December 15. Report the total on the CIT-1 line for estimated payments so it credits against your final liability.

How to File

Online Through TAP

The Taxation and Revenue Department’s Taxpayer Access Point at tap.state.nm.us is the primary electronic filing channel.⁸ You can file the original return, amend a prior return, and pay by electronic funds transfer or credit card. TAP issues a confirmation number when the return is accepted; keep it. Electronic returns generally process within a few weeks.

By Mail

Paper filers send the return and any payment to:

New Mexico Taxation and Revenue Department
Corporate Income Tax
P.O. Box 25127
Santa Fe, NM 87504-5127⁹

Paper processing runs several months in peak season. Make checks payable to the New Mexico Taxation and Revenue Department and put the FEIN on the check.

Extensions

A federal automatic extension obtained by filing IRS Form 7004 also extends the New Mexico return; you don’t file a separate state request.¹⁰ Form 7004 gives Form 1120 filers six additional months.¹¹ If you need more time than the federal extension covers, you can ask for a New Mexico extension, but the department normally grants 60 days initially and wants a demonstrated need for anything longer.

An extension moves the filing deadline, not the payment deadline. Any tax not paid by the original due date starts accruing penalty and interest.

Late Filing and Late Payment

Filing late or paying late costs 2 percent per month, or any fraction of a month, on the unpaid tax, capped at 20 percent of the amount due.¹² The statute calculates the penalty as the greater of 2 percent per month of the unpaid tax or 2 percent per month of the liability shown on the late return, but neither path can push the total over 20 percent. The $5 minimum penalty that applies elsewhere in state tax law does not apply under the Corporate Income and Franchise Tax Act. Interest also runs on top of the penalty at a rate the department sets annually.

If You Disagree With an Assessment

When the department issues a notice of assessment, you have 90 days from its mailing date to file a written protest with the secretary of the Taxation and Revenue Department.¹³ The protest has to identify the taxpayer and the tax at issue, state the grounds for the dispute with supporting evidence, and describe the relief you want.

You can protest without paying the disputed amount first, though any portion you aren’t contesting must be paid by the protest deadline. Miss the 90 days and the assessment becomes final; the department can then move to collect. Further administrative and judicial review is available if the protest is denied, but the written protest itself is what preserves the right to challenge.¹³

1
Justia. New Mexico Code 7-2A-5 – Corporate Income Tax Rate
2
Justia. New Mexico Code 7-2A-5.1 – Corporate Franchise Tax Amount
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Justia. New Mexico Code 7-2A-3 – Imposition and Levy of Taxes
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Justia. New Mexico Code 7-2A-9 – Taxpayer Returns; Payment of Tax
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Justia. New Mexico Code 7-2A-8.3 – Combined and Consolidated Returns
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Justia. New Mexico Code 7-4-10 – Apportionment of Business Income
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Justia. New Mexico Code 7-2A-9.1 – Estimated Tax Due
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Taxation and Revenue New Mexico. Online Services
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New Mexico Taxation and Revenue Department. Corporate Income and Franchise Tax Overview
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New Mexico Taxation and Revenue Department. Request an Extension to File
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Internal Revenue Service. About Form 7004, Application for Automatic Extension of Time to File Certain Business Income Tax, Information, and Other Returns
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Justia. New Mexico Code 7-1-69 – Civil Penalty for Failure to Pay Tax or File a Return
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Justia. New Mexico Code 7-1-24 – Disputing Liabilities