Corporate Income & Franchise Tax
New Mexico doesn’t let corporations slip under the radar. If you’re incorporated in the state, doing business here while being registered somewhere else, or even just earning income sourced from New Mexico—you’re in.
Every corporation has to pay something, even when there’s no income tax due. That “something” is a USD 50 franchise tax. Think of it as the state’s baseline fee for simply holding or exercising a corporate franchise.
Now, C corporations face income tax on net taxable income. Here’s how the math works:
- Up to USD 500,000 → taxed at 4.8%.
- Over USD 500,000 → it jumps to USD 24,000 plus 5.9% on the excess above that.
So smaller corporations feel the lighter end of the scale, while larger ones hand over a bigger slice of their profits. Any corporation with a nexus—a taxable connection—to the state must file a return.
Filing obligations are clear-cut. A C corporation files Form CIT-1, the Corporate Income and Franchise Tax Return. The due date? The 15th day of the fourth month after the tax year ends.
But that’s not all. If a corporation’s expected liability is USD 5,000 or more (after credits), it also needs to make estimated tax payments. And those aren’t optional—they come in quarterly installments. Corporations use Form CIT-ES to make these payments.
In other words, if you’re above the USD 5,000 mark, the state wants to see money coming in during the year—not just at filing time.
New Mexico backs its deadlines with penalties and interest.
- Penalties: Late filing or payment costs 2% per month (or part of a month). This stacks up until it hits a ceiling of 20% of the tax owed. If you have an approved extension and pay by the extended deadline, the penalty doesn’t apply.
- Interest: The state sets this each quarter, usually close to 6% annually. It’s based on the prime rate. The formula is straightforward:
Tax due × daily interest rate × number of days late = interest owed.
Extensions are fairly practical. If you already have an IRS extension, attaching it to your New Mexico return works—no extra state form needed. But if you don’t have one, or you need more time than the IRS allows, you’ll have to ask New Mexico directly. That’s done either by letter or by filing Form RPD-41096, and it must land before the original deadline.
Pass Through Entity Tax
Pass-through entities—S corporations, partnerships, LLCs—don’t escape entirely. They may not pay corporate-level income tax, but they do have reporting duties.
The form here is Form PTE (Information Return for Pass-Through Entities). And the deadline is slightly earlier than corporations: the 15th day of the third month after year-end.
Entities must file if they:
- Earn gross receipts in New Mexico,
- Record income or losses sourced here, or
- Have members, partners, or shareholders who live in New Mexico or owe tax here.
So, even when the entity itself passes profits on, the state still wants visibility on what’s flowing through.
Extensions are treated much like those for corporations. If you already have a federal extension, just attach it—the state accepts it.
If not, or if more time is needed than what the IRS grants, then you’ll need to request it directly from the New Mexico Taxation and Revenue Department. The route is the same: write a letter or file Form RPD-41096 before the original deadline.
And here’s the kicker: penalties and interest run at the same rates as corporate income tax. So late is late—whether you’re a C corporation or a pass-through entity.
Final Thoughts
New Mexico’s tax setup might look straightforward at first glance, but the details matter. A flat USD 50 franchise tax applies to all corporations, active or not. C corporations face progressive rates that climb as profits grow. Pass-through entities, even if not taxed on income directly, are still roped in through mandatory filings.
The compliance side is where businesses can trip up. Quarterly estimates, different filing dates, and penalties that add up quickly—all these require careful tracking. The state does give some breathing space by honoring federal extensions, but only if you plan ahead.
For businesses, the lesson is clear: know your thresholds, mark deadlines on the calendar, and don’t leave extensions until the last minute. Do that, and New Mexico’s system is manageable. Skip it, and penalties and interest can snowball before you realize it.
