Governor’s Office says proposed tax incentive for quantum companies could be ‘meaningful anchor’ for industry

Alex Greenberg hopes the approval of a multimillion-dollar tax incentive during this year’s 30-day legislative session can be the “meaningful anchor” for New Mexico’s quantum industry. 

“We’re at such an inflection point for these technologies that capturing early market share now can mean that we have an advantage for decades to come,” said Greenberg, economic development policy adviser for the Governor’s Office. “There is a sense of urgency about it, but I think we’re trending in the right direction with this tool.”

The quantum computing tax refund — consisting of $50 million a year over three years — is only a small part of Gov. Michelle Lujan Grisham’s proposed $11.3 billion budget plan, which would increase state spending by a smaller amount than in previous years.

The proposed tax refund comes just months after Lujan Grisham announced a new state partnership with the Defense Advanced Research Projects Agency to develop the Quantum Frontier Project aimed at accelerating quantum development across the state. 

That announcement was a “big success” for New Mexico, Greenberg said. Just weeks ago, he said DARPA officials told the Lujan Grisham administration that New Mexico currently has the largest density of people working in quantum computing, validation and verification in the nation. 

Quantum technologies are built on the principles of quantum mechanics — the physics of atoms and subatomic particles — and can perform tasks that were previously impossible or extremely slow with more traditional computing approaches.

“If you look at the history of Silicon Valley, it was the density of people that first led to these giant internet companies,” Greenberg said. “Quantum is a platform technology, albeit an industry in itself. It’ll help things like defense tech, aerospace, medical diagnostics, pharmaceutical development (and) clean-energy breakthroughs. 

“Leaning into quantum, you could see where these clusters are going to be self-reinforcing.”

Greenberg, who played an instrumental role in propping up the tax refund proposal, said it would apply to a wide range of quantum technologies, including computing, sensing and other equipment. It would also focus on companies that have a large footprint in New Mexico, specifically in manufacturing, he added. 

As the quantum tax refund is laid out now, Greenberg said companies would need to spend a minimum of $5 million on manufacturing, equipment or infrastructure to be eligible for the credit, capped at $30 million per business. That ensures no one entity is taking advantage of or receiving more money back from the refund, he added.

But some state officials remain on the fence about the incentive, including Rep. Derrick Lente, D-Sandia Pueblo, who said he is not convinced that New Mexico should shoulder this type of recurring spending. 

“When we talk about these quantum tax credits, I understand that there are opportunities that we have as a state to maybe create (other) opportunities, but I just don’t know if this is the year that we have the capacity to do that,” said Lente, who chairs the House Taxation and Revenue Committee. 

As part of the governor’s budget plan, Lente expected there to be some kind of campaign explaining the economic benefits of such a refund. 

“In my mind, when I think about tax incentives or a way that we can invest in our tax structure for New Mexico, I would rather it first go to the benefit of the public,” Lente said.

Details of the quantum tax refund are subject to change until the budget proposal is discussed in the upcoming 30-day legislative session, beginning Jan. 20, Greenberg said. Items like Senate Bill 211 during last year’s 60-day session, which would have offered companies and individuals who invest at least $3 million in quantum facilities the opportunity to receive up to 30% of that money back through tax credits, have previously failed. 

“This is just a technology that is tailor-made for New Mexico, and we’re really well positioned to take advantage of it,” Greenberg said. “With the right incentives that we can have, we can become — along with Colorado and the whole Mountain West — the Silicon Valley of quantum.”

While Sandia National Laboratories, Los Alamos National Laboratory and the University of New Mexico make the state a great partner for quantum companies, Greenberg said the buildout of manufacturing operations has been challenging. 

Whether it’s 1,000-drum liquid helium, developing clean rooms or creating high-tech lasers, Greenberg said these components can cost millions of dollars. 

“The hope is that each one of those capital expenditures comes with a large operations footprint, and that this refund will effectively pay for itself by being able to anchor a company who may not be able to move or scale otherwise here into the state,” Greenberg said.

Greenberg said Elevate Quantum’s tech hub designation from the U.S. Economic Development Administration has made New Mexico an “incredibly attractive” place for these emerging technologies, incentivizing companies and startups across the nation to set up shop in the state. 

That designation was one of many commitments made to New Mexico throughout the year, including Colorado-based companies Quantinuum and Mesa Quantum looking to build and expand operations in the state.

Elevate Quantum CEO Zach Yerushalmi said unlocking quantum technologies is not something that will happen overnight, but state incentives, like the refund, are essential to building out the local industry. 

“A little bit like the success you saw in the film industry, these incentives can be the decisive factor where folks locate, on top of the already incredible ecosystem,” Yerushalmi said. “It’s building off of that credible foundation from New Mexico. With this aggressive — in a good way — package, it just makes it an undeniable place.”

Yerushalmi said he hasn’t seen a quantum tax refund “this clean” implemented elsewhere. The proposal ensures that the companies utilizing it have skin in the game, as well as make a commitment to New Mexico’s economic development, he said. 

Even those who are fairly new to the state understand how big a win this could be for the industry. 

Bob Ledoux, director of UNM’s Quantum New Mexico Institute, said this tax refund has been the “talk of the town” since he relocated here in August. While universities may not use the tax refund directly, he is confident that they can still reap some benefits.

If New Mexico wants to translate innovations from the universities and national labs, Ledoux said it needs to keep people here and invite more in. UNM has trained multiple students in quantum information science, and though many would like to stay, they need more job opportunities. 

“I think it would bring in more talent because they realize that once they’re educated here, if they want to stay in academia, hopefully (UNM is) growing,” Ledoux said. “But if they want to go into the commercial sector, they need companies. Otherwise, they go.” 

Hannah García covers tech and energy for the Journal. You can reach her at hgarcia@abqjournal.com.