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Orders are written statements to implement a decision after a Department administrative hearing. 

A taxpayer may file an appeal with the New Mexico Court of Appeals within 30 days after the date of the decision. Appeals are decided based on the evidence and arguments presented at the administrative hearing. 



08/31/2017

17-36

Eastern Sunbelt Real Estate

On February 23, 2016, the Department assessed the Taxpayer for gross receipts tax for the periods starting January 1, 2011 and ending December 31, 2012. On April 21, 2016 the Taxpayer filed a timely formal protest with the Department. The Taxpayer was unable to obtain the additional documents needed because the accountant that handled the returns filed for the time in questions is deceased. The Department determined that the Taxpayer had filed a Schedule C for the tax years in question and did not pay gross receipts tax on the transactions. At the hearing, the Department acknowledged the Taxpayer provided sufficient proof during the protest to show that the Taxpayer that was assessed was not responsible for the gross receipts tax owed. Therefore, the Hearing officer determined that the Taxpayer was not involved in the transactions and did not owe any tax. However, the Hearing Officer did note that this decision would not prohibit the Department from assessing the appropriate taxpayer. For the forgoing reasons, the Taxpayer’s protest is granted.


08/08/2017

17-35

All Medical Personnel Inc.

On May 5, 2016, the Department issued an assessment for gross receipts tax, penalty, and interest for the periods starting March 31, 2009 and ending September 30, 2015. The Taxpayer filed a timely protest of the assessment on July 27, 2016. The Taxpayer is a staffing agency that specializes in finding and recruiting medical professionals and then facilitates the staffing and payment of those medical professionals. The Taxpayer argued that they do not owe gross receipts tax to the state because it is a joint employer with businesses in New Mexico, has no physical presence, office, or staff in New Mexico. Third, the Taxpayer argues that based on Public Law 86-272 under 15 USCS Section 381 it believes that it has de minimus activities in New Mexico. Lastly, the Taxpayer argues that even if it was subject to tax it would be able to claim a healthcare deduction. The Department argues that gross receipts tax is due for the service that is being provided and the employees that the Taxpayer has working in New Mexico. Based on the service agreement that was provided at the time of the hearing, it was clear that the Taxpayer was an independent contractor responsible for locating employees, paying the employees, making sure that the employees had benefits, collection of any tax based withholdings, and workers compensation insurance. It was specified that the Taxpayer does not lease employees. However, the Taxpayer was being paid for the employee services and not the worker directly. The Taxpayer argued that based on the work that is performed that it is able to claim a deduction that applies to medical. The Hearing Officer determined that the Taxpayer does not fit the qualifications of the deduction mentioned. The Hearing Officer did bring up that a certain part of the assessment was beyond the statute of limitations. The Department noted that when the audit was completed it was only for January 2010 forward. The Hearing Officer determined that the Taxpayer is subject to gross receipts tax in New Mexico. The Taxpayer provides a service and employees workers who work in facilities in New Mexico. The Taxpayer also benefits monetarily for that exchange of service. The Hearing Officer ordered that the assessed reporting periods March 31, 2009 through November 30, 2009 be stricken from the assessment as they were found to be beyond the statute of limitation. It was further ordered, the amount of the assessment which resulted from the audit be carefully reviewed and anything from the 2009 periods mentioned above to make sure that any of that liability is removed from the amount due. The Department is then to provide the Taxpayer with a statement of account for current outstanding liabilities and update all interest calculation. When the information is provided to the Taxpayer they are to pay the updated gross receipts tax, penalty, and interest. For the reasons listed above, the Taxpayers’ protest is partially granted and is partially denied.


07/31/2017

17-34

Peabody Coalsales Company

On February 27, 2016, the Department denied the Taxpayer’s claim for refund for periods 2011 through 2012. The Taxpayer filed a timely a timely protest on April 21, 2016. The issue to be decided is if the Taxpayer is entitled to deduct sales of coal from its gross receipts when those sales were made in lots in excess of 18 tons to a power plant that used the coal to produce electricity. The Taxpayer argument is that it was entitled to deduct its sales of coal to the power plant from its gross receipts per Section 7-9-65 NMSA 1978. The Taxpayer argues that a plain reading of the statute and regulation can lead to the conclusion that coal is a chemical based on the regulations definition and can be allowed in the deduction. The Department argues that the Taxpayers argument is against the purpose of regulations. Regulations are used to help further define and narrow the applicability of deductions not to overstep the statute. The first step in statutory interpretation is to look at the plain language of the statute and refrain from further interpretation if the plain language is clear. The Hearing Officer also noted that when statutes and regulations are inconsistent, the statute prevails. The Hearing Office stated that the interpretation of statutes should be done by keeping in mind legislative intent and in a way that does not lead to absurd, unreasonable, and unjust results. The Hearing Officer determined after looking at legislative history and the information presented that the statute is related to the processing of ores or oil. It was also concluded that the burning of coal to produce electricity is not an activity related to the processing of ores or oil. The statute must be read in its entirety and a single phrase of a statute cannot determine the statutes intent. The Hearing Officer determined that coal is for producing heat which is used in the processes of making electricity and is not a chemical under the statute or regulation because it is not used for producing a chemical reaction. The Taxpayer failed to establish that it was entitled to the deduction. For the reasons mentioned above, the Taxpayer’s protest is denied.


07/31/2017

17-33

Michael Trujillo

On April 30, 2015, the Department assessed the Taxpayer for personal income tax, penalty, and interest for the tax years 2007 through 2013. On July 29, 2015, the Taxpayer filed a timely protest with the Department. On October 9, 2015, the scheduled hearing was conducted. At the time of the hearing, the protest was consolidated with two related protests and the Taxpayer requested that the protest be held back as the parties were working on a settlement. The request was granted and the hearing was rescheduled for July 20, 2017. Two of the protests were withdrawn by the Taxpayer before the final hearing took place. During the time at issue, the Taxpayer was in business as a valet and parking services for events. The Taxpayer admitted to not keeping good records of his business activity for the time at issue. In 2014, the Department began an audit of the Taxpayer and his business. Due to poor record keeping, the Department used an extrapolation and average method to determine the tax owed. The auditor at the time determined that the Taxpayer willfully failed to provide documentation for the time period at issue and assessed a fraud penalty. During, the protest the Taxpayer was able to provide better documentation with the help of a CPA. Based on the documentation submitted, the Department started using the bank deposit method to calculate the tax owed. The Department also changed position and determined that the Taxpayer’s failure to report and pay timely was due to negligence. Based on the information above, the Department was able to recalculate the tax owed and assessed. The Hearing Officer determined that based on the new information provided the Department’s recalculated liability is reasonable. The Hearing Officer called for a partial abatement of the original assessment. The Taxpayer’s protest is denied in part and granted in part. 


06/30/2017

17-32

Martin D. Moore Eunice Sports Broadcasting

On February 17, 2016, the Department assessed the Taxpayer for gross receipts tax, penalty, and interest. The initial assessment was never protested. On March 2, 2017, the Department issued a warrant of levy for the unpaid amount due. On March 14, 2017, the Taxpayer filed a formal protest of the warrant of levy. In the protest, the Taxpayer argued against the original assessments claim. As the protest was for the warrant of levy the issue to be decided is if the warrant of levy based on the assessment was in accordance with the law. The Taxpayer is still allowed to discuss his defense against the original assessment. The Taxpayer acknowledged receiving the original assessment but stated that he was not aware of his rights to protest the assessment at that time. The Hearing Officer takes notice that the Department sends out a document with each assessment which addressees the Taxpayers right to protest. If the taxpayer fails to file a protest within the required time, the secretary can enforce collection of tax if the taxpayer is delinquent in paying the amount due per Section 7-1-16 NMSA 1978 and Section 7-1-24 NMSA 1978. The Hearing Officer determined that there is no jurisdiction to consider the claims and the defense that the Taxpayer presented to the assessment as there is no authority under the law to dispute an assessment after the protest period has passed. In this case, when the Taxpayers liability was not paid and had not protested the Department pursued collection activities. Per Section 7-1-31 NMSA 1978 the Department can pursue collection by levy on all property of the taxpayer. The Hearing Officer determined that the warrant of levy was executed correctly by the Department. For the reasons above, the Taxpayer’s protest is denied.


06/29/2017

17-31

David B. Graham

On December 13, 2016, the Department assessed the Taxpayer for personal income tax, interest, and penalty for the periods January 1, 2009 through December 31, 2015. On March 3, 2017, the Taxpayer filed a formal protest with the Department. In 2011, the Taxpayer started horseracing activities. From 2012 through 2015, the Taxpayer incurred expenses based on the horseracing activities and with those losses he claimed deductions against his personal income tax. The Department argues that the activities for 2012-2015 were not for profit and therefore cannot be used in the deduction. However, the Department acknowledged that the assessment of personal income tax for 2009 and 2011 in this case was in error because they were not within the applicable statute of limitations. The Taxpayers argument is that he has a plan and purpose for the activities and expects to make income throughout his retirement from the horseracing profits. The Departments disallowance follows suit with the federal deduction for expenses incurred while engaging in trade or business per 26 USCS Sec 162. The deduction is disallowed when the activity being engaged in is found to not be a for-profit activity, The Hearing Officer decided to use the nine factor test in federal regulation to determine if the activity was for profit during the time at issue. The factors are: 1) the manner in which the person carries on the activity; 2) the expertise of the person and his or her advisors; 3) the time and effort put into the activity; 4) the expectation that assets may appreciate in value; 5) the person’s success in carrying on similar or dissimilar activities; 6) the history of income or loss with respect to the activity; 7) the amount of profits earned; 8) the financial status of the person; and 9) the elements of personal pleasure and recreation. Based on the information presented, the Hearing Officer determined that the activity was not motivated by profit. The Hearing Officer concluded that the Taxpayer did not overcome the presumption of correctness and establish a right claim to the deduction. The Hearing Officer concluded that interest is mandatory by statute and was assessed correctly, the Taxpayer is liable for the penalty due and the disallowance of the deduction for 2012 through 2015 was reasonable therefore the Taxpayers protest based on these periods is denied. The Hearing officer determined that the Department lacked the authority in this case to assess taxes prior to 2012 and believes that the Taxpayers protest should be granted for tax years 2009 through 2011. For the reasons above, the Taxpayer’s protest was granted in part and denied in part.


06/28/2017

17-30

Kelly A. Day

On September 7, 2016, the Department issued a notice of assessment and demand for payment for the tax year 2009. On August 31, 2016, the Department issued a notice of assessment and demand for payment for the tax year 2010 and 2011. On September 22, 2016, the Taxpayer filed a formal protest with the Department. The Taxpayer paid all taxes due for tax years at issue and the Department waived all penalties for tax years 2009-2011. On December 15, 2016, the Taxpayer submitted a formal protest seeking a refund for the taxes paid for tax years 2009-2011. On March 29, 2017, the Taxpayer submitted a memorandum of law arguing that the assessment of interest in this case violates the US and New Mexico constitution. On April 5, 2017, the Taxpayer submitted a memorandum of law arguing that the Taxpayer should be awarded attorney’s fees. For the periods at issue, the Taxpayer was classified as an independent contractor by the business she was working for. The Taxpayer filed forms with the Internal Revenue Service (IRS) to submit facts showing that she was an employee not an independent contractor. The IRS confirmed and accepted those facts on March 14, 2016. As a result, the Taxpayer filed amended returns for the time at issue. During the hearing, the Taxpayer argued that the assessment of interest was a violation of the United States Constitution. It was also argued that the error in employment status was the employers and not the taxpayers. The Department recognized that the Taxpayer filing of a late return was not due to negligence based on the timely original returns that were filed with the Department so penalty was abated. However, the Department recognizes that it does not have the statutory authority to abate interest. The Hearing Officer determined that based on Section 7-1-18 (A) NMSA 1978, the department is not barred from assessing any taxes or interest against a taxpayer based on amended returns. Based on the result from the IRS determination the Taxpayer had 180 days to file an amended return with the Department. The Hearing Officer determined that based on when the amended returns were submitted to the Department and Section 7-1-18 (E) NMSA 1978; the Department may assess the taxpayer for liabilities owed until the end of 2019. The Hearing Officer determined that the Department did not violate the US or New Mexico constitutions and that the Taxpayer is liable for the interest due for the time at issue. As the Taxpayer is not the prevailing party in the administrative proceedings the Taxpayer is not entitled to any costs or fees. For the reasons listed above, the Taxpayer’s protest is denied.


06/21/2017

17-29

Dustin R. and Clarissa Ptolemy

On December 5, 2016, the Department issued an assessment for personal income tax, interest, and penalty for the periods starting January 1, 2011 through December 31, 2015. On February 15, 2017, the Taxpayers submitted a formal protest letter which was acknowledged by the Department on March 13, 2017. The Taxpayer started activities in the agriculture and farming field in 2011. The Taxpayers have since purchased cattle and have tried different business strategies with the goal of having a profitable agricultural and ranching business. When starting the business the Taxpayers both had full time jobs and in the beginning of 2017 decided to pursue the agricultural and ranching activities full time. The Taxpayers have seen a loss from their activities since 2011 but the Taxpayers believe that 2016 will be showing a profit on the activities. However, based on the adjustments for prior year losses and depreciation they are unsure what the 2016 tax returns will show. The Taxpayers argue that there have had losses while starting the business and they are starting to see profits. The Department argues that the deduction for the losses was denied and assessed because the activity during the time at issue was not a for-profit activity. The Hearing Officer determined that the decision on the profit status of the business will be based on 26 U.S. Code § 183and the federal 9 factor test. Federally, the deduction of losses in excess of profits is disallowed when the activity being engaged in is found to not be a for-profit activity. The 9 factors are: 1) the manner in which the person carries on the activity; 2) the expertise of the person and his or her advisors; 3) the time and effort put into the activity; 4) the expectation that assets may appreciate in value; 5) the person’s success in carrying on similar or dissimilar activities; 6) the history of income or loss with respect to the activity; 7) the amount of profits earned; 8) the financial status of the person; and 9) the elements of personal pleasure and recreation. The Hearing Officer determined that six out of the nine factors weigh in favor that the activity is for-profit and that the losses in the startup years of a business are fairly common and should not be used against the Taxpayers. The Hearing Officer determined that the Department’s disallowance of the deduction was not reasonable and that the Taxpayers overcame the presumption of correctness. The Hearing Officer decided that the Taxpayers’ tax, penalty and interest should be abated based on the reasons listed above. The Taxpayers’ protest is granted.


06/14/2017

17-28

Hyundai Corporation USA

On August 12, 2016, the Department issued a Notice of Assessment of Taxes and Demand for Payment of withholding tax penalty and interest for the period ending June 30, 2016. The formal protest was received by the Department on October 4, 2016. The Taxpayer is asking for relief of the penalty and interest owed due to modifications of the Taxpayers internal computer networking system that resulted in an employee not having access to the Departments online filing system during the time at issue. In the protest letter, an employee of the Taxpayers noted that they believed they had until July 31, 2016 to file and make a payment for the tax due for the period at issue. The Taxpayer filed its return and payment on July 28, 2016. The Department confirmed that the return and the payment due date for that reporting period was July 25, 2016. The untimely filed return resulted in the assessment showing penalty and interest due for the period at issue. The Taxpayer did not disagree that the payment and return were late but is asking for leniency due to the circumstances. The Hearing Officer determined that the assessment of interest is mandatory and the Department has no legal authority to abate it. For the issue of penalty, the Hearing Officer Determined that the Taxpayer failed to establish that it was entitled to an abatement of penalty. For the reasons above, the Taxpayer’s protest is denied.


06/12/2017

17-27

The Local Vapory

On September 22, 2016, the Department issued a Notice of Assessment of Taxes and a Demand for Payment letter to the Taxpayer. The Taxpayer denied ever receiving the notice and therefore never protested the assessment. On January 5, 2017, the Department issued a Notice of Intent to Lien. The Taxpayer executed a timely formal protest referencing the Notice of Intent to Lien. On March 2, 2017, the Department acknowledged the Taxpayer’s protest. The issue the Taxpayer presented in this protest is whether or not the Hearing Officer can make a decision based on the future conduct of the Department. At the time of the hearing, the Taxpayers counsel disclosed that the Taxpayer plans to pay the outstanding liability and then submit a claim for refund. Upon the denial of the refund, the Taxpayer would file a formal protest. The Taxpayer explained that making the payment of penalty and interest at this time would be a hardship on the current business. Therefore, the Taxpayer was requesting that the Hearing officer prohibit the Department from collecting penalty and interest on the assessment because the Taxpayer was a successor in business. The Hearing Officer determined that the assessment is not currently in protest and the Department retains its authority to determine if the assessment is incorrect and if any type of abatement is necessary. In the event that the Department chooses not to abate any portion of the assessment, then the Taxpayer retains all rights under the Tax Administration Act to seek a refund, file a protest, and have a hearing on the refund denial. The Hearing Officer untimely decided that the issue presented by Taxpayer is not ripe. The Hearing Officer specified that the relief the Taxpayer was requested was based on a future Department decision that have not taken place yet and the Administrative Hearing Office Act does not grant the hearing office the authority to make decisions on future conduct. For the reason above, the Taxpayer’s protest is denied.


05/31/2017

17-26

A Team Productions

On October 21, 2016, the Department denied the Taxpayers September 14, 2016 untimely submission of a written protest of an assessment. On November 10, 2016, the Taxpayer filed a formal protest for the Departments denial of protest. The original protest was a result of an assessment that was issued June 15, 2016 for gross receipts tax, penalty, and interest for the reporting periods January 1, 2010 through December 31, 2013. The Taxpayers testified that the postmark date on the envelope was June 17, 2016 and that would make the deadline to protest September 15, 2016. The Taxpayers CPA testified that they were unable to locate the envelope to include with the protest. The Department testified that through its mailing process the assessment was printed on June 15, 2016 and the assessment was delivered to the US Postal Service the same day. The Hearing Officer was persuaded that the Notice of Assessment to the Taxpayer was properly mailed on June 15, 2016. The Hearing Officer determined that based on the 90-day timeline to file a protest, the protest should have been filed with the Department on September 13, 2016. Therefore, the protest filed with the Department was not timely and the 90-day deadline was not met. Based on the information above, the protest cannot be accepted as valid by the Department. The Taxpayer’s protest is denied.


05/30/2017

17-25

Louie Casias

On June 24, 2013, the Department issued an assessment for gross receipts tax to the Taxpayer for the periods from March 2006 through September 2011. The Taxpayer filed a protest to the assessment that was later withdrawn. The Taxpayer worked with the Department on the assessment and received a partial abatement. In withdrawing the protest, the Taxpayer agreed to conclusive liability for the tax due for the periods at issue. The Taxpayer ceased business operations around 2014. On August 22, 2016, the Department issued a Notice of Claim of Tax Lien for the remaining tax due, penalty, and interest. The lien was issued to the individual rather than the business because the Taxpayer was listed as a sole proprietorship with the Department. Through his attorney, the Taxpayer filed a protest on September 30, 2016. The Taxpayer argued that the lien should not have been in his name because the company was a limited liability company for the time at issue. The Department argued that there was never any record that the Taxpayer changed his company from a sole proprietorship to a limited liability company (LLC) and that the Taxpayer has already issued a protest withdrawal for the amount of the assessment that was subject to the lien issued. The issues to be determined in the protest are to what extent the Taxpayer is personally responsible to the tax liability of his business and to what extent can the Taxpayer protest the lien based on the assessment and previous protest withdrawal. The Taxpayer argued that he should not be liable for the tax liability because as of 2003 the company became a LLC. During the hearing, the Taxpayer was unable to show evidence that the LLC took over the assets, rights, obligations, liabilities, or tax reporting responsibilities of the sole proprietorship. It was discovered that the Taxpayer never formally updated his business registration with the Department and continued filing with the sole proprietorships combined reporting system (CRS) number. The Department testified that there is a system in place for when businesses changes from one business type to another that results in a new CRS number is issued. Specifically, for a change from sole proprietorship to LLC the company has to close its existing account and open a new account as an LLC. In regards to the protest of the lien, it was determined that the Taxpayer was re-protesting the original tax due and penalty. Even if based on the business changes the protest would be untimely filed and would not be a valid protest. Based on the information provided in the hearing, the Hearing Officer determined that as the Taxpayer did not follow the correct process for changing the business entities business type that the lien was properly assessed to the sole owner of the business. The Taxpayer’s protest is denied.


05/19/2017

17-24

Helmerich & Payne Intnl Drlg

On October 6, 2015, the Department assessed the Taxpayer for corporate income tax, penalty, and interest for the period ending September 30, 2013.  The Taxpayer filed a formal written protest to the Department including a request for costs and fees. The Taxpayer later filed another request for costs and fees and provided a copy of the abatement of the assessment from the Department. The Taxpayer stated again in the motion its stance that the Departments assessment was improper and contrary to established case law. The issue to be decided in the hearing is if the Taxpayer is the prevailing party for purposes of Section 7-1-29.1 NMSA 1978 for the purpose of a judgment or a settlement for reasonable administrative costs. The Department argued that a hearing officer may not order an award of administrative costs without first rendering a decision on the merits of the protest. In this case the abatement was allowed by the Department before the date the hearing was set. If the hearing officer issued an award for costs it would infringe on the separation of powers doctrine because the Administrative Hearing Office (AHO) is attached to the Department of Finance and Administration and that issuing an award of costs would be impermissible formulation of tax policy. The Hearing Officer determined that the statute allows for the award to be reviewed in the same manner on appeal as a decision by the hearing officer. The Department argued that its decision to abate the assessment does not mean that the Taxpayer substantially prevailed since there was not a decision on the merits of the protest and that that allowing a request for attorney’s fees is a second level evaluation of the Department’s internal processes. The Hearing Officer Determined that even if the Department abates the assessment while the protest was pending it does not remove the jurisdiction of the AHO under Section 7-1-.29.1 NMSA 1978 based on the circumstances of this protest. The Hearing Officer determined that as the protest was timely filed, a hearing was scheduled with AHO, the deadlines for discovery and motion were set, and the matter was scheduled for hearing on the issues. The abatement then took place through an administrative procedure or action before the Department, while the protest was pending. The Hearing Officer determined that when the Department abated the assessment in its entirety, the Taxpayer became the prevailing party since the abatement was for the entire amount in protest. The Hearing Officer also noted that there was no evidence or argument presented by the Department indicating that the taxpayer should not be treated as the prevailing party. The Hearing Officer awarded the Taxpayer $50,000.00 for costs and fees. The Taxpayers’ protest was granted.


05/19/2017

17-23

Aventis Pharmaceuticals Inc. & Sanofi-Synthelabo, Inc

On April 4, 2013, the Taxpayers were assessed for corporate income tax, penalty, and interest for the reporting periods starting December 31, 2007 through December 31, 2009. On May 3, 2013, the Taxpayers collectively filed a written protest. The protest was accepted as valid by the Department on May 17, 2013. The Taxpayers involved in this protest are subsidiaries of a large multinational pharmaceutical company. The Taxpayers argued that they are not subject to taxation in New Mexico due to Public Law 86-272 and the Commerce Clause. For the tax years 2007 through 2009, there was a joint income tax audit performed by the Multistate Tax Commission (MTC). MTC determined that the operations of the business fall under a unitary business in the United States. The Taxpayers do employ sales personnel who solicit sales in New Mexico but all sales were submitted to the Taxpayers headquarters in New Jersey. Through the MTC audit, it was discovered that along with the solicitation of sales the doctors were provided with ongoing education, clinical trials, textbooks, funding for training materials, and classes at the doctor’s offices. The MTC audit concluded that the Taxpayers had nexus in New Mexico. The main issue to be determined in the hearing is if the Taxpayers are subject to New Mexico corporate income tax or if they are protected from taxation based on Public Law 86-272 and the Commerce Clause. The next issue to determine is if the Taxpayers present sufficient evidence to support their protest and the election of filling method and whether the Taxpayers are liable for the payment of penalty and interest. The Hearing Officer determined that there was sufficient nexus for the state to impose the assessed tax to the Taxpayers under the Commerce Clause. Both of the Taxpayers had activities in the state beyond the solicitation of sales and those activities increased the Taxpayers market and market potential in the state. The Hearing Officer determined that although the Taxpayers were granted partial summary judgment to allow them to select a reporting method the Taxpayers failed to present their first elected reporting method and there was no factual basis to modify the assessed tax principal. Therefore, the Taxpayers are liable for the entire tax principal assessed. The Hearing Officer determined that the Taxpayers decision to not file and pay New Mexico corporate income taxes was a mistake of law made in good faith and on reasonable grounds based on the circumstances in the case. So, the Taxpayers are not liable for the assessed penalty in this case or civil negligence penalty. The Taxpayers’ protest is denied in part and granted in part.


05/12/2017

17-22

Donald W. Krumrey

On August 3, 2016, the Department assessed the Taxpayer for underpayment penalty of personal income estimated payments for the 2015 tax year. The Taxpayer paid the assessed penalty and filed an application for refund with the Department on October 9, 2016. After 120 days had elapsed without the Department approving or denying the Taxpayers claim for refund the Taxpayer filed a formal protest which was received by the Department on February 13, 2017. The Taxpayer moved to New Mexico in 2014 and relied on the personal income tax instructions to file his return. The Taxpayers primary sources of income for the relevant period were from pensions. From those pensions, only federal tax was withheld. The Taxpayer argued that based on the instructions he did not believe that he was required to make estimated payments in 2015. The Taxpayer believed that as the instructions were not clear on the requirements that the underpayment penalty should be abated. The Department argued that the information was in the instruction packet for personal income tax and that as there was no state withholding taken out from the Taxpayers pensions that the Taxpayer was required to pay estimated payments in order to avoid the underpayment penalty of tax due. Based on Section 7-2-12.2 (A) NMSA 1978, annual payments in installments through withholding or estimated tax payments are required by taxpayers. The Department is required to assess a penalty when a taxpayer underpays the required annual payments based on Section 7-1-67 (B) NMSA 1978. For the period at issue, withholding or estimated payments were not made and the calculation of underpayment penalty was not disputed by the Taxpayer. Although, the Taxpayer believes that the instruction were inadequate. During the hearing, the Taxpayer admitted that the instructions were not fully reviewed. The Hearing Officer determined that based on the statutes use of the word shall that the underpayment penalty is mandatory in all instances where a taxpayer fails to make the required annual payment due to negligence. The Taxpayer failed to overcome the presumption of correctness and the Department’s assessment was correct. For the reasons above, the Taxpayer’s protest is denied.


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