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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. 


All Posts > 2011

12/02/2011

11-29

John & Bonnie Yearley

The Taxpayers are a married couple who live together in Gallup, New Mexico.  Mrs. Yearley is an enrolled tribal member of the Navajo Nation, a member of the Teesto Chapter in Arizona.  In tax years 1999 through 2002, Mrs. Yearley earned her income working at a coal mine near Window Rock, Arizona, on the Navajo Nation.  She retired on December 21, 2002, and received retirement income stemming from her work on the Navajo Nation in tax years 2003 and 2004.  Beginning in 1999 and continuing through 2004, Mrs. Yearley  moved in with her ailing father in Teesto to care for him.  Mrs. Yearley did not pay personal income tax on her income during this period.  On September 18, 2006, the department assessed the Taxpayers for Mrs. Yearley’s unpaid personal income tax, penalty and interest for tax years 1999 through 2004.  Mr. Yearley did pay New Mexico personal income taxes on all of his income.  The Taxpayer’s filed a written protest to the assessment and a hearing was set on the matter.  The issue to be decided was whether Mrs. Yearley’s personal income for the tax years in question was exempt from New Mexico personal income tax pursuant to Section 7-2-5.5 NMSA 1978.  The hearing officer determined that Mrs. Yearley’s income was exempt during tax years 1999-2004 because she was an enrolled member of the Navajo Nation, earned income from working on the Navajo Nation, and lived within the boundaries of the Navajo Nation during the time period in question.  The Taxpayer’s protest was granted.?


12/02/2011

11-31

William & Diane Severns

The Taxpayers, who were residents of New Mexico beginning at least in 1977, filed joint New Mexico personal income tax returns for tax years 1977 through 2000.  For tax years 2001 through 2007, the Taxpayers did not file any personal income tax returns in New Mexico.  On June 13, 2008, the Department issued seven notices of assessment to the Taxpayers for unreported and unpaid personal income taxes, penalty and interest for those tax years.  The Taxpayers filed a written protest to the assessments, claiming that they had switched their place of residency from New Mexico to Nevada during the years in question.  During the hearing, the Taxpayers conceded that they were New Mexico residents in 2005, and withdrew their protest for that year.  The issue of whether the Taxpayers were residents for the other six years in question, and subject to New Mexico personal income tax for those years, remained to be decided at the hearing.  The Taxpayers had purchased a succession of RVs during the years in question, and spent time travelling the country and they purchased fixed RV lots in Nevada and Florida.  They also maintained their home in Albuquerque.  In 2000 and 2001, the Taxpayers consulted with a tax and estate-planning attorney about their desire to change their residency to Nevada.  He informed them that they could keep their Albuquerque home as a second home and still not be considered New Mexico residents.  Both Taxpayers had changed their voter registration from New Mexico to Nevada by 2004.  Taxpayers executed wills in which they testified that they were residents of Nevada.  One Taxpayer changed her driver’s license to Nevada, while the other Taxpayer renewed his license in New Mexico for 8-years.  However, the Taxpayers continued to spend the majority of each year in New Mexico, including holidays.  They also conducted their daily living activities in New Mexico, which included medical and vision appointments, shopping, vehicle registrations, and still had their mail delivered to their Albuquerque address.  This day-to-day business and the time spent in New Mexico strongly indicated that this is where the Taxpayers truly lived.   The hearing officer found that the Taxpayers were New Mexico residents during the tax years in question, and were required to pay the assessed personal income tax and interest.  The hearing officer also found that the Taxpayers were not negligent as they relied upon the advice of an attorney about the change of residency to Nevada.  Due to this, the penalty was to be abated.  The Taxpayer’s protest was granted in part and denied in part.


12/02/2011

11-30

Benny Nevarez

The Taxpayer worked for ten years as a plumber for Pronto Plumbers, Inc., in Las Cruces/Mesilla Park, New Mexico.  The Taxpayer vested in Pronto Plumbers Profit Sharing Plan during his employment.  In 2001, the Taxpayer’s employment with Pronto Plumbers was terminated.  In 2003, the Taxpayer contacted the owner of Pronto Plumbers about withdrawing from the Profit Sharing Plan.  The owner provided the Taxpayer with a packet of materials that he needed to complete to get his distribution.  The Taxpayer took the packet to Jackson Hewitt Tax Service to be completed.  Pronto Plumbers informed the Taxpayer that federal withholding of 20% from the distribution was required.  The Taxpayer returned the completed packet to Pronto Plumbers and was issued a check from the Profit Sharing Plan, less the 20% for federal withholding.  None of the materials the Taxpayer presented indicate that Pronto Plumbers would withhold any amount for New Mexico personal income tax.  On April 9, 2004, the Taxpayer filed his New Mexico personal income tax return listing a federal adjusted gross income that did not include the distribution from the Profit Sharing Plan.  As a result of this filing, the Taxpayer received a New Mexico income tax refund.  At some later time, the IRS made a correction to the Taxpayer’s adjusted gross income as a result of the distribution from the profit sharing plan and another amount of unreported work income.  The Taxpayer did not amend his New Mexico return to account for this correction.  As a result of the tape match program with the IRS, the Department learned of this discrepancy and sent the Taxpayer a notice of limited scope audit.  At the conclusion of this audit, the Department sent the Taxpayer a notice of assessment for personal income tax, penalty and interest for the 2003 tax year.  The Taxpayer protested this assessment arguing that his former employer was responsible for making the proper withholdings.  The Taxpayer provided no evidence that he requested any New Mexico withholdings be made from his profit sharing distribution, and New Mexico’s self-reporting tax system dictates that the responsibility for correctly reporting and filing a personal income tax return rests on the Taxpayer.  The Taxpayer’s protest was denied.?


11/17/2011

11-28

Exerplay, Inc.

The Taxpayer is a New Mexico based corporation whom the Department initiated an audit of for gross receipts tax in March, 2005.  The audit was completed in November, 2006, and an assessment was issued for gross receipts tax and interest for tax period from January 31, 1999 through February 28, 2005.  No penalty was assessed.  The Taxpayer filed a written protest to the assessment.  The Taxpayer sells park, playground and other equipment to federal and state agencies, departments and political subdivisions, as well as 501(c)(3) organizations.  The majority of the sales was for equipment that is attached with footers and concrete or concrete slabs and is buried in the ground.  The Department disallowed certain deductions for sales of equipment to government agencies and exempt organizations.  The issue to be decided was whether the Taxpayer’s sales to these agencies and organizations constituted the sale of tangible personal property, which may be deductable, or construction material, which is fully taxable.  The Taxpayer argued that the Department overstepped its authority and went beyond the Legislature’s intent in some of the regulations used to determine whether items are considered construction materials.  The Taxpayer also argued that the majority of its sales to government agencies were replacement fixtures, which are not considered construction materials.  The Taxpayer was able to show that some of the receipts from the period in question were from the sale of replacement fixtures, so the hearing officer found that the deductions for these receipts should be allowed however, many other sales were found to be sales of construction materials, so the Taxpayer was rightfully assessed for gross receipts tax and interest for these receipts.  The Taxpayer’s protest was granted in part and denied in part.


10/26/2011

11-27

William & Jane Kellerman

On December 16, 2009, the Department assessed Taxpayers, a married couple filing jointly, for personal income tax, penalty and interest for tax years 2003 through 2006.  One spouse has always been a New Mexico resident, while the other, William Kellerman, claimed to be a resident of Texas.  During the tax years in question, Mr. Kellerman was a pilot and flew mainly out of Texas, where he rented a condominium and obtained a driver’s license.  During this time, the Taxpayer’s owned a home in Albuquerque and Mr. Kellerman conducted his day-to-day affairs almost exclusively in Albuquerque.  Mrs. Kellerman resided exclusively at the home in Albuquerque and paid all of their bills in Albuquerque.  The issue to be decided is whether Mr. Kellerman was a resident of New Mexico during the tax years in question.  The question presented was whether Mr. Kellerman established actual residency in Texas with intent to abandon New Mexico and make Texas his permanent home.  The hearing officer found that, for each year, there was more than sufficient evidence to support the Department’s position that Mr. Kellerman did not intend to abandon New Mexico as his home state and that he was domiciled in New Mexico and a resident for New Mexico personal income tax purposes.  Also applying the New Mexico’s 185 day physical presence requirement, Mr. Kellerman spent close to that amount of time in New Mexico each of the years in question.  The hearing officer also found that ten percent of the penalty assessed should be abated because the amount imposed should not have exceeded the ten percent penalty allowed at the time these taxes were due.  The Taxpayer’s protest was granted in part and denied in part.?


10/18/2011

11-26

Brewer Oil Company

The Department notified the Taxpayer in February 2009 of its September 2006 fuel excise tax overpayment.  A Department employee had offered to complete a spreadsheet explaining the overpayment. The Taxpayer never received the spreadsheet.  The Taxpayer completed the application for refund for the overpayment on July 22, 2010.  The time allowed for timely filing of a refund expired December 31, 2009. The Department denied the Taxpayer’s request for refund because it was not filed within the limitations set forth in Section 7-1-26 NMSA 1978.  The Taxpayer filed a written protest to the Department’s denial.  The issue to be decided was whether the Taxpayer was entitled to the refund and whether Taxpayer being involved in another audit tolled the running of the time period for timely requesting a refund.  The Taxpayer claimed that it was waiting for the spreadsheet offered by the Department employee and that it was involved in an audit for a different time period at the same time. NMSA 1978, Section 7-1-26 is very clear that the Taxpayer is responsible for seeking a refund during the statutory three year time period and that the Department is unable to allow a refund after this time has passed.  The Taxpayer’s protest was denied.


10/18/2011

11-25

ADC Ltd. NM Inc.

The Taxpayer was a New Mexico corporation, in the business of auditing and security services, who contracted with the various National Laboratories in New Mexico.  In 1999, the Taxpayer entered into a subcontractor agreement with a division of Comforce Corporation to provide temporary security personnel and clerical support personnel.  The contract stated that the project was exempt from New Mexico gross receipts tax and that a copy of the Nontaxable Transaction Certificate (NTTC) would be mailed to the subcontractor separately.  In July 2002, the Department selected the Taxpayer for an audit of tax periods January 1, 1999 through May 31, 2002.  On August 14, 2002, the Department notified the Taxpayer that it had 60 days, until October 15, 2002, to obtain the appropriate NTTCs to support any claimed deductions.  The Taxpayer did not have any NTTCs related to this project by November 21, 2002.  During the audit, the Department also disallowed the Taxpayer’s Type 6 and Type 7 NTTCs for construction services because the services that they provided were not related to construction.  On December 4, 2002, based on the audit, the Department assessed the Taxpayer for unpaid gross receipts tax, compensating tax, withholding tax, and interest.  On December 19, 2002, the Taxpayer filed a written protest to the assessment.  The Department acknowledged the Taxpayer’s protest letter on February 7, 2003, but did not request a hearing on the Taxpayer’s protest until June 1, 2010.  The issues to be decided were whether the Taxpayer was required to have the appropriate NTTCs for its claimed deductions within 60-days of the commencement of the audit, and whether the lengthy delay between the Taxpayer’s protest and the Department’s request for a hearing denied the Taxpayer procedural due process, which would necessitate an abatement of the assessment.  The Taxpayer failed to timely produce valid NTTCs within the 60-day time limit required by Section 7-9-43 NMSA 1978.  Additionally, the Taxpayer did not suffer a due process violation because the Taxpayer suffered no prejudice from the Department’s delay.  The Taxpayer's protest was denied.


10/11/2011

11-24

Jeannie L. Myers

The Taxpayer has been a full-time resident of New Mexico on a fixed out-of-state retirement income since 2005.  For each tax year through tax year 2009, the Taxpayer had a personal income tax liability that was slightly less than the $500 minimum difference between income earned and wage withholding that triggers a penalty for failure to make estimated payments.  In tax year 2010, the Taxpayers retirement income again resulted in a personal income tax liability below $500.  However, in tax year 2010, the Taxpayer accepted a temporary job with the Census Bureau.  The pay from this position resulted in a personal income tax liability above $500.  The Taxpayer did not make quarterly estimated payments for tax year 2010.  The Taxpayer filed and paid her 2010 personal income taxes on April 14, 2011.  On June 9, 2011, the Department assessed Taxpayer for $12.28 in penalty for failure to make quarterly estimated payments.  The Taxpayer paid the assessed penalty, but also filed a protest to the assessment and asked for a refund.  The issues to be decided were whether the Taxpayer qualified for any exception to the assessment for failure to make estimated payments, and whether the Taxpayer’s excellent payment history allows for relief in this situation.  No exception applies that allows the Department to abate this penalty, and the hearing officer does not have the authority to grant relief based on prior history.  The Taxpayer's protest was denied.


09/22/2011

11-23

Samuel O. Ponce

The Taxpayer was issued one personal income tax assessment by the Department for tax year 1996.  Sometime in 1998, the Department filed a recorded a Notice of Claim of Lien in Bernalillo County on the Taxpayer’s property based on the assessment.  In February 2003, the Department filed and recorded a Second Notice of Claim of Lien in Bernalillo County, and in February 2006, the Department filed a third Notice of Claim of Lien based on the same assessment.  In January 2009, the Department denied a request to release the second and third liens.  In December 2007, the Department was precluded from taking any action or collecting on the assessment because ten years had passed since the assessment was issued.  This also precluded the Department from enforcing the liens.  The issue to be determined was whether the Department is authorized to record multiple overlapping liens for one assessment.  The Taxpayer argued that by recording multiple liens on the same assessment, the Department was extending the statutory period in which to collect on the assessment.  Department employees testified that the multiple liens were sometimes issued to update penalty and interest.  They also testified that under current policy, the multiple liens filed in this case would likely not have been filed.  The hearing officer found that, in this case, there was no statutory authority for the Department to file multiple overlapping tax liens based on one assessment.  The Taxpayer's protest was granted.  


09/20/2011

11-22

Mark & Debra StangerMark & Debra Stanger

On July 23, 2009, the Taxpayers were assessed for personal income tax principal, plus penalty and interest for the 2003, 2004 and 2005 tax years.  The Taxpayers filed a written protest only as to the penalty and interest of the assessments, and paid the income tax principal on the assessments.  The Taxpayers filed timely returns for the tax years in question.  Because of a decision by the IRS that certain contributions ruled to be deductible were no longer deductible; the Taxpayers’ federal income tax returns were adjusted.  The Taxpayers did not amend their New Mexico returns upon being notified by the IRS that their deductions were disallowed.  The Departments’ assessments were based on the federal adjustments.  The hearing officer determined that penalty should be abated because the Taxpayers had been informed in writing by the IRS that certain contributions were deductible.  The IRS eventually allowed the deductions, but not in the amounts initially filed by the Taxpayers.  The Department’s assessments were not reduced based on the adjusted federal amounts.  The hearing officer ruled that the Taxpayers were not negligent when they initially filed their returns because they had been advised by the IRS and an accountant on the deductibility of the contributions.  Taxpayers were not negligent and not subject to penalty when they failed to file amended returns because they made a mistake of law made in good faith based on reasonable grounds.  However, interest must be assessed on taxes not paid when due.  The Taxpayer's protest was granted in part and denied in part. 


09/18/2011

11-21

Thomas J. Nagle

The Taxpayer and his former wife failed to file a personal income tax return by April 16, 2007 for tax year 2006.  On March 29, 2010, the Department assessed the Taxpayer for personal income tax, penalty and interest.  On April 21, 2010, the Taxpayer filed a written protest to the assessment.  The Department’s assessment was based on a tape match in which wage information was provided by the Department of Labor.  This information did not include how much state income tax was withheld from the wages.  The Taxpayer provided the Department with a wage statement or pay stub from December 15, 2006 indicating his year-to-date state withholding.  The Department provided the Taxpayer with a credit for the amount indicated on the wage statement.  On August 30, 2011, the Taxpayer filed a return for tax year 2006.  The Department agreed to all the amounts on the return except for the amount of New Mexico income tax claimed to be withheld, with exceeded the amount shown on the statement the Taxpayer had provided to the Department.  The Taxpayer argued that this included withholding for his ex-wife and withholding for a two week period.  W-2s could not be found for the Taxpayer or his ex-wife.  The Taxpayer did not dispute that he owed the tax shown on the return he filed, plus penalty and interest on that amount, but he argued that he did not owe the amount calculated by the Department.  The Taxpayer argued that he should be credited an additional amount for withholding since the documentation he provided did not show withholding through December 31, 2006.  The hearing officer agreed with the Taxpayer that he provided sufficient documentation as to his own withholding, but the Taxpayer failed to show with sufficient evidence his wife’s withholding.  Additionally, the Department had assessed 20% penalty, under the current amended statute that allows that amount.  The statute in effect at the time this tax was due only allowed penalty up to 10%, so the hearing officer found.  The Taxpayer's protest was granted in part and denied in part.  
 NOTE: The New Mexico Court of Appeals has overruled the 10% penalty issue mentioned in this decision.  (Case No. 30,932)


09/09/2011

11-20

Sunrooms Plus, Inc.

The Taxpayer was a corporation doing business in New Mexico from 1989 until sometime in 2004.  In February 2004, the Department began an audit of the Taxpayer using the bank deposit method of auditing.  The audit period was from January 31, 2001 through December 31, 2003.  The Taxpayer was required to produce certain documents by the audit start date, but the necessary documents were not produced.  In November 2004, the Department subpoenaed the Taxpayer’s records and books.  On December 13, 2004, the audit concluded and the Taxpayer was assessed for gross receipts tax, plus penalty and interest, and withholding tax.  The Taxpayer argued that many of deposits that were identified as gross receipts in the audit were not gross receipts but were loan proceeds, cobra reimbursements, and nonsufficient checks that were returned by the bank to Taxpayer.  The Taxpayer provided evidence to show that a portion of the amount was reimbursement from a former employee for cobra payments, but was unable to provide evidence on any of the rest.  Taxpayer failed to produce sufficient documentation that the amounts it was claiming was either not gross receipts or deductible.  The hearing officer ordered that the amount the Taxpayer showed was from cobra payments and not gross receipts was to be abated, but the rest of the assessment was correct.  The Taxpayer's protest was granted in part and denied in part.  


09/06/2011

11-19

Healthsouth Rehabilitation

The Taxpayer filed a claim for refund for the gross receipts tax periods from January 2006 through December 2008 on October 8, 2009.  On May 19, 2010, the Department sent the Taxpayer a letter indicating that the Department could not take action on the claim because more than 210 days had passed.  The letter also stated that the claim could be re-filed if the statute of limitations had not expired.   A representative, calling on behalf of the Taxpayer, spoke with a Department employee who told him that the statute of limitations would not apply because the claim had originally been filed within the allowed time.  The Taxpayer re-filed the claim on May 19, 2010.  On July 20, 2010, the Department issued a letter granting the claim for tax periods December 2006 through December 2008, but denying the claim for tax periods January 2006 through November 2006, due to the statute of limitations.  The Taxpayer filed a formal protest to the denial and argued that they relied on the information provided by the Department employee.  Statute bars the Department from acting on a claim for refund that is more than 210 days old, even when the claim was originally filed within the statute of limitations.  For this reason, the Hearing Officer found that the Department’s denial of the claim for refund for tax periods January 2006 through November 2006 was appropriate.  The Taxpayer's protest was denied.  


08/29/2011

11-18

Estate of Mary C. Satterla

The Decedent and her husband were long time New Mexico residents.  They filed personal income tax returns in New Mexico for tax years 1994 through 2000.  In 2000, they moved to Oregon to be closer to their son.  During their time in Oregon, they retained their residence, personal property, business assets, voter and car registrations, and bank accounts in New Mexico.  The Decedent died in July 2001, following her husband’s death in April 2000.    On April 15, 2002, the Decedent’s estate (“Taxpayer”), filed a New Mexico estate tax return and paid estimated resident estate taxes.  The Taxpayer made an estate tax payment to the State of Oregon on the same date.    On October 11, 2002, the Taxpayer filed an amended estate tax return and requested a partial refund.  The Department refunded part of the requested amount and denied the remaining claim for refund.  In June, 2003, the IRS initiated an audit of the Taxpayer for their federal estate tax return and any federal credits allowed for payments to New Mexico and Oregon.  The State of Oregon issued a determination in August 2003, stating that the Decedent and her husband were full-time Oregon residents since 1991 for income tax purposes.  Because of this, the Taxpayer submitted an amended New Mexico Estate Tax Return and a protective claim for refund in June 2004.  The Department did not act on this claim, but did grant a later request for partial refund because of a stipulation as part of the IRS audit.  In May 2007, the Taxpayer submitted an amended return and request for refund on the basis that Oregon determined that the Decedent was a non-resident of New Mexico and disputed the estate tax due or paid to New Mexico.  The Department sent a letter to the Taxpayer stating that the amended return and claim for refund were incomplete.  The Taxpayer challenged Oregon’s determination of the Decedent’s domicile, but that appeal has yet to be resolved.    The Taxpayer protested the Department’s letter asking for more information, as the Taxpayer took this as a denial of its claim.  The legal question at protest is whether the Department has authority to grant claims for refund after the statute of limitations for such claims has passed.  The Department may not grant either the Taxpayer’s June 2004 or May 2007 claims for refund because the claims are time-barred.  The Hearing Officer found that the Taxpayer was not entitled to any additional refund for the April 2002 payment of estate tax regardless of the legal merits of the refund claim because the Department does not have statutory authority to refund any additional amounts because the statute of limitations expired on December 31, 2005.  The Taxpayer's protest was denied. 


08/17/2011

11-17

Aurelia Shorty

The Taxpayer is an enrolled tribal member of the Navajo Nation, a member of a Chapter in Arizona.  The Taxpayer is the only remaining immediate member of her family and is the only person with interest in their home site lease in Arizona, which the Taxpayer considers to be her permanent home.  The Taxpayer is a teacher working for the US Department of the Interior, Bureau of Indian Education.  As part of her job, the Taxpayer travels to schools across the Navajo Nation, including schools in Arizona and New Mexico.  Beginning in 2001, the Taxpayer was employed year round at a school in Crownpoint, New Mexico.  All of the Taxpayer’s income in 2005 came from work performed within the Navajo Nation a this school in Crownpoint.  Since 2003, the Taxpayer rented an apartment in Gallup, New Mexico.  The Taxpayer used this address in Gallup on her bank account, on the New Mexico driver’s license she obtained, and on the registration for several cars in New Mexico.  Beginning in tax year 2006, Taxpayer filed and paid her personal income taxes in New Mexico, identifying herself as a New Mexico resident and listing her Gallup address.  In August 2009, the Department assessed the Taxpayer for unfiled and unpaid personal income tax, penalty and interest for the 2005 tax year.  The Taxpayer filed a written protest to the assessment, arguing that her income was exempt under Section 7-2-5.5 NMSA 1978, which gives an exemption for income earned by a member of a Nation, Tribe or Pueblo who lives and works on their Nation, Tribe or Pueblo’s land.  The Taxpayer was a member of a Nation and did earn income on that Nation’s land, so the only question to be decided in protest was whether she lived within the boundaries of the Nation’s land during tax year 2005.  Although the Taxpayer considered her permanent home to be on the Navajo Nation’s land in Arizona, she failed to show any evidence that she lived within the Navajo Nation during the 2005 tax year.  Taxpayer lived in Gallup, paid her utilities in Gallup, and commuted to work from Gallup during tax year 2005.  The assessment for unpaid personal income tax, plus interest, was correctly assessed.  However, the hearing officer ordered the Department to abate penalty that had been imposed in excess of the 10% not to exceed cap allowable under the law at the time this tax was due.  The Taxpayer's protest was granted in part and denied in part.  
 NOTE: The New Mexico Court of Appeals has overruled the 10% penalty issue mentioned in this decision.  (Case No. 30,932)


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