Burlington Northern Santa Fe Corp.

12-01

The Taxpayer was the subject of a federal audit for the tax years 1995 through 1999.  On November 3, 2008, the Taxpayer filed amended New Mexico corporate income tax returns for those tax years to reflect the final IRS adjustments on income for those years.  The amended returns for 1995 and 1996 showed additional tax liabilities, while the amended returns for 1997, 1998 and 1999 showed overpayments.  When the Taxpayer filed its amended returns, it also paid the tax and interest that it determined was still owed.  The Taxpayer calculated the interest from the due dates of the taxes for 1995 and 1996 until the overpayments in 1997, 1998 and 1999, and until the final payment of tax in November 2008.  On April 1, 2009, the Department assessed the taxpayer for additional interest for the 1996 tax year.  The Department calculated the interest from the due dates of the taxes until the amended return was filed in November 2008.  The Taxpayer filed a timely protest to the assessment.  The issue to be decided at hearing was whether interest accrued from the due date of the tax until the overpayments in 1997, 1998, 1999, and the final payment in 2008, as the Taxpayer believed, or whether the interest accrued  from the due date of the tax until the amended return was filed without regard to previous overpayments, as the Department stated.  The arguments of both the Taxpayer and the Department were based upon different interpretations of Section 7-1-29 NMSA 1978.  The Department based their position on prior Decision and Orders, as well as case law.  The Taxpayer pointed out that that the statute had been amended after those situations had been decided and that the amendment corrected the statute precisely for this issue.  The hearing officer found that the 1995 and 1996 liabilities were deemed paid in 1997, 1998 and 1999 based on the overpayments made in those years.  The Taxpayer paid the remaining tax balance and the proper interest with the final payment in 2008.   The Taxpayer’s protest was granted.