Thomas & Leslie Hammack

15-2

On January 3, 2014, the Department issued assessments for personal income tax and interest for tax years 2009 through 2012.  The Taxpayers filed protests to these assessments.  The Taxpayers filed New Mexico personal income tax returns for the tax years in question.  For each of these tax years, they filed married filing jointly.  On each of these returns, the Taxpayers claimed an exemption for Mr. Hammack’s wages.  For the years at issue, Mr. Hammack was an active duty officer for the United States Public Health Services (USPHS).  Section 7-2-5.11 NMSA 1978, provides an exemption from state income tax for wages if a taxpayer is on active duty service in the armed forces of the United States.   USPHS officers are not considered armed forces for purposes of this exemption.  The Taxpayers made a mistake of law in claiming the exemption in 2009, and therefore penalty was abated.  The Department did not assess penalty for tax year 2010.  In 2011, the PIT-ADJ Schedule Instructions were amended to specifically state that USPHS officers were not covered by the exemption.  Therefore, the Taxpayers were on notice that they should not claim the exemption in 2011 and thereafter.  All the other assessments were determined to be correct, as Mr. Hammack’s wages were subject to personal income tax.  The Taxpayer’s protest was granted in part and denied in part.