Agman Louisiana Inc.

17-47

On August 1, 2016, the Department assessed the Taxpayer for corporate income tax, penalty, and interest for the reporting period ending September 30, 2013. On September 22, 2016, the Taxpayer filed a timely protest with the Department. The Taxpayer is an indirect wholly-owned subsidiary of a larger group of subsidiary and affiliated entities for agricultural commodities. The Taxpayer is headquartered in New Orleans, Louisiana. The Taxpayer had two subsidiaries that were sold between 2006 and 2009 that were recognized and reported as a gain on the sale of its interest on the 2013 tax return as allocable non-business income which was reported back to its commercial domicile. Based on an audit, the Department determined that the income was business income and apportioned part of the gain on the sale of stock to New Mexico. At issue in this protest is whether the gain from the 2013 sale of its interest is business income apportionable and subject to New Mexico corporate income tax or if it is allocable nonbusiness income, not subject to New Mexico tax under the Uniform Division of Income for Tax Purposes Act and applicable to the commerce clause and due process clause requirements. New Mexico adopted three tests to determine whether the income is business or non-business income under Section 7-4-2(A) NMSA 1978. There is a transactional test, disposition test, and functional test. However, under the Uniform Division of Income Property Purposes Act all income that is not business income is nonbusiness income. The Chief Hearing Officer determined that the income from the sale of interest met the dispositional and functional tests for business income. For the reasons above, the Taxpayers gain is business income, apportionable to New Mexico and the Taxpayer’s protest is denied.