My tax payment was only one day late by accident. Can the hearing officer waive part of the penalty and interest to be fair?

Plain-English summary

A corporation's tax payment was one banking day late because its controller lost track of a busy day. The penalty and interest were correct under the statutes, and the hearing officer had no power to reduce them out of sympathy — mandatory penalties and interest set by the Legislature cannot be waived by a court or a hearing officer. Protest DENIED.

Because of its large dollar volume, Wolf Corporation was required to pay its monthly gross receipts, compensating, and withholding (CRS) taxes using the special large-taxpayer payment procedures of Section 7-1-13.1 — the rules that apply once average monthly payments hit $25,000, and that are designed to make funds immediately available to the state by the due date. The company's usual method was to hand-deliver a check drawn on a New Mexico bank to the Santa Fe office one banking day before the due date.

The February 2000 payment had to be received by Friday, March 24, 2000. That day was unusually busy for the controller, Sheila Burns; she lost track of time, and by the time she remembered the delivery it was after 5:00 p.m. She delivered the check the following Monday, March 27 — knowing it was late, and pointing that out to the employee who accepted it. The Department assessed $2,723.06: $1,675.73 penalty and $1,047.33 interest.

The company conceded the assessment was correct — and asked only for mercy

Wolf did not dispute that the payment was one day late, or that the penalty and interest were calculated correctly under New Mexico law. Instead it argued the result was excessively harsh and asked the hearing officer to exercise "judicial discretion" to relieve at least part of the assessment.

The hearing officer has no discretion to override mandatory statutes

The hearing officer explained that "judicial discretion" is the option to do or not do something that a party cannot demand as of right — and it cannot be used to override valid laws passed by the Legislature. Where a statute's meaning is clear, courts apply it as written rather than second-guessing legislative policy (State ex rel. Helman v. Gallegos), and an administrative agency's discretion "may not justify altering, modifying or extending the reach of a law created by the Legislature" (State ex rel. Taylor v. Johnson).

Interest under Section 7-1-67 and penalty under Section 7-1-69 are mandatory legislative commands. Drawing on criminal-law precedent, the hearing officer noted that even courts cannot mitigate mandatory sentences the Legislature imposes (State v. Mabry: fixing penalties is a legislative function) — so an administrative hearing officer plainly cannot waive a mandatory civil tax penalty. The company's separation-of-powers argument failed on the same ground: the Legislature acted within its constitutional power, and neither branch may rewrite its penalty scheme.

Result: protest DENIED.

What this means for you

One day late is still late — and the large-taxpayer rules are unforgiving

New Mexico's Section 7-1-13.1 payment methods for large taxpayers are built so the money is in the state's hands by the due date. Missing that deadline by even one banking day triggers penalty and interest, and a good reason (a busy day, an honest slip) does not change the outcome.

A hearing officer cannot waive mandatory penalty or interest as a matter of fairness

If your only argument is that the result is harsh, a Decision and Order will not help you. The hearing officer's job is to apply the statutes as written; interest under Section 7-1-67 and penalty under Section 7-1-69 are mandatory, and no amount of sympathy gives the officer authority to reduce them. Relief for a genuinely harsh outcome is a matter for the Legislature, not the hearing office.

Build in a margin, not a same-day scramble

The loss here came down to leaving delivery to the last hours of the last day. For deadline-driven payment methods, submit with a buffer — earlier in the day, or a day ahead — so a single distraction does not cost thousands in penalty and interest.

Common questions

Q: My payment was only one day late, and it was an honest mistake. Can the penalty and interest be waived?
A: Not by the hearing officer. Penalty (Section 7-1-69) and interest (Section 7-1-67) are mandatory once tax is paid late, and the hearing officer has no authority to reduce them out of fairness. The reason for the lateness does not matter.

Q: Isn't it unfair that no one can show discretion here?
A: The hearing officer can only apply the statutes the Legislature wrote. Even courts cannot override mandatory penalties the Legislature sets, so an administrative officer cannot either. Changing that would require the Legislature to act.

Q: I use the large-taxpayer payment method. Does that give me any leeway?
A: No — if anything it is stricter. Those methods (Section 7-1-13.1) exist to ensure the funds reach the state by the due date, so missing the deadline by a single banking day still results in penalty and interest.

Citations and references

Statutes:

• NMSA 1978, § 7-1-13.1 — special payment methods required of large taxpayers (average monthly payments of $25,000 or more) so funds are available by the due date
• NMSA 1978, § 7-1-67 — interest is mandatory on tax not paid when due
• NMSA 1978, § 7-1-69 — penalty for failure to pay tax when due
• NMSA 1978, § 7-1-24 — protest procedure

Cases cited:

• State ex rel. Helman v. Gallegos, 117 N.M. 346, 871 P.2d 1352 (1994) — where a statute's meaning is clear, the judiciary applies it as written and does not second-guess legislative policy
• State ex rel. Taylor v. Johnson, 1998-NMSC-015, 961 P.2d 768 — an administrative agency's discretion may not alter, modify, or extend the reach of a law created by the Legislature
• State ex rel. Coll v. Johnson, 1999-NMSC-036, 990 P.2d 1277 — courts do not question the wisdom, policy, or justness of legislation
• State v. Mabry, 96 N.M. 317, 630 P.2d 269 (1981) — fixing penalties is a legislative function; courts cannot override mandatory sentences without violating separation of powers
• State v. Hargrove, 81 N.M. 145, 464 P.2d 564 (Ct. App. 1970) — defines "judicial discretion"

Source

• Listing: New Mexico Decisions & Orders
• Decision post: Wolf Corporation
• Decision PDF: D&O 00-20

Original ruling text

BEFORE THE HEARING OFFICER
OF THE TAXATION AND REVENUE DEPARTMENT
OF THE STATE OF NEW MEXICO

IN THE MATTER OF THE PROTEST OF
WOLF CORPORATION No. 00-20
ID NO. 01-148959-00-6
ASSESSMENT NO. 2509007

DECISION AND ORDER

A formal hearing on the above-referenced protest was held July 10, 2000, before Margaret B.

Alcock, Hearing Officer. Wolf Corporation (“Taxpayer”) was represented by Sheila Burns, its

Controller. The Taxation and Revenue Department ("Department") was represented by Monica M.

Ontiveros, Special Assistant Attorney General. Based on the evidence and arguments presented, IT IS

DECIDED AND ORDERED AS FOLLOWS:

FINDINGS OF FACT

1. The Taxpayer is a corporation engaged in business in New Mexico.

2. Due to the large dollar volume of the Taxpayer's business, the Taxpayer is required to

pay its monthly gross receipts, compensating and withholding taxes, which are reported under New

Mexico's Combined Reporting System (CRS), according to the special payment procedures set out in

Section 7-1-13.1 NMSA 1978.

3. Section 7-1-13.1 NMSA 1978 requires taxpayers whose average monthly tax

payments during the preceding calendar year equaled or exceeded $25,000 to pay their current taxes

in accordance with one of five different payment methods set out in Subsection B of Section 7-1-

13.1. Each of these payment methods is designed to insure that funds are immediately available to

the state on or before the tax due date.

4. During the period at issue, the Taxpayer's usual method of paying its monthly CRS

taxes was to hand-deliver a check drawn on a New Mexico bank to the Department’s Santa Fe office
one banking day prior to the due date. This method of payment complies with the requirements of

Subsection B(4) of Section 7-1-31.1.

5. The Taxpayer's CRS taxes for the February 2000 reporting period were due on or

before March 25, 1995, which was a Saturday. Payments made by check drawn on a New Mexico

bank had to be received by the Department on or before Friday, March 24, 2000.

6. On March 24, 2000, Sheila Burns, the Taxpayer’s controller, prepared the Taxpayer’s

February 2000 CRS return and wrote out a check to cover the taxes due for that period.

7. March 24th was an unusually busy day for Ms. Burns, and she lost track of time.

When she remembered that she still had to deliver the Taxpayer’s February tax payment to the

Department, it was already after 5:00 p.m.

8. Ms. Burns delivered the Taxpayer’s check to the Department at 10:00 a.m. the

following Monday, March 27, 2000. Ms. Burns was aware the payment was late according to the

special payment requirements of Section 7-1-13.1 and pointed this out to the Department employee

who accepted the check.

9. On March 31, 2000, the Department issued Assessment No. 2509007 to the Taxpayer

in the total amount of $2,723.06, representing $1,675.73 of penalty and $1,047.33 of interest due on

the late payment of the Taxpayer's February 2000 CRS taxes.

10. On April 18, 2000, the Taxpayer filed a written protest to the Department’s

assessment of penalty and interest.
DISCUSSION

The Taxpayer does not dispute that its February 2000 CRS taxes were paid one day late

under the special payment provisions set out in Section 7-1-13.1 NMSA 1978. Nor does the

Taxpayer dispute that the Department’s assessment was made in accordance with the provisions of

New Mexico law governing imposition of penalty and interest on late tax payments. Instead, the

Taxpayer asserts that the law as applied in this situation is excessively harsh and asks the hearing

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officer to exercise “judicial discretion” to relieve the Taxpayer of at least some portion of the

assessment.

The Taxpayer misunderstands the scope of the hearing officer’s authority. The term “judicial

discretion” has been defined as “the option which the judge may exercise between the doing and the

not doing of a thing, the doing of which can not be demanded as an absolute right of the party asking

it to be done.” State v. Hargrove, 81 N.M. 145, 147, 464 P.2d 564, 566 (Ct. App. 1970). Judicial

discretion may not be exercised to override valid laws passed by the legislature. As the New Mexico

Supreme Court stated in State ex rel. Helman v. Gallegos, 117 N.M. 346, 352, 871 P.2d 1352, 1358

(1994): “If the meaning of a statute is truly clear, it is the responsibility of the judiciary to apply it as

written and not second guess the legislature's policy choices.” See also, State ex rel. Coll v. Johnson,

1999 NMSC-036, 990 P.2d 1277 (it is not the province of the court to question the wisdom, policy,

or justness of legislation enacted by the legislature). In State ex rel. Taylor v. Johnson, 1998-NMSC-

015 ¶ 022, 961 P.2d 768, 774-775, the supreme court made the following observations concerning

the power of administrative agencies:

Generally, the Legislature, not the administrative agency, declares the policy and
establishes primary standards to which the agency must conform. See State ex rel.
State Park & Recreation Comm'n v. New Mexico State Authority, 76 N.M. 1, 13,
411 P.2d 984, 993 (1966). The administrative agency's discretion may not justify
altering, modifying or extending the reach of a law created by the Legislature.
See, e.g., Chalamidas v. Environmental Improvement Div. ( In re Proposed
Revocation of Food and Drink Purveyor's Permit), 102 N.M. 63, 66, 691 P.2d 64,
67 (Ct. App. 1984) (stating that an "agency cannot amend or enlarge its authority
through rules and regulations"); Rainbo Baking Co. v. Commissioner of Revenue,
84 N.M. 303, 306, 502 P.2d 406, 409 (Ct. App. 1972).

In this case, Section 7-1-67 NMSA 1978 governs the imposition of interest and Section 7-1-69

NMSA 1978 governs the imposition of penalty on the Taxpayer’s late payment of tax. The Taxpayer

acknowledges that the Department’s assessment was made in accordance with these statutes. The

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Taxpayer’s request that the hearing officer override the provisions of Sections 7-1-67 and 7-1-69

NMSA 1978 to relieve the Taxpayer of the statutorily-mandated consequences of its failure to timely

pay its February 2000 CRS taxes is not a request the hearing officer has the authority to grant.

The Taxpayer asserts that restricting the power of courts and administrative agencies to

mitigate penalties assessed against a taxpayer violates the balance of power between the different

branches of government. This issue has already been addressed in the context of criminal penalties.

In State v. Mabry, 96 N.M. 317, 321, 630 P.2d 269, 273 (1981), the defendant challenged mandatory

sentencing guidelines imposed by the legislature, arguing that denying the courts the right to suspend

sentences violated the doctrine of separation of powers. The court rejected the defendant’s argument

as follows:

[T]his Court does not sit as a super-legislature with the power to uphold or strike
down the laws of the state based upon our own judgment as to the wisdom and
propriety of such laws. See In re McCain, 84 N.M. 657, 506 P.2d 1204 (1973). So
long as the Legislature acts within the parameters of its constitutional powers and
limitations, this Court is powerless to intercede. Id.

Thus the scope of our review is here limited to whether the Legislature had the
power to enact these statutes. It has long been recognized in this state that it is
solely within the province of the Legislature to establish penalties for criminal
behavior. See State v. Archibeque, 95 N.M. 411, 622 P.2d 1031 (1981); State v.
Holland, 91 N.M. 386, 574 P.2d 605 (Ct. App. 1978).

See also, State v. Michael V. 107 N.M. 305, 756 P.2d 585 (Ct. App. 1988) (the fixing of penalties is a

legislative function and the trial court has authority to impose only what has been authorized by the

legislature). If the courts do not have the power to alter criminal penalties set by the legisla-ture, it is

clear that an administrative hearing officer does not have the power to alter civil tax penalties

imposed by the legislature. The hearing officer is limited to construing the tax statutes as written and

applying those statutes in accordance with legislative intent. The hearing officer may not rewrite the

language of the statutes or second-guess the wisdom of the legislature’s enactments.

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CONCLUSIONS OF LAW

1. The Taxpayer filed a timely, written protest to Assessment No. 2509007 pursuant to

Section 7-1-24 NMSA 1978, and jurisdiction lies over the parties and the subject matter of this protest.

2. The Department’s assessment of penalty and interest against the Taxpayer was issued

in accordance with the provision of Sections 7-1-67 and 7-1-79 NMSA 1978.

3. The hearing officer does not have authority to override the provisions of Sections 7-1-

67 and 7-1-69 NMSA 1978 to relieve the Taxpayer of the statutory consequences of its failure to timely

pay taxes due to the state.

For the foregoing reasons, the Taxpayer's protest IS DENIED.

DATED July 17, 2000.

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