For New Mexico's alternative-energy manufacturers credit, did the employee lookback run from the date Emcore signed its application or the later date it mailed it?

Plain-English summary

Emcore applied for New Mexico's alternative-energy manufacturers credit when it mailed the completed application—not when it signed the form five months earlier. By the mailing date, the company no longer met the required employee-growth test.

The credit allowed qualifying alternative-energy product manufacturers to claim five percent of qualified expenditures against modified combined tax liability. Section 7-9J-5 required at least one more full-time employee than the number employed one year before the day the taxpayer applied.

Emcore prepared and signed its application on July 24, 2011. Over the year ending that day, it had added at least one employee and would have satisfied the test.

But a senior partner at its accounting firm still needed to review the application. Emcore waited until December 21, 2011 to mail it, and the Department received it December 29. Over the year ending on the mailing date, Emcore had a net reduction of 146 employees.

“Applies” required formal submission

The statute used the verb “applies.” The hearing officer read that ordinary meaning as making a formal request. Signing a form did not make a request to the Department because the agency had not yet received or been sent anything to consider.

That interpretation matched the Tax Administration Act's other filing rules. Credit requests, returns, refund claims, and other submissions generally become actionable when filed, mailed, delivered, or transmitted—not when privately signed.

The Department's Schedule A examples likewise used “submit” and “file” as the operative events. Nothing in the instructions said the signature date controlled.

The later Department letter did not create estoppel

On January 6, 2012, after receiving the application, a Department letter requested payroll records for the year preceding the date the application was signed. Emcore argued that this language supported its signature-date interpretation.

Even assuming the letter expressed that view, Emcore could not have relied on it when deciding to delay mailing: the company did not receive the letter until after it had already waited and submitted the application. It also had not consulted the Department or another tax professional about the legal effect of delaying.

Without a pre-delay representation and detrimental reliance, neither statutory nor equitable estoppel applied.

Result: protest denied. Emcore did not qualify because its employee count fell during the one-year period ending on the December 21, 2011 application date. The decision did not state the dollar amount of the requested credit.

What this means for you

Manufacturers applying for hiring-based credits

Treat submission timing as substantive. A review delay can move the measurement window and change eligibility even when the signed form was accurate.

Businesses using outside accounting firms

Calendar both the legal filing event and every lookback date tied to it. Internal signature or partner approval may not preserve the earlier eligibility snapshot.

Taxpayers considering an estoppel argument

You must show actual reliance before taking the harmful action. Guidance received after the decision cannot have caused that decision.

Common questions

Q: Did Emcore meet the employee test when it signed?
A: Yes. It had increased employment by at least one over the year ending July 24, 2011.

Q: Why did it fail by the application date?
A: It mailed the form on December 21, 2011, and had 146 fewer employees than one year before that date.

Q: Why wasn't the signature date the application date?
A: Signing did not formally present a request to the Department. The decision held that applying required submission.

Q: Did the Department's later letter bind it to the signature date?
A: No. Emcore could not have relied on a January 2012 letter when it chose months earlier to delay mailing.

Q: How large was the requested credit?
A: The decision did not state a dollar amount.

Citations and references

Statutes and regulation:

• NMSA 1978, §§ 7-9J-1 through 7-9J-8 — Alternative Energy Product Manufacturers Tax Credit
• NMSA 1978, § 7-9J-4 — five-percent credit for qualified expenditures
• NMSA 1978, § 7-9J-5 — one-year employee-increase requirement
• NMSA 1978, §§ 7-9J-3, 7-1-9, 7-1-13, 7-1-26, and 7-1-29.2 — application and filing rules
• Regulation 3.1.9.8(A) NMAC — completed and timely transmitted refund claim
• NMSA 1978, § 7-1-60 — statutory estoppel

Cases cited:

• Summers v. New Mexico Water Quality Control Commission, 2011-NMCA-097
• Carter v. New Mexico Human Services Department, 2009-NMCA-063
• Kilmer v. Goodwin, 2004-NMCA-122
• Gallegos v. Pueblo of Tesuque, 2002-NMSC-012

Source

• Listing: New Mexico Decisions & Orders
• Decision post: Emcore Corporation
• Decision PDF: D&O 13-20

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
EMCORE CORPORATION No. 13-20
TO DENIAL OF APPLICATION FOR ALTERNATIVE
ENERGY MANUFACTURERS TAX CREDIT
UNDER LETTER ID NO. L0797210944

DECISION AND ORDER

A protest hearing occurred on the above captioned matter on July 9, 2013 before Brian

VanDenzen, Esq., Tax Hearing Officer, in Santa Fe. Ms. Bobbi Kay Nelson, CPA, appeared

representing Emcore Corporation (“Taxpayer”). Staff Attorney Susanne Roubidoux appeared

representing the State of New Mexico, Taxation and Revenue Department (“Department”).

Protest Auditor Thomas Dillon appeared as a witness for the Department. Taxpayer Exhibits 1-3

and Department Exhibits A-D were admitted into the record. All exhibits are more thoroughly

described in the Administrative Exhibit Log. Based on the evidence and arguments presented, IT

IS DECIDED AND ORDERED AS FOLLOWS:

FINDINGS OF FACT

1. On July 24, 2011, Taxpayer, through its representative accounting firm, prepared

and signed an Application for Alternative Energy Product Manufacturer’s Tax Credit.

[Department Ex. A; CD 7-09-13, 19:50-57].

2. From the one-year period beginning on July 24, 2010 through Taxpayer’s July 24,

2011 signature on the Application, Taxpayer had an increase of at least one-employee. [CD 7-

09-13, 32:28-44].

3. Taxpayer did not submit the Application for Alternative Energy Product

Manufacturer’s Tax Credit on July 24, 2011 because a senior partner at Taxpayer’s accounting

firm needed to review and approve the application. That review did not occur until December

2011. [CD 7-09-13, 20:06-26].

2012. Taxpayer did not consult with the Department or a tax professional about the

potential legal consequences of delaying the submission of the application to the Department.

5. While the Department’s Instructions accompanying the Application for the

Alternative Energy Credit Form and the Instructions accompanying Schedule A of that

Application do not expressly state that the date of application is the date of mailing, those forms

also do not expressly state the signature date is the date of application. [Taxpayer Ex. 2].

6. The two examples listed on the Schedule A Instructions that accompany the

Department’s Application form are based on the applicant’s date of submission or filing of the

application respectively, not on the date of signature on the application. [Taxpayer Ex. 2.6].

7. Taxpayer mailed its Application for Alternative Energy Product Manufacturer’s

Tax Credit to the Department on December 21, 2011. [Department Ex. B.CN1; CD 7-09-13,

25:25-55].

8. The Department received Taxpayer’s application for Alternative Energy Product

Manufacturer’s Tax Credit on December 29, 2011. [Department Ex. A; Department Ex.

B.CN1; CD 7-09-13, 25:25-55].

9. Upon receipt of the application, the Department conducted a Credit Audit of

Taxpayer’s Alternative Energy Product Manufacturer’s Tax Credit. [Department Ex. B].

10. On January 6, 2012, the Department sent Taxpayer a letter acknowledging receipt

of Taxpayer’s Application for Alternative Energy Product Manufacturer’s Tax Credit. In that

In the Matter of the Protest of Emcore Corporation., page 2 of 11
letter, the Department’s Tax Accounts Auditor Supervisor requested from Taxpayer a copy of

payroll registers “including the date the credit application was signed, and one year and one day

prior to the date on which the credit application was signed.” [Taxpayer Ex. 1].

11. At the request of the Department during the audit, Taxpayer provided payroll

registers for January 7, 2010 and January 6, 2011, which showed Taxpayer’s employee payroll

history for years 2009 and 2010. [Department Ex. B.CN2; Department Ex. B.CN3; CD 7-09-

13, 28:00-15; CD 7-09-13, 34:39-45].

12. From the one-year period beginning on December 21, 2010 through Taxpayer’s

December 21, 2011 mailing of the Application for Alternative Energy Product Manufacturer’s

Tax Credit, Taxpayer had a net reduction of 146 employees. [Department Ex. B.CN3; CD 7-

09-13, 32:20-28].

13. On September 24, 2012, the Department denied Taxpayer’s Application for

Alternative Energy Product Manufacturer’s Tax Credit because Taxpayer “had no increase in

employees.” [Department Ex. D; Letter id. no. L0797210944].

14. On October 17, 2012, Taxpayer protested the Department’s denial of Taxpayer’s

Application for Alternative Energy Product Manufacturer’s Tax Credit.

15. On November 7, 2012, the Department acknowledged receipt of Taxpayer’s

protest.

16. On April 18, 2013, the Department requested a hearing in this matter.

17. On April 22, 2013, the Hearing Bureau issued Notice of Administrative Hearing,

scheduling the protest hearing for June 25, 2013.

18. On May 2, 2013, Taxpayer moved to continue the scheduled hearing. The

Department concurred with Taxpayer’s motion.

In the Matter of the Protest of Emcore Corporation., page 3 of 11

19. On May 3, 2013, the Hearing Bureau issued an Order of Continuance and

Amended Notice of Hearing, rescheduling this matter for July 9, 2013.

DISCUSSION

In 2011, Taxpayer applied for the Alternative Energy Product Manufacturer’s Tax Credit

(“Alt. Energy Credit”) codified under NMSA 1978, Section 7-9J-1 to -8 (2007). The Department

denied Taxpayer’s application. Taxpayer protested the Department’s denial of its application.

The issue in this case is which date controls the statutory one-year increase in employment look-

back period under the Alt. Energy Credit: the July 24, 2011 date Taxpayer signed the application

form or the December 21, 2011 date that Taxpayer mailed its application to the Department. If

the starting date for the one-year increase in employment look-back period commenced from the

date of signature on Taxpayer’s application, then Taxpayer added at least one additional full-time

equivalent employee over the previous year and was entitled to the Alt. Energy Credit. However,

if the one-year increase in employment look-back period did not commence until Taxpayer

mailed the application on December 21, 2011, then Taxpayer had a reduction of employees over

the previous year and is therefore not entitled to the Alt. Energy Credit.

The Alt. Energy Credit allows qualifying manufacturers of alternative energy products to

claim a five-percent credit of qualified expenditures from their modified combined tax liability.

See NMSA 1978, §7-9J-4 (2007). The Department is to apply the Alt. Energy Credit consistent

with the Tax Administration Act (“TAA”). See NMSA 1978, §7-9J-3 (2007).

In order to qualify for the Alt. Energy Credit, under NMSA 1978, Section 7-9J-5 (2007),

an applicant-taxpayer must

employ a number of full-time employees equal to one full-time employee
in addition to the number of full-time employees employed one year prior
to the day on which the taxpayer applies for the credit…

In the Matter of the Protest of Emcore Corporation., page 4 of 11
(italics for emphasis). That is, Section 7-9J-5 establishes a one-year look-back period to

determine whether an applicant-taxpayer qualified for the Alt. Energy Credit by adding at least

one-employee during that period.

The phrase in dispute under Section 7-9J-5 is what is meant by “one year prior to the day

on which the taxpayer applies for the credit…” (italics for emphasis). Interpretation of any

statute must begin with a plain meaning reading of the statute. See Wood v. State Educ. Ret. Bd.,

2011-NMCA-20, ¶12, 149 N.M. 455, 458. Extra words should not be read into a statute if the

statute is plain on its face, especially if it makes sense as written. See Johnson v. N.M. Oil

Conservation Comm'n, 1999-NMSC-121, ¶ 27, 127 N.M. 120, 126 (internal citations omitted).

Statutes are to be interpreted in a manner to give the entire statute effect and not render portions of

the statute superfluous. See Regents of the Univ. of New Mexico v. New Mexico Fed'n of Teachers,

1998-NMSC-20, ¶28, 125 N.M. 401, 411.

The disputed phrase contains only one operative verb: “applies.” Black’s Law Dictionary,

116 (9th ed. 2009) defines the verb “apply” as “[t]o make a formal request or motion.” Simply

filling out and signing an application form does not meet the definition of “apply” because the

request or motion has not been made until it is formally submitted; while the application may

have been signed, it was not formally made to someone or some entity with an ability to consider

the application. Under a plain meaning reading of the statute, the one-year look back period

under Section 7-9J-5 commences upon a taxpayer-applicant’s formal submission of the

application to the Department.

This interpretation is also consistent with other provisions under the TAA. The

Department is required to administer the Alt. Energy Credit pursuant to the TAA. See § 7-9J-3.

NMSA 1978, Section 7-1-29.2 (2003) of the TAA specifically addresses claims for a tax credit.

In the Matter of the Protest of Emcore Corporation., page 5 of 11
In pertinent part under Section 7-1-29.2, “[a]ny taxpayer who requests approval of a statutory tax

credit is deemed to have received such approval if the request has not been granted or denied

within one hundred eighty days of the date it was filed.” (emphasis added). In other words, in the

application for tax credit context, the Legislature has clearly specified that the date of filing the

application, not the date of signature on the application, as the actionable date.

Further, under the TAA, the timeliness of a submission of a notice, a return, or an

application is determined by the date of mailing to the Department or personal delivery on the

Department, not by the date that a taxpayer signs or completes the document. See NMSA 1978, §

7-1-9 (1997). Under NMSA 1978, Section 7-1-13 (2007), the filing of a tax return entails both

completion of the form and the filing of the form with the Department. When making a claim for

refund under NMSA 1978, Section 7-1-26 (2007), a circumstance analogous to an application for

investment credit, a taxpayer must timely submit the claim to the Secretary of the Department.

By Regulation 3.1.9.8 (A) NMAC, a claim for refund is only timely if it is both fully completed

and is “transmitted, delivered, or mailed to the department prior to the expiration of the statutory

time limits.” These other examples under the TAA show generally that the date of submission to

the Department, either through mailing or personal delivery, is the operative date.

Two New Mexico Court of Appeals decisions also provide support to the notion that “to

apply” requires a formal filing or submission of an application to the Department. In Summers v.

N.M. Water Quality Control Comm'n (In re Final Order in the Alta Vista Subdivision DP #1498

WQCC 07-11(A)), 2011-NMCA-97, ¶1, 150 N.M. 694, 695, the New Mexico Court of Appeals

had to consider what was meant by “submit” an application under the Water Quality Act.

Although Summers addressed the submission of an application under a specific provision of the

Water Quality Act, it is instructive in this tax context. After looking to the Black’s Law

In the Matter of the Protest of Emcore Corporation., page 6 of 11
Dictionary for a definition of the verb “submit”, the Court of Appeals in Summers found that

under the Water Quality Act an application is not submitted until the applicant files the

application with the relevant agency or at some later point if the applicant files additional

information at the agency’s request. See id. ¶20, 701. Using the rationale articulated in Summers,

a person does not apply until they submit an application to the relevant agency.

In a second instructive case, Carter v. N.M. Human Servs. Dep't, 2009-NMCA-63, ¶1,

146 N.M. 422, 423, the Court of Appeals considered a broader question regarding whether an

agency had to consider an applicant’s submission of additional information as part of a hearing

process after the initial submission of an application for Medicaid. In addressing one of the

agency’s delay-in-process, timeliness concerns, the Court of Appeals noted that the application

date that triggered the period in which the agency had to act was the date that the applicant

“completed and submitted” application to the agency. Carter ¶14, 426. While the Carter Court

of Appeals was not directly addressing the legal question of when is the date of an application, it

is nevertheless instructive that the Court of Appeals noted that factually the application date was

the date when the application was completed and submitted to the relevant agency. The sum of

Summers and Carter is that a person submits an application the day they file that completed

application with the relevant agency. Extending that logic to the Alt. Energy Credit, a taxpayer-

applicant does not apply for the credit until they file the application with the Department through

either mailing or personal service.

Turning to the facts of this case, Taxpayer did not submit the application for the Alt.

Energy Credit when it signed the application on July 24, 2011. If Taxpayer had mailed its

application on that date, it would have qualified for the Alt. Energy Credit because the evidence

shows an increase in the number of full-time equivalents employees over that period. However,

In the Matter of the Protest of Emcore Corporation., page 7 of 11
Taxpayer chose to wait to mail the application form until a Senior Partner at Taxpayer’s

accounting firm reviewed it sometime in December. Taxpayer postmarked its application for the

Alt. Energy Credit to the Department on December 21, 2011. In accord with the above-discussed

statutory interpretation, provisions of the TAA, and case law, this December 21, 2011 date was

that date that Taxpayer applied for the Alt. Energy Credit under Section 7-9J-5. Taxpayer did not

have an increase in full time employees in the one year period from December 21, 2010 through

December 21, 2011. In fact, Taxpayer had a decrease in full time employees over that one-year

look back period.

Taxpayer argued the Department’s acknowledgement of receipt of application letter,

Taxpayer Ex. 1, supports Taxpayer’s interpretation of the Section 9-9J-5. In that letter, after

acknowledging receipt of Taxpayer’s application for the credit, the Department’s Tax Accounts

Supervisor asked Taxpayer for a copy of employment records for the one-year before “the date

on which the credit application was signed.” Because of this request, Taxpayer claims that some

Department employees agreed with Taxpayer’s interpretation that the one-year look back period

commenced from the date of signature rather than the date of mailing or filing of the application.

Accepting Taxpayer’s substantive argument regarding the Department’s

acknowledgement letter as correct for the purposes of further discussion, such written assurances

that the Department interprets a statute in a particular manner might be the basis for the claim of

either statutory estoppel under NMSA 1978, Section 7-1-60 (1993) or equitable estoppel.

However, case law makes the application of estoppel against the Department in the tax context

difficult. See generally Kilmer v. Goodwin, 2004-NMCA-122, ¶26-8, 136 N.M. 440, 447

(providing an overview of case law and the estoppel doctrine in the tax context). One of the

essential elements of any estoppel analysis is whether the complaining party relied upon the

In the Matter of the Protest of Emcore Corporation., page 8 of 11
representations of the other party to its detriment. See Gallegos v. Pueblo of Tesuque, 2002-

NMSC-12, ¶24, 132 N.M. 207, 216.

In this case, Taxpayer could not have possibly relied upon that January 6, 2012

Department letter in making its decision to delay sending the application from the July 24, 2011

signature date until the date of mailing on December 21, 2011 because the Department’s letter

was not mailed until after Taxpayer’s submission of the application to the Department. As the

Department’s Mr. Dillon pointed out, the Department’s acknowledgement of receipt of

application was incorrectly dated January 6, 2011 rather than January 6, 2012; this is a common

mistake that occurs shortly after the change of any new year. Since Taxpayer did not sign the

application until July 24, 2011, mail that application until December 21, 2011, and the

Department did not receive the application until December 29, 2011, the Department could not

have possibly acknowledged receipt of the application in January of 2011. Moreover, the letter

itself references a March 20, 2012 deadline to submit materials, which is more consistent with

the letter being mailed on January 6, 2012 rather than January 6, 2012. Under the preponderance

standard, the Department’s Acknowledgement Letter was in fact mailed on January 6, 2012.

Therefore, Taxpayer did not have access to the disputed Department letter until after Taxpayer

had made its decision to delay submission of the completed application.

Moreover, Taxpayer could not establish that it consulted with the Department in any

other manner before delaying the mailing of the application until December 21, 2011. Without

establishing that the Department made any representations to Taxpayer before the mailing of the

application that the date of signature on the application controlled the look-back period,

Taxpayer cannot show it relied on the Department’s advice to its own detriment. Therefore,

In the Matter of the Protest of Emcore Corporation., page 9 of 11
neither statutory estoppel under Section 7-1-60 nor equitable estoppel compels the Department to

grant Taxpayer relief in this protest.

Taxpayer also argued that the Department’s Instructions accompanying the Application

for the Alt. Energy Credit and the Schedule A instructions supports its contention that the date of

signature on the application, not the date of mailing the application, is the operative date under

Section 7-9J-5. However, there is nothing in the instructions that references the signature date on

the application as the operative date for the one-year look back period. Most of the instructions

simply reference the date of application, the day the credit is applied for, or the day taxpayer

applied for the credit. Moreover, as the Department highlighted, there are two examples on

Schedule A Instructions that support the interpretation that the date of application under the

statute is the date that taxpayer-applicant submits the application to the Department. See

Taxpayer Ex. 2.6. In Example (1), the operative date for the one-year look-back period is the

date the applicant submits the application. See id. In Example (2), the operative date is the date

that the applicant filed the second application. See id. The words “submit” and “file” used in the

examples in Schedule A Instructions require more than simply a signature on the application.

In conclusion, Taxpayer did not apply for the Alt. Energy Credit until it mailed the

completed application to the Department on December 21, 2011. In the one-year period from

December 21, 2010 until the mailing of its application on December 21, 2011, Taxpayer had a

decrease in full time employees. Consequently, the Department properly denied Taxpayer’s

application for the Alt. Energy Credit because Taxpayer did not satisfy the eligibility

requirements under Section 7-9J-5. Taxpayer’s protest is denied.

CONCLUSIONS OF LAW

In the Matter of the Protest of Emcore Corporation., page 10 of 11
A. Taxpayer filed a timely, written protest to the Department’s denial of Taxpayer’s

application for Alt. Energy Credit. Jurisdiction lies over the parties and the subject matter of this

protest.

B. Under NMSA 1978, Section 7-9J-5 (2007), Taxpayer did not apply for the Alt.

Energy Credit until it mailed its completed application to the Department on December 21, 2011.

See Summers, ¶20, 701; See also Carter, ¶14, 426.

C. Taxpayer was not eligible for an Alt. Energy Credit under NMSA 1978, Section 7-

9J-5 (2007) because it did not establish an increase in full-time equivalent employees over the one-

year period before the date it mailed its application to the Department. In fact, Taxpayer had less

full-time equivalent employees on the December 21, 2011 date it mailed its application than it had

the previous year.

D. Neither statutory estoppel under NMSA 1978, Section 7-1-60 (1993) nor equitable

estoppel are applicable to this protest because there is no evidence that Taxpayer relied on

Department advice to its detriment before making the decision to delay mailing the application for

Alt. Energy Credit. See Gallegos, ¶24, 216; See also Kilmer, ¶27, 447.

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

DATED: August 6, 2013.

Brian VanDenzen, Esq.
Tax Hearing Officer
Taxation & Revenue Department
Post Office Box 630
Santa Fe, NM 87504-0630

In the Matter of the Protest of Emcore Corporation., page 11 of 11