Could a Zuni Navy veteran receive Native American veterans' settlement funds for years without records showing New Mexico tax withholding?

Plain-English summary

Andrus Lesansee qualified as a Native American veteran domiciled on tribal land, but he could receive settlement funds only for a year in which New Mexico military-pay withholding was documented. His 1985 statement supported $81.47 plus interest; no records supported 1981 through 1984.

Lesansee was an enrolled Zuni Pueblo member. He lived on the Pueblo before entering the Navy in 1981, remained domiciled there while stationed at Pearl Harbor, and returned there after leaving active duty in 1985.

He applied for Native American Veterans' Income Tax Settlement Fund payments on November 18, 2011 for all five service years.

Eligibility required actual state withholding

Section 7-2H-3 covered Native American veterans who remained domiciled within tribal lands during active service and had New Mexico personal income tax withheld from military income.

The fund refunded documented withholding with applicable interest when an otherwise eligible veteran had not already received a refund and could no longer file a timely ordinary refund claim. The claim deadline was December 31, 2012.

The proof regulation required W-2s for the years claimed. If a veteran lacked them, the claimant could ask the Department to seek information from the Department of Defense.

The 1985 statement supported partial payment

Lesansee provided a 1985 Leave and Earnings Statement showing $81.47 of New Mexico withholding from Navy salary. The Department granted that amount plus accrued interest.

He supplied no W-2 or earnings statement showing withholding for 1981 through 1984. At his request, the Department contacted the Defense Manpower Data Center, which reported that it had no state withholding record for him.

Extra time produced no additional records

The hearing originally set for September 2013 was continued for about three months so Lesansee could pursue Navy records. A second last-minute continuance request was denied in January, but the Department agreed that he could submit late military exhibits through February 5.

No additional documents were supplied by February 10, and the Department reported no new records warranting payment.

Because no assessment had been issued, the ordinary assessment presumption did not apply. Lesansee nevertheless bore the burden to establish entitlement to settlement funds and the amount withheld. Without records, he could not do so for the earlier years.

Result: protest DENIED. The $81.47 plus interest for 1985 remained granted; settlement claims for 1981 through 1984 remained denied.

What this means for you

Native American veterans

Tribal domicile and active service are necessary but not sufficient. Preserve W-2s, Leave and Earnings Statements, or other official records showing the state and amount of withholding for every claimed year.

Claimants missing old military records

Use the authorized Defense Department record-request process, but continue searching personal, payroll, and service archives. A “no record” response left the claimant unable to prove payment here.

Taxpayers seeking a refund-like benefit

Even without an assessment presumption, the person claiming a credit, refund, or settlement payment generally must prove each statutory eligibility fact.

Common questions

Q: Was Lesansee's Zuni domicile disputed?
A: No. The decision found that he remained domiciled on Zuni Pueblo throughout active duty.

Q: Why was 1985 paid?
A: His Leave and Earnings Statement documented $81.47 of New Mexico withholding.

Q: Did Defense records show withholding for 1981-1984?
A: No. The Defense Manpower Data Center reported no record of state withholding.

Q: Could payment be estimated without records?
A: No. The decision required proof both of withholding and, if eligible, its amount.

Citations and references

Statute and regulation:

• NMSA 1978, § 7-2H-3 — Native American Veterans' Income Tax Settlement Fund eligibility and deadline
• Regulation 3.3.2.11(B)(4) NMAC — W-2 proof and Department of Defense record request
• NMSA 1978, § 7-1-17(C) — assessment presumption inapplicable where no assessment issued

Cases cited:

• Wing Pawn Shop v. Taxation and Revenue Department, 1991-NMCA-024 — claimant's burden to establish tax relief
• TPL, Inc. v. New Mexico Taxation and Revenue Department, 2003-NMSC-007 — strict proof for claimed relief

Source

• Listing: New Mexico Decisions & Orders
• Decision post: Andrus A. Lesansee
• Decision PDF: D&O 14-03

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
ANDRUS A. LESANSEE No. 14-3
TO DENIAL OF NATIVE AMERICAN VETERAN’S
INCOME TAX SETTLEMENT FUND

DECISION AND ORDER

A protest hearing occurred on the above captioned matter on January 6, 2014 before

Brian VanDenzen, Esq., Hearing Officer, in Santa Fe. Andrus A. Lesansee (“Taxpayer”)

appeared pro se. Staff Attorney Peter Breen appeared representing the State of New Mexico

Taxation and Revenue Department (“Department”). Protest Auditor Milagros Bernardo appeared

as a witness for the Department. Taxpayer Exhibits 1-4 and Department Exhibits A-B 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 November 18, 2011, Taxpayer applied for Native American Veteran’s Income

Tax (“NAVIT”) settlement funds for tax years 1981, 1982, 1983, 1984, and 1985.

2. On June 21, 2013, the Department partially granted Taxpayer NAVIT settlement

funds for 1985. The Department denied Taxpayer NAVIT settlement funds for 1981, 1982, 1983,

and 1984 because there was no record of state personal income tax withholdings in those years.

3. On July 11, 2013, Taxpayer protested the Department’s denial of claim for

NAVIT settlement funds.

4. Taxpayer is an enrolled member of a Federally-recognized Indian Tribe, the Zuni

Pueblo.

5. Before 1981, Taxpayer lived and resided on Zuni Pueblo.

6. In 1981, Taxpayer entered the United States Navy. Taxpayer was stationed in

Pearl Harbor, Hawaii during his active duty service. Taxpayer remained in the Navy until 1985.

7. Taxpayer remained domiciled on Zuni Pueblo during his military service.

8. In 1985, after finishing his service with the Navy, Taxpayer returned to living and

residing within Zuni Pueblo.

9. Taxpayer provided the Department with a Leave and Earnings Statement for

1985, showing that Taxpayer had $81.47 in New Mexico personal income taxes withheld in that

year from his Navy salary. [Department Ex. B].

10. Based on the 1985 Leave and Earnings Statement, the Department granted

Taxpayer NAVIT settlement funds for $81.47 plus accrued interest.

11. Taxpayer did not provide the Department any evidence that he had New Mexico

personal income taxes withheld from his Navy salary in 1981, 1982, 1983, or 1984.

12. Taxpayer requested his withholding records from the Department of the Navy, but

has not received any additional documentation to show whether he had New Mexico personal

income taxes withheld in 1981, 1982, 1983, and 1984.

13. On or after November 18, 2011, the Department requested Taxpayer’s state tax

withholding information while in the Navy from the United States Department of Defense,

Defense Manpower Data Center.

14. On December 12, 2011, the Defense Manpower Data Center informed the

Department that it had no record of state tax withholdings for Taxpayer. [Department Ex. A].

In the Matter of the Protest of Andrus A. Lesansee, page 2 of 8

15. On August 27, 2013, the Department requested a hearing in this matter.

16. On August 28, 2013, the Hearings Bureau mailed Notice of Administrative

Hearing, scheduling this matter for a hearing on September 12, 2013.

17. On September 11, 2013, Taxpayer moved to continue the scheduled hearing so

that he had more time to obtain supporting W-2’s showing his state income tax withholdings

during the relevant period.

18. On September 12, 2013, a telephonic status conference occurred rather than a

formal protest hearing. Taxpayer’s request for a continuance was granted in order to allow

Taxpayer more time to gather supporting evidence. Taxpayer was advised that if he was still

having trouble obtaining the supporting evidence before the time of the next hearing, he must file

a continuance request at least fourteen-days before the hearing. [09-12-13 CD 05:07-06:00].

19. On September 12, 2013, the Hearings Bureau issued a Continuance Order and

Amended Notice of Administrative Hearing, setting a new hearing date for January 6, 2014.

20. On January 6, 2014, during the protest hearing, Taxpayer asked to continue the

matter again so that he could obtain necessary records. The Department opposed Taxpayer’s

request. Given the tax calendar and the short-notice of the request for continuance at the time of

hearing, that request for continuance was denied on the record. [01-06-14 CD 09:55-12:45].

21. In lieu of a continuance, the Department proposed to allow Taxpayer to present

additional military records to the Department and into the administrative record as late-filed

exhibits in this matter. Taxpayer was given until February 5, 2014 to submit additional military

records to the Department and into the record. [01-06-14 CD 11:03-28; 12:43-54; 43:28-46:42].

In the Matter of the Protest of Andrus A. Lesansee, page 3 of 8

22. As of February 10, 2014, Taxpayer has not provided any additional documents for

the administrative record and the Department has not advised that it has received any additional

records from Taxpayer warranting further NAVIT settlement funds.

DISCUSSION

Taxpayer sought NAVIT settlement fund money for the time of his military service in

1981 through 1985. The Department partially approved Taxpayer’s claim for 1985 because

Taxpayer provided proof that he had state income tax withholdings from his military pay checks

during that time. However, the Department denied the remaining claims in tax years 1981

through 1984 because it had no records of state income tax withholdings in those years.

Taxpayer protested the Department’s denial of the remaining years. The only issue at protest is

whether Taxpayer was eligible for NAVIT settlement funds in 1981 through 1984.

Burden of Proof

Since no assessment was issued in this matter, the presumption of correctness that

attaches to an assessment under NMSA 1978, Section 7-1-17(C) (2007) does not apply.

However, under persuasive case law, Taxpayer nevertheless maintains the burden of proof to

establish he was entitled to NAVIT settlement funds. The New Mexico Court of Appeals has

found that “[w]here an exemption or deduction from tax is claimed, the statute must be construed

strictly in favor of the taxing authority, the right to the exemption or deduction must be clearly and

unambiguously expressed in the statute, and the right must be clearly established by the taxpayer.”

Wing Pawn Shop v. Taxation and Revenue Department, 1991-NMCA-024, ¶16, 111 N.M. 735

(internal citation omitted); See also TPL, Inc. v. N.M. Taxation & Revenue Dep't, 2003-NMSC-7,

¶9, 133 N.M. 447. Seeking NAVIT settlement funds is similar to seeking an exemption from

taxation in that Taxpayer is requesting a refund of withheld personal income taxes that otherwise

In the Matter of the Protest of Andrus A. Lesansee, page 4 of 8
might have been exempt from state taxation. Therefore, under the rationale articulated by Wing

Pawn Shop, Taxpayer has the obligation to establish that he is entitled to NAVIT settlement funds.

NAVIT

NMSA 1978, Section 7-2H-3 (2008) established the NAVIT settlement fund. Under

Section 7-2H-3, the Department is to pay settlement funds to “Native American veterans who

were domiciled within the boundaries of their tribal lands…during the period of their active

military duty and had state personal income taxes withheld from their military income.” In other

words, to be eligible for NAVIT settlement funds under Section 7-2H-3, the Native American

Veteran must have been domiciled on his or her tribal lands during their active duty and must

have had state personal income tax withheld from their military pay. Under Section 7-2H-3, the

Department is to refund the withheld taxes and applicable interest to eligible Native American

veterans who have not previously been refunded and who are no longer able to timely claim a

refund. The deadline for submitting a NAVIT settlement fund claim under Section 7-2H-3 was

December 31, 2012.

Regulation 3.3.2.11 NMAC (12/15/11) addresses the eligibility and proof requirements

for NAVIT settlement fund payments. In pertinent part to this protest, Regulation 3.3.2.11 (B)

(4) NMAC requires a claimant to substantiate their claim for settlement funds by “providing

copies of Form(s) W-2 covering active duty military pay” for the years at issue. If the claimant

does not have the appropriate W-2’s, then under Regulation 3.3.2.11 (B) (4) NMAC, the

claimant can request that the Department seek the information from the Department of Defense.

In this case, there is no dispute that Taxpayer is a Native American veteran who was

domiciled on his tribal land during his active duty military service from 1981 to 1985. With his

November 11, 2011 application for NAVIT settlement funds, Taxpayer did not present any W-

In the Matter of the Protest of Andrus A. Lesansee, page 5 of 8
2’s for the period in question, as required under Regulation 3.3.2.11 (B) (4) NMAC. However,

for 1985 Taxpayer presented his “Leave and Earnings Statement” showing that he had $81.47 in

New Mexico state income taxes withheld that year. Based on that 1985 “Leave and Earnings

Statement,” the Department approved NAVIT settlement funds for that 1985 state tax

withholding plus appropriate interest.

Taxpayer did not submit any proof –either W-2’s or Leave and Earning Statements—

showing he had withholdings in 1981 through 1984 and the Department was unable to find any

evidence of withholdings in those years. As required by Regulation 3.3.2.11 (B) (4) NMAC, the

Department researched Taxpayer’s records with the United States Department of Defense,

Defense Manpower Data Center. From July 28, 1981 through July 27, 1985, the Defense

Manpower Data Center showed that Taxpayer had no New Mexico personal income tax

withholdings. Without proof of withholdings in 1981 through 1984 either directly from Taxpayer

or through Department’s own research of the Department of Defense records, the Department

properly determined that Taxpayer was not eligible for NAVIT settlement funds in those years.

Taxpayer has been seeking his W-2 records from the Navy Processing Center since

receiving the Department’s Acknowledgement of Protest Letter on July 24, 2013. When he was

unable to obtain those records by the time of the scheduled September 12, 2013 hearing date,

Taxpayer moved to continue the protest hearing. The Hearings Bureau granted Taxpayer a

continuance of approximately three months in order to give Taxpayer more time to seek his

records from the Navy Processing Center. At the beginning of the protest hearing, Taxpayer

again moved to continue the hearing in order to have more time to seek his W-2 records from the

Navy Processing Center. Although Taxpayer’s request for a second continuance was denied, the

undersigned Hearing Officer did agree with the Department’s proposal in this matter to reserve

In the Matter of the Protest of Andrus A. Lesansee, page 6 of 8
ruling for an additional 30-days in the event Taxpayer obtained those records and submitted them

to the Department or the Hearings Bureau as late-filed exhibits. As of the date of this decision,

neither Taxpayer nor the Department has advised the undersigned Hearing Officer that Taxpayer

obtained or provided any withholding records for 1981 through 1984.

Taxpayer has not been able to obtain or produce the W-2 withholding records in the two-

years since his NAVIT settlement fund application or in the six-months since his protest. In the

absence of those additional records, the Department is left only with the Defense Manpower

Data Center information reporting that Taxpayer had no state tax withholdings. Without records

of state tax withholdings in 1981 through 1984, Taxpayer was unable to establish he was eligible

for NAVIT settlement funds (and if eligible, in what amount) for those periods under the

language of Section 7-2H-3 and the substantiation requirements of Regulation 3.3.2.11 (B) (4)

NMAC. Therefore, the Department properly denied Taxpayer’s NAVIT settlement fund

application for 1981 through 1984 and Taxpayer’s protest is denied.

CONCLUSIONS OF LAW

A. Taxpayer filed a timely, written protest to the Department’s partial denial of NAVIT

settlement funds. Jurisdiction lies over the parties and the subject matter of this protest.

B. Taxpayer did not present sufficient records to show he had state tax withholdings in

1981 through 1984, as required to be eligible for NAVIT settlement funds under Section 7-2H-3

and Regulation 3.3.2.11 (B) (4) NMAC. See Wing Pawn Shop ,¶16 (a taxpayer must clearly

establish the right to a deduction or an exemption from taxation, which is analogous to the claim for

settlement funds).

In the Matter of the Protest of Andrus A. Lesansee, page 7 of 8
For the foregoing reasons, Taxpayer's protest IS DENIED.

DATED: February 11, 2014.

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

In the Matter of the Protest of Andrus A. Lesansee, page 8 of 8