Could John and Susan Grazier receive 2008-2010 income-tax refunds claimed in 2015 because hardship and Department conversations delayed their returns?

Plain-English summary

John and Susan Grazier could not recover $1,219 of personal income tax refunds because they filed the underlying 2008-2010 returns after the statutory refund periods expired. Their hardship and conversations with Department employees did not extend the deadlines or establish equitable estoppel.

The Graziers sought $557 for 2008, $380 for 2009, and $282 for 2010. They filed all three returns on or about November 19, 2015.

They had lost their jobs in 2007, Mrs. Grazier later became ill, and they supported a daughter and two grandchildren. They became overwhelmed and said they could not afford a tax preparer during the relevant period.

Each three-year deadline had passed

Section 7-1-26(D) barred the Department from allowing a refund after the statutory period. Applying the personal-income-tax filing rules, the AHO identified these final claim dates:

• 2008 refund: December 31, 2012;
• 2009 refund: December 31, 2013; and
• 2010 refund: December 31, 2014.

The November 2015 claims were late for every year. The decision treated the limitation as an absolute bar designed to avoid stale claims and allow the Department to manage public funds predictably.

Not knowing the deadline did not extend it

Mrs. Grazier did not know there was a refund statute of limitations. The AHO found that lack of knowledge did not change the statutory deadline and noted that the couple had communicated with Department employees during the relevant years.

Oral statements did not establish estoppel

The Graziers said Department employees had told them the Department would owe them money or that they would owe at most $25. The AHO found those statements were not inaccurate when made; timely filed returns could have produced refunds.

Equitable estoppel against a government agency also required affirmative misconduct, reasonable reliance, and the other established elements. The record showed no affirmative misconduct or inaccurate assurance, so estoppel did not require payment of the late refunds.

Result: protest DENIED. The Department's denials of the $557, $380, and $282 claims were upheld.

What this means for you

Taxpayers expecting a refund

File the return within the refund period even if payment is not due. A valid refund can be lost solely because the return or claim arrives too late.

Taxpayers facing illness or financial hardship

Do not assume hardship automatically pauses a refund limitation. Seek timely filing help and document any formal extension or statutory exception that actually applies.

Taxpayers relying on agency conversations

Record names, dates, questions, and exact answers, and request written guidance when possible. General oral comments about whether money may be owed do not necessarily address the separate claim deadline.

Common questions

Q: How much did the Graziers request?
A: $557 for 2008, $380 for 2009, and $282 for 2010, totaling $1,219.

Q: When did they file the returns?
A: On or about November 19, 2015.

Q: Did job loss, illness, or inability to hire a preparer extend the deadlines?
A: No extension was recognized in this decision.

Q: Did ignorance of the limitation period excuse late claims?
A: No.

Q: Why did equitable estoppel fail?
A: The AHO found no inaccurate Department statement or affirmative governmental misconduct.

Citations and references

Statutes:

• NMSA 1978, § 7-1-26(D) — three-year refund limitation
• NMSA 1978, §§ 7-2-12 and 7-2-12.1 — personal income tax return and credit or rebate timing

Cases cited:

• Kilmer v. Goodwin, 2004-NMCA-122 — refund deadline is an absolute bar intended to avoid stale claims
• Gallegos v. Pueblo of Tesuque, 2002-NMSC-012 — elements and affirmative-misconduct requirement for estoppel against government
• Bien Mur Indian Market Center v. Taxation and Revenue Department, 1988-NMCA-104 — reluctance to apply estoppel based only on oral representations
• Wisznia v. State Human Services Department, 1998-NMSC-011 — heightened standard for estoppel against the state

Source

• Listing: New Mexico Decisions & Orders
• Decision post: John & Susan Grazier
• Decision PDF: D&O 16-14

Original ruling text

STATE OF NEW MEXICO
ADMINISTRATIVE HEARINGS OFFICE
TAX ADMINISTRATION ACT

IN THE MATTER OF THE PROTEST OF
JOHN C. & SUSAN GRAZIER No. 16-14
TO DENIAL OF REFUNDS ISSUED UNDER LETTER
ID NOs. L0541053488, L1614795312, and L0196366896

DECISION AND ORDER

A formal hearing on the above-referenced protest was held on April 13, 2016, before

Monica Ontiveros, Hearing Officer. The Taxation and Revenue Department (“Department”) was

represented by Julia Belles, attorney for the Department. Ms. Sonya Varela, protest auditor,

appeared and testified as a witness for the Department. John C. and Susan Grazier (“Taxpayers”)

appeared and testified on their own behalf. No exhibits were offered by either party.

Based on the evidence and arguments presented, IT IS DECIDED AND ORDERED AS

FOLLOWS:

FINDINGS OF FACT

1. Taxpayers failed to file timely personal income tax returns for tax years 2008,

2009 and 2010.

2. Taxpayers filed personal income tax returns for tax years 2008, 2009 and 2010 on

or about November 19, 2015, claiming a refund for each tax year.

3. Taxpayers claimed a refund in the amount of $557.00 for tax year 2008. [Letter

Id. No. 0541053488].

4. The Department denied the refund request on January 21, 2016 because the tax
   return was filed beyond the three year statute of limitations. [Letter Id. No. 0541053488].

5. Taxpayers claimed a refund in the amount of $380.00 for tax year 2009. [Letter

Id. No. 1614795312].

6. The Department denied the refund request on January 21, 2016 because the tax

return was filed beyond the three year statute of limitations. [Letter Id. No. 1614795312].

7. Taxpayers claimed a refund in the amount of $282.00 for tax year 2010. [Letter

Id. No. 0196366896].

8. The Department denied the refund request on January 20, 2016 because the tax

return was filed beyond the three year statute of limitations. [Letter Id. No. 1614795312].

9. Taxpayers protested the three denials of refund on January 30, 2016.

10. The Department acknowledged the three denials on February 9, 2016. [Letter Id.

No. 0700265008].

11. The Department requested a hearing in this matter on March 16, 2016.

12. On March 17, 2016, the Administrative Hearings Office mailed a Notice of

Administrative Hearing setting the hearing for April 13, 2016.

13. Taxpayers were both employed by a retirement community center. They both lost

their jobs sometime in August 2007 within a short period of time of each other. (CD 8:05-8:44;

9:25-9:35).

14. Mrs. Grazier became ill sometime after losing her job. (CD 9:44-10:05).

15. Prior to and during the tax periods at issue, Taxpayers supported themselves, their

daughter and two grandchildren. (CD 8:44-9:00).

16. Taxpayers became overwhelmed by the loss of their jobs and Mrs. Grazier’s

In the Matter of John C. & Susan Grazier
page !2 of 7!
illness. (CD 10:22–10:26).

17. Taxpayers could not afford to hire someone to prepare their tax returns during the

tax periods at issue. (CD 10:18–10:26).

18. Taxpayers spoke with two Department employees, Daniel Trujillo and Jessica, in

2009 and later who told them that tax years 2006, 2007, 2008, 2009, and 2010 were being

audited/reviewed and that the Department would owe them money or the most they owed was

$25.00. (CD 12:57-14:00; 15:11-15:28).

19. In 2009 and 2010, the Department assessed Taxpayers for tax years 2006 and

2007 and the Department made partial abatements. (CD 35:50-35:55; 36:34-36:40).

20. Mrs. Grazier did not know there was a statute of limitations for filing refund

claims. (CD 20:15-20:35).

DISCUSSION

The issue to be determined is whether Taxpayers are entitled to refund amounts of

$557.00, $380.00 and $282.00 which they requested on November 19, 2015. There are no

factual issues in dispute. Taxpayers argued that they were unable to file timely refund claims

because they did not realize that there was a statute of limitations and because the Department

employees provided misleading information to them.

Claims for Refund.

Generally speaking, a claim for refund must be filed within three years from the end of

the calendar year in which the payment was originally due or the overpayment was made. The

statute is fairly clear and states that: “…no credit or refund of any amount may be allowed or

made to any person … (1) within three years of the end of the calendar year in which: (a) the

In the Matter of John C. & Susan Grazier
page !3 of 7!
payment was originally due or the overpayment resulted from an assessment…”. NMSA 1978,

§7-1-26(D)(1)(a) (2015). A return must be filed by the 15th of April following the taxable year.

NMSA 1978, §7-2-12 (2003). If a credit or rebate is being requested, a taxpayer has three years

from the end of the calendar year which follows the calendar year in which the return was due to

claim a credit or rebate. NMSA 1978, §7-2-12.1 (1990).

The claim for refund statute absolutely bars the Department from acting on a claim for

refund that is not filed within the time period set out in the statute. See Kilmer v. Goodwin,

2004-NMCA-122, 136 N.M. 440, 99 P.3d 690. While not referring to the specific paragraph of

Section 7-1-26 which is at issue in this case, the court in Kilmer stated that, “(t)he purpose of the

time deadline in Section 7-1-26 is to avoid stale claims, which protects the Department’s ability

to stabilize and predict, with some degree of certainty, the funds it collects and manages.” See

id. at ¶16.

In this case, the refund amounts of $557.00, $380.00 and $282.00, which were requested

on November 19, 2015, were filed untimely for all of the tax periods of 2008, 2009 and 2010.

Taxpayers were required to file their 2008 personal income tax claim for refund, which was due

on April 15, 2009, no later than December 31, 2012; the 2009 personal income tax claim for

refund, which was due on April 15, 2010, was due no later than December 31, 2013; and the

2010 personal income tax claim for refund, which was due on April 15, 2011, was due no later

than December 31, 2014. Each return or claim for refund was filed outside of the three year

period. Therefore, the claims for refund were filed untimely by Taxpayers.

No Information.

Taxpayers argued that they did not know that there was a statute of limitations in which

In the Matter of John C. & Susan Grazier
page !4 of 7!
to file a claim for refund. However, Taxpayers testified that they were in contact with

Department employees when they received the Notice of Assessments in 2009 and 2010, and

they could certainly have asked the Department’s employees when the deadline was for filing the

claims for refund.

Equitable Estoppel.

Taxpayers did not use the phrase “equitable estoppel” when they argued that they were

entitled to a refund, but a quick review of the elements of equitable estoppel will be discussed.

The argument proposed by Taxpayers is that the statements made by Department employees,

Daniel Trujillo and Jessica, in 2009 and later indicating that the Department would owe them

money or they only owe $25.00 misled them and now requires the Department to refund them

the requested amounts of $557.00, $380.00 and $282.00.

Generally, the courts are reluctant to apply equitable estoppel against a government to

agency. Gallegos v. Pueblo of Tesuque, 2002-NMSC-12, §24, 132 N.M. 207, 46 P.3d 668.

Before the courts will apply estoppel, the state’s conduct must be “shocking degree of aggravated

and overreaching conduct or where right and justice demand it.” Wisznia v. State, Human Servs.

Dep’t, 1998-NMSC-11, §17, 125 N.M. 140, 958 P.2d 98. Moreover, the courts are reluctant to

apply equitable estoppel against a government agency if there are no written assurances made

and only oral representations exist. Bien Mur Indian Mkt. Ctr., 1988-NMCA-104,108 N.M.355,

772 P.2d 885. The elements Taxpayers would need to prove that estoppel applies against the

Department are: “(1) the government knew the facts; (2) the government intended its conduct to

be acted upon or so acted that plaintiffs had the right to believe it was so intended; (3) plaintiffs

must have been ignorant of the true facts; and (4) plaintiffs reasonably relied on the

In the Matter of John C. & Susan Grazier
page !5 of 7!
government’s conduct to their injury.” Gallegos 2002-NMSC-12, §24 n.5. In addition to these

four elements, there must be “affirmative misconduct on the part of the government.” Gallegos

2002-NMSC-12, §24 n.5.

In applying these principals to Taxpayers’ argument, the statements made by Daniel

Trujillo and Jessica were not incorrect. In 2009 or later, when they spoke with the employees,

Taxpayers should have filed their personal income tax returns for 2008, 2009 and 2010 and they

would have been eligible for refunds for 2008, 2009 and 2010. By waiting six years to file their

returns, Taxpayers were precluded from receiving a refund. For estoppel to apply, there needs to

be affirmative misconduct on the part of the government employees. Since there is no

affirmative misconduct and since there are no statements that are inaccurate, equitable estoppel

does not apply in this case.

CONCLUSIONS OF LAW

A. Taxpayers filed three timely written protests on January 30, 2016 to the denial of the

claims for refund in the amounts of $557.00, $380.00 and $282.00, and jurisdiction lies over the

parties and the subject matter of this protest.

B. The hearing was timely set and held within 90-days from the date of the

protest pursuant to NMSA 1978, Section 7-1B-8(A) (2015).

C. The personal income tax returns or claims for refund for tax years 2008, 2009 and

2010 were filed on November 19, 2015, and they were filed untimely pursuant to NMSA 1978,

§7-1-26(D) (2015).

D. Taxpayers were not misled by the Department’s employees and equitable estoppel

does not apply in this matter because there was no affirmative misconduct by the Department.

In the Matter of John C. & Susan Grazier
page !6 of 7!
For the foregoing reasons, the Taxpayers's protest is DENIED.

DATED: May 9, 2016

Monica Ontiveros

Monica Ontiveros
Hearing Officer
Taxation & Revenue Department
Post Office Box 630
Santa Fe, NM 87504-0630

NOTICE OF RIGHT TO APPEAL

Pursuant to NMSA 1978, Section 7-1-25 (1989), Taxpayers have the right to appeal this

decision by filing a notice of appeal with the New Mexico Court of Appeals within 30 days of

the date shown above. See, Rule 12-601 NMRA. If an appeal is not filed within 30 days, this

Decision and Order shall become final. A copy of the Notice of Appeal should be mailed to John

Griego, Taxation & Revenue Hearings Bureau at P.O. Box 630 Santa Fe, New Mexico

87504-0630. Mr. Griego may be contacted at 505-827-0466.

In the Matter of John C. & Susan Grazier
page !7 of 7!