Did a later Department review and partial abatement reopen Robert Hooper's expired 90-day deadline to protest gross receipts tax assessments?

Plain-English summary

A later Department review and partial abatement did not reopen Robert Hooper's expired deadline to protest the original assessments. The AHO upheld the Department's denial of his October 16, 2015 protest as untimely.

The Department mailed three assessments on February 9, 2015 for CRS periods ending in 2009, 2010, and 2011. The 90-day deadline, adjusted because the date fell on a weekend, was Monday, May 11, 2015. Hooper did not protest by then.

After Hooper retained a CPA, the CPA sent additional documents to an auditor. On September 22, 2015, the auditor said the Department would adjust the 2011 assessment, and the Department did partially abate it. Hooper argued that this later letter started a new 90-day period to challenge the remaining balances.

The original mailing triggered the jurisdictional deadline

Section 7-1-24 required a written assessment protest within 90 days of mailing or service. The AHO treated “shall” as mandatory and Regulation 3.1.7.11 as depriving the Department of authority to consider an untimely protest.

Hooper did not dispute that the assessments were timely mailed or that he missed the deadline. Because his protest came about eight months after the assessments and he offered no contrary evidence about notice, the presumption of administrative regularity applied.

A general protest provision did not create a second chance

Hooper argued that the September letter was a later action under the Tax Administration Act that could itself be protested. The AHO rejected using the general provision for challenges to Tax Administration Act actions to bypass the specific 90-day rule for assessments.

The assessment provision specifically controlled challenges to assessed liability. Allowing any later Department mailing to reopen the merits would conflict with the collection and finality consequences that follow when an assessment is not timely protested.

Partial relief did not reopen the balance

The Department's later action under Section 7-1-28 granted Hooper a favorable partial abatement for 2011. He was not aggrieved by that relief, and dissatisfaction with its size did not renew the expired opportunity to challenge the remaining assessment.

Result: protest DENIED. As of the hearing, the original assessments still carried $16,816.93 of gross receipts tax, $3,363.38 of penalty, and $2,383.46 of interest after the partial abatement.

What this means for you

Taxpayers receiving an assessment

Calendar the protest deadline from the assessment's mailing or service date. Continuing to exchange documents with an auditor does not itself preserve or extend the statutory protest period.

Taxpayers receiving partial relief

A later favorable adjustment may reduce liability without reopening the unprotested remainder. Do not assume a new explanatory letter creates a fresh merits deadline.

Representatives engaged after assessment

Determine immediately whether the statutory protest period is still open. The decision indicates that later representation and document submission could not cure an already expired jurisdictional deadline.

Common questions

Q: When did Hooper's deadline expire?
A: May 11, 2015, 90 days after the February 9 assessments with the weekend rule applied.

Q: When did he submit the protest at issue?
A: October 16, 2015.

Q: Did the Department review his later documents?
A: Yes. It made a partial adjustment to the 2011 assessment.

Q: Did that adjustment restart the 90-day period?
A: No. The AHO held that it did not reopen the deadline for challenging the original assessments.

Q: Could the AHO decide whether the remaining assessments were correct?
A: No. The untimely protest left the Department without authority to consider their merits.

Citations and references

Statutes and regulations:

• NMSA 1978, § 7-1-24 — mandatory 90-day assessment protest deadline
• NMSA 1978, §§ 7-1-17 and 7-1-28 — assessment consequences and Department abatement authority
• NMSA 1978, § 7-1-77 — deadline falling on a weekend or holiday
• Regulation 3.1.7.11 NMAC — Department authority over untimely protests
• Regulation 3.1.6.12 NMAC — assessment presumption

Cases cited:

• Wing Pawn Shop v. Taxation & Revenue Department, 1991-NMCA-024 — presumption of administrative regularity in notice
• Associated Petroleum Transport v. Shepard, 1949-NMSC-002 — failure to follow the statutory protest procedure deprived the agency of jurisdiction
• Lopez v. New Mexico Department of Taxation & Revenue, 1997-NMCA-115 — enforcement of the statutory protest time limit
• Hi-Country Buick GMC, Inc. v. Taxation & Revenue Department, 2016-NMCA-027 — specific statutory provision controls over a general one
• Kilmer v. Goodwin, 2004-NMCA-122 — strict deadlines help avoid stale claims and stabilize public revenues

Source

• Listing: New Mexico Decisions & Orders
• Decision post: Robert G. Hooper
• Decision PDF: D&O 16-20

Original ruling text

STATE OF NEW MEXICO
ADMINISTRATIVE HEARINGS OFFICE
TAX ADMINISTRATION ACT

IN THE MATTER OF THE PROTEST OF
ROBERT G. HOOPER No. 16-20
TO DENIAL OF PROTEST ISSUED UNDER LETTER
ID NO. L0663820336

DECISION AND ORDER

A protest hearing occurred on the above captioned matter February 3, 2016 before Brian

VanDenzen, Esq., Chief Hearing Officer, in Santa Fe. At the hearing, Michael Andrews, CPA,

appeared, representing Robert G. Hooper (“Taxpayer”). Staff Attorney Elena Morgan appeared

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

Protest Auditor Milagros Bernardo appeared as a witness for the Department. Taxpayer Exhibit

1 was admitted into the record. Department Exhibits A-D were admitted into the record. Based

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

FINDINGS OF FACT

1. On October 26, 2015, under letter id. no. L0663820336, the Department denied

Taxpayer’s October 16, 2015 submission of a protest related to three assessments dated February

9, 2015.

2. On November 10, 2015, Taxpayer submitted a formal protest of the Department’s

denial of protest.

3. On November 16, 2015, the Department acknowledged receipt of a valid protest

to its denial of protest.

4. On December 21, 2015, the Department filed a request for hearing in this matter

with the Administrative Hearings Office, a separate agency from the Department.

5. On December 29, 2015, the Administrative Hearings Office sent Notice of

Administrative Hearing, setting this matter for a merits hearing on February 3, 2016.

6. The February 3, 2016 hearing occurred within 90-days of Taxpayer’s protest and

the Department’s acknowledgement of receipt of a valid protest in this matter.

7. On February 9, 2015, through letter id. no.’s L1414664144, L0877793232, and

L1951535056, the Department assessed Taxpayer for tax liabilities for the CRS reporting periods

ending on December 31, 2009, December 31, 2010, and December 31, 2011 respectively. [Dept.

Ex. B].

8. Monday, May 11, 2015 was 90-days after the Department’s assessments.

9. Taxpayer did not file a protest on or before May 11, 2015.

10. At some point in the spring of 2015, Taxpayer engaged the services of Michael

Andrews, CPA.

11. Mr. Andrews, CPA, could not recall whether he was engaged before or after May

11, 2015.

12. Upon engagement, Mr. Andrews, CPA, made contact with Department Auditor

Laura Gage about the assessments.

13. Mr. Andrews, CPA, submitted additional documentation to Ms. Gage related to

the assessments.

14. On September 22, 2015, Department Auditor Laura Gage sent Taxpayer’s

representative Mr. Andrews, CPA, a letter indicating that Taxpayer’s file had been reviewed in

conjunction with the additional documents submitted by Taxpayer. Based on that review of the

submitted documentation, Ms. Gage indicated that the Department could only make one

adjustment to the assessment for the 2011 reporting year. [Dept. Ex. #1].

In the Matter of the Protest of Robert G. Hooper, page 2 of 9

15. The Department in fact abated a portion of the original assessment for the 2011

reporting year.

16. Taxpayer contended in his protest letter and at hearing that the Department’s

September 22, 2015 letter is controlling for the purposes of starting the 90-day protest period.

17. As of the date of the hearing, Taxpayer still owed $16,816.93 in gross receipts

tax, $3,363.38 in penalty, and $2,383.46 in interest under the three February 9, 2015 original

assessments. [Dept. Ex. D].

DISCUSSION

This case involves the issue of whether Taxpayer timely protested the underlying

assessments, or alternatively whether the Department’s September 22, 2015 letter triggered the

90-days protest period to challenge the underlying assessment issued on February 9, 2015.

In this case, Taxpayer does not dispute that the Notices of Assessments were timely

mailed and that Taxpayer did not file a protest within 90-days of the February 9, 2015

assessments. Although the Department did not provide evidence of mailing of the original

assessments in this matter, as discussed in In the Matter of the Protest of Club 33, Inc., Decision

and Order No. 12-13 (non-precedential) and In the Matter of the Protest of Reggie Olguin,

Decision and Order No. 16-19 (non-precedential), such information is generally only pertinent in

cases involving an alleged tardiness of a day or two rather than the eight months between the

assessments and the protest at issue in this case. Since Taxpayer presented no argument or

countervailing evidence related to the assessments, the presumption of administrative regularity

of notice applies to the Department mailing of those assessments. See Wing Pawn Shop v.

Taxation & Revenue Dep't, 1991-NMCA-024, ¶29, 111 N.M. 735 (there is a presumption of

administrative regularity with notice).

In the Matter of the Protest of Robert G. Hooper, page 3 of 9
Upon mailing of the February 9, 2015 assessments, under Section 7-1-17 (C) the

Department is entitled to the presumption of correctness of those assessments. Consequently,

Taxpayer carries the burden to overcome the assessments. See Archuleta v. O'Cheskey, 1972-

NMCA-165, ¶11, 84 N.M. 428. Accordingly, it is Taxpayer’s burden to present some

countervailing evidence or legal argument to show that it is entitled to an abatement, in full or in

part, of the assessments issued against him. See N.M. Taxation & Revenue Dep't v. Casias

Trucking, 2014-NMCA-099, ¶8. “Unsubstantiated statements that the assessment is incorrect

cannot overcome the presumption of correctness." See MPC Ltd. v. N.M. Taxation & Revenue

Dep't, 2003 NMCA 21, ¶13, 133 N.M. 217; See also Regulation 3.1.6.12 NMAC.

Taxpayer had 90-days to protest the Department’s assessments by filing a written protest

with the Secretary. See NMSA 1978, Section 7-1-24 (2015). In pertinent part under Section 7-1-

24 (C) (emphasis added), such protest “shall be filed within ninety days of the date of the mailing

to or service upon the taxpayer by the department…” Section 7-1-24 (C)’s use of the word

“shall” makes it an absolute requirement that a taxpayer file a protest within 90-days. See

Marbob Energy Corp. v. N.M. Oil Conservation Comm'n, 2009-NMSC-013, ¶22, 146 N.M. 24 (use

of the word “shall” in a statute indicates provision is mandatory absent clear indication to the

contrary). Accordingly, Department Regulation 3.1.7.11 NMAC finds that the 90-day protest

period is jurisdictional and that the Department lacks authority to consider an untimely protest.

Department regulations interpreting a statute are presumed proper and are to be given substantial

weight. See Chevron U.S.A., Inc. v. State ex rel. Dep't of Taxation & Revenue, 2006-NMCA-50,

¶16, 139 N.M. 498.

Case law further affirms that the statutory deadline for filing a protest is jurisdictional. In

Associated Petroleum Transp. v. Shepard, 1949-NMSC-002, ¶6 & ¶11, 53 N.M. 52, the New

Mexico Supreme Court noted that a taxpayer’s inability to timely follow the then-in-place

In the Matter of the Protest of Robert G. Hooper, page 4 of 9
designated protest procedure deprived the State Tax Commission of jurisdiction over the protest.

More recently, the New Mexico Court of Appeals ordered the dismissal of a property tax

taxpayer’s complaints for refund when such complaints were not timely filed in compliance with

the Legislature’s statutorily imposed deadlines. See Chan v. Montoya, 2011-NMCA-72, 150

N.M. 44. In Lopez v. New Mexico Dep't of Taxation & Revenue, 1997-NMCA-115, 124 N.M.

270, the Court of Appeals had opportunity to consider whether a taxpayer timely and properly

filed a protest against the Department’s notice of audit. At the administrative tax protest hearing,

the tax hearing officer found that the Lopez taxpayer had failed to timely protest the

Department’s audit under Section 7-1-24 (which then required a protest within 30-days rather

than 90-days under the current statute). See id., ¶6. The Court of Appeals in Lopez noted that

Section 7-1-24 imposed a 30-day time restriction on a protest. See id., ¶6. The Court of Appeals

in Lopez affirmed that hearing officer’s conclusion that the Lopez taxpayer did not timely protest

the Department’s audit. See id., ¶9.

In this case, applying this 90-day period to protest, Taxpayer had until Monday, May 11,

2015, to file a protest with the Department’s secretary to challenge the underlying assessments.

See NMSA 1978, § 7-1-77 (when a due date falls on a weekend or holiday, then the next

business day is considered timely). Taxpayer did not submit a protest letter by that date. In fact,

it is not even clear that Taxpayer retained Mr. Andrews, CPA, on his behalf by that time.

Because Taxpayer did not timely protest the assessments within 90-days under Section 7-1-24

(C), the Department lacks authority to consider a challenge to merits of those assessments under

Regulation 3.1.7.11 NMAC. See Associated Petroleum Transp., 1949-NMSC-002, ¶6; See also

Lopez, 1997-NMCA-115, ¶6.

In the Matter of the Protest of Robert G. Hooper, page 5 of 9
Taxpayer nevertheless asserted that the Department’s subsequent letter of September 22,

2015 was an action under the Tax Administration Act (“TAA”) that allowed Taxpayer to protest

the merits of the balance due on the underlying assessments. This argument is not persuasive.

It is true that Section 7-1-24 (A) (2) allows a taxpayer to protest the application of any

provision of the Tax Administration Act except the issuance of a subpoena or summons.

However, reading this provision both within the remaining structure of Section 7-1-24 and in

conjunction with other broader provisions of the TAA, that provision does not grant taxpayers a

second opportunity to protest the merits of an assessment after the 90-day period for such a

protest has already lapsed. That is because Section 7-1-24 (A) (1) specifically addresses a

taxpayer’s ability to protest an assessment separately from more general challenges to the TAA

under Section 7-1-24 (A) (2). It is a principal of statutory construction that a more specific

provision applies over a more general provision in the same subject matter. See Hi-Country

Buick GMC, Inc. v. Taxation & Revenue Dep't of N.M., 2016-NMCA-027, ¶21. Thus, with

respect to challenging an assessment, which is specifically listed under Section 7-1-24 (A) (1),

taxpayers only have 90-days to challenge that assessment, and failure to do so deprives the

Department jurisdiction to consider the assessment further. The more general provision to protest

the application of any provision of the TAA does not reopen the 90-day period to challenge the

merits of the underlying assessment after that 90-day period related to the assessment has already

lapsed.

To find that the general protest provision under Section 7-1-24 (A) (2) would allow a

taxpayer to challenge the merits of the underlying assessment after the 90-day protest period had

lapsed upon receipt of any subsequent mailing by the Department could potentially result in

discord between other related provisions of the TAA, a disfavored approach to statutory

construction. See State v. Trujillo, 2009-NMSC-012, ¶22, 146 NM 14 and Hayes v. Hagemeier,

In the Matter of the Protest of Robert G. Hooper, page 6 of 9
1963-NMSC-095, ¶9, 75 N.M. 70 (Statutes are to be read in harmony with other provisions of the

law dealing with the same subject matter). Under the TAA, a notice of assessment is a triggering

action with specific legal implications and consequences. As discussed above, the date of

mailing of an effective assessment legally triggers the 90-days protest period under Section 7-1-

24. Another legal consequence is that unless a notice of assessment is timely protested within 90-

days, a taxpayer becomes a delinquent taxpayer under NMSA 1978, Section 7-1-16 (2013).

Absent a timely protest, the TAA provides numerous enforcement and collection actions against

a delinquent taxpayer for the Department to satisfy the assessed tax liability, including the ability

to seize property through a levy under NMSA 1978, Section 7-1-31 (2015) and execute a lien

against a delinquent taxpayer under NMSA 1978, Section 7-1-37 through 7-1-40.

To allow a protest of an assessment after 90-days, when the Department is already

pursuing the collections actions established elsewhere by the Legislature under the TAA, would

be to create confusion and uncertainty in the state’s ability and authority to accurately project

and collect revenue after the defined 90-day assessment protest period had expired. While not

entirely on point because it deals with the deadlines to protest inaction under a refund claim

pursuant to NMSA 1978, Section 7-1-26, rather than the time to protest an assessment, the New

Mexico Court of Appeals in Kilmer v. Goodwin, 2004-NMCA-122, ¶16, 136 N.M. 440,

expressed a rationale that also carries some persuasive weight in this matter: that the purpose of

the strict nature of the statutory timeliness deadlines on a refund claim was to “avoid stale

claims, which protect the Department’s ability to stabilize and predict, with some degree of

certainty, the funds it collects or manages.” Given the other collection provisions under the TAA

tied to the expiration of the 90-day assessment protest period, it seems that the Legislature may

have had a similar purpose in mind when it established that deadline.

In the Matter of the Protest of Robert G. Hooper, page 7 of 9
Taxpayer’s theory that the September 22, 2015 letter constitutes the last action under the

TAA related to the assessments pursuant to Section 7-1-24 (A) (2) also would not have the

practical effect of reopening the underlying assessments that Taxpayer hopes for in this protest.

The September 22, 2015 letter informed Taxpayer that the Department had reviewed the

information submitted, and based on that information made a partial abatement of the assessed

taxes for the CRS reporting period ending in 2011. NMSA 1978, Section 7-1-28 (2013) gives the

Department authority to abate an assessment in response to a written protest filed under Section

7-1-24 when it determines that any part of the assessment was incorrectly, erroneously, or

illegally made. Here, Department Auditor Laura Gage apparently determined that some portion

of the assessment related to the 2011 CRS period was incorrectly and/or erroneously made.

Consequently, Ms. Gage applied the provisions of Section 7-1-28 to abate that portion of the

assessed tax. The application of the TAA at issue in the September 22, 2015 letter for the

purposes of protest under Section 7-1-24 (A) (2) is the Department’s use of Section 7-1-28 to

grant an abatement in favor of Taxpayer. In other words, the action that Taxpayer would

challenge would be the Department’s abatement in favor of Taxpayer, meaning that Taxpayer

would not be aggrieved by the abatement.

Taxpayer may be dissatisfied with the amount of abatement, but considering that

Taxpayer missed the 90-day period in which to file a protest against the underlying assessments,

the fact that the Department nevertheless gave Taxpayer a partial abatement under Section 7-1-

28 (A) does not confer Taxpayer a new opportunity to challenge the remaining assessed amounts

after the 90-day period to protest the underlying assessment has lapsed. In summary, Taxpayer

did not timely protest the underlying Notices of Assessment. Therefore, the Department properly

denied the October 16, 2015 protest letter as untimely pursuant to Section 7-1-24 (C)’s

In the Matter of the Protest of Robert G. Hooper, page 8 of 9
mandatory 90-day requirement, Regulation 3.1.7.11 NMAC, Associated Petroleum Transp and

Lopez.

CONCLUSIONS OF LAW

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

jurisdiction lies over the parties and the subject matter of this protest.

B. The hearing was timely set and held within 90-days of the Department’s

acknowledgment of receipt of a valid protest under NMSA 1978, Section 7-1B-8 (2015).

C. Taxpayer’s October 16, 2015 protest letter was filed with the Department well after

the 90-day period under Section 7-1-24 to protest the assessments had lapsed. The Department is

without authority to consider an untimely protest. See Regulation 3.1.7.11 NMAC; See also

Associated Petroleum Transp. v. Shepard, 1949-NMSC-002, ¶6 & ¶11, 53 N.M. 52; See also

Chan v. Montoya, 2011-NMCA-72, 150 N.M. 44; See also Lopez v. New Mexico Dep't of

Taxation & Revenue, 1997-NMCA-115, 124 N.M. 270.

D. The Department’s partial abatement of tax pursuant to NMSA 1978, Section 7-1-28

(2013) on September 22, 2015 does not restart or otherwise reopen the 90-day protest period to

challenge the underlying assessments.

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

denied Taxpayer’s protest of the underlying assessments as untimely.

DATED: May 25, 2016.

Brian VanDenzen
Chief Hearing Officer
Administrative Hearings Office
P.O. Box 6400
Santa Fe, NM 87502

In the Matter of the Protest of Robert G. Hooper, page 9 of 9