Could nonresident executive Jack Dill allocate his New Mexico employer wages based on where he physically performed the work, including remote work from Indiana and New Jersey?

Plain-English summary

Jack Dill could allocate his wages from a New Mexico employer based on where he physically performed the work. Because he performed only 24% of his services while present in New Mexico, the AHO rejected the Department's attempt to tax 100% of his compensation.

The Dills were entitled to an additional $1,191 refund for 2016.

Dill was a nonresident executive of a New Mexico company

Dill lived in Indiana and later New Jersey during 2016. The Department agreed he was never a New Mexico resident during the relevant period.

He served as CEO, president, and CFO of Indian Jewelers Supply Co., Inc. (IJS), a wholesale jewelry-materials and tools supplier headquartered in Gallup with operations in Gallup and Albuquerque.

His contract paid $85,000 per year and required at least 10 days of physical presence in New Mexico each month. Otherwise, he could perform his administrative and financial duties from his resident states.

Those responsibilities generally did not require physical presence. He performed the overwhelming majority by telephone and electronic means from Indiana and New Jersey.

He allocated 24% of the wages to New Mexico

Dill estimated that he was physically present in New Mexico for 24% of 2016, or approximately 88 days. The Department did not dispute that his actual presence was below the 120 days required by the contract.

He allocated 24% of his IJS compensation to New Mexico on the 2016 PIT-1.

IJS reported $56,884.93 of W-2 wages and withheld $1,970.07 of New Mexico tax. Dill calculated a $384 New Mexico obligation and requested a $1,586 refund.

The Department instead allocated all IJS wages to New Mexico, calculated $1,575 of tax, and issued only a $395 refund.

“Within this state” meant services physically performed here

Section 7-2-11(A)(4) allocated a nonresident's compensation to New Mexico only to the extent the compensation was for activities, labor, or personal services within this state.

The AHO read that phrase according to its geographic meaning: inside New Mexico's boundaries.

The Department's own 2016 PIT-B instructions supported that reading. They told nonresidents to allocate only wages earned in New Mexico and to enter the portion coming from “services performed in New Mexico.”

Dill's New Mexico employer connection made his income subject to the Income Tax Act, but Section 7-2-11 governed how much compensation was allocated to New Mexico.

New Mexico had no convenience-of-the-employer rule

The Department's position resembled New York's convenience-of-the-employer rule, under which some remote work can remain sourced to the employer's state when performed elsewhere for the employee's convenience.

But New York had adopted that rule by regulation. The Department identified no New Mexico regulation governing remote work in that manner, and the AHO found none.

New Mexico's only public instruction for the 2016 facts instead focused on where the services were actually performed. The AHO would not apply an unwritten policy taxing all compensation from a New Mexico employer.

Dill also paid income tax on the IJS compensation to his resident states: $4,411 to Indiana and $373 to New Jersey.

Result: protest GRANTED. The 24% allocation was proper. From the requested $1,586 refund, the Department had already paid $395, leaving an additional $1,191 due.

What this means for you

Nonresident remote employees

For the 2016 law applied here, track the days and services physically performed inside and outside New Mexico. Employer location alone did not source every wage dollar to New Mexico.

Executives traveling into New Mexico

Maintain calendars, travel records, and workday documentation. Dill's credible testimony established the 24% physical-presence allocation.

Employers withholding New Mexico tax

W-2 withholding does not determine final sourcing. A nonresident employee may need a PIT-B allocation and refund claim when work is performed in multiple states.

Tax professionals handling telecommuters

Check the law and instructions for the specific tax year. This decision expressly depended on the absence of a New Mexico convenience-of-the-employer rule and the wording of the 2016 PIT-B instructions.

Common questions

Q: Was Dill a New Mexico resident?
A: No. He lived in Indiana and New Jersey throughout 2016.

Q: Where was his employer?
A: IJS was headquartered in Gallup and operated in Gallup and Albuquerque.

Q: How much time did he spend in New Mexico?
A: He credibly estimated 24% of 2016, approximately 88 days.

Q: Why did the Department allocate all wages to New Mexico?
A: It treated the compensation as New Mexico income because Dill was employed by a New Mexico business.

Q: Why did the AHO reject that position?
A: Section 7-2-11(A)(4) and the 2016 instructions allocated nonresident compensation based on services performed within New Mexico.

Q: Did New Mexico have a convenience-of-the-employer rule?
A: No such regulation or rule was identified for the 2016 period.

Q: How much additional refund was awarded?
A: $1,191, after crediting the $395 already issued.

Citations and references

Statutes and guidance:

• NMSA 1978, §§ 7-2-1 through 7-2-36 — New Mexico Income Tax Act
• NMSA 1978, § 7-2-3 — tax on residents and nonresidents with New Mexico income
• NMSA 1978, § 7-2-11(A)(4) — allocation of nonresident compensation for services within New Mexico
• NMSA 1978, §§ 7-2-2(A) and 7-2-12 — adjusted gross income and return requirement
• Regulation 3.1.8.10 NMAC — refund claimant's burden
• Instructions for 2016 PIT-B, Schedule of New Mexico Allocation and Apportionment of Income — services performed in New Mexico

Cases cited:

• Holt v. New Mexico Department of Taxation & Revenue, 2002-NMSC-034 — state income tax begins with federal adjusted gross income
• State v. Johnson, 2001-NMSC-001 — geographic meaning of “within this state” discussed
• Huckaby v. New York State Division of Tax Appeals, 829 N.E.2d 276 (N.Y. 2005) — contrasting New York convenience-of-the-employer rule
• Marbob Energy Corp. v. New Mexico Oil Conservation Commission, 2009-NMSC-013 — plain-language statutory interpretation

Source

• Listing: New Mexico Decisions & Orders
• Decision post: Jack & Karen Dill
• Decision PDF: D&O 17-42

Original ruling text

STATE OF NEW MEXICO
ADMINISTRATIVE HEARINGS OFFICE
TAX ADMINISTRATION ACT

IN THE MATTER OF THE PROTEST OF
JACK & KAREN DILL No. 17-42
TO RETURN ADJUSTMENT NOTICE
ISSUED UNDER LETTER
ID NO. L1391478064

DECISION AND ORDER

A hearing occurred in the above-captioned protest on August 22, 2017 before Chris

Romero, Esq., Hearing Officer, in Santa Fe, New Mexico. At the hearing, Jack Allan Dill

(“Taxpayer”) appeared in person and represented Taxpayers pro se. Since the facts and

circumstances of the protest relate only to the employment of Mr. Dill, references to “Taxpayer”

in its singular form shall be interpreted as referring to Mr. Dill, but may also be intended to

reference both Taxpayers when required by the context. Reference to “Taxpayers” in its plural

form is intended to refer to both of the above-captioned Taxpayers. 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.

Department Exhibits A – D were admitted into the evidentiary record without objection.

Taxpayers did not proffer any exhibits for the record of the hearing. A more detailed description

of exhibits submitted at the hearing is included on the Administrative Exhibit Coversheet. Based

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

FINDINGS OF FACT

1. On April 18, 2017, under Letter ID No. L1391478064, the Department issued a

Return Adjustment Notice.

2. On April 28, 2017, the Department’s Protest Office received Taxpayers’ formal

protest of the Department’s Return Adjustment Notice.

3. On May 22, 2017, the Department acknowledged receipt of Taxpayers’ protest of

its Return Adjustment Notice.

4. On June 30, 2017, the Department submitted a Hearing Request that requested a

hearing on the merits of Taxpayers’ protest.

5. On June 30, 2017, the Administrative Hearings Office sent Notice of

Administrative Hearing, setting this matter for a merits hearing on July 27, 2017.

6. On July 24, 2017, Taxpayers submitted a request that the hearing be continued.

7. Rather than continue the hearing set for July 27, 2017, the Chief Hearing Officer

and the parties utilized the allotted time to conduct a telephonic scheduling conference.

8. The parties did not object that the telephonic scheduling hearing conducted on

July 27, 2017 was within 90 days of Taxpayers’ protest and satisfied the 90-day hearing

requirement of NMSA 1978, Sec. 7-1B-8 (A).

9. On July 27, 2017, the Administrative Hearings Office filed and served the Second

Notice of Administrative Hearing which set a hearing on the merits of Taxpayers’ protest for

August 22, 2017 at 9 a.m.

10. On August 14, 2017, Taxpayer submitted to the Administrative Hearings Office

and the Department correspondence summarizing Taxpayers’ positions together with copies of

documents referenced therein.

11. In 2016, Mr. Dill resided in the states of Indiana and New Jersey. At no relevant

time was Mr. Dill a resident of New Mexico. [Testimony of Mr. Dill; Testimony of Ms.

Bernardo].

12. In 2016, Mr. Dill was the CEO, President, and CFO of Indian Jewelers Supply

Co. Inc. (hereinafter “IJS”). [Testimony of Mr. Dill].

13. IJS is a wholesale supplier of materials and tools serving jewelry manufacturers.

In the Matter of the Protest of Jack and Karen Dill
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[Testimony of Mr. Dill].

14. IJS is established in New Mexico and engages in business in Gallup and

Albuquerque with its headquarters being in Gallup. [Testimony of Mr. Dill].

15. IJS does not engage in business in Indiana or New Jersey. [Testimony of Mr.

Dill].

16. Mr. Dill is under contract with IJS until 2018. [Testimony of Mr. Dill].

17. Mr. Dill’s contract with IJS requires that he be physically present in New Mexico

for no less than the aggregate of 10 days per month. Otherwise, Mr. Dill may perform his

contractual obligations from his resident states. [Testimony of Mr. Dill; Dept. Ex. B-2, Sec. 3].

18. Mr. Dill’s contract with IJS provides that he be compensated $85,000.00 per year

to be paid in bi-weekly installments. [Dept. Ex. B-2, Sec. 4; Testimony of Ms. Bernardo].

19. Mr. Dill’s primary employment responsibilities for IJS concern its administrative

and financial operations. [Testimony of Mr. Dill; Dept. Ex. B-1, Sec. 1].

20. Attending to his primary employment responsibilities does not require a physical

presence in New Mexico. In 2016, Mr. Dill performed the overwhelming majority of his

employment responsibilities from his home states by telephone and other electronic means.

[Testimony of Mr. Dill].

21. Mr. Dill estimated that he was physically present in New Mexico for 24 percent

of tax year 2016. [Testimony of Mr. Dill].

22. Mr. Dill’s estimate represented approximately 88 days present in New Mexico

considering that 2016 was a leap year containing 366 days.

23. Although the Mr. Dill’s contract required that he be physically present in New

Mexico for 10 days per month, which represented 120 days per year, the Department did not

dispute testimony that his actual presence in 2016 was less than what was contractually required.

In the Matter of the Protest of Jack and Karen Dill
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24. Mr. Dill filed a 2016 PIT-1 in which he allocated and apportioned 24 percent of

his income to the State of New Mexico and claimed a refund. The percent apportioned and

allocated to New Mexico represented the time he was working for IJS while physically present

within New Mexico. [Testimony of Mr. Dill].

25. IJS issued a W-2 to Mr. Dill which indicated that it withheld New Mexico

personal income tax in the amount of $1,970.07. [Dept. Ex. D; Testimony of Ms. Bernardo].

26. The W-2 also reported the sum of $56,884.93 as wages, tips, and other

compensation. [Testimony of Ms. Bernardo; Dept. Ex. D (Box 1)].

27. Relying in relevant part on the Instructions for 2016 PIT-B Schedule of New

Mexico Allocation and Apportionment of Income (hereinafter “2016 PIT-B Instructions”), Mr.

Dill calculated a net New Mexico income tax obligation of $384.00. Because IJS withheld

$1,970.00 (rounded to the nearest dollar), Mr. Dill sought a refund of the difference, representing

$1,586.00. [Testimony of Mr. Dill].

28. The Department recalculated Taxpayers’ New Mexico income tax obligation. In

contrast with Mr. Dill’s calculation, it allocated and apportioned 100 percent of his income from

IJS to New Mexico resulting in a net New Mexico income tax obligation of $1,575.00.

[Testimony of Ms. Bernardo; Dept. Ex. A; Dept. Ex. C].

29. The Department issued a refund in the amount of $395 based on its adjustment of

Taxpayers’ return. [Testimony of Ms. Bernardo].

30. The difference between the amounts Taxpayers’ assert should be refunded

($1,586.00), and the sum actually refunded by the Department ($395.00), represents the amount

of controversy in this protest ($1,191.00). [Testimony of Ms. Bernardo].

31. Mr. Dill also filed resident returns as required by his resident states of Indiana and

New Jersey. Mr. Dill resided in Indiana prior to relocating to New Jersey where he presently

In the Matter of the Protest of Jack and Karen Dill
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resides. [Testimony of Mr. Dill].

32. Taxpayer paid state income tax in the amounts of $4,411 to Indiana and $373 to

New Jersey on the income he generated from IJS in 2016. [Testimony of Mr. Dill].

DISCUSSION

The issue presented in this protest is whether the non-resident Taxpayers were entitled to

allocate and apportion income among New Mexico, and the states in which they resided during

tax year 2016. The Department conceded that Taxpayers did not reside in New Mexico at any

time relevant to this protest. However, the Department asserts that 100 percent of the wages

reported by IJS were taxable in New Mexico because Mr. Dill was employed in New Mexico,

although primarily working remotely from his resident states of Indiana and New Jersey.

Presumption of Correctness and Burden of Proof

Although no assessment was issued in this case, and thus the typical presumption of

correctness found under NMSA 1978, Sec. 7-1-17 (C) (2007) does not apply, Taxpayer

nevertheless carries the burden in the protest proceeding under Regulation 3.1.8.10 NMAC

(8/30/2001) and must establish entitlement to the claimed refund.

Personal Income Tax

Payment of New Mexico personal income tax is governed by NMSA 1978, Sections 7-2-

1 to 36. Unless otherwise exempted by law, “[a] tax is imposed at the rates specified in the

Income Tax Act upon the net income of every resident individual and upon the net income of

every nonresident individual employed or engaged in the transaction of business in, into or from

this state, or deriving any income from any property or employment within this state.” See

NMSA 1978, Sec. 7-2-3 (1981). New Mexico law, NMSA 1978, Sec. 7-2-12 (2003), goes on to

require that any resident or any person deriving income from New Mexico file a state income tax

return. Like many states, the calculation of New Mexico’s personal income tax liability begins

In the Matter of the Protest of Jack and Karen Dill
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with a taxpayer’s adjusted gross income as reported to the IRS. See NMSA 1978, Sec. 7-2-2 (A)

(2010); See also Holt v. N.M. Dep't of Taxation & Revenue, 2002- NMSC-34, ¶23, 133 N.M. 11

(“calculation of the taxpayers’ state income tax is based upon their adjusted gross income…on their

federal return.”).

In this case, the Department determined that because the non-resident Taxpayer was

employed in New Mexico, all of his income from IJS was taxable under Sec. 7-2-3, and that he was

not entitled to allocate and apportion income from IJS among New Mexico and his resident states of

Indiana and New Jersey. The Department relied heavily on that portion of Sec. 7-2-3 which states

“[a] tax is imposed at the rates specified in the Income Tax Act . . . upon the net income of every

nonresident individual employed or engaged in the transaction of business in, into or from this

state, or deriving any income from . . . employment within this state.” The Department’s

contention was that although Taxpayer was a non-resident, his net income derived from

employment within New Mexico, which would also include transacting business in, into, or from

New Mexico.

Taxpayer did not dispute that his income was taxable under Sec. 7-2-3. However,

Taxpayer asserted that the central issue was the application of NMSA 1978, Sec. 7-2-11 (A). The

relevant portions of NMSA 1978, Sec. 7-2-11 (A) provide as follows:

7-2-11. Tax credit; income allocation and apportionment.

A. Net income of any individual having income that is taxable both
within and without this state shall be apportioned and allocated as
follows:

…

(4) compensation of a nonresident taxpayer shall be allocated to
this state to the extent that such compensation is for activities,
labor or personal services within this state[.];

(Emphasis Added)

In the Matter of the Protest of Jack and Karen Dill
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The Department argues that this provision also supports its determination that, consistent

with NMSA 1978, Sec. 7-2-3, all income deriving from employment within New Mexico is

taxable to New Mexico regardless of where the employment duties were performed. In contrast,

Taxpayer asserts entitlement to apportion and allocate his net income based on the percentage of

time he was compensated for activities, labor or personal services actually performed while

within this state. Therefore, the central issue may be addressed by interpreting and applying the

statute’s use of the phrase “within this state.”

The first step in statutory interpretation is to look at the plain language of the statute and

to refrain from further interpretation if the plain language is not ambiguous. See Marbob Energy

Corp. v. N.M. Oil Conservation Comm’n., 2009-NMSC-013, 146 N.M. 24. Statutes are to be

applied as written unless a literal use of the words would lead to an absurd result. See New

Mexico Real Estate Comm’n. v. Barger, 2012-NMCA-081, ¶ 7. If a statute is ambiguous or

would lead to an absurd result, then it should be construed in accordance with the legislative

intent or spirit and reason for the statute, even though it may require a substitution or addition of

words. See id. See also State ex rel. Helman v. Gallegos, 1994-NMSC-023, 117 N.M. 346. See

also Kewanee Indus., Inc. v. Reese, 1993-NMSC-006, 114 N.M. 784.

In other contexts, New Mexico courts have acknowledged that “[t]he plain meaning of

‘within this state’ is quite broad and does not specify a distinction between public and private

property in the interior of the State of New Mexico.” See State v. Johnson, 130 N.M. 6, 9 (2000).

Even given the broad definition acknowledged in Johnson, the court generally acknowledged

that the phrase referred to the “interior of New Mexico.” Id. This construal is consistent with the

common meaning of “within” which is defined simply as “in or into the interior: inside[.]” See

Merriam Webster’s Collegiate Dictionary (10th ed. 1994). Accordingly, the Hearing Officer is

In the Matter of the Protest of Jack and Karen Dill
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persuaded that the statute’s use of the phrase “within this state” is intended to define, and

consequently limit the application of the statute to an area within the geographic boundaries of

New Mexico.

This construction of the phrase, “within this state,” is also consistent with the

Department’s 2016 PIT-B Instructions, a form published by the Department to assist taxpayers

with apportioning and allocating income deriving from within and without New Mexico. See

Instructions for 2016 PIT-B – Schedule of New Mexico Allocation and Apportionment of Income.

Line 1 of the 2016 PIT-B Instructions explains, “[o]nly if wages were earned in New Mexico, do

non-residents allocate income from line 1 to New Mexico.” (Emphasis Added). The instructions

go on to provide for Column 2 of Line 1 that:

Non-resident. Enter the part of column 1 that came from services
performed in New Mexico.
(Emphasis Added)

In the case at hand, Taxpayer was employed by IJS which is based in New Mexico.

However, due to the nature of the work, Taxpayer was permitted to work remotely from his

residence in Indiana, and then from his residence in New Jersey after he relocated. Taxpayer,

required by IJS to be present in New Mexico for at least 10 days per month, attempted to

apportion and allocate a percentage of income to New Mexico that corresponded with the period

of time that he was physically present within this state while performing employment obligations

for which he was compensated by IJS.

The Hearing Officer was persuaded that Taxpayers’ position was consistent with the

plain letter of the law. In contrast, the Department’s position contradicts its own interpretation

and application of Sec. 7-2-11 as observed in the 2016 PIT-B Instructions. The instructions

reflect the Department’s interpretation of the law and are presumed to be a proper

implementation of the provisions of law to which the Department should be bound. See NMSA

In the Matter of the Protest of Jack and Karen Dill
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1978, Sec. 9-11-6.1 (G).

The Department’s position in this protest appears to promote an unwritten policy that

compensation paid to a non-resident for employment performed outside New Mexico for an

employer within New Mexico is taxable to New Mexico. It is probable that as technology

advances, opportunities to telecommute, such as those afforded to Taxpayer, will be more

common. Some jurisdictions, such as New York, have been addressing issues arising from

remote employment for decades. In Huckaby v. New York State Division of Tax Appeals, 829

N.E.2d 276 (N.Y. 2005), the New York court of appeals addressed a scenario similar to the facts

in the present case. In that case, the taxpayer was a computer programmer who was employed by

an organization based in New York. However, the taxpayer resided in Tennessee. Similar to

Taxpayer in the present matter, the taxpayer performed most of this work from his home in

Tennessee and traveled to New York as circumstances occasionally required. During the years at

issue, the taxpayer spent approximately 75 percent of his time working from his home in

Tennessee with the remainder working in New York. He allocated and apportioned income

between New York and Tennessee based on the number of days he worked in each state.

After completing an audit, the state of New York determined that 100 percent of the

taxpayer’s New York-sourced income should be allocated to New York. In affirming the taxing

authority, the New York court of appeals cited the long-standing policy of the state known as the

“convenience of the employer test.” The court explained that although the origins of the test were

obscure, it was first embodied in the regulations of its taxing authority as early as 1960. The test

was promulgated under the authority of an income tax statute which the court in Huckaby quoted

as follows:

"[i]f a business, trade, profession or occupation is carried on partly
within and partly without this state, as determined under
regulations of the tax commission, the items of income, gain, loss

In the Matter of the Protest of Jack and Karen Dill
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and deduction derived from or connected with New York sources
shall be determined by apportionment and allocation under such
regulations." (Tax Law § 631[c].) Huckaby, 829 N.E.2d at 280.

The statute in Huckaby shares some characteristics with NMSA 1978, Sec. 7-2-3 and 7-2-

11. In common with Sec. 7-2-3, both statutes embody the intention of imposing tax on

individuals deriving income from transacting business in, into or from their states, and income

from employment within the state. Similar with Sec. 7-2-11, it also embodies the intention to

allow for income to be apportioned and allocated as the relevant taxing authority determines to

be appropriate. It should be noted that although Sec. 7-2-3 and Sec. 7-2-11 do not include an

express grant of authority to promulgate regulations, unlike the statute in Huckaby, the authority

for the Department to promulgate regulations is provided elsewhere. NMSA 1978, Sec. 9-11-6.2

states:

9-11-6.2. Administrative regulations, rulings, instructions and
orders; presumption of correctness.

A. The secretary is empowered and directed to issue and file as
required by law all regulations, rulings, instructions or orders
necessary to implement and enforce any provision of any law the
administration and enforcement of which the department, the
secretary, any division of the department or any director of any
division of the department is charged, including all rules and
regulations necessary by reason of any alteration of any such law.
In order to accomplish its purpose, this provision is to be liberally
construed.

Under the authority of the relevant statute in Huckaby, the New York taxing authority

then promulgated the following regulation:

“[i]f a nonresident employee . . . performs services for his
employer both within and without New York State, his income
derived from New York State sources includes that proportion of
his total compensation for services rendered as an employee which
the total number of working days employed within New York State
bears to the total number of working days employed both within
and without New York State. . . . However, any allowance claimed
for days worked outside New York State must be based upon the

In the Matter of the Protest of Jack and Karen Dill
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performance of services which of necessity, as distinguished from
convenience, obligate the employee to out-of-state duties in the
service of his employer” (20 NYCRR 132.18[a]). Huckaby, 829
N.E.2d at 280. (Emphasis added).

In other words, if the work is performed in another state due to convenience rather than

necessity, then the compensation for that out-of-state work is taxable to New York. In Huckaby,

the court found that the taxpayer’s ability to work from Tennessee was more for the convenience

of the taxpayer than for the necessity of the employer, in which case the state of New York was

entitled to tax 100 percent of his income sourced from New York employment despite the fact

that the taxpayer performed the majority of his employment functions in Tennessee.

The “convenience of the employer test,” although long-standing in New York, is not

without its asserted defects. In fact, Hellerstein and Hellerstein, in the leading treatise on state

taxation, state, “we believe that the ‘convenience of the employer’ rule is vulnerable to

constitutional attack under the Due Process Clause and the Commerce Clause.” See J. Hellerstein

& W. Hellerstein, State Taxation, ¶20.05[4][e][i] (3rd ed. 2001-2015). Because New Mexico has not

adopted the “convenience of the employer test,” further discussion regarding those issues is not

necessary.

However, the Department promotes a similar result as seen in Huckaby with one glaring

difference. Unlike the taxing authority in New York, the Department has not promulgated any

regulations adopting a “convenience of the employer test” or any other rule governing the

allocation of income in situations where a non-resident derives income from remote employment

in New Mexico. In contrast, and particularly in reference to the 2016 PIT-B Instructions, the

Department’s implementation of the law is that non-residents are only taxed on that portion of

their net income which derived “from services performed in New Mexico.” Taxpayer in this case,

although performing some services in New Mexico, performed the majority of services in his

In the Matter of the Protest of Jack and Karen Dill
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resident states in which he also paid income taxes on his IJS income.

The court in Huckaby made the following observation which the Hearing Officer found

particularly noteworthy.

In short, the statute facially evidences the Legislature’s intent to
tax nonresidents on all New York source income, and to task the
Commissioner to develop a workable rule for apportioning and
allocating the taxable income of nonresidents who work both
within and without the state. The Commissioner has carried out his
statutory responsibility by adopting the convenience of the
employer test. Huckaby, 829 N.E.2d at 281.

In contrast, the Department did not direct the Hearing Officer’s attention to any

regulations addressing issues arising from remote employment of non-residents by New Mexico

employers, nor was the Hearing Officer able to locate any other regulatory authority on this

issue. Instead, the Department’s only public position on this scenario, as of 2016, appeared in its

2016 PIT-B Instructions, which with respect for non-residents, applied only to compensation for

“services performed in New Mexico.”

Taxpayers’ protest should be granted. Taxpayer should be allowed to apportion and

allocate compensation among New Mexico and his resident states, based on the location of

Taxpayer where the services were actually performed. In this protest, Taxpayer credibly testified

that he was physically present in New Mexico for 24 percent of tax year 2016.

CONCLUSIONS OF LAW

A. Taxpayer filed a timely, written protest to the Department’s Return Adjustment

Notice issued under Letter ID No. L1391478064, and jurisdiction lies over the parties and the

subject matter of this protest.

B. A 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 overcame overcome the presumption of correctness under Taxpayer under

In the Matter of the Protest of Jack and Karen Dill
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Regulation 3.1.8.10 NMAC (8/30/2001) and established entitlement to the claimed refund.

D. Taxpayer was entitled to apportion and allocate income pursuant to NMSA 1978,

because a percentage of his income was not derived from activities, labor, or performing services

within this state pursuant to NMSA 1978, Sec. 7-2-11 (A) (4).

For the foregoing reasons, Taxpayers’ protest IS GRANTED. Taxpayers’ apportionment

and allocation of income was proper and Taxpayers are entitled to a refund representing $1,586.00

less $395, an amount which was refunded at the time of the Department’s Return Adjustment

Notice. Therefore, Taxpayers’ actual refund shall be $1,191.00.

DATED: October 5, 2017

Chris Romero
Hearing Officer
Administrative Hearings Office
Post Office Box 6400
Santa Fe, NM 87502

In the Matter of the Protest of Jack and Karen Dill
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NOTICE OF RIGHT TO APPEAL

Pursuant to NMSA 1978, Section 7-1-25 (2015), the parties 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. If an appeal is not timely filed with the Court of Appeals within 30 days, this

Decision and Order will become final. Rule of Appellate Procedure 12-601 NMRA articulates

the requirements of perfecting an appeal of an administrative decision with the Court of Appeals.

Either party filing an appeal shall file a courtesy copy of the appeal with the Administrative

Hearings Office contemporaneous with the Court of Appeals filing so that the Administrative

Hearings Office may begin preparing the record proper. The parties will each be provided with a

copy of the record proper at the time of the filing of the record proper with the Court of Appeals,

which occurs within 14-days of the Administrative Hearings Office receipt of the docketing

statement from the appealing party. See Rule 12-209 NMRA.

In the Matter of the Protest of Jack and Karen Dill
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CERTIFICATE OF SERVICE

On October 5, 2017, a copy of the foregoing Decision and Order was mailed to the parties

listed below in the following manner:

In the Matter of the Protest of Jack and Karen Dill
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