Was Roswell Hospital Corporation's protest timely when the Department generated a refund-denial notice but could not prove that it mailed it?

Plain-English summary

Roswell Hospital Corporation timely protested the Department's failure to act on its 2015 gross receipts tax refund claim. Although the Department's computer system had generated a denial notice, the Department did not prove that the notice was mailed.

The AHO ordered the Department to acknowledge the protest and request a separate hearing on the refund's merits. It did not decide whether the hospital qualified for the refund.

The hospital filed a 2015 refund claim through its representatives

Roswell Hospital, through Ryan, L.L.C., submitted its refund application on July 26, 2016. Tax Information Authorization forms named two Ryan representatives, and the cover letter and application directed further inquiries to Josh Killian.

The Department communicated with Killian about the claim and requested additional records in October.

The system generated a denial, but mailing was not proved

The Department's GenTax system generated and printed a Notice of Denial dated September 19, 2016. The hospital denied receiving it.

The Department's witnesses could describe general correspondence procedures but had no personal knowledge that this particular notice was mailed. The Department produced no postmarked envelope, mailing log, testimony from a person with personal knowledge, or other reliable evidence of mailing.

The employee who allegedly generated the denial was no longer with the Department and did not testify.

Later correspondence treated the refund as still pending

On December 14, 2016, nearly three months after the generated notice, the auditor reviewing the claim wrote that the refund “has not been processed at this time” and that additional information was required.

The letter requested detailed information under Section 7-9-93 and stated that processing would not begin until the hospital supplied it.

The AHO found it unreasonable to believe the auditor would request more information in those terms if she had already denied the only relevant 2015 refund application.

The 210-day inaction deadline controlled

Under the 2015 version of Section 7-1-26(B)(2), when the Department neither granted nor denied a refund claim within 120 days, the taxpayer had the next 90 days to pursue a statutory remedy—210 days total from submission.

The hospital filed its formal protest on February 21, 2017, the 210th day after July 26, 2016.

Because mailing of the September notice was not established, the 90-day deadline for a written denial under Section 7-1-26(B)(1) did not control. The protest was timely under the inaction provision.

Due process limited this hearing to timeliness

The Department argued at the hearing that the AHO should also decide whether the hospital qualified for the Section 7-9-93 deduction underlying the refund.

But the Department's own acknowledgment, hearing request, scheduling record, and prehearing statement had limited the matter to the “protest of protest denial” and timeliness. Expanding the hearing without notice would violate due process.

Result: protest GRANTED on timeliness only. The Department had to acknowledge the underlying protest and request another hearing to decide the refund merits.

What this means for you

Businesses with pending refund claims

Track the statutory action period from the date the Department receives the claim. If no effective grant or denial occurs, the inaction deadline may control.

Taxpayers disputing a mailed notice

Receipt and mailing are distinct questions, but a notice that is effective only upon mailing requires evidence that it was actually mailed. General office procedures did not prove mailing in this case.

Businesses using outside tax representatives

Keep authorization forms, cover letters, correspondence, and contact instructions together. Those records helped establish how the claim was handled, although the AHO did not need to decide whether the notice should have been addressed to the representatives.

Parties preparing for an administrative hearing

The hearing notice and prehearing record define the issues. A party may not receive a merits determination on an issue that was presented and noticed only as a procedural timeliness dispute.

Common questions

Q: When did Roswell Hospital submit the refund claim?
A: July 26, 2016.

Q: When did the Department's system generate the denial?
A: September 19, 2016.

Q: Why did that notice not start the 90-day protest period?
A: The Department did not provide reliable evidence that the notice was mailed or personally served.

Q: What evidence suggested the claim remained pending?
A: A December 14 letter said the refund had not been processed, requested more information, and said processing would not begin until the information was supplied.

Q: When did the hospital protest?
A: February 21, 2017, exactly 210 days after submitting the claim.

Q: Did the AHO award the refund?
A: No. It decided only that the protest was timely and ordered a separate hearing on the refund merits.

Q: Did the AHO decide whether the denial should have gone to the hospital's authorized representatives?
A: No. Because mailing itself was not proved, the competing arguments about the proper address were secondary and unnecessary to decide.

Citations and references

Statutes and regulations:

• NMSA 1978, § 7-1-26(B)(1), (B)(2), and (C)(1) (2015) — refund denials, Department inaction, and protest remedy
• NMSA 1978, § 7-1-24(A)(3)(b) and (C) — right and deadline to protest refund action or inaction
• NMSA 1978, § 7-1-9(A) — effectiveness of notices sent by mail
• NMSA 1978, § 7-9-93 — deduction underlying the refund claim, whose merits were not decided
• Regulation 3.1.8.10 NMAC — refund claimant's burden of proof

Cases cited:

• Marbob Energy Corp. v. New Mexico Oil Conservation Commission, 2009-NMSC-013 — statutory “shall” generally creates a mandatory requirement
• Rayellen Resources, Inc. v. New Mexico Cultural Properties Review Committee, 2014-NMSC-006 — due process requires reasonable notice and an opportunity to present claims and defenses
• Mullane v. Central Hanover Bank & Trust Co., 339 U.S. 306 (1950) — notice and an appropriate hearing must precede a deprivation of property

Source

• Listing: New Mexico Decisions & Orders
• Decision post: Roswell Hospital Corporation
• Decision PDF: D&O 17-45

Original ruling text

STATE OF NEW MEXICO
ADMINISTRATIVE HEARINGS OFFICE
TAX ADMINISTRATION ACT

IN THE MATTER OF THE PROTEST OF No. 17-45
ROSWELL HOSPITAL CORPORATION
TO THE DENIAL OF PROTEST ISSUED UNDER
LETTER ID NO. L0291658032

DECISION AND ORDER

A hearing on the merits occurred on the above-captioned protest on October 19, 2017

before Chris Romero, Esq., Hearing Officer, in Santa Fe, New Mexico. Ms. Suzanne Wood

Bruckner and Mr. Andrew J. Simons (Sutin, Thayer & Browne, P.C.) appeared in person,

representing Roswell Hospital Corporation (“Taxpayer”). Mr. Josh Killian (Ryan, L.L.C.) and

Mr. Craig Pickard, Vice President for Corporate Taxation for Community Health Services,

appeared as witnesses and testified for Taxpayer. Mr. Gerard Quinlan (Ryan L.L.C.), also

appeared and was present for the duration of the hearing, but was not called upon to testify.

Staff Attorney, Mr. David Mittle, represented the Taxation and Revenue Department of

the State of New Mexico (“Department”). Auditor, Ms. Irene Jaramillo, and Ms. Robin Cruz,

Assistant Bureau Chief for the Revenue Processing Division, appeared as witnesses and testified

for the Department. Protest Auditor, Tom Dillon, also appeared and was present for the duration

of the hearing, but was not called upon to testify.

Taxpayer Exhibits Nos. 1 – 8 and 10 and Department Exhibits B, C, and F were admitted

into the record, and are described in the Administrative Exhibit Coversheet. Based on the

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

FINDINGS OF FACT

1. Taxpayer is owned and operated by Community Health Systems (“CHS”).

[Testimony of Mr. Pickard].

2. On June 28, 2016, Taxpayer, by and through CHS Vice-President for Corporate

Taxation, Mr. Craig Pickard, executed two Tax Information Authorization forms which

authorized Mr. Josh Cohen and Mr. Josh Killian of Ryan, L.L.C. to represent Taxpayer in

matters regarding CRS taxes for tax year 2015. [Taxpayer Ex. 2; Testimony of Mr. Pickard;

Testimony of Mr. Killian].

3. Mr. Pickard’s intention was to authorize Mr. Cohen and Mr. Killian of Ryan,

L.L.C. to act on Taxpayer’s behalf on all matters pertinent to its 2015 New Mexico CRS filings

and payments, including a 2015 refund application which it intended to subsequently submit to

the Department for consideration. [Testimony of Mr. Pickard].

4. Mr. Pickard’s expectations were that Taxpayer’s representatives would coordinate

all aspects of the refund application, and act as Taxpayer’s points of contact for the claim,

including all communications with the Department relevant to the claim. [Testimony of Mr.

Pickard].

5. Mr. Pickard’s expectations were consistent with his prior experience with the

Department, in which he had also delegated authority to Ryan, L.L.C. by Tax Information

Authorization forms. [Testimony of Mr. Pickard].

6. Mr. Pickard has been with CHS for 19 years. [Testimony of Mr. Pickard].

7. The Tax Information Authorization forms provided the following address for

Taxpayer’s authorized representatives: Three Galleria Tower, 13155 Noel Road, Suite 100,

Dallas, Texas 75240. [Taxpayer Ex. 2].

In the Matter of the Protest of Roswell Hospital Corporation
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8. On July 26, 2016, Taxpayer, by and through Ryan, L.L.C., submitted an

application for refund of gross receipts taxes for the periods from January 1, 2015 through

December 31, 2015. The application was submitted under a cover letter displaying the Ryan,

L.L.C. insignia and its address, which was the same as that contained in the Tax Information

Authorization forms, likewise included in the submission. [Taxpayer Ex. 1; Taxpayer Ex. 2;

Testimony of Mr. Killian].

9. The body of the cover letter which accompanied the application for refund, as

well as the application itself, stated that Ryan, L.L.C. was representing Taxpayer in reference to

the application and expressed that further inquiries should be directed to Mr. Killian. [Taxpayer

Ex. 1].

10. The Department will copy correspondence to an authorized representative of a

taxpayer if the representative makes such request. [Testimony of Ms. Jaramillo].

11. Taxpayer’s application for refund, dated and submitted on July 26, 2016, was the

only application it filed relevant to CRS taxes in tax year 2015. [Testimony of Mr. Killian].

12. In or about September or October of 2016, after several weeks had elapsed from

the time it submitted its application for refund, Taxpayer’s representative initiated contact with

the Department. Taxpayer’s plan was to permit the Department several weeks to review the

application before it initiated follow-up inquiries. [Testimony of Mr. Killian].

13. Ms. Robin Cruz is the Assistant Bureau Chief of the Revenue Processing Division

and supervised Mr. Daniel Varela during all relevant times. [Testimony of Ms. Cruz].

14. Mr. Varela, CRS Tax Examiner for the Department, was Taxpayer’s point of

contact in reference to its 2015 refund application. [Testimony of Mr. Killian; Testimony of Ms.

Cruz].

In the Matter of the Protest of Roswell Hospital Corporation
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15. Despite the fact that Mr. Varela was the Department’s point of contact with

Taxpayer, the refund application was actually under review by Ms. Jaramillo, Tax Accounts

Auditor. [Testimony of Ms. Cruz].

16. Mr. Varela and Mr. Killian communicated regarding the 2015 application for

refund. One such communication occurred by email dated October 14, 2016 in which Mr. Varela

requested additional records “regarding the refund claim for Roswell Hospital, TY 2015[.]”

[Taxpayer Ex. 4; Testimony of Mr. Killian].

17. Mr. Varela is no longer employed by the Department. [Testimony of Ms.

Jaramillo; Testimony of Ms. Cruz; Testimony of Mr. Killian].

18. On December 14, 2016, the Department, by and through Ms. Jaramillo made

another written request for additional information in reference to Taxpayer’s application. The

request, stated in part: “Your tax year 2015 New Mexico Combined Reporting System refund

has been received. However, the refund you claim has not been processed at this time.

Additional information is required[.]” (Emphasis contained in original). [Taxpayer Ex. 5;

Testimony of Mr. Killian].

19. The December 14, 2016 correspondence went on to identify the information

which the Department required in order “to permit the Department to verify the correct refund

amount[,]” and specifically requested “[d]etail information for the requested refund under 7-9-93

NMSA 1978 to include: billing date, detail customer names, and billing amounts.” The

correspondence concluded with a statement that indicated “[t]his request for additional

information or forms may result in a considerable delay in the issuance of any refund as

processing will not commence until you submit the requested information.” [Taxpayer Ex. 5;

Testimony of Mr. Pickard; Testimony of Mr. Killian].

In the Matter of the Protest of Roswell Hospital Corporation
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20. Taxpayer interpreted the December 14, 2016 correspondence as indicating that

the application to which it referred was pending, and had neither been granted nor denied as of

the date it was generated. [Taxpayer Ex. 5; Testimony of Mr. Pickard; Testimony of Mr. Killian].

21. On February 21, 2017, the 210th day from the submission of Taxpayer’s

application for refund, Taxpayer filed a formal protest because the Department had not granted

or denied its application as of that date. [Taxpayer Ex. 6; Testimony of Mr. Killian].

22. On March 15, 2017, the Department responded, under Letter ID No.

L0291658032, to Taxpayer’s formal protest and indicated that Taxpayer’s protest was not timely

because it had not been submitted within 90 days of a refund denial letter dated September 19,

2016. [Taxpayer Ex. 7].

2017. The letter to which the denial referenced, was generated and printed by the

Department’s computer system (GenTax), on September 19, 2016, under Letter ID No.

L0106339888 (hereinafter “Notice of Denial”). [Taxpayer Ex. 3; Testimony of Ms. Jaramillo;

Testimony of Ms. Cruz].

24. The Notice of Denial purported to deny Taxpayer’s refund application and invited

Taxpayer to contact Mr. Varela with any questions. [Taxpayer Ex. 3].

25. Taxpayer denied receiving the Notice of Denial and disputed that its underlying

protest was untimely. Taxpayer filed a Formal Protest of the denial of protest on March 23, 2017.

[Taxpayer Ex. 8].

26. On April 10, 2017, the Department acknowledged Taxpayer’s protest of the

denial of its underlying protest. The correspondence indicated that Taxpayer should “be advised

that this protest will only address the denial of your protest.” The correspondence went on to

indicate that “[t]he refund denial will not be addressed at this time. If the hearing officer rules

In the Matter of the Protest of Roswell Hospital Corporation
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that the denial was not in accordance with the provisions of the Tax Administration Act, your

protest of the refund denial will be acknowledged at that time.” [See Administrative File, Letter

ID. No. L1188136240, April 10, 2017].

27. On April 12, 2017, the Department filed a Hearing Request for the Administrative

Hearings Office to set a hearing to address scheduling on Taxpayer’s protest. The Hearing

Request indicated that the issue under protest was the “Protest of Protest Denial”.

28. On April 14, 2017, the Administrative Hearings Office filed a Notice of

Administrative Hearing which set a hearing on the merits of Taxpayer’s protest for May 12,

2017.

29. On April 24, 2017, Taxpayer’s counsel of record filed an Entry of Appearance.

30. On April 24, 2017, Taxpayer filed Taxpayer’s Motion to Continue Hearing

scheduled for May 12, 2017.

31. On May 1, 2017, the Administrative Hearings Office entered a Notice of

Telephonic Scheduling Order which set a telephonic scheduling conference for May 15, 2017.

32. On May 17, 2017, the Administrative Hearings Office entered a Scheduling Order

and Notice of Hearing on the Merits. In addition to establishing various deadlines, a hearing on

the merits of Taxpayer’s protest was set for August 17, 2017.

33. On June 2, 2017, Taxpayer filed a Certificate of Service indicating that it served

Taxpayer’s First Sets of Requests for Admission, Interrogatories and Requests for Production.

34. On June 16, 2017, the Department filed Department’s Preliminary Witness List

which also contained its preliminary exhibit list.

35. On June 16, 2017, Taxpayer filed a Certificate of Service indicating that it served

Taxpayer’s Preliminary Witness List.

In the Matter of the Protest of Roswell Hospital Corporation
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36. On June 16, 2017, Taxpayer filed a Certificate of Service indicating that it served

Taxpayer’s Preliminary Exhibit List.

37. On June 28, 2017, the Department filed a Certificate of Service indicating that it

served “Property Tax Division’s [sic] Response to Taxpayer’s First Sets of Requests for

Admissions, Interrogatories [and] Requests for Production.”

38. On August 2, 2017, Taxpayer filed Taxpayer’s Motion to Vacate and Reset Merits

Hearing, and to Extend Certain Prehearing Deadlines.

39. On August 9, 2017, the Administrative Hearings Office entered a Scheduling

Order and Notice of Administrative Hearing on the Merits which in addition to establishing

various deadlines, noticed a hearing on the merits of Taxpayer’s protest for October 19, 2017.

40. On September 29, 2017, the Administrative Hearings Office entered a Notice of

Reassignment of Hearing Officer for Administrative Hearing that assigned the above-captioned

protest to the undersigned Hearing Officer.

41. On October 4, 2017, the parties filed a Joint Prehearing Statement.

42. On October 4, 2017, Taxpayer filed the Affidavit of Holly Elizabeth Schmidt.

43. Although the Notice of Denial was allegedly generated through GenTax by Mr.

Varela, he was not called upon to testify regarding any circumstances relevant to the protest,

including the events concerning the preparation or mailing of the Notice of Denial.

44. Ms. Jaramillo was responsible for reviewing Taxpayer’s application. If Mr.

Varela generated the Notice of Denial, it would have been only after Ms. Jaramillo determined

that the application should be denied. [Testimony of Ms. Cruz].

45. If the Notice of Denial was mailed, then it would have been mailed to Taxpayer’s

mailing address as provided in its Business Tax Registration Update, dated June 10, 2013. The

In the Matter of the Protest of Roswell Hospital Corporation
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mailing address provided therein was 4000 Meridian Blvd., Franklin, Tennessee 37067.

[Taxpayer Ex. 3; Department Ex. C].

46. The Department stipulated to the fact that it did not mail the Notice of Denial to

either of Taxpayer’s authorized representatives at Ryan, L.L.C. at the address provided in the

Tax Information Authorization forms.

47. Mr. Pickard is familiar with the mail distribution procedures utilized by CHS at

4000 Meridian Blvd., Franklin, Tennessee 37067. [Testimony of Mr. Pickard].

48. Neither Mr. Pickard nor anyone within his knowledge received the Notice of

Denial at 4000 Meridian Blvd., Franklin, Tennessee 37067. [Testimony of Mr. Pickard].

49. Neither Ms. Jaramillo nor Ms. Cruz had personal knowledge of whether the

Notice of Denial was ever mailed. [Testimony of Ms. Jaramillo; Testimony of Ms. Cruz].

50. There was no other reliable evidence provided to establish that the Department

ever mailed the Notice of Denial to Taxpayer at 4000 Meridian Blvd., Franklin, Tennessee

37067, the address appearing on the face of the Notice of Denial. [Taxpayer Ex. 3; Department

Ex. C].

DISCUSSION

The lone issue in protest is whether Taxpayer filed a timely protest of the Department’s

failure to grant or deny its underlying refund application. In contrast, the Department asserted

during the course of the hearing that both the timeliness of the underlying protest and the actual

merits of that protest needed to be addressed concurrently in the same hearing. For that reason,

the Hearing Officer will briefly address the scope of the hearing that was held in this protest.

Scope of Hearing on the Merits

In the Matter of the Protest of Roswell Hospital Corporation
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This dispute arose as counsel for the Department cross-examined Mr. Killian, at which

time a specific inquiry was directed to the existence or contents of any internal memos regarding

the likelihood of success in obtaining a refund in reliance on the deduction stated at NMSA

1978, Sec. 7-9-93.

Counsel for Taxpayer objected based on relevance. Counsel for the Department argued

that his inquiry was relevant because the purpose of the hearing was to address the merits of the

underlying refund application in addition to the timeliness of Taxpayer’s protest. The inquiry

into any internal memos addressing the application of Sec. 7-9-93 was directed at the underlying

refund application. The objection was sustained. However, the Hearing Officer noted that the

issue regarding the scope of the hearing would be addressed in more detail at a more appropriate

time, rather than during the testimony of a witness.

At the conclusion of the witness’ examination, which coincided with the conclusion of

Taxpayer’s presentation of evidence, the Hearing Officer requested that the Department address

its understanding of the scope and purpose of the hearing. The Department requested that the

Hearing Officer require Taxpayer to rest prior to addressing the Hearing Officer’s inquiry. The

Hearing Officer denied the Department’s request.

The Department argued that the purpose of the hearing has always been to address both

the timeliness of Taxpayer’s underlying protest and the merits of that protest, which concern

application of the deduction under NMSA 1978, Sec. 7-9-93. The Department suggested that this

should have been evident to the Hearing Officer and Taxpayer, but the record clearly provides

otherwise.

On April 10, 2017, the Department acknowledged Taxpayer’s protest of the denial of its

underlying protest. The correspondence indicated that Taxpayer should “be advised that this

In the Matter of the Protest of Roswell Hospital Corporation
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protest will only address the denial of your protest.” (Emphasis added). The correspondence

went on to indicate that “[t]he refund denial will not be addressed at this time. If the hearing

officer rules that the denial was not in accordance with the provisions of the Tax Administration

Act, your protest of the refund denial will be acknowledged at that time.” (Emphasis Added).

[See Administrative File, Letter ID. No. L1188136240, April 10, 2017].

Two days later, on April 12, 2017, the Department submitted a Hearing Request in which

it stated that the nature of the protest was “Protest of Protest Denial[.]” Then, on May 15, 2017,

during a telephonic scheduling hearing, the parties addressed the scope of the hearing, at which

time it was once again stated, in no-uncertain terms, as confirmed by the record of that hearing,

that the scope of the hearing on the merits was limited to the timeliness of the protest. Finally, in

the Joint Prehearing Statement, filed on October 4, 2017, the Department identified one solitary

issue which it viewed as unresolved: “Taxpayer’s protest is barred by the statute of limitations.

Taxpayer claims they did not receive notice; however, notice was sent to the address maintained

in Gentax” [See Joint Prehearing Statement (filed 10/4/2017)].

The Department cites In the Matter of the Protest of A Team Productions, Decision and

Order No. 17-26, Administrative Hearings Office, for the proposition that the scope of the

hearing in this matter necessarily includes the merits of the underlying protest. The Department

misreads A Team Productions, which promotes no such requirement. In any regard, a thorough

review of the record in this matter clearly illustrates that the purpose and scope of this hearing

has always been limited to the question of whether Taxpayer’s protest was untimely, which

would then determine whether Taxpayer would be entitled to address the merits of its underlying

protest in a separate hearing.

In the Matter of the Protest of Roswell Hospital Corporation
Page 10 of 20
At no time in the record of this proceeding has Taxpayer received notice to the contrary,

and for that reason, it would offend the most fundamental element of due process for the scope of

the hearing to be expanded as the Department suggested. See Rayellen Res., Inc. v. N.M. Cultural

Props. Review Comm., 2014-NMSC-006, ¶ 20, 319 P.3d 639 (due process requires reasonable

notice and opportunity to be heard and present any claim or defense); See also Mullane v. Cent.

Hanover Bank & Tr. Co., 339 U.S. 306, 313-14, 70 S.Ct. 652, 94 L.Ed 865 (1950) (requiring that

an adjudication for deprivation of property “be preceded by notice and opportunity for hearing

appropriate to the nature of the case”).

Timeliness of Taxpayer’s Underlying Protest

A taxpayer may dispute the Department’s denial of, or its failure to act on a claim for

refund as provided by NMSA 1978, Sections 7-1-24 (A) (3) (b) and 7-1-26 (B) (2015). 1

However, the right to a protest is not unrestricted. Section 7-1-24 (C) requires that “[a] protest by

a taxpayer shall be filed within ninety days of the date of mailing to or service upon the taxpayer

by the department of the . . . denial of a claim pursuant to Section 7-1-26 NMSA 1978 or the last

date upon which the department was required to take action on the claim but failed to take

action.” 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).

The process for claiming refunds is provided at NMSA 1978, Sec. 7-1-26 (2015). In

addition to establishing the general provisions governing the process by which taxpayers may

1
House Bill 408 of the 53rd Legislature of the State of New Mexico enacted various amendments to the Tax
Administration Act, including NMSA 1978, Sec. 7-1-24 and Sec. 7-1-26. The amendments took effect June 16,
2017, subsequent to all relevant events at issue in the current protest. The parties do not assert that any amendments
enacted by House Bill 408 should be applied retroactively to events relevant to the current protest.

In the Matter of the Protest of Roswell Hospital Corporation
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claim refunds, the statute also establishes the deadlines for protesting the Department’s action or

inaction. In a nutshell, the deadlines adhere to the 90-day limit established in Section 7-1-24.

Section 7-1-26 (B) establishes the following deadlines:

B. The secretary or the secretary’s delegate may allow the claim in
whole or in part or may deny the claim.

(1) If the claim is denied in whole or in part in writing, no claim
may be refiled with respect to that which was denied, but the
person, within ninety days after either the mailing or delivery of the
denial of all or any part of the claim, may elect to pursue one, but
not more than one, of the remedies in Subsection C of this section.

(2) If the department has neither granted nor denied any portion of
a claim for refund within one hundred twenty days of the date the
claim was mailed or delivered to the department, the person may
refile it within the time limits set forth in Subsection D of this
section or may within ninety days elect to pursue one, but only one,
of the remedies in Subsection C of this section. After the expiration
of the two hundred ten days from the date the claim was mailed or
delivered to the department, the department may not approve or
disapprove the claim unless the person has pursued one of the
remedies under Subsection C of this section.

(Emphasis Added)

One of the remedies referenced in Sec. 7-1-26 (B) (1) and (2), and the remedy selected in

this instance, was the remedy to file a protest. See NMSA 1978, Sec. 7-1-26 (C) (1). The

deadline for filing the protest is determined by whichever of the foregoing provisions governs.

Since the issue in this protest is whether or not the protest was timely filed, it is essential to

determine which deadline applies, a question that is answered by determining which course of

action the Department took with respect to Taxpayer’s application. Taxpayer has the burden of

proof as provided in Regulation 3.1.8.10 NMAC.

The Department contends that it mailed the Notice of Denial to Taxpayer at the

designated mailing address provided in its Business Registration Update, dated June 18, 2013.

In the Matter of the Protest of Roswell Hospital Corporation
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[Dept. Ex. C]. Consequently, the Department claims that the deadline for Taxpayer to protest that

denial was ninety days following the mailing of the denial: December 19, 2016. This argument

relies on the application of Sec. 7-1-26 (B) (1) and presumes that the denial letter was also

mailed on September 19, 2016. The Department does not assert that the denial letter was

personally served.

In contrast, Taxpayer asserted that the Department never took action on the refund

application. Therefore, the deadline was determined by Section 7-1-26 (B) (2) which provides

210 days, consisting of an initial period of 120 days plus 90 days, in which to file a protest. Since

Taxpayer filed its application for refund on July 26, 2016, it asserted that the deadline to file its

protest was 210 days from that date: February 21, 2017. In this matter, Taxpayer’s protest was

filed on February 21, 2017. This argument relies on a determination that the Notice of Denial

was never mailed as provided in Section 7-1-26 (B) (1).

If the Hearing Officer were to be persuaded that the Notice of Denial was mailed, then

the parties offer conflicting interpretations of NMSA 1978, Section 7-1-9 (A), which establishes

where the Notice of Denial should have been mailed in order to be effective. Section 7-1-9 (A)

provides:

A. Any notice required or authorized by the Tax Administration
Act to be given by mail is effective if mailed or served by the
secretary or the secretary's delegate to the taxpayer or person at
the last address shown on his registration certificate or other
record of the department. Any notice, return, application or
payment required or authorized to be delivered to the secretary or
the department by mail shall be addressed to the secretary of
taxation and revenue, taxation and revenue department, Santa Fe,
New Mexico or in any other manner which the secretary by
regulation or instruction may direct.

(Emphasis Added)

In the Matter of the Protest of Roswell Hospital Corporation
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In summary, the Department asserted that the Notice of Denial was effective because it

was purportedly mailed to the address provided in Taxpayer’s Business Registration Update and

in GenTax. Taxpayer asserted that the Department erred by not addressing the Notice of Denial

to its authorized representatives, whose address represented the last address shown in another

record of the Department, specifically referring to the Tax Information Authorization forms and

the application to which they were attached.

However, the Hearing Officer finds that consideration of the competing interpretations of

Section 7-1-9 is secondary to the threshold question of whether or not there is reliable evidence

to first establish mailing under Sec. 7-1-26 (B) (1). Only if there was evidence to establish

mailing does it then become necessary to determine whether the envelope containing the Notice

of Denial was properly addressed, and therefore effective under Section 7-1-9.

The evidence firmly established that the Department, regardless of the Notice of Denial,

never took action to grant or deny Taxpayer’s refund application before February 21, 2017.

Under Sec. 7-1-26 (B) (2), that date represented the final day in which Taxpayer was permitted

to file its protest to the Department’s failure to act on its application, and the Department’s

reliance on the Notice of Denial, is misplaced for the reasons explained in more detail below.

The Hearing Officer will first address the threshold question of mailing.

Taxpayer presented credible testimony from Mr. Pickard that the Notice of Denial was

never received. Although that is not necessarily the relevant inquiry, it does lead reasonable

minds to consider what evidence exists to establish that the Notice of Denial was mailed, because

only upon mailing is the Department’s Notice of Denial effective pursuant to Sec. 7-1-9 (A). The

Department does not allege personal service in this matter.

In the Matter of the Protest of Roswell Hospital Corporation
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Evidence that the Notice of Denial was mailed was inadequate and insufficient, at best.

Ms. Jaramillo and Ms. Cruz testified regarding the general process of generating and mailing

correspondence. However, they also candidly and credibly admitted that they lacked personal

knowledge regarding the mailing of the Notice of Denial in this particular case.

Beyond the general information provided by Ms. Jaramillo and Ms. Cruz, the Department

offered no records or documents establishing that it adhered to any mailing procedures, practices,

routines, or policies in this specific case. It offered no testimony from any witness having

personal knowledge of mailing, or other types of reliable and relevant evidence to establish that

the Department mailed the Notice of Denial, such as a copy of the postmarked envelope or a

mailing log.

The Hearing Officer finds the testimony of Ms. Cruz, in addition to evidence of other

communications between Taxpayer and the Department to weigh heavily in Taxpayer’s favor in

finding that the Department either: 1) did not actually intend to deny Taxpayer’s refund

application at the time it generated the Notice of Denial, meaning that the Notice of Denial may

have been generated in error; or 2) that the Department reconsidered the action stated in the

Notice of Denial prior to mailing. Both scenarios would explain the lack of evidence to establish

mailing in this case, and would be consistent with the balance of the evidence in this protest. Ms.

Cruz, whose candor was notable, testified as follows beginning at 1:53:03:

Mr. Mittle: So who makes the decision that a refund’s been
denied?

Ms. Cruz: It, in this instance, the, the refund was
actually under review by ACD Auditor, Irene
Jaramillo. She worked in conjunction with Daniel,
who is in our, in Revenue Processing Division
under CRS, and he handled the correspondence. So
in discussion with him, with Irene, when she made
her determination, she provides that determination
In the Matter of the Protest of Roswell Hospital Corporation
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to Daniel who would generate the refund denial.

Accordingly, this testimony established that the Notice of Denial would not have been

generated by Mr. Varela until, or unless, Ms. Jaramillo first authorized him to do so, and only

after she determined that the refund should be denied. Mr. Varela was not called to testify.

Ms. Jaramillo did testify. However, neither the Department nor Taxpayer asked any

questions that provided her with an opportunity to explain whether she actually denied the

application or authorized Mr. Varela to generate the Notice of Denial.

However, the record speaks for itself. Nearly three months after the Notice of Denial was

generated, Ms. Jaramillo made a written request for additional information in reference to

Taxpayer’s application. The request clearly stated “Your tax year 2015 New Mexico Reporting

System refund has been received. However, the refund you claim has not been processed at this

time. Additional information is required[.]” (Emphasis contained in original). [Taxpayer Ex. 5].

Her correspondence went on to identify the information which the Department required

in order “to permit the Department to verify the correct refund amount[,]” and specifically

requested “[d]etail information for the requested refund under 7-9-93 NMSA 1978 to include:

billing date, detail customer names, and billing amounts.” The correspondence concluded with a

statement that indicated “[t]his request for additional information or forms may result in a

considerable delay in the issuance of any refund as processing will not commence until you

submit the requested information.” The correspondence provided a deadline of January 16, 2017

in which to provide her with information responsive to the request. [Taxpayer Ex. 5].

It is unreasonable to believe that Ms. Jaramillo would continue making follow-up

inquiries for additional information nearly three months after she denied the application, and in

doing so, make clear statements indicating that “the refund you claim has not been processed at

In the Matter of the Protest of Roswell Hospital Corporation
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this time[,]” or that “processing [would] not commence until you submit the requested

information.” [Taxpayer Ex. 5].

Rather, the evidence suggests the probability that the Notice of Denial was generated

within one of the two possible scenarios explained above. If there were other facts known to Ms.

Jaramillo that might controvert or clarify the foregoing, she was not asked to address them at the

hearing.

The Department expressed the possibility that the December 14, 2016 follow-up

correspondence may have been in reference to another, unrelated application. However, there

was no evidence to establish that more than one application for refund was pending for tax year

2015 which addressed the application of Sec. 7-9-93. Mr. Killian credibly testified that Taxpayer

submitted only one refund application for tax year 2015. Moreover, had the correspondence of

December 14, 2016 been in reference to another, unrelated application, then Ms. Jaramillo would

have been in the best position to provide that explanation. She was never asked to do so.

Based on the evidence presented, the Hearing Officer was persuaded that the Department

did not grant or deny Taxpayer’s application for refund within 210 days of the application being

submitted for consideration.

Under these circumstances, and because Taxpayer established application of NMSA

1978, Sec. 7-1-26 (B) (2), Taxpayer was entitled to file its protest within 210 days from the date

it submitted its refund application. Since Taxpayer filed its protest within the allotted time,

Taxpayer’s protest should be GRANTED.

In the Matter of the Protest of Roswell Hospital Corporation
Page 17 of 20
CONCLUSIONS OF LAW

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

protest of the Department’s failure to grant or deny its application for refund. Jurisdiction lies over

the parties and the subject matter of this protest.

B. Taxpayer had 210 days from the date its application for refund was submitted to file

a protest based on the Department’s failure to grant or deny its application under NMSA 1978, Sec.

7-1-26 (B) (2).

C. Taxpayer’s underlying protest was timely within NMSA 1978, Sec. 7-1-26 (B) (2)

(2015).

D. NMSA 1978, Sec. 7-1-26 (B) (1) was not applicable to Taxpayer’s underlying

protest.

For the foregoing reasons, Taxpayer’s protest IS GRANTED. The Department shall

acknowledge the receipt of Taxpayer’s underlying protest [Taxpayer Ex. 6] and request a hearing

with the Administrative Hearings Office to address the merits of that protest.

DATED: October 24, 2017

Chris Romero
Hearing Officer
Administrative Hearings Office
P.O. Box 6400
Santa Fe, NM 87502

In the Matter of the Protest of Roswell Hospital Corporation
Page 18 of 20
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 Roswell Hospital Corporation
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CERTIFICATE OF SERVICE

On October 30, 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 Roswell Hospital Corporation
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