Could a law firm avoid a $4,900 penalty when accounting-staff turnover caused its $783.48 unclaimed-property report to be filed 49 days late?

Plain-English summary

Guglielmo & Associates owed a $4,900 penalty for filing its $783.48 unclaimed-property report 49 days late. Sudden accounting-staff turnover may have been unintentional, but the firm did not show good cause or freedom from negligence because the filing deadline remained calendared and accessible.

The Arizona-based creditor-rights law firm collected debts in five western states, including New Mexico. It deposited third-party funds into a trust account. Some payments exceeded the amount due, and refunds could not always be completed because the remitter could not be located or a refund check was never negotiated.

The firm prepared a New Mexico Report of Unclaimed Property showing $783.48 due to the state. The report was due November 1, 2017 but was not prepared until December 14, 2017, making it 49 days late.

The Department assessed:

• $4,900.00 penalty; and
• $4.21 interest.

Total: $4,904.21.

The statute imposed $100 for each late day

Section 7-8A-24(b) required a holder that failed to report, pay, or deliver property on time to pay $100 per day, up to $5,000, in addition to interest.

The Legislature's use of “shall” made the daily penalty mandatory. At 49 days late, the required amount was $4,900.

Section 7-8A-24(e) allowed the administrator to waive penalty for good cause and required waiver when the holder acted both in good faith and without negligence. Guglielmo therefore had to establish more than lack of bad intent.

Staff turnover did not establish non-negligence

The firm attributed the missed report to sudden and unanticipated departures from its accounting staff. It acted to replace the employees and later adopted new procedures.

But the evidence did not show when the employees resigned or how the turnover caused the 49-day delay. The deadline had been correctly placed on an accessible calendar. Information-technology staff could assist anyone who needed access, and the calendar was never unavailable for more than 24 to 48 hours.

The AHO reasoned that if the firm filed as soon as it discovered the omission, then no one had reviewed the relevant calendar until more than 40 days after the deadline. That prolonged inattention fit the Department's definitions of negligence: failure to use ordinary business care, inaction when action was required, and inadvertence or inattention.

The firm had also filed one late unclaimed-property report in 2014 without receiving a penalty. The record indicated that the Department's resources at the time may not have supported consistent penalty assessment. The earlier nonassessment did not establish entitlement to relief in 2017.

The hearing officer acknowledged being “astonished” that a late report of $783.48 produced a $4,900 penalty. But without proof of good cause or non-negligence, the statute left no basis to abate it.

Result: protest DENIED. The full $4,904.21 assessment remained.

What this means for you

Businesses holding customer funds

Overpayments, uncashed refund checks, and other third-party funds may become reportable unclaimed property. Track owner contact, dormancy, reporting, and remittance deadlines separately from ordinary tax deadlines.

Companies experiencing staff turnover

Immediately audit every departing employee's calendar, recurring filings, credentials, and open tasks. A deadline that remains accessible but unreviewed may support negligence.

Multistate holders

Maintain a centralized compliance calendar with named primary and backup owners for each state's unclaimed-property report. Ensure management and IT can access it during personnel changes.

Holders requesting penalty waiver

Document exact departure dates, access outages, recovery steps, calendar reviews, and filing actions. General evidence of disruption may not prove good cause or non-negligence.

Common questions

Q: What property was reported?
A: $783.48 of unclaimed funds arising from overpayments and refunds that could not be returned or were never negotiated.

Q: How late was the report?
A: Forty-nine days.

Q: Why was the penalty so much larger than the property?
A: The statute imposed $100 for each late day, up to $5,000, regardless of the property's value.

Q: Was the firm accused of bad faith?
A: No. The AHO accepted that the error was probably unintentional, but good faith alone did not establish freedom from negligence.

Q: Was the filing calendar lost?
A: No. It remained accessible, with IT assistance if needed, and any inaccessibility lasted no more than 24 to 48 hours.

Q: Did prior timely filings or the unpenalized 2014 late report help?
A: No. They did not overcome the negligence shown by the extended failure to review an accessible 2017 deadline.

Q: What amount remained due?
A: $4,904.21: $4,900 penalty and $4.21 interest.

Citations and references

Statutes and regulations:

• NMSA 1978, § 7-8A-7 — annual unclaimed-property report
• NMSA 1978, § 7-8A-24(b) and (e) — daily penalty and waiver standards
• NMSA 1978, §§ 7-1-17(C) and 7-1-3(X) — assessment presumption and tax definition
• NMSA 1978, § 7-1-69(B) — good-faith mistake-of-law provision considered by analogy
• Regulations 3.1.11.10 and 3.1.11.11 NMAC — negligence and indicators of non-negligence
• Regulation 3.1.6.13 NMAC — assessment presumption for penalty and interest

Cases cited:

• Marbob Energy Corp. v. New Mexico Oil Conservation Commission, 2009-NMSC-013 — mandatory effect of “shall”
• Archuleta v. O'Cheskey, 1972-NMCA-165 — taxpayer's burden to overcome an assessment
• Chevron U.S.A., Inc. v. State ex rel. Department of Taxation and Revenue, 2006-NMCA-050 — weight given to agency regulations

Source

• Listing: New Mexico Decisions & Orders
• Decision post: Guglielmo & Associates PLLC
• Decision PDF: D&O 18-18

Original ruling text

STATE OF NEW MEXICO
ADMINISTRATIVE HEARINGS OFFICE
TAX ADMINISTRATION ACT

IN THE MATTER OF THE PROTEST OF
GUGLIELMO & ASSOCIATES PLLC AHO Case No. 18.03-052P
TO THE ASSESSMENT ISSUED ON JANUARY 5, 2018

v. D&O No. #18-18

NEW MEXICO TAXATION AND REVENUE DEPARTMENT

DECISION AND ORDER

A protest hearing occurred in the above-captioned matter on May 16, 2018 before Chris

Romero, Esq., Hearing Officer, in Santa Fe, New Mexico. Ms. Eliza A. Guglielmo, Esq.,

appeared by video conference and telephone for Guglielmo & Associates PLLC (Taxpayer).

Staff attorney, Mr. Peter Breen, Esq., appeared representing the Taxation and Revenue

Department of the State of New Mexico (Department). Protest auditor, Ms. Veronica Galewaler,

appeared as a witness for the Department.

Taxpayer Exhibits 1 and 2 were admitted into the record without objection. The

Department proffered Exhibits B and C of which only Exhibit C was admitted without objection.

Exhibit B was excluded from the evidentiary record upon Taxpayer’s objection because it was

not previously disclosed as an exhibit prior to the hearing. Despite its exclusion from the

evidentiary record, Exhibit B was accepted as part of the record of the hearing. All exhibits are

more fully described in the Administrative Exhibit Log. Based on the evidence and arguments

presented, IT IS DECIDED AND ORDERED AS FOLLOWS:
FINDINGS OF FACT

1. On January 5, 2018, the Department’s Unclaimed Property Office issued an

assessment asserting liability for penalty in the amount of $4,900.00, and interest in the amount

of $4.21, arising from the failure to report, pay or deliver property within the time prescribed by

the Uniform Unclaimed Property Act. The total assessment was $4,904.21. [See Administrative

File].

2. The purported value of the property subject of the underlying report and resulting

assessment was $783.48. [See Administrative File].

3. On January 29, 2018, Taxpayer submitted a protest of the assessment. The protest

was received in the Department’s Protest Office on February 2, 2018. [See Administrative File].

4. On February 7, 2018, the Department acknowledged Taxpayer’s protest. [See

Administrative File].

5. On March 9, 2018, the Department submitted a Hearing Request to the

Administrative Hearings Office in which it requested a hearing on the merits of Taxpayer’s

protest. [See Administrative File].

6. On March 12, 2018, the Administrative Hearings Office issued a Notice of

Administrative Hearing that set a hearing on the merits of Taxpayer’s protest for April 2, 2018.

[See Administrative File].

7. On March 26, 2018, Taxpayer submitted a request to appear at the hearing on the

merits by videoconference. [See Administrative File].

8. On March 27, 2018, the Department filed a Motion for Continuance. [See

Administrative File].

In the Matter of the Protest of
Guglielmo & Associates, P.L.L.C.
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9. On March 29, 2018, Taxpayer waived the 90-day hearing requirement under

NMSA 1978, Section 7-1B-8 (2015). [See Administrative File].

10. On April 2, 2018, the Administrative Hearings Office entered a Continuance

Order and Amended Notice of Administrative Hearing setting a hearing on the merits of

Taxpayer’s protest to occur on May 16, 2018. [See Administrative File].

11. On April 26, 2018, Taxpayer filed an unopposed Motion for Plaintiff [sic] to

Appear Via Video Conference. [See Administrative File].

12. On May 3, 2018, the Administrative Hearings Office entered an Order Granting

Motion for [Taxpayer] to Appear Via Video Conference. [See Administrative File].

13. On May 4, 2018, Taxpayer filed Taxpayer’s Argument to Waive Penalty and

attached Taxpayer Exhibits 1 and 2. [See Administrative File].

14. Taxpayer is a creditor rights law firm engaging in debt collection activities in five

western states, including New Mexico. Taxpayer is based in Tucson, Arizona. [Testimony of Ms.

Guglielmo].

15. Taxpayer receives payments of funds from various sources each month that are

deposited and maintained in a trust account consistent with the requirements imposed on law

firms for the maintenance of third-party funds. [Testimony of Ms. Guglielmo].

16. In its regular course of business, Taxpayer received funds from sources that

amounted to overpayments of funds due and owing. [Testimony of Ms. Guglielmo].

17. Accordingly, parties making such overpayments were entitled to refunds in the

amounts overpaid. [Testimony of Ms. Guglielmo].

In the Matter of the Protest of
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18. In some situations, funds could not be refunded because the remitter of such funds

could not be located or because negotiable instruments issued to remitters were never negotiated.

[Testimony of Ms. Guglielmo].

19. As such, Taxpayer maintained property that, as of the date relevant to the

assessment, was unclaimed. [Testimony of Ms. Guglielmo].

20. On December 14, 2017, Taxpayer prepared a New Mexico Report of Unclaimed

Property indicating a total remittance of $783.48. [Testimony of Ms. Guglielmo; See Taxpayer

Ex. 1].

21. The report was due on or before November 1, 2017. [Testimony of Ms.

Galewaler; See NMSA 1978, Section 7-8A-7].

22. The report was made to the Department 49 days late. [See Assessment of January

5, 2018].

23. The lateness of the report occurred as a result of sudden and unanticipated

employee turnover in Taxpayer’s accounting staff. [Testimony of Ms. Guglielmo].

24. Taxpayer could not recall the specific dates that individual members of its

accounting staff resigned and left Taxpayer’s employment. Some resignations could have been

received significantly prior to or after the November 1, 2017 deadline. [Testimony of Ms.

Guglielmo].

25. Taxpayer discovered that it missed the deadline for filing the Report of

Unclaimed Property after reviewing the calendar of at least one of the departed employees.

[Testimony of Ms. Guglielmo].

26. Although Taxpayer’s accounting staff was severely depleted or perhaps entirely

departed, all calendared deadlines were accessible to Taxpayer, although any individual

In the Matter of the Protest of
Guglielmo & Associates, P.L.L.C.
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requiring access to the calendar would be required to access the calendar with assistance from

Taxpayer’s information technology personnel. [Testimony of Ms. Guglielmo].

27. At no time under the circumstances did Taxpayer experience more than 24 to 48

hours of inaccessibility to the relevant calendar. [Testimony of Ms. Guglielmo].

28. Taxpayer took immediate action to remediate the loss of its accounting staff, but

incurred various impediments resulting from the loss of accounting experience. [Testimony of

Ms. Guglielmo].

29. Taxpayer does not dispute the untimeliness of its report, but denies it was

negligent in failing to make a timely Report of Unclaimed Property. [Testimony of Ms.

Guglielmo].

30. Taxpayer seeks that penalty be abated because it acted in good faith without

negligence. [Testimony of Ms. Guglielmo].

31. As a result of the incident giving rise to the assessment, Taxpayer has employed

new procedures. [Testimony of Ms. Guglielmo].

32. Taxpayer incurred one incident in 2014 in which it submitted a late Report of

Unclaimed Property. However, the Department did not assess a penalty. [Testimony of Ms.

Guglielmo; Testimony of Ms. Galewaler; See Taxpayer’s Argument to Waive Penalty].

33. Penalty may not have been assessed in 2014 as a result of then-existing resources.

Current resources enable the Department to assess penalty on a more consistent basis.

[Testimony of Ms. Galewaler].

In the Matter of the Protest of
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DISCUSSION

The solitary issue in this protest is whether Taxpayer is entitled to an abatement of

assessed penalty resulting from its failure to timely file a New Mexico Report of Unclaimed

Property. Taxpayer does not dispute the untimeliness of the filing, but asserts that abatement of

penalty is appropriate because Taxpayer was not negligent and because Taxpayer has a history of

timely filings.

Burden of Proof

Under NMSA 1978, Section 7-1-17 (C), the assessments of tax issued in this case are

presumed correct. Unless otherwise specified, for the purposes of the Tax Administration Act,

“tax” is defined to include interest and civil penalty. See NMSA 1978, Section 7-1-3 (X). Under

Regulation 3.1.6.13 NMAC, the presumption of correctness under Section 7-1-17 (C) extends to

the Department’s assessment of penalty and interest. See Chevron U.S.A., Inc. v. State ex rel.

Dep’t of Taxation & Revenue, 2006-NMCA-050, ¶16, 139 N.M. 498, 134 P.3d 785 (agency

regulations interpreting a statute are presumed proper and are to be given substantial weight).

Taxpayers have the burden to overcome the assessments. See Archuleta v. O’Cheskey, 1972-

NMCA-165, ¶11, 84 N.M. 428, 504 P.2d 638.

Assessment of Penalty

Taxpayer conceded its failure to make a timely report under NMSA 1978, Section 7-8A-7,

but asserts that penalty should be abated because it acted in good faith and without negligence.

Taxpayer relies on the following emphasized portions of the Uniform Unclaimed Property Act:

7-8A-24. Interest and penalties.

…

In the Matter of the Protest of
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(b) Except as otherwise provided in Subsection (c) of this section, a
holder who fails to report, pay or deliver property within the time
prescribed by the Uniform Unclaimed Property Act (1995), or fails
to perform other duties imposed by that act, shall pay to the
administrator, in addition to interest as provided in Subsection (a) of
this section, a civil penalty of one hundred dollars ($100) for each
day the report, payment or delivery is withheld, or the duty is not
performed, up to a maximum of five thousand dollars ($5,000).

…

(e) The administrator for good cause may waive, in whole or in part,
penalties under Subsections (b) and (c) of this section, and shall
waive penalties if the holder acted in good faith and without
negligence.

(Emphasis Added)

The Hearing Officer notes that the imposition of penalty is mandatory by virtue of the

Legislature’s use of the term “shall” in Section 7-8A-24 (b), which establishes that an act is

mandatory, not discretionary. See Marbob Energy Corp. v. N.M. Oil Conservation Comm’n, 2009-

NMSC-013, ¶22, 146 N.M. 24, 206 P.3d 135. In this instance, the Department was obligated to

assess a penalty equivalent to $100 per day for each day Taxpayer’s report was late.

However, despite the mandatory imposition of penalty, Section 7-8A-24 (e) also provides

the Department with discretion to waive penalty for good cause shown. In cases in which the

Taxpayer acted in good faith and without negligence, the Department’s discretion yields to a

mandatory abatement of penalty, again by virtue of the word “shall.”

In this protest, the Hearing Officer was not persuaded that the Taxpayer presented evidence

sufficient to establish good cause or that it acted without negligence. Although the Hearing Officer

acknowledges astonishment that failure to timely report the sum of $783.48 in unclaimed property

could result in a penalty of $4,900.00 and nominal interest in the amount of $4.21, the Hearing

In the Matter of the Protest of
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Page 7 of 12
Officer recognizes that the imposition of penalty at the rate of $100 per day is mandatory, up to a

maximum penalty of $5,000.

Taxpayer’s position in support of waiving penalty is unpersuasive. The Hearing Officer

recognizes the probability that Taxpayer’s failure to timely file its report was unintentional, and

resulted neither from bad faith nor ill intention. However, that is insufficient to establish entitlement

to a waiver of assessed penalty. Section 7-8A-24 (e) also requires that the Taxpayer act without

negligence. Evidence in support of the good cause or non-negligence was insufficient.

Taxpayer claimed an unforeseen and extraordinary turnover in its accounting staff, yet

Taxpayer was unable to establish how those circumstances caused it to miss a deadline that it

simultaneously acknowledged was properly calendared and accessible to any person having a need

to know. If upon a mass exodus of its accounting staff, there existed a period of time ranging from

24 to 48 hours in which Taxpayer lacked access to its relevant calendar, and if the Taxpayer filed

the relevant report as soon as it discovered its oversight, then the testimony would correspondingly

suggest that there was no effort to review the relevant calendar until 24 to 48 hours before the report

was eventually prepared on December 14, 2017. By that time, more than 40 days had passed since

the deadline. Contrary to Ms. Guglielmo’s testimony, these facts are insufficient for finding that

Taxpayer was not negligent. In contrast, it suggests that a significant period of time elapsed in

which Taxpayer did not recognize a calendared filing deadline or take any action to satisfy that

deadline.

Although neither party referenced Regulation 3.1.11.10 NMAC, the Department therein

defines negligence in three separate ways: (A) “failure to exercise that degree of ordinary business

care and prudence which reasonable taxpayers would exercise under like circumstances;” (B)

In the Matter of the Protest of
Guglielmo & Associates, P.L.L.C.
Page 8 of 12
“inaction by taxpayer where action is required”; or (C) “inadvertence, indifference, thoughtlessness,

carelessness, erroneous belief or inattention.”

In the present case, Taxpayer may have had a formal system of tracking reporting deadlines,

but the system failed when Taxpayer did not give it appropriate attention. This indicates a failure to

exercise that degree of ordinary business care and prudence which reasonable taxpayers would

exercise under like circumstances, inaction by Taxpayer where action is required, and inadvertence,

indifference, thoughtlessness, carelessness, or inattention.

In instances where a taxpayer might otherwise fall under the definition of civil negligence

generally subject to penalty, Section 7-1-69 (B) provides a limited exception which although not

specifically applicable to the present matter, is nevertheless instructive: “[n]o penalty shall be

assessed against a taxpayer if the failure to pay an amount of tax when due results from a mistake of

law made in good faith and on reasonable grounds.” Taxpayer has not presented sufficient evidence

to establish that its failure to act in this regard was a mistake of law made in good faith and on

reasonable grounds. The other grounds for abatement of civil negligence penalty are found under

Regulation 3.1.11.11 NMAC. However, a thorough review of those factors fails to provide any

basis for an abatement.

Since Taxpayer has failed to establish good cause or non-negligence, the Department is

without discretion to abate penalty, and the assessment of penalty under the facts of this protest is

mandatory. Taxpayer’s protest must be denied.

CONCLUSIONS OF LAW

A. Taxpayer filed a timely written protest to the assessment dated January 5, 2018

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

In the Matter of the Protest of
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B. Taxpayer waived the 90-day hearing requirement provided in NMSA 1978,

Section, 7-1B-8 (A).

C. Pursuant to NMSA 1978, Section 7-1-17 (C) (2007), the Department’s assessment

is presumed to be correct, and it is Taxpayer’s burden to come forward with evidence and legal

argument to establish entitlement to an abatement.

D. Taxpayer did not establish good cause or non-negligence entitling it to an

abatement of assessed penalty. See NMSA 1978, Section 7-8A-24 (e).

For the foregoing reasons, Taxpayer’s protest IS DENIED.

DATED: June 20, 2018

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

In the Matter of the Protest of
Guglielmo & Associates, P.L.L.C.
Page 10 of 12
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
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CERTIFICATE OF SERVICE

On June 20, 2018, a copy of the foregoing Decision and Order was mailed to the parties

listed below in the following manner:

First Class Mail Interagency State Mail

In the Matter of the Protest of
Guglielmo & Associates, P.L.L.C.
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