Were Harris Corporation's $5,038,488 of High-Wage Jobs Tax Credit applications timely after a 2016 amendment changed New Mexico's filing deadlines?

View original ruling (PDF)

Plain-English summary

Harris Corporation's three High-Wage Jobs Tax Credit applications were timely under the 2013 law, and the AHO ordered the full $5,038,488 of claimed credits approved. A 2016 amendment could not retroactively eliminate Harris's existing filing window, and the Department's alternative eligibility objections also failed.

Exelis, Inc. had applied in 2013 for initial qualifying periods associated with New Mexico high-wage jobs. The Department approved that application in full in September 2015.

Harris acquired Exelis in May 2015, took over its operations, retained the New Mexico jobs, and continued employing the people who occupied them. On December 22, 2016, Harris filed three applications for later qualifying periods involving the same jobs and employees:

• $1,932,653.95 for 253 periods;
• $1,821,620.40 for 216 periods; and
• $1,284,213.65 for 179 periods.

The Department denied all three solely as untimely. The total amount in controversy was $5,038,488.

The 2013 filing deadline still controlled

Under the 2013 statute, an employer could apply after a qualifying period closed but no later than 12 months after the end of the calendar year in which the final qualifying period closed. Harris's final periods closed in 2016, so that rule allowed filing through December 31, 2017.

The 2016 Legislature changed the system from permitting accumulated applications to requiring annual applications. The amendment took effect immediately when signed on October 19, 2016. The Department argued that the new deadlines barred two applications and much of the third.

The AHO rejected that reading. The 2016 act said it applied to applications “for a new high-wage economic-based job” filed on or after January 1, 2017. It did not clearly terminate applications that were already ripe and timely under the 2013 law.

New Mexico statutes presumptively operate prospectively. Under the Department's interpretation, Harris's deadline would have expired immediately when the governor signed the amendment, imposing a new and unanticipated consequence on existing claims. The AHO held that the Legislature did not intend that retrospective result.

Because Harris filed on December 22, 2016—well before the 2013-law deadline—the applications were timely.

An out-of-state headquarters did not disqualify Harris

The Department argued at the hearing that the credit was limited to New Mexico businesses and that Harris employed fewer than 500 of its approximately 23,000 employees in the state.

The statute did not impose a New Mexico-incorporation or headquarters requirement. Its stated purpose was to encourage creation of high-wage jobs in New Mexico, and its “eligible employer” definition focused on the employer's sales and other criteria.

Harris produced high-tech communications services in New Mexico for federal customers. Its New Mexico employees primarily worked on the Tethered Aerostat Radar System for U.S. Customs and Border Protection and Space Communications Network Services for NASA. The resulting services and data supported national or global agency missions.

Harris showed that more than 50% of its New Mexico-produced services were sold to persons outside New Mexico. It therefore qualified as an eligible employer under the 2013 standard, even though it was incorporated or headquartered elsewhere.

Harris also satisfied the headcount rule

The Department argued that Harris had not shown a year-to-year increase in high-wage headcount. But the 2013 statute compared the number of high-wage jobs on the last day of the qualifying period with the number on the day before the new job was created—not with the immediately preceding qualifying period.

The applications established that Harris met that statutory comparison. The record also showed that the jobs were occupied for 48 weeks, met the wage threshold, were held by New Mexico residents and eligible employees, and had been included in Exelis's previously approved application.

Result: protest GRANTED. All three Harris applications were ordered approved in full.

What this means for you

Employers with pre-amendment credit claims

Check the effective-date and application language of any amendment before applying new deadlines to older jobs or qualifying periods. An immediately effective change does not necessarily extinguish an existing filing window.

Buyers of businesses with approved job credits

An acquisition does not automatically destroy credit eligibility for retained jobs. Here Harris kept the Exelis jobs and employees, and the statute allowed acquired positions to retain eligibility.

Multistate employers

Under the 2013 law applied here, being incorporated or headquartered outside New Mexico did not bar the credit. The relevant questions included whether qualifying jobs were created in New Mexico and whether the eligible-employer sales test was met.

Employers applying the headcount test

Use the comparison specified in the governing version of the statute. For these claims, the baseline was the day before each new job was created, not the prior year's ending headcount.

Common questions

Q: How much credit did Harris claim?
A: $5,038,488 across three applications for later qualifying periods of jobs initially claimed by Exelis.

Q: Why did the Department deny the applications?
A: The denial letters treated them as untimely under the 2016 amendment. No other basis was identified in the letters.

Q: What was the filing deadline under the controlling law?
A: Because the final qualifying periods closed in 2016, the 2013 statute allowed filing through December 31, 2017. Harris filed on December 22, 2016.

Q: Why did the 2016 amendment not control?
A: Its application language did not clearly terminate existing claims, and applying it as the Department proposed would have imposed an immediate, unanticipated retrospective consequence.

Q: Did Harris have to be headquartered in New Mexico?
A: No. The statute did not impose that requirement, and Harris proved the New Mexico jobs and out-of-state-sales criteria.

Q: What services did the New Mexico employees perform?
A: They primarily worked on radar operations for U.S. Customs and Border Protection and space communications services for NASA.

Q: Did declining employee counts between applications defeat the credit?
A: No. Harris stopped claiming a job when its previously approved employee left. The statutory headcount comparison was to the day before the new job was created, and Harris satisfied it.

Citations and references

Statutes and session law:

• NMSA 1978, § 7-9G-1(B), (D), (E), (G), and (M) (2013) — credit purpose, filing deadline, headcount, acquired jobs, and definitions
• NMSA 1978, § 7-9G-1(M)(3)(a) (2013) — eligible-employer sales test
• NMSA 1978, § 7-9G-1(M)(5) (2013) — credit amount based on area population
• 2016 (2nd S.S.), ch. 3, § 8 — application of the 2016 amendments
• NMSA 1978, § 12-2A-8(A) — presumption that statutes and rules operate prospectively
• NMSA 1978, § 12-2A-18(A)(3) — construction to avoid an unconstitutional result

Cases cited:

• Team Specialty Products v. New Mexico Taxation & Revenue Department, 2005-NMCA-020 — claimant's burden to prove a tax credit
• GEA Integrated Cooling Technologies v. State Taxation & Revenue Department, 2012-NMCA-010 — when applying a new statute to antecedent events becomes retrospective
• Regents of the University of New Mexico v. New Mexico Federation of Teachers, 1998-NMSC-020 — plain-language statutory construction
• Security Escrow Corp. v. State Taxation & Revenue Department, 1988-NMCA-068 — tax benefits remain subject to reasonable construction

Source

• Listing: New Mexico Decisions & Orders
• Decision post: Harris Corporation
• Decision PDF: D&O 18-35

Original ruling text

STATE OF NEW MEXICO
ADMINISTRATIVE HEARINGS OFFICE
TAX ADMINISTRATION ACT

IN THE MATTER OF THE PROTEST OF
HARRIS CORPORATION
TO DENIAL OF HIGH WAGE JOB TAX CREDIT ISSUED UNDER
LETTER ID NOs. L1924638000, L0597968176 and L0850896176

v. D&O 18-35

NEW MEXICO TAXATION AND REVENUE DEPARTMENT

DECISION AND ORDER

A hearing in the above-captioned protest occurred on August 14, 2018 before Chris

Romero, Hearing Officer, in Santa Fe, New Mexico. Mr. Wade Jackson, Esq. (Sutin, Thayer &

Browne, P.C.) appeared representing Harris Corporation (Taxpayer) and was accompanied by Ms.

Vanessa Sanz and Ms. Lisa Leff from Harris Corporation, and Ms. Brandi Price and Mr. Vaqar

Khan from ADP, LLC. Ms. Sanz and Ms. Price testified as witnesses for Taxpayer.

Mr. David Mittle, Esq., appeared representing the Taxation and Revenue Department of

the State of New Mexico (Department). Ms. Amanda Carlisle, protest auditor, was present and

testified as the Department’s only witness. Department employees, Ms. Priscilla Castro and Ms.

Regina Ryanczak, Esq., were present for observation and training purposes only and did not

participate in the hearing.

On September 28, 2018, the Department filed Department of Taxation and Revenue’s

Proposed Findings of Fact and Conclusions of Law and Taxpayer filed Harris Corporation’s

Proposed Findings of Fact and Conclusions of Law.

Taxpayer Exhibits 1, 2, 3, 5, 7, 9, 11, 12, 13, 14, 15, 16 and Department Exhibits A, B and

C were admitted into the evidentiary record. All exhibits are 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 June 12, 2013, Exelis, Inc. executed an Application for High Wage Jobs Tax

Credit seeking a total high wage jobs tax credit in the amount of $2,773,542.83 for 313 periods

between November 7, 2011 and April 24, 2013 (“Exelis Application”). [See Taxpayer Exhibit 1;

Taxpayer Exhibit 2].

2. The Exelis Application only included the initial-qualifying periods of jobs for

which Exelis, Inc. sought the High Wage Jobs Tax Credit. It did not include subsequent qualifying

periods. [See Taxpayer Exhibit 1; Taxpayer Exhibit 2].

3. Exelis, Inc. was an entity engaging in business similar to Taxpayer, and could be

characterized as one of its competitors. [Testimony of Ms. Sanz].

4. On or about May 29, 2015, Taxpayer acquired Exelis, Inc. [Testimony of Ms. Sanz;

See Taxpayer Exhibit 14].

5. After acquiring Exelis, Inc., Taxpayer took control of its business operations. It

retained jobs created by Exelis, Inc. in New Mexico, and continued to employ the individuals

occupying those jobs. [Testimony of Ms. Sanz].

6. The Exelis Application was fully approved on September 24, 2015 under Letter ID

No. L0089204784. [Testimony of Ms. Sanz; Testimony of Ms. Price; See Taxpayer Exhibit 3].

7. By approving the Exelis Application, the Department was satisfied that Exelis, Inc.

had wholly established right and entitlement to the credit for which application was made.

8. On December 22, 2016, Taxpayer executed an Application for High Wage Jobs

Tax Credit seeking a total high wage jobs tax credit in the amount of $1,932,653.95 for 253 periods

In the Matter of Harris Corporation
Page 2 of 30
between November 8, 2012 and April 11, 2014 (“Harris Application 1”). [See Administrative File;

Taxpayer Exhibit 5].

9. Harris Application 1 contained the second qualifying periods for the same jobs and

same employees subject of the Exelis Application. [Testimony of Ms. Sanz; Testimony of Ms.

Price; See Taxpayer Exhibit 5; Taxpayer Exhibit 2].

10. On December 22, 2016, Taxpayer executed an Application for High Wage Jobs

Tax Credit seeking a total high wage jobs tax credit in the amount of $1,821,620.40 for 216 periods

between November 8, 2013 and April 25, 2015 (“Harris Application 2”). [See Administrative File;

Taxpayer Exhibit 7].

11. Harris Application 2 contained the third qualifying periods for the same jobs and

same employees subject of the Exelis Application and Harris Application 1. [Testimony of Ms.

Sanz; Testimony of Ms. Price; See Taxpayer Exhibit 5; Taxpayer Exhibit 7; Taxpayer Exhibit 2].

12. On December 22, 2016, Taxpayer executed an Application for High Wage Jobs

Tax Credit seeking a total high wage jobs tax credit in the amount of $1,284,213.65 for 179 periods

between November 10, 2014 and April 12, 2016 (“Harris Application 3”). [See Administrative

File; Taxpayer Exhibit 9].

13. Harris Application 3 contained the fourth and final qualifying periods for the same

jobs and same employees subject of the Exelis Application, Harris Application 1, and Harris

Application 2. [Testimony of Ms. Sanz; Testimony of Ms. Price; See Taxpayer Exhibit 5; Taxpayer

Exhibit 7; Taxpayer Exhibit 9; Taxpayer Exhibit 2].

14. If an eligible employee vacated a previously-approved job, Taxpayer abandoned its

claim for credit as to that specific job. Accordingly, Harris Applications 1, 2, and 3 (collectively

“Harris Applications”) did not seek credit for new employees who replaced previous employees

In the Matter of Harris Corporation
Page 3 of 30
for whom the credit was previously approved, even if the position that the new employee occupied

was still eligible for a credit. [Testimony of Ms. Price].

15. Taxpayer’s decision not to seek credit for new employees hired into previously

approved, eligible new high-wage jobs was motivated by Taxpayer’s desire to simplify evaluation

of its applications, and avoid areas of potential dispute. [Testimony of Ms. Sanz; Testimony of

Ms. Price].

16. Consequently, the total number of employees with high wage positions on the last

day of each qualifying period appeared to decline from the total established in each previous

qualifying period, although it still exceeded the total number of jobs on the day prior to the date

the new high wage economic based job was created. [Testimony of Ms. Price; See Harris

Applications; Taxpayer Exhibits 1, 2, 5, 7, 9].

17. On April 7, 2017, the Department denied the Harris Applications under Letter ID

Nos. L0597968176, L0850896176, and L1924638000. [See Administrative File; Taxpayer Exhibit

11].

18. The denials were based on the determination that the Harris Applications were

untimely. [Testimony of Ms. Carlisle; See Department Exhibits A, B and C].

19. If the Department considered any other factors in the denial of the Harris

Applications, those factors were not evident from the denial letters under Letter ID Nos.

L0597968176, L0850896176, and L1924638000 or the narratives that apparently accompanied the

denials. [See Department Exhibits A, B, and C].

20. On July 3, 2017, Taxpayer executed a protest of the denial of its applications. The

protest was received in the Department’s protest office on July 12, 2017 and asserted that the

Harris Applications were timely filed contrary to the Department’s conclusion. [See

In the Matter of Harris Corporation
Page 4 of 30
Administrative File].

21. On July 27, 2017, the Department acknowledged the Taxpayer’s protest under

Letter ID No. L1345613104. [See Administrative File].

22. On September 11, 2017, the Department filed a Hearing Request in which it

requested a scheduling hearing for the purpose of setting a date for a hearing on the merits of

Taxpayer’s protest and establishing associated prehearing deadlines. [See Administrative File].

23. The amount in controversy represented the sum of the denied credits in the amount

of $5,038,488.00. [See Administrative File].

24. On September 11, 2017, the Administrative Hearings Office entered a Notice of

Telephonic Scheduling Conference that set a telephonic scheduling hearing for October 6, 2017.

[See Administrative File].

25. On October 6, 2017, a telephonic scheduling hearing occurred for which Taxpayer

did not appear. The hearing occurred within 90 days of Taxpayer’s protest being acknowledged

by the Department. [See Administrative File; Record of Hearing 10/6/2017].

26. On October 6, 2017, the Administrative Hearings Office entered a Scheduling

Order and Notice of Administrative Hearing, which in addition to establishing various prehearing

deadlines, set a hearing on the merits of Taxpayer’s protest for April 9, 2018. [See Administrative

File].

27. On March 9, 2018, Taxpayer filed Harris Corporation’s Motion for Partial

Summary Judgment. [See Administrative File].

28. On March 15, 2018, Taxpayer filed Taxpayer’s Motion to Convert hearing on the

Merits into Summary Judgment Hearing and to Hold Hearing on the Merits in Abeyance. [See

Administrative File].

In the Matter of Harris Corporation
Page 5 of 30

29. On March 21, 2018, the Department filed Department’s Response to Taxpayers

Motion to Convert Hearing on the Merits into Summary Judgment Hearing and to Hold Hearing

on the Merits in Abeyance. [See Administrative File].

30. On March 21, 2018, the Department filed Department’s Response to Motion for

Partial Summary Judgment. [See Administrative File].

31. On March 26, 2018, the parties filed a Joint Prehearing Statement. [See

Administrative File].

32. On March 27, 2018, the Hearing Officer entered an Order Denying Taxpayer’s

Motion to Convert Hearing on the Merits into Summary Judgment Hearing and to Hold Hearing

on the Merits in Abeyance. [See Administrative File].

33. On March 29, 2018, Taxpayer filed taxpayer’s Motion to Continue Hearing stating

that counsel recently entered his appearance on March 9, 2018 and required additional time to

prepare. [See Administrative File].

34. On March 30, 2018, the Department filed Department’s Response to Taxpayer

Motion to Continue Hearing. The Department did not oppose the request for a continuance. [See

Administrative File].

35. On April 3, 2018, the Administrative Hearings Office entered a Continuance Order

and Amended Notice of Administrative Hearing. [See Administrative File].

36. On July 10, 2018, the Administrative Hearings Office entered an Order Denying

Harris Corporation’s Motion for Partial Summary Judgment and Motion for Leave to File Motion

for Partial Summary Judgment. [See Administrative File].

37. On August 2, 2018, the parties filed a Joint Prehearing Statement. [See

Administrative File].

In the Matter of Harris Corporation
Page 6 of 30

38. Ms. Vanessa Sanz is the senior tax manager for Taxpayer and has served in that

capacity for approximately 7 years. [Testimony of Ms. Sanz].

39. Taxpayer is engaged in the business of manufacturing high-tech communications

systems for governmental agencies, including the U.S. Department of Defense, National

Aeronautics and Space Administration (NASA), U.S. Customs and Border Protection, and the

Federal Aviation Administration (FAA). [Testimony of Ms. Sanz; See e.g. Taxpayer Exhibits 15

and 16].

40. Taxpayer employs approximately 23,000 employees in the United States and

abroad, of which approximately 9,000 are engineers and scientists. [Testimony of Ms. Sanz].

41. Taxpayer’s corporate headquarters is in Melbourne, Florida where it employs

approximately 6,000 of its 23,000-employee workforce. [Testimony of Ms. Sanz].

42. Taxpayer employs less than 500 individuals in New Mexico. [Testimony of Ms.

Sanz].

43. Taxpayer operates in nearly every state and internationally, and generates

approximately $8 billion in revenue per year. [Testimony of Ms. Sanz].

44. Gross revenue generated from activities in New Mexico is less than two percent of

Taxpayer’s total global revenue. [Testimony of Ms. Sanz].

45. Invoices for Taxpayer’s services, and payments for those services are generated in

Virginia or Florida, and remitted to Virginia or Florida. [Testimony of Ms. Sanz].

46. In New Mexico, Taxpayer operates the Tethered Aerostat Radar System (TARS)

which is used for a variety of purposes, including detection of activities in areas where smuggling

may be prevalent along the United States-Mexico border. Taxpayer’s primary client for the TARS

program is U.S. Customs and Border Protection. [Testimony of Ms. Sanz; See Taxpayer Exhibit

In the Matter of Harris Corporation
Page 7 of 30
15].

47. In New Mexico, Taxpayer operates the Space Communications Network Services

(SCNS) which provides communications for a variety of earth-orbiting craft and equipment,

including the International Space Station and Hubble Space Telescope. Taxpayer’s primary client

for the SCNS program is NASA. [Testimony of Ms. Sanz; See Taxpayer Exhibit 16].

48. NASA and U.S. Customs and Border Protection operate on a national, if not a

global level. The product of the services of TARS and SCNS is transmitted to the client-agency

for use in their respective national or global missions, although data generated by the TARS

program may also be transmitted back to law enforcement agencies in New Mexico for local border

protection operations. [Testimony of Ms. Sanz].

49. Data generated by the SCNS program would similarly be transmitted to NASA

which might use it anywhere it had a presence, including orbiting space craft. [Testimony of Ms.

Sanz].

50. Taxpayer’s employees in New Mexico, subject of the Exelis Application as well as

the Harris Applications, concentrated their work primarily on TARS and SCNS. [Testimony of

Ms. Sanz].

51. All jobs subject of the Harris Applications were occupied for 48 weeks out of each

qualifying period. [See Taxpayer Exhibits 5, 7, and 9; Testimony of Ms. Price].

52. All jobs subject of the Harris Applications satisfied the minimum wages required

to be eligible for the credit. [See Taxpayer Exhibits 5, 7, and 9; Testimony of Ms. Price].

53. All jobs subject of the Harris Applications were occupied by New Mexico residents.

[See Taxpayer Exhibits 5, 7, and 9; Testimony of Ms. Price].

54. All jobs subject of the Harris Applications were occupied by eligible employees.

In the Matter of Harris Corporation
Page 8 of 30
[See Taxpayer Exhibits 5, 7, and 9; Testimony of Ms. Price].

DISCUSSION

A preliminary issue in this protest concerns the choice of law governing the Harris

Applications, which will specifically determine whether they were timely submitted, or untimely

and therefore barred. The dispute in controlling law arises by virtue of an amendment to the High-

Wage Jobs Tax Credit Act in 2016 which modified the period of time and deadlines for an

employer to submit an application for a high-wage jobs tax credit.

Whether the protest is controlled by the 2013 or 2016 version of the High-Wage Jobs Tax
Credit Act.

The solitary reason specified for the denial of the Harris Applications was their alleged

untimeliness. See Department Exhibit A, B, and C. If additional factors contributed to the denial

of the Harris Applications, the influence of those factors was undetermined as of the date the

denials occurred.

With regard for the issue of timeliness, the Department reasoned that a 2016 amendment

to the High-Wage Jobs Tax Credit Act had established new deadlines for submission of the

applications, which Taxpayer failed to satisfy. Consequently, the 2016 amendment to the High-

Wage Jobs Tax Credit Act would preclude the consideration of two of the three Harris

Applications, and a significant portion of the third, if it applied.

In contrast, the Harris Applications would be timely if the 2013 version of the High-Wage

Jobs Tax Credit Act continued to govern. Therefore, it is critical to determine which version of the

Act controls.

Under the 2013 version of the High-Wage Jobs Tax Credit Act (hereinafter “2013 Act”),

an applicant was required to “apply for approval of the credit after the close of the qualifying

In the Matter of Harris Corporation
Page 9 of 30
period, but not later than twelve months following the end of the calendar year in which the

taxpayer’s final qualifying period close[d].” See NMSA 1978, Section 7-9G-1 D (2013).

Accordingly, a taxpayer could submit applications for its initial qualifying period in

addition to its three subsequent periods no later than one year from the date the final period closed.

In this protest, the initial periods closed in 2012 and 2013. They were presented in the Exelis

Application submitted on or about June 12, 2013, and eventually approved on September 24, 2015.

Credits for the remaining unclaimed periods could have thereafter been claimed annually,

or in bulk so long as they were claimed no later than one year from the end of the calendar year in

which the final period closed. The evidence in this protest established that the final periods closed

in 2016, therefore permitting Taxpayer through December 31, 2017 to apply for all remaining and

eligible credits, if the 2013 Act applies.

However, on September 30, 2016, the 52nd Legislature of the State of New Mexico

convened for the second special session of 2016. One purpose of the second special session was

to address concerns with the status of the state budget. 1 On that very same day, Sen. John Arthur

Smith and Sen. Carlos R. Cisneros introduced Senate Bill 6 (hereinafter “SB 6”) which proposed

an amendment to the 2013 Act. By October 6, 2016 2, it passed both chambers of the legislature

and was sent to the governor for final action. The governor signed SB 6 on October 19, 2016.

Because it contained an emergency clause 3, SB 6 became effective immediately.

Consequently, within three weeks of its introduction, SB 6 was law. One of its changes

1
See Proclamation, Second Special Session 2016, available at
http://www.sos.state.nm.us/uploads/files/2016%20Special%20Session%20Proclamation.pdf
2
https://www.nmlegis.gov/Legislation/Legislation?Chamber=S&LegType=B&LegNo=6&year=16s
3
Section 10 of SB 6 stated “It is necessary for the public peace, health and safety that this act take effect
immediately.”

In the Matter of Harris Corporation
Page 10 of 30
would require taxpayers to submit credit applications on an annual basis, rather than permitting an

application in bulk at the end of four years of accumulated qualifying periods. See NMSA 1978,

Section 7-9G-1 D (2016). The parties do not dispute that the intended outcome of this specific

amendment was to enable the State to more accurately forecast and anticipate the fiscal impact of

the credit to the State budget on an annual basis.

The 2016 Act presently requires an annual application presenting all qualifying periods

that closed during the calendar year for which the application is made, and provides that any

qualifying period that did not close in the calendar year for which the application is made must be

denied. The deadline for submitting an application for qualifying periods closing in a calendar year

is the last day of the following calendar year. Accordingly, the deadline for submitting an

application for qualifying periods closing at any time in 2015 would be the last day of 2016.

Likewise, the deadline for submitting an application for qualifying periods closing at any time in

2016 would be the last day of 2017, and so on. See NMSA 1978, Section 7-9G-1 D (2016).

The quandary is that Taxpayer, under the 2013 Act, was not required to file the Harris

Applications until the end of the calendar year following the calendar year in which its final

qualifying period closed. Under the facts of this protest, that deadline would have been December

31, 2017 with respect to all of the Harris Applications. Therefore, the Department asserts that the

2016 Act foreclosed consideration of applications that may have been proper, but not submitted

by the end of 2016. See Department of Taxation and Revenue’s Proposed Findings of Fact and

Conclusions of Law, Proposed Finding Nos. 6 - 7. Consequently, the Department seems to argue

that Taxpayer’s ability to submit its applications perished with the stroke of the governor’s pen,

except for those employees whose final qualifying period closed in 2016, but even those portions

of Harris Application 3 were denied.

In the Matter of Harris Corporation
Page 11 of 30
In response, Taxpayer asserts that the Harris Applications are timely because Section 8 of

SB 6 applies only to new applications addressing new jobs, or in other words, new jobs in which

the initial qualifying period closed on or after January 1, 2017. Section 6 addressing the application

of SB 6 provides that the amendment should “apply to applications for a high-wage jobs tax credit

for a new high-wage economic-based job filed with the taxation and revenue department on or

after January 1, 2017.” See 2016 (2nd S.S.), ch. 3, sec. 8.

The starting point for resolving this dispute resides in the plain wording of the law. It is a

canon of statutory construction in New Mexico to adhere to the plain wording of a statute except

if there is ambiguity, error, absurdity, or a conflict among statutory provisions. See Regents of the

Univ. of N.M. v. N.M. Fed’n of Teachers, 1998-NMSC-020, ¶28, 125 N.M. 401, 962 P.2d 1236. In

Wood v. State Educ. Ret. Bd., 2011-NMCA-020, ¶12, 149 N.M. 455, 250 P.3d 881 (internal

quotations and citations omitted), the New Mexico Court of Appeals stated:

the guiding principle in statutory construction requires that we look
to the wording of the statute and attempt to apply the plain meaning
rule, recognizing that when a statute contains language which is
clear and unambiguous, we must give effect to that language and
refrain from further statutory interpretation.

Extra words should not be read into a statute if the statute is plain on its face, especially if

it makes sense as written. See Johnson v. N.M. Oil Conservation Comm’n, 1999-NMSC-021, ¶27,

127 N.M. 120, 978 P.2d 327; See also Amoco Prod. Co. v. N.M. Taxation & Revenue Dep’t, 1994-

NMCA-086, ¶8 & ¶14, 118 N.M. 72, 878 P.2d 1021.

Only if the plain language interpretation would lead to an absurd result not in accord with

the legislative intent and purpose is it necessary to look beyond the plain meaning of the statute.

See Bishop v. Evangelical Good Samaritan Soc’y, 2009-NMSC-036, ¶11, 146 N.M. 473, 212 P.3d

361. Because this case also involves a tax credit, which is an act of legislative grace, the language

In the Matter of Harris Corporation
Page 12 of 30
of the credit statute must be narrowly construed. See Team Specialty Prods, 2005-NMCA-020, ¶9.

Adhering to the foregoing, the Hearing Officer finds that the Legislature’s intentions were

clearly embodied in the language used in the 2016 enactment when it expressed the intention that the

2016 Act “apply to applications for a high-wage jobs tax credit for a new high-wage economic-

based job filed with the taxation and revenue department on or after January 1, 2017.” The effect

of this language was to apply the 2016 Act prospectively to new jobs which would be seeking a credit

for their initial qualifying period on or after January 1, 2017. It did not terminate a taxpayer’s

opportunity to submit applications which were ripe and timely under the 2013 Act. Had the

Legislature intended that consequence, it would have stated so in clear and unambiguous terms, but

it did not.

Furthermore, accepting the Department’s interpretation of the 2016 Act with respect to its

effect on the Harris Applications would require that the Hearing Officer disregard the emphasized

portion of the statute as surplusage or superfluous contrary to the rules of statutory construction.

See Katz v. N.M. Dep’t of Human Servs., Income Support Div., 1981-NMSC-012, ¶18, 95 N.M.

530, 624 P.2d 39 (a statute must be construed so that no part of the statute is rendered surplusage

or superfluous).

If the Legislature intended that the 2016 Act apply to all applications, then it would not

have inserted the descriptive phrase “for a new high-wage economic-based job,” and it could have

achieved the result the Department suggests by simply stating that the 2016 Act should “apply to

applications for a high-wage jobs tax credit filed with the taxation and revenue department on or

after January 1, 2017.” This language would have mimicked its approach to the application of the

2013 Act. See e.g. 2013, ch. 160, sec. 14(e).

The Department places considerable reliance on Decision and Order 18-20 (“D&O 18-20”)

In the Matter of Harris Corporation
Page 13 of 30
addressing the protest of Raytheon Company. However, the facts relevant to Raytheon are wholly

distinguishable because that matter involved a conflict between the application of the 2013 Act and

its predecessor. Coincidentally, the Department acknowledged the protest in that matter the very same

day that the Legislature convened for the second special session that would eventually produce the

2016 Act at issue in this protest. See D&O 18-20, Finding of Fact No. 6. Accordingly, all material

facts in Raytheon were firmly established well before the Legislature enacted the 2016 Act.

Despite that significant distinction, the Department partly quoted D&O 18-20 in reference to

the application of the 2016 Act, stating:

In this regard, 2016 SB 6 Section 8 “notified the public that it would
apply to claims made after its effective date, thereby providing an
opportunity for potential claimants, including [Harris Corporation], to
submit applications before that date, in order for them to be evaluated
under the prior law. This observation is significant because had there
been genuine concern for the effect of the [2016 enactment, Harris
Corporation] had ample opportunity to submit its Applications under
the previous version of the Act, but did not do so. In the Matter of the
Protest of Raytheon, 2018 WL 3434602, at *9.

See Department of Taxation and Revenue’s Proposed Findings of Fact
and Conclusions of Law, Finding of Fact No. 11.

The undersigned Hearing Officer administratively notices that he also presided in the matter

of Raytheon and drafted the language upon which the Department’s quotation is based. That

paragraph was specifically in reference to the 2013 Act, as applied to the unique facts of that protest,

not the 2016 Act, and it stated exactly as follows at page 14 of D&O 18-20:

In this regard, 2013 N.M. Ch. 160, Sec. 14 notified the public that it
would apply to claims made after its effective date, thereby providing
an opportunity for potential claimants, including Taxpayer, to submit
applications before that date, in order for them to be evaluated under
the prior law. This observation is significant because had there been
genuine concern for the effect of the 2013 enactment, Taxpayer had
ample opportunity to submit its Applications under the previous
version of the Act, but did not do so.

In the Matter of Harris Corporation
Page 14 of 30
The Hearing Officer would not generally call out the use of a quotation in this manner, if the

circumstances could be perceived as analogous. However, the 2016 Act took effect immediately upon

the governor’s approval, while the 2013 Act was signed on April 4, 2013 4, but did not take effect until

June 13, 2013, which provided the window of notice and opportunity to which the quotation in

Raytheon spoke. In contrast, the 2016 Act took immediate effect, less than three weeks following the

commencement of the special legislative session, and it also employed different terms in reference to

its intended application. The Department’s reliance on the quotation in its modified form is clearly

misplaced.

The facts in Raytheon are distinguishable for other reasons as well. First, the 2013 Act was

not raised as a bar to preclude the taxpayer’s application for the credit, which is the primary

consequence of the 2016 Act, as asserted by the Department in this protest. Instead, the 2013 Act

in Raytheon amended various factors effecting a taxpayer’s eligibility for the credit, but it did not

impose them retrospectively. Second, the 2013 Act in Raytheon preserved a taxpayer’s ability to

submit an application under the prior version of the Act, before its amendments became effective.

In contrast to Raytheon, the consequence of the 2016 Act, as suggested by the Department, should

fundamentally terminate Taxpayer’s applications by moving the deadline back in time, so that

compliance becomes an impossibility, a result that clearly resembles an improper retrospective

application of the law that the Legislature did not intend.

The Legislature intends that its enactments be applied prospectively only, unless it

expressly states otherwise. See NMSA 1978, Section 12-2A-8A (“A statute or rule operates

prospectively only unless the statute or rule expressly provides otherwise or its context requires

4
https://www.nmlegis.gov/Legislation/Legislation?Chamber=H&LegType=B&LegNo=641&year=13

In the Matter of Harris Corporation
Page 15 of 30
that it operate retrospectively.”) There is no clear statement of intent, nor indication from the

context of the 2016 Act that the Legislature intended it to apply retrospectively.

The next question requires closer examination of the context of the 2016 Act. The parties

do not dispute that the primary Legislative concern underlying the 2016 Act was elimination of

the “sticker shock” that resulted from a taxpayer presenting applications for several years of

accumulated qualifying periods. In other words, there was no perceived desire or intent to

legislatively terminate the applications of otherwise eligible employers who may have had a

legitimate claim to a credit prior to the moment the governor signed the 2016 Act.

In fact, construing the 2016 Act in the manner the Department suggests could actually raise

constitutional questions because it could be perceived as a local or special law prohibited by the

New Mexico Constitution. See N.M. Const. Art. IV, Sec. 24; See Thompson v. McKinley Cty.,

1991-NMSC-076, ¶5, 112 N.M. 425, 816 P.2d 494 (“[a] special law is generally defined as

legislation written in terms which [make] it applicable only to named individuals or determinative

situations.”). In this protest, the application of the 2016 Act to Taxpayer could be perceived as a

local or special law because by virtue of its application to these facts, it arguably singles out and

terminates the Harris Applications and others that might be similarly situated.

However, “[i]t is, of course, a well-established principle of statutory construction that

statutes should be construed, if possible, to avoid constitutional questions.” See Lovelace Med.

Ctr. v. Mendez, 111 N.M. 336, 340, 805 P.2d 603, 607 (1991); See also NMSA 1978, Section 12-

2A-18 (A) (3) (a statute is construed, if possible, to avoid an unconstitutional result.); Bradbury &

Stamm Constr. Co. v. Bureau of Revenue, 1962-NMSC-078, ¶8, 70 N.M. 226, 372 P.2d 808 (every

presumption is to be indulged in favor of the validity and regularity of the legislative act).

Accordingly, the Hearing Officer will abstain from any inferences that the Legislature

In the Matter of Harris Corporation
Page 16 of 30
intended a consequence that might potentially offend the constitution. Instead, the Legislature’s

intentions were to encourage employers to create and fill jobs in New Mexico while

simultaneously providing a mechanism for the State to better monitor and manage the fiscal

consequences of the credit. Terminating the claims of a select class of employers, in which

Taxpayer was a member, would not have accomplished that purpose. In conclusion, nothing within

the context of the 2016 Act suggests that the Legislature intended retrospectivity.

The Hearing Officer acknowledges that “[a]lthough the presumption of prospectivity

appears straightforward, confusion often arises as to what retroactivity means in particular

contexts.” See Gadsden Fed’n of Teachers v. Bd. of Educ., 1996-NMCA-069, ¶14, 122 N.M. 98,

920 P.2d 1052. A statute is considered retroactive if it impairs vested rights or requires new

obligations, imposes new duties, or affixes new disabilities to past transactions. See GEA

Integrated Cooling Tech. v. State Taxation & Revenue Dep’t, 2012-NMCA-010, ¶18, 268 P.3d 48.

“[A] statute does not operate retroactively just because it is applied to facts and conditions existing

on its effective date, even though the condition results from events that occurred prior to its

enactment.” Id. citing State v. Morales, 2010-NMSC-026, ¶9, 148 N.M. 305, 236 P.3d 24.

In GEA, the New Mexico Court of Appeals considered whether a 2007 amendment to the

statute establishing the rate at which tax penalty was to be calculated and assessed should be

applied to liabilities arising prior to its effective date, but assessed subsequent to its effective date,

and whether such application gave the amendment an improper retroactive effect. GEA

acknowledged that the Supreme Court’s holding in Crane v. Cox, 1913-NMSC-089, ¶6, 18 N.M.

377, 137 P. 589 was dispositive, having addressed an analogous issue in which it considered

whether there was an impermissible retrospective application of a new law providing for collection

of delinquent taxes outstanding as of the enactment of that statue.

In the Matter of Harris Corporation
Page 17 of 30
In its discussion, GEA recognized the long-standing presumption against the retroactive

application of a statute, but nevertheless held that the application of a new law to pre-existing facts

did not automatically give the statute retroactive effect. Relying on the reasoning in Crane, it

agreed that “[a] statute does not operate retroactively from the mere fact that it relates to antecedent

events. A retrospective law [is] intended to affect transactions which occurred . . . before it became

operative . . . and which ascribes to them affects not inherent in their nature in view of the law in

force at the time of their occurrence.” See GEA, 2012-NMCA-010, ¶20 quoting Crane, 1913-

NMSC-089, ¶6.

GEA summarized the holding in Crane, stating “the new act . . . did not operate

retroactively because the operation of the statute did not affect any right the taxpayer possessed

under prior law, did not change the taxpayer’s status, and did not impose a consequence that was

not already anticipated.” See GEA, 2012-NMCA-010, ¶20.

In contrast to GEA and Crane, the 2016 Act, if interpreted as the Department suggests

imposed a new consequence that could not have been anticipated because the 2016 Act took

immediate effect. The consequence to Taxpayer was that the deadline to submit the Harris

Applications expired before the ink forming the governor’s signature dried. See Department of

Taxation and Revenue’s Proposed Findings of Fact and Conclusions of Law, Proposed Finding

Nos. 6 - 7.

From Taxpayer’s vantage point, the Exelis Application had been approved in full under the

2013 Act, and Taxpayer, having acquired Exelis, Inc., assumed and occupied the same status that

Exelis, Inc. occupied at the time the Exelis Application was submitted. After the acquisition, and

during all times relevant to the protest, Taxpayer retained Exelis, Inc. employees in the very same

positions subject of the Exelis Application, and when previously-approved employees left

In the Matter of Harris Corporation
Page 18 of 30
previously approved high-wage jobs, Taxpayer simply abandoned any claim to the position even

if the position continued to be eligible for the high-wage jobs tax credit. Without substantial change

in circumstances, it was reasonable for Taxpayer under these facts to have an expectation that its

applications would be accepted, evaluated on their merits, and most likely approved, in reliance

on the Department’s previous conduct.

Application of the 2016 Act would eviscerate Taxpayer’s status under the 2013 Act and

impose consequences that Taxpayer could not reasonably anticipate. Under these circumstances,

the presumption of prospectivity weighs heavily in Taxpayer’s favor, and the Department’s

arguments in contradiction of that presumption fail to persuade. The 2013 Act governs the Harris

Applications.

Burden of Proof.

Having considered which version of the Act should apply to the protest at hand, it is now

appropriate to discuss the burden of proof. Although the current protest does not arise from an

assessment, but rather from the denial of the Harris Applications, Taxpayer bears the burden of

establishing entitlement to the credit central to its protest. The New Mexico Court of Appeals has

found that tax credits are legislative grants of grace that must be narrowly interpreted and construed

against a taxpayer. See Team Specialty Prods. v. N.M. Taxation & Revenue Dep’t, 2005-NMCA-

020, ¶9, 137 N.M. 50, 107 P.3d 4. Accordingly, Taxpayer carries the burden of proving that it is

entitled to the claimed credit.

Although, pursuant to Team Specialty, a credit must be narrowly interpreted and construed

against a taxpayer, the credit must also be construed in a reasonable manner consistent with

legislative language. See Sec. Escrow Corp. v. State Taxation & Revenue Dep’t, 1988-NMCA-

068, ¶9, 107 N.M. 540, 760 P.2d 1306 (although construed narrowly against a taxpayer, deductions

In the Matter of Harris Corporation
Page 19 of 30
and exemptions—similar to credits—are still to be construed in a reasonable manner).

Basis for Denial of Harris Applications.

Department Exhibits A, B, and C, state rather clearly that the sole basis for the denial of the

Harris Applications is the fact that the Department perceived them as untimely. There is no indication

that the Department based the denial on any other factors. That is not to say that other factors were

not considered, but if they were, there is no indication of what they were or how they influenced the

Department’s final action. The only evidence on the record indicates that as of the time of the denials,

timing of the Harris Applications, and nothing else, was dispositive.

At the hearing, the Department asserted various reasons why Taxpayer should nevertheless

fail to qualify for the credit. However, there was no reliable evidence to establish that those reasons

actually contributed to the Department’s denial, at the time of the denial. See Department Exhibits A,

B and C.

The Department previously approved the Exelis Application which contained all of the

employees that were subsequently included in the Harris Applications and the Department did not

dispute, for example, that all jobs subject of the Harris Applications: (1) were occupied for 48 weeks

out of each qualifying period; (2) that all jobs subject of the Harris Applications satisfied the

minimum wages required to be eligible for the credit; (3) that all jobs subject of the Harris

Applications were occupied by New Mexico residents; and (4) that all jobs subject of the Harris

Applications were occupied by eligible employees.

The issues that the Department did dispute in reference to the merits of the Harris Applications

are summarized as follows: (1) whether Taxpayer is an eligible employer by virtue of its locale and

its sales; and (2) whether Taxpayer satisfied the headcount requirement. These issues were not

specifically noted in any of the denials of the Harris Applications. See Department Exhibits A, B, and

In the Matter of Harris Corporation
Page 20 of 30
C. The Hearing Officer will nevertheless address them below.

Whether Taxpayer is a “New Mexico” Business.

The most significant development from the time the Department approved the Exelis

Application to the time it denied the Harris Applications was Taxpayer’s acquisition of Exelis, Inc.

However, that alone would not preclude Taxpayer from qualifying for the credit so long as the

acquired positions retained their eligibility. See NMSA 1978, Section 7-9G-1 G (2013).

However, the Department argued that the credit conferred by the 2013 Act, as well as the

2016 Act for that matter, was limited to New Mexico businesses. In other words, an out-of-state

entity creating high-wage economic based jobs in New Mexico is not eligible for the credit because

the Department construes NMSA 1978, Section 7-9G-1 B as limiting eligibility to urban and rural

businesses in New Mexico. The Department claimed Taxpayer was not a New Mexico business

because it is based in another state and employees less than 500 of its 23,000-employee workforce

in New Mexico.

The Department relies on NMSA 1978, Section 7-9G-1 B which states that “[t]he purpose

of the high-wage jobs tax credit is to provide an incentive for urban and rural businesses to create

and fill new high-wage economic-based jobs in New Mexico.” See NMSA 1978, Section 7-9G-1

B (2013) (Emphasis Added). The Department claims the phrase “urban and rural” describes

locations within New Mexico where eligible businesses must be established. In support of its

construction, the Department argued “[t]he words ‘urban and rural businesses’ are very important.

If one were to eliminate them, the statute reduces to[:] ‘to provide an incentive […] to create and

fill new high-wage economic-based jobs in New Mexico.’” See Department of Taxation and

Revenue’s Proposed Findings of Fact and Conclusions of Law, Finding of Fact No. 29.

The Department concludes:

In the Matter of Harris Corporation
Page 21 of 30
Given that no words in a statute are surplusage, the words must be
included and the legislative intent becomes clear - “to provide an
incentive for [New Mexico] urban and rural businesses to create and
fill new high-wage economic-based jobs in New Mexico.” (Yes, it
could be urban and rural business located anywhere, but that would
result in an absurd result.) T.W.I.W., Inc. v. Rhudy, 1981-NMSC-
062, ¶14, 96 N.M. 354, 630 P.2d 753 (Citing the rule of statutory
construction that no part of a statute should be construed so that it is
rendered surplusage.) (citation omitted).

See Department of Taxation and Revenue’s Proposed Findings of Fact
and Conclusions of Law, Finding of Fact No. 30 (brackets and
parentheticals included in original).

The Department’s perception of Section 7-9G-1 B is erroneous. It does not limit eligibility

to New Mexico businesses. Had there been a genuine intention to limit the credit to New Mexico

businesses, at the exclusion of all others, the Legislature would have specifically said so in its

definition of “eligible employer.” See NMSA 1978, Section 7-9G-1 M (3).

Instead, the Legislature’s reference to “urban and rural” areas simply conveyed its

objective to encourage business to create and fill new high-wage jobs in those areas, as

demonstrated by the fact that it established the amounts of available credit by reference to area

population. See NMSA 1978, Section 7-9G-1 M (5) (2013).

Interpreting the phrase “urban and rural” in this manner does not render the term superfluous

or surplusage as submitted by the Department. In contrast, the Department’s position literally inserts

words into an otherwise clear and unambiguous statute that the Legislature did not see fit to insert.

See Department of Taxation and Revenue’s Proposed Findings of Fact and Conclusions of Law,

Finding of Fact No. 30; See Johnson, 1999-NMSC-021, ¶27; See also Amoco, 1994-NMCA-086, ¶8

& ¶14.

Moreover, the Department’s interpretation fails to conform to ordinary rules of grammatical

construction regarding prepositional phrases. “According to standard rules of grammar,

In the Matter of Harris Corporation
Page 22 of 30
prepositional phrases modify those nouns or verbs closest to the phrase.” See e.g. In re the disp. of: A

Brown Ford Pickup Truck, NO. 1403, 1983 Ohio App. LEXIS 13586, at *5 (Ct. App. July 7, 1983);

See United States v. Nader, 542 F.3d 713, 717-18 (9th Cir. 2008) (“A prepositional phrase with an

adverbial or adjectival function should be as close as possible to the word it modifies to avoid

awkwardness, ambiguity, or unintended meanings.”) (citing William Strunk, Jr. & E. B. White, The

Elements of Style 30 (4th ed. 2000)).

In this scenario, the prepositional phrase (“in New Mexico”) modifies the phrase closest to

it (“new high-wage economic-based jobs”). See also Envtl. Improvement Div. of N.M. Health &

Env’t Dep’t v. Bloomfield Irrigation Dist., 1989-NMCA-049, ¶11-14, 108 N.M. 691, 778 P.2d 438

(interpreting a regulation according to the clause that the prepositional phrase modified). See also

State ex rel. Sego v. Kirkpatrick, 1974-NMSC-059, 86 N.M. 359, 524 P.2d 975 (holding that

striking a prepositional phrase from a bill amounted to an alteration to its meaning and was not an

appropriate exercise of the veto power to disapprove or to destroy an item).

In addition to the basic grammatical analysis, the Department’s construction doesn’t

accurately reflect the Legislature’s intent behind establishing the credit, which was to maximize

high-wage employment opportunities for New Mexico residents in urban and rural areas by

providing an incentive for businesses to create those opportunities. Instead, the Department’s

interpretation dis-incentivizes out-of-state businesses, similarly situated to Taxpayer, which have

the resources and desire to create high-wage jobs in New Mexico and employ its residents in those

jobs. Although the Department minimizes the total number of employees Taxpayer retains in New

Mexico by comparison to its global workforce, Taxpayer nevertheless employs hundreds of New

Mexico residents, which even if less than 500 total, represents a significant figure of employed

New Mexicans. Considering the foregoing, the Department’s interpretation produces an absurd

In the Matter of Harris Corporation
Page 23 of 30
result in direct opposition to the stated purpose of the statute. See In the Matter of the Protest of

Old Dominion Freight Lines, Administrative Hearings Office, D&O 18-35 (non-precedential).

The Hearing Officer is not persuaded that Taxpayer should be disqualified from eligibility

under Section 7-9G-1 B because it is not based in New Mexico, and therefore not a New Mexico

business. 5

Whether Taxpayer was an Eligible Employer by virtue of sales or other eligibility.

The Department asserted that Taxpayer failed to prove that it was an “eligible employer”

under NMSA 1978, Section 7-9G-1. Under the 2013 Act, an “eligible employer” means an

employer that “made more than fifty percent of its sales of goods or services produced in New

Mexico to persons outside New Mexico during the applicable qualifying period[.]” See NMSA

1978, Section 7-9G-1 M (3) (a) (2013). (Emphasis Added).

The 2016 Act revised the definition of “eligible employer” to require that “more than fifty

percent of its goods produced in New Mexico or non-retail services performed in New Mexico”

be sold and delivered to persons outside New Mexico, “provided that the fifty percent of those

goods or services is measured by the eligible employer’s gross receipts.” See NMSA 1978, Section

7-9G-1 Q (6) (a) (2016). Although the 2013 Act applies, Taxpayer nevertheless satisfied both

standards.

Taxpayer established that its gross revenue generated through its global operations

exceeded $8 billion. Taxpayer presented evidence to establish that less than two percent of that

5
The record does not indicate where Exelis, Inc. was headquartered. However, administrative notice may be taken
that it was incorporated in the State of Indiana and conducted business in New Mexico as a Foreign Profit
Corporation, and its application was approved. See Business ID No. 4510607 at
https://portal.sos.state.nm.us/BFS/online/CorporationBusinessSearch/CorporationBusinessInformation. Taxpayer is
incorporated in the State of Delaware and similarly conducts business in New Mexico as a Foreign Profit
Corporation. See Business ID No. 1636877.

In the Matter of Harris Corporation
Page 24 of 30
revenue is attributed to its activities in New Mexico. Although two percent may seem insignificant

on its face, in this protest it represents approximately $160 million of New Mexico-generated gross

revenue from services produced in New Mexico, nearly all of which all were sold and delivered to

entities outside New Mexico. Taxpayer is an eligible employer under the 2013 Act and would

similarly qualify under the 2016 Act, if it applied.

The Hearing Officer will not consider Taxpayer’s alternate argument that it was eligible

for development training program assistance pursuant to NMSA 1978, Section 21-19-7. None of

the applications asserted eligibility in reliance on that factor. In fact, each application responded

“No” in reference to the inquiry of whether the “Employer was eligible for JTIP assistance [.]” See

Taxpayer Exhibits 5, 7, and 9.

Headcount.

The Department argued that Taxpayer lacked evidence to establish that its headcount was

increasing from year-to-year. However, the Department reads requirements into the statute which

are not there. The 2013 Act provides that “[a] new high-wage economic-based job shall not be

eligible for a credit pursuant to this section unless the eligible employer’s total number of

employees with high-wage economic-based jobs on the last day of the qualifying period at the

location at which the job is performed or based is at least one more than the number on the day

prior to the date the new high-wage economic-based job was created.” See NMSA 1978, Section

7-9G-1 E (2013).

Accordingly, the statute measures headcount against the number of jobs “on the day prior

to the date the new high-wage economic-based job was created.” It does not measure headcount

against the number of jobs in the immediately-adjacent period. Taxpayer Exhibits 5, 7, and 9

establish that Taxpayer satisfied this requirement.

In the Matter of Harris Corporation
Page 25 of 30
The 2016 Act would amend this requirement to require that “[a] new high-wage economic-

based job shall not be eligible for a credit pursuant to this section for a consecutive qualifying

period unless the total number of threshold jobs at a location at which the job is performed or based

on the last day of that qualifying period is greater than or equal to the number of threshold jobs at

that same location on the last day of the initial qualifying period for the new high-wage economic-

based job.” However, this amendment does not apply to Taxpayer under the 2013 Act. In fact, the

Department’s argument on this issue appears to rely solely on the 2013 Act, not the 2016 Act. See

Department of Taxation and Revenue’s Proposed Findings of Fact and Conclusions of Law,

Proposed Finding Nos. 38 – 39.

For the reasons discussed, the Harris Applications were timely submitted under the 2013

Act applicable to Taxpayer’s claims. None of the alternative reasons for denying Taxpayer’s

protest were identified as contributing to the denial of the Harris Applications, but even if they

were, the Hearing Officer is not persuaded that they render Taxpayer ineligible for the claimed

credit. Taxpayer satisfied its burden and its protest should be granted.

CONCLUSIONS OF LAW

A. Taxpayer filed a timely, written protest to the Department’s denials of the Harris

Applications for high wage jobs tax credit, and jurisdiction lies over the parties and the subject matter

of this protest.

B. A scheduling hearing occurred on October 6, 2017 that satisfied the 90-day hearing

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

C. The 2013 version of the High-Wage Job Tax Credit Act governs the issues at protest.

See 2016 (2nd S.S.), ch. 3, sec. 8; See NMSA 1978, Section 12-2A-8A (“A statute or rule operates

prospectively only unless the statute or rule expressly provides otherwise or its context requires

In the Matter of Harris Corporation
Page 26 of 30
that it operate retrospectively.”)

D. Taxpayer established that the Harris Applications were timely under the 2013 version

of the High-Wage Job Tax Credit Act which provides that Taxpayer may “apply for approval of the

credit after the close of the qualifying period, but not later than twelve months following the end

of the calendar year in which the taxpayer’s final qualifying period close[d].” See NMSA 1978,

Section 7-9G-1 D (2013).

E. Taxpayer is an eligible employer under NMSA 1978, Section 7-9G-1 M (3) (a)

because it made more than fifty percent of its sales of goods or services produced in New Mexico to

persons outside New Mexico during the applicable qualifying periods.

F. Taxpayer is not an ineligible employer because it conducts business in other locales

or because it is incorporated or headquartered in another state. See NMSA 1978, Section 7-9G-1 M.

G. Taxpayer established its total number of employees with high-wage economic-

based jobs on the last day of the qualifying period at the location at which the job was performed

or based was at least one more than the number on the day prior to the date the new high-wage

economic-based job was created. See NMSA 1978, Section 7-9G-1 E (2013).

H. Taxpayer satisfied the minimum requirement to establish right and entitlement to

the credit claimed in the Harris Applications. See Team Specialty Prods. v. N.M. Taxation &

Revenue Dep’t, 2005-NMCA-020, ¶9, 137 N.M. 50, 107 P.3d 4

For the foregoing reasons, Taxpayer’s protest IS GRANTED and its applications should be

approved in full.

DATED: November 2, 2018

In the Matter of Harris Corporation
Page 27 of 30
Chris Romero
Hearing Officer
Administrative Hearings Office
P.O. Box 6400
Santa Fe, NM 87502

In the Matter of Harris Corporation
Page 28 of 30
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 Harris Corporation
Page 29 of 30
CERTIFICATE OF SERVICE

On November 2, 2018, a copy of the foregoing Decision and Order was submitted to the

parties listed below in the following manner:

First Class Mail Interagency Mail

INTENTIONALLY BLANK

---

John D. Griego
Legal Assistant
Administrative Hearings Office
Post Office Box 6400
Santa Fe, NM 87502
PH: (505)827-0466, FX: (505)827-9732

In the Matter of Harris Corporation
Page 30 of 30