Could a physical-therapy practice seek administrative costs and professional fees in a new refund claim after receiving its tax refund and unconditionally withdrawing the original protest?

Plain-English summary

Rio Rancho Physical Therapy could not recover $10,643.10 of administrative costs and professional fees through a new refund claim after closing its original tax protest. It had received the tax refund, signed an unconditional withdrawal, and never preserved a fee request in that proceeding.

The practice's 2016 application sought $47,691.76 of gross receipts tax based on the health-care-practitioner deduction in Section 7-9-93. The Department denied the claim because supporting eligibility documentation was missing. Rio Rancho Physical Therapy protested.

During that protest, the Department indicated that the refund likely would be approved if the practice supplied documentation showing that it was an eligible health care practitioner. The parties continued exchanging information, settled, and jointly placed the case in abeyance. On April 9, 2018, the Department paid $49,963.39, representing the full claimed refund plus accrued interest.

Rio Rancho Physical Therapy then withdrew the protest unconditionally. It had never expressly requested costs or fees in that case and did not reserve any unresolved fee issue in the withdrawal.

A fee claim belonged in the original proceeding

Section 7-1-29.1 authorized reasonable administrative and litigation costs for a prevailing taxpayer in the proceeding connected with determining, collecting, or refunding tax. The AHO read that language to require the fee issue to arise in the same proceeding where the costs were incurred.

Regulation 22.600.3.13(C) said a properly executed withdrawal closed the protest and administrative file. Unlike a case where a taxpayer had repeatedly demanded fees before the tax dispute ended, Rio Rancho Physical Therapy's withdrawal left nothing pending.

The practice could not reopen the issue by filing a new application under Section 7-1-26. That refund statute covered excess tax paid or withheld, denied credits or rebates, and prior rights to property taken by levy. It did not create a refund procedure for costs and fees under Section 7-1-29.1.

Receiving the tax refund did not automatically make it the prevailing party

The fee claim also failed independently under Section 7-1-29.1(C)(2). A taxpayer is not treated as the prevailing party when the Department's position was a reasonable application of law to the facts.

The original claim lacked documentation needed to establish the Section 7-9-93 deduction. The Department requested the missing information, denied the incomplete claim, continued working with the practice during the protest, and granted the refund after the documentation was supplied. The AHO found that sequence reasonable.

Result: protest DENIED. The Department received summary judgment, and Rio Rancho Physical Therapy did not recover the requested $10,643.10 of costs and fees.

What this means for you

Raise costs and fees before the underlying protest closes

If you intend to seek an award under Section 7-1-29.1, assert it in the tax protest where the costs are being incurred and make sure settlement or withdrawal papers preserve any unresolved fee issue.

An unconditional withdrawal closes the file

A withdrawal that says the protest is resolved and does not reserve fees can end the AHO's jurisdiction over all issues in that proceeding.

A tax refund application is not a general payment-demand procedure

Section 7-1-26 did not authorize a standalone refund claim for administrative costs or professional fees.

Winning the refund is not always enough for fees

Even after a full refund, fees can be unavailable if the Department reasonably applied the law to the information it had when it acted.

Common questions

Q: Did Rio Rancho Physical Therapy receive its underlying tax refund?
A: Yes. It received $49,963.39, consisting of the full $47,691.76 claim plus accrued interest.

Q: Why was the original refund initially denied?
A: The practice had not supplied requested documentation establishing its eligibility for the Section 7-9-93 health-care-practitioner deduction.

Q: Could the practice file a second refund application just for fees?
A: No. Section 7-1-26 did not cover a costs-and-fees claim, and Section 7-1-29.1 placed that issue in the underlying tax proceeding.

Q: What should a withdrawal say if fees remain disputed?
A: This decision does not prescribe exact wording. It holds that this unconditional withdrawal did not preserve fees; any unresolved claim should be expressly raised and reserved before the protest closes.

Q: Why wasn't the practice a prevailing party after receiving the full refund?
A: The Department's initial denial was reasonable because the claim lacked supporting documents, and it issued the refund after those documents were provided.

Citations and references

Statutes and regulations:

• NMSA 1978, § 7-9-93 — health-care-practitioner deduction underlying the original refund claim
• NMSA 1978, § 7-1-29.1(A) and (C)(2) — costs, fees, prevailing-party status, and reasonable Department position
• NMSA 1978, § 7-1-26 — tax-refund procedure
• Regulation 3.1.9.8 NMAC — documentation supporting a refund claim
• Regulation 22.600.3.13(C) NMAC — closing effect of a properly executed protest withdrawal

Cases:

• Helmerich & Payne International Drilling Co. v. New Mexico Taxation and Revenue Department, No. A-1-CA-36478 (N.M. Ct. App. June 27, 2019) — fee issue preserved within the underlying protest
• Wing Pawn Shop v. Taxation and Revenue Department, 1991-NMCA-024, and TPL, Inc. v. New Mexico Taxation and Revenue Department, 2003-NMSC-007 — taxpayer's burden to establish a deduction
• Koenig v. Perez, 1986-NMSC-066 — summary judgment on undisputed facts presenting a legal question

Source

• Listing: New Mexico Decisions & Orders
• Decision post: Rio Rancho Physical Therapy
• Decision PDF: D&O 19-23

Original ruling text

1 STATE OF NEW MEXICO
2 ADMINISTRATIVE HEARINGS OFFICE
3 TAX ADMINISTRATION ACT

4 IN THE MATTER OF THE PROTEST OF
5 RIO RANCHO PHYSICAL THERAPY
6 TO DENIAL OF REFUND ISSUED ON JULY 5, 2018

7 v. Case Number 18.12-318R
8 D&O 19-23

9 NEW MEXICO TAXATION AND REVENUE DEPARTMENT

10 DECISION AND ORDER
11 GRANTING SUMMARY JUDGMENT

12 A summary judgment hearing on the above-referenced protest occurred on April 22,

13 2019, before Chris Romero, Esq., Hearing Officer, in Santa Fe, New Mexico. Staff Attorney, Mr.

14 Kenneth E. Fladager, Esq., appeared representing the Taxation and Revenue Department

15 (“Department”). Mr. Robert B. Kenney, CPA, appeared representing Rio Rancho Physical

16 Therapy (“Taxpayer”) and was accompanied by Mr. Steven Bartlett (Axiom CPAs and Business

17 Advisors, LLC).

18 The matter came before the Hearing Officer on New Mexico Taxation and Revenue

19 Department’s Motion for Summary Judgment (hereinafter “Motion”) filed on February 5, 2019

20 and Taxpayer’s Response to New Mexico Taxation and Revenue Department’s Motion for

21 Summary Judgment and Taxpayer’s Motion for Summary Judgment (hereinafter “Cross

22 Motion”) filed on February 26, 2019.

23 The Department’s Motion and Taxpayer’s Cross Motion presented brief statements of

24 facts that were principally undisputed. The Hearing Officer also took administrative notice of the

25 separate protest from which the current protest arises: In the Matter of the Protest of Rio Rancho

26 Physical Therapy to Denial of Refund issued under Letter ID No. L2056683056 (2017).

27 Based on the undisputed facts, the Hearing Officer finds that the Department is entitled to

In the Matter of the Protest of Rio Rancho Physical Therapy
Page 1 of 16
1 summary judgment because: (1) Taxpayer’s request was not preserved nor properly asserted; and

2 (2) Taxpayer was not the prevailing party in the underlying protest. IT IS DECIDED AND

3 ORDERED AS FOLLOWS:

4 FINDINGS OF FACT

5 1. On August 22, 2016, Taxpayer filed an Application for Refund claiming an

6 overpayment of Gross Receipts Taxes in the amount of $47,691.76 (hereinafter “2016

7 Application”). [Taxpayer’s Cross Motion, Ex. 1]

8 2. On October 3, 2016, the Department denied Taxpayer’s 2016 Application under

9 Letter ID No. L2056683056 stating as its basis, “you failed to provide the requested

10 documentation to support the refund to be granted.” [Taxpayer’s Cross Motion, Ex. 2.1]

11 3. On December 26, 2016, Taxpayer submitted a protest of the denial of its 2016

12 Application. The protest was received in the Department’s Protest Office on December 28, 2016.

13 [Administrative File in the Matter of Letter ID No. L2056683056]

14 4. On January 6, 2017, the Department acknowledged Taxpayer’s protest of the

15 denial of its 2016 Application under Letter ID No. L0237340976. [Administrative File in the

16 Matter of Letter ID No. L2056683056]

17 5. On January 9, 2017, the Department requested a hearing on the protest of the

18 denial of Taxpayer’s 2016 Application with the Administrative Hearings Office. [Administrative

19 File in the Matter of Letter ID No. L2056683056]

20 6. The Administrative Hearings Office held an initial scheduling hearing on March

21 3, 2017 and the parties thereafter engaged in various prehearing activities. [Administrative File

22 in the Matter of Letter ID No. L2056683056]

23 7. On June 8, 2017, the Department moved for partial summary judgment. Taxpayer

In the Matter of the Protest of Rio Rancho Physical Therapy
Page 2 of 16
1 responded on July 6, 2017. The Administrative Hearings Office held a hearing on the

2 Department’s motion on October 18, 2017. [Administrative File in the Matter of Letter ID No.

3 L2056683056]

4 8. At the hearing on October 18, 2017, the Department, by and through its counsel

5 stated his expectation that Taxpayer’s 2016 Application would be approved if Taxpayer could

6 provide some document to establish that Taxpayer was an eligible health care practitioner under

7 NMSA 1978, Section 7-9-93. The parties agreed that a ruling on the pending motion should be

8 reserved while the parties coordinated efforts to address that issue. [Administrative File in the

9 Matter of Letter ID No. L2056683056 (Record of Hearing 10/18/2017)]

10 9. On March 30, 2018, the Department and Taxpayer jointly moved to hold the

11 protest on the denial of the 2016 Application in abeyance. The parties indicated they had settled

12 the issues underlying the protest. The request was granted on April 2, 2018. [Administrative File

13 in the Matter of Letter ID No. L2056683056]

14 10. On April 9, 2018, the Department issued a refund to Taxpayer in the amount of

15 $49,963.39 representing the entire amount claimed in the 2016 Application, plus accrued

16 interest. [Taxpayer’s Cross Motion, Ex. 4]

17 11. On April 9, 2018, Taxpayer withdrew its protest of the Department’s denial of its

18 2016 Application. The Protest Withdrawal was filed in the Administrative Hearings Office on

19 April 13, 2018. [Department’s Motion, Ex. A]

20 12. At no time while the underlying protest was pending did Taxpayer explicitly

21 demand costs or fees provided by NMSA 1978, Section 7-1-29.1. [Administrative File in the

22 Matter of Letter ID No. L2056683056]

23 13. On June 4, 2018, Taxpayer submitted an Application for Refund seeking

In the Matter of the Protest of Rio Rancho Physical Therapy
Page 3 of 16
1 $10,643.10 in costs and fees arising from, or associated with, the protest of the denial of its 2016

2 Application (hereinafter “2018 Application”). [Department’s Motion, Ex. B]

3 14. Taxpayer’s 2018 Application contended that the administrative costs claimed

4 were incurred in pursuit of acquiring the refund subject of the 2016 Application, subject of the

5 prior protest withdrawn on April 9, 2019. [Department’s Motion, Ex. B]

6 15. The Department denied the 2018 Application by letter dated July 5, 2018.

7 [Department’s Motion, Ex. C].

8 16. On October 3, 2018, Taxpayer, by and through Mr. Wryan Capps, CPA,

9 submitted a protest of the Department’s denial of its 2018 Application. [Administrative File]

10 17. On November 5, 2018, the Department acknowledged Taxpayer’s protest under

11 Letter ID No. L0344641712. [Administrative File]

12 18. On December 14, 2018, the Department submitted a Hearing Request in which it

13 requested a scheduling hearing on Taxpayer’s protest. [Administrative File]

14 19. On December 14, 2018, the Administrative Hearings Office entered a Notice of

15 Telephonic Scheduling Hearing that set a hearing for January 11, 2019. [Administrative File]

16 20. On January 15, 2019, the Administrative Hearings Office entered a Scheduling

17 Order and Notice of Motion Hearing. [Administrative File]

18 21. On February 5, 2019, the Department filed its Motion. [Administrative File]

19 22. On February 26, 2019, Taxpayer filed its Cross Motion. [Administrative File]

20 23. On April 19, 2019, Taxpayer filed Taxpayer’s Substitution of Authorized

21 Representative. [Administrative File]

22 24. On April 22, 2019, a hearing occurred on the Department’s Motion and

23 Taxpayer’s Cross Motion. [Administrative File; Record of Hearing 4/22/2019]

In the Matter of the Protest of Rio Rancho Physical Therapy
Page 4 of 16
1 DISCUSSION

2 The parties present competing motions on whether, under the unique facts of this protest,

3 Taxpayer should be entitled to an award of costs and fees as the prevailing party in a prior and

4 separate protest that was resolved and unconditionally withdrawn by Taxpayer.

5 In 2016, Taxpayer applied for a refund of gross receipts taxes. The request relied on NMSA

6 1978, Section 7-9-93 which affords a gross receipts deduction for certain receipts derived from

7 services provided by health care practitioners. Taxpayer’s application was denied “because

8 [Taxpayer] failed to provide the requested documentation to support the refund to be granted.”

9 [Taxpayer’s Cross Motion, Ex. 2] Taxpayer exercised its right to protest the Department’s denial

10 and the protest eventually came before the Administrative Hearings Office.

11 In that protest, the Department moved for partial summary judgment asserting Taxpayer was

12 not eligible to claim a deduction under Section 7-9-93. 1 A hearing on the Department’s motion

13 occurred at which time the parties argued their competing positions on the law, but also expressed

14 substantial optimism that the 2016 Application could still be approved, obviating the need for a

15 ruling on the motion or further proceedings, if Taxpayer could provide additional documentation

16 establishing its eligibility to that deduction.

17 The hearing officer concluded the hearing on the Department’s motion specifying that a

18 ruling on the legal issues presented would be reserved while the parties continued to exchange

19 documents that might render the disputed legal issues moot.

20 Approximately five months later, the parties moved to place the protest in abeyance,

21 explaining that the protest had indeed been resolved, but more time was required to finalize the

1
The Department’s legal position in the previous protest was substantially identical to the position it took in other
contemporaneous protests involving the same deduction. See e.g. In the Matter of the Protests of Golden Services
Home Health and Hospice and Unnamed Nursing and Rehabilitation Center, A-1-CA-36987.

In the Matter of the Protest of Rio Rancho Physical Therapy
Page 5 of 16
1 settlement. The presiding hearing officer granted the motion and placed the protest in abeyance.

2 Shortly thereafter, on April 13, 2018, the parties submitted a protest withdrawal executed by the

3 Department’s counsel of record and Mr. Steven Bartlett who signed as Taxpayer’s representative.

4 The withdrawal was unconditional and did not suggest that any issues had been left unresolved or

5 outstanding. The protest of the denial of the 2016 Application was, therefore, closed.

6 Approximately two months later, Taxpayer submitted its 2018 Application for refund to the

7 Department, this time seeking reimbursement of costs and fees incurred in the previously withdrawn

8 protest. The Department denied the 2018 Application stating:

9 Refund is Denied. Pursuant to Section 7-1-29.1 NMSA 1978, the
10 taxpayer was not the prevailing party in the protest. The department
11 had reasonably applied the law based on the facts of the case. The
12 original refund claim was not valid at the time the denial was issued
13 pursuant to Regulation 3.1.9.8 NMAC. The original claim did not
14 contain information sufficient to allow for processing of the claim.
15 The department advised the taxpayer and requested the missing
16 information be provided within 10 days. The department denied the
17 claim for refund when the information was not provided. This was a
18 reasonable application of the law. Once the requested information
19 was provided during protest, the refund was granted.

20 [Administrative File; Department’s Motion, Ex. C]

21 Taxpayer once again exercised its right to protest, which is the protest now before the

22 Administrative Hearings Office.

23 The Department’s legal argument in support of its Motion, which occupies no more than

24 half a page, relies primarily on Regulation 22.600.3.13 (C) NMAC which provides:

25 A properly executed withdrawal of protest satisfying the
26 requirements of this section shall result in the closing of the protest
27 and the administrative file as of the date of filing. If a withdrawal
28 of protest is insufficient for any reason, the hearing officer may
29 enter an order closing a protest after notice and opportunity to be
30 heard regarding any deficiencies in the withdrawal.

31 The Department’s legal argument makes no reference to Regulation 3.1.9.8 NMAC or the

In the Matter of the Protest of Rio Rancho Physical Therapy
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1 stated reason for denying the 2018 Application.

2 In opposition, Taxpayer asserts that Regulation 22.600.3.13 (C) NMAC should not apply

3 because “Taxpayer’s properly executed withdrawal of the protest of Letter ID L2056683056

4 filed with the Administrative Hearings Office on April 13, 2018 did not withdraw Taxpayer’s

5 request for costs and fees because Taxpayer had not yet protested this issue until June 4, 2018.” 2

6 See Cross Motion Pages 4 – 5.

7 Taxpayer also argues that it is entitled to summary judgment because it was the

8 prevailing party in the previous protest, directly challenging the explicit basis for the denial of its

9 2018 Application. Having reviewed the competing arguments and having taken administrative

10 notice of the administrative record in the prior protest, the Hearing Officer finds that the

11 Department is entitled to summary judgment in its favor.

12 Summary Judgment Standard

13 Summary Judgment is appropriate when there is no genuine dispute as to any material

14 fact and the moving party is entitled to prevail as a matter of law. See Romero v. Philip Morris,

15 Inc., 2010-NMSC-035, ¶7, 148 N.M. 713. In controversies involving a question of law, or

16 application of law where there are no disputed facts, summary judgment is appropriate. See

17 Koenig v. Perez, 1986-NMSC-066, ¶10-11, 104 N.M. 664.

18 Even if a nonmoving party does not file its own motion for summary judgment, summary

19 judgment may be granted to the nonmoving party if there is no genuine dispute of fact, it is

20 entitled to judgment as a matter of law, and the moving party was generally on notice of the

21 nonmoving party’s position. See Martinez v. Logsdon, 1986-NMSC-056, ¶12, 104 N.M. 479.

22 Consideration of Costs and Fees After a Protest Withdrawal

2
The Administrative File demonstrates that the 2018 Application was denied on July 5, 2018. Taxpayer’s protest of
that denial then received by the Department’s Protest Office on October 3, 2018.

In the Matter of the Protest of Rio Rancho Physical Therapy
Page 7 of 16
1 The protest of the denial of the 2016 Application was resolved by mutual agreement of

2 the parties and voluntarily withdrawn by Taxpayer without the need for any decision from the

3 presiding hearing officer. Consistent with Regulation 22.600.3.13 (C) NMAC, the fully executed

4 withdrawal closed the protest on the denial of the 2016 Application and no further action was

5 taken. Cautious review of the protest withdrawal failed to reveal any intention to limit the scope

6 of Taxpayer’s withdrawal or preserve other issues that would have properly been addressed in

7 that administrative proceeding, such as claims to costs and fees.

8 Nonetheless, whether Taxpayer may file a new protest for costs and fees assertedly due from

9 a previously withdrawn protest, demands consideration of the applicable provision of the Tax

10 Administration Act, recognizing that questions of statutory construction begin with the plain-meaning

11 rule. See Wood v. State Educ. Ret. Bd., 2011-NMCA-020, ¶12, 149 N.M. 455, 250 P.3d 881. In Wood,

12 the Court of Appeals stated “that the guiding principle in statutory construction requires that we look

13 to the wording of the statute and attempt to apply the plain meaning rule, recognizing that when a

14 statute contains language which is clear and unambiguous, we must give effect to that language and

15 refrain from further statutory interpretation.” Id. A statutory construction analysis begins by

16 examining the words chosen by the legislature and the plain meaning of those words. See State v.

17 Hubble, 2009-NMSC-014, ¶13, 146 N.M. 70, 206 P.3d 579. Extra words should not be read into a

18 statute if the statute is plain on its face, especially if it makes sense as written. See Johnson v. N.M.

19 Oil Conservation Comm’n, 1999-NMSC-21, ¶27, 127 N.M. 120, 126, 978 P.2d 327, 333.

20 The plain language of NMSA 1978, Section 7-1-29.1 (A) advises that the award of costs

21 and fees will arise in the proceeding in which they were incurred, not through a separate protest.

22 The pertinent portions of Section 7-1-29.1 (A) explain, “In an administrative proceeding …

23 conducted in connection with the determination, collection or refund of a tax or the interest or

In the Matter of the Protest of Rio Rancho Physical Therapy
Page 8 of 16
1 penalty for a tax …, the taxpayer shall be awarded a judgment or a settlement for reasonable

2 administrative costs and reasonable litigation costs and attorney fees incurred in connection with

3 the proceeding if the taxpayer is the prevailing party.” (Emphases Added)

4 The statute neither requires nor suggests that costs and fees should be the central issue in

5 a separate, standalone protest representing the solitary issue for consideration. Instead, the issue

6 is to be considered in the administrative proceeding “conducted in connection with the

7 determination, collection or refund of a tax or the interest or penalty for a tax.”

8 Taxpayer disputes this conclusion and directs the Hearing Officer’s attention to a Fiscal

9 Impact Report (“FIR”) (Taxpayer’s Cross Motion, Ex. 5) discussing House Bill 64 of the 46th

10 Legislature of the State of New Mexico (First Session – 2003) where the Department’s analyst

11 stated, “In a case where the Department concedes even a portion of its initial case, the protester

12 could apply for attorney’s fees, which will be, in turn, subject to a separate protest hearing.”

13 However, the FIR does not insinuate that costs and fees should be subject of a separate

14 protest, only that the consideration of the issue might require a separate hearing, similar to what

15 occurred in Helmerich Payne Int’l Drilling Co. v. N.M. Taxation & Revenue Dep’t, No. A-1-CA-

16 36478, 2019 N.M. App. LEXIS 84 (Ct.App.June 27, 2019) in which a hearing was conducted for

17 the single purpose of determining whether the taxpayer was entitled to relief under the statute

18 after all other disputed issues arising in the same protest had been resolved.

19 The Court in Helmerich contemplated the same FIR and observed that the Administrative

20 Hearings Office retains jurisdiction over a protest until the protest is fully resolved, citing 20

21 Am. Jur. 2d Courts § 95 (2019). It said, “[O]nce a court has acquired jurisdiction of a case, its

22 jurisdiction continues until the . . . cause is finally determined or disposed of, or is resolved,

23 subject to appellate review, that is, all the issues of fact and law are determined and a final

In the Matter of the Protest of Rio Rancho Physical Therapy
Page 9 of 16
1 judgment is entered.”). See Helmerich, No. A-1-CA-36478, 2019 N.M. App. LEXIS 84, at *8-9.

2 As observed in Helmerich, the Administrative Hearings Office retained jurisdiction to

3 consider costs and fees in that protest because that issue remained after all others were resolved.

4 In fact, the taxpayer in Helmerich made several prior written demands in its protest for costs and

5 fees which continued to remain outstanding even after the Department abated its assessment.

6 In contrast, the administrative file in the matter of Letter ID No. L2056683056 revealed

7 no such prior demands for costs and fees arising in that protest. Unlike the facts in Helmerich,

8 Taxpayer withdrew its protest knowing that the withdrawal would conclude its protest and the

9 Administrative Hearings Office would close the file and take no further action, consistent with

10 Regulation 22.600.3.13 (C) NMAC. The withdrawal was abundantly clear and specified that the

11 protest should be closed and did not even remotely suggest the possibility of outstanding

12 unresolved issues. Undoubtedly, at the time Taxpayer executed its protest withdrawal, it would

13 have had all information necessary to assert a claim for costs and fees had that been its actual

14 intention, but it did not do so.

15 There is other support for the conclusion that Taxpayer was not entitled to file a separate

16 protest for costs and fees, when scrutinizing the procedure utilized by Taxpayer in this case.

17 Taxpayer asserted its claim to administrative costs and fees by filing its 2018 Application under

18 Section 7-1-26 which provides in relevant part:

19 A. A person who believes that an amount of tax has been paid by or
20 withheld from that person in excess of that for which the person was
21 liable, who has been denied any credit or rebate claimed or who claims
22 a prior right to property in the possession of the department pursuant
23 to a levy made under authority of Sections 7-1-31 through 7-1-34
24 NMSA 1978 may claim a refund[.]

25 There is no clear and unambiguous expression of legislative intent for any of those categories

26 to include a “refund” of administrative costs and fees assertedly due under Section 7-1-29.1. Instead,

In the Matter of the Protest of Rio Rancho Physical Therapy
Page 10 of 16
1 the statutory refund procedure is applicable only to: (1) tax paid or withheld in excess of a taxpayer’s

2 obligation; (2) denial of any credit or rebate claimed; and (3) claims of a prior right to property in the

3 possession of the Department pursuant to a levy.

4 Therefore, there is no authority to utilize Section 7-1-26 for asserting a claim for costs and

5 fees under Section 7-1-29.1, lending further support to the conclusion that the issue must be raised in

6 the underlying protest, not through an application for refund, or through a protest denying such

7 application, as occurred in this protest.

8 The Department is entitled to summary judgment.

9 Taxpayer’s Cross Motion for Summary Judgment

10 Even if Taxpayer could establish the correctness of the procedure it employed for seeking

11 costs and fees, which the Hearing Officer rejected in the prior section, Taxpayer would still not

12 prevail. Taxpayer’s claim for costs and fees relies heavily on NMSA 1978, Section 7-1-29.1 (A)

13 which provides the following:

14 In any administrative or court proceeding that is brought by or
15 against a taxpayer on or after July 1, 2003 in connection with the
16 determination, collection or refund of any tax, interest or penalty
17 for a tax governed by the provisions of the Tax Administration
18 Act, the taxpayer shall be awarded a judgment or a settlement for
19 reasonable administrative costs incurred in connection with an
20 administrative proceeding with the department or the
21 administrative hearings office or reasonable litigation costs
22 incurred in connection with a court proceeding, if the taxpayer is
23 the prevailing party.

24 (Emphasis Added)

25 As Taxpayer correctly points out, the word “shall” directs that the provision is mandatory,

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

27 013, ¶ 22, 146 N.M. 24. However, assuming for the sake of argument that Taxpayer is “the

28 prevailing party” as that term is used in Section 7-1-29.1 (A), the mandatory “shall” does not

In the Matter of the Protest of Rio Rancho Physical Therapy
Page 11 of 16
1 necessarily guarantee entitlement to costs and fees because Taxpayer may not read Section 7-1-

2 29.1 (A) in isolation from subsequent provisions of the statute.

3 Section 7-1-29.1 (C) (2) afterwards declares that “the taxpayer shall not be treated as the

4 prevailing party if, prior to July 1, 2015, the department establishes or, on or after July 1, 2015,

5 the hearing officer finds that the position of the department in the proceeding was based upon a

6 reasonable application of the law to the facts of the case.” (Emphases Added)

7 Taxpayer’s Cross Motion omits any reference to Section 7-1-29.1 (C) (2), and Taxpayer’s

8 representative seemingly took offense during the hearing when the Hearing Officer inquired

9 about its potential application, stating “I don’t believe that the Department’s motion for summary

10 judgment … even speaks to that. So, I don’t know if the … if, Mr. [Hearing Officer], are you

11 making the case for the Department?” [Record of Hearing dated 4/22/19 – 00:33:36 – 00:33:49]

12 Although it is accurate that neither party attributed any significance to Section 7-1-29.1

13 (C) (2), it was Taxpayer who asserted its status as the prevailing party. Providing an opportunity

14 for Taxpayer to address the potential consequence of Section 7-1-29.1 (C) (2) to its claim, when

15 it had not done so up to that point, was not only reasonable and fair, but necessary because the

16 Hearing Officer is not at liberty to disregard a relevant provision of the law merely because a

17 party has chosen to ignore or overlook its consequence.

18 It is a cardinal rule in construing statutes that the entire act be read together so that every

19 provision may be considered in its relation to every other part. See Winston v. N.M. State Police

20 Bd., 1969-NMSC-066, ¶5, 80 N.M. 310, 454 P.2d 967; See N.M. Pharm. Ass’n v. State, 1987-

21 NMSC-054, ¶8, 106 N.M. 73, 738 P.2d 1318 (“In interpreting statutes, we should read the entire

22 statute as a whole so that each provision may be considered in relation to every other part”)

23 The Hearing Officer’s inquiry was not about “making the case for the Department.” The

In the Matter of the Protest of Rio Rancho Physical Therapy
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1 inquiry was about assuring Taxpayer’s right to be heard on a relevant matter of law. In fact, the

2 New Mexico Court of Appeals has acknowledged that hearing officers and judges may address

3 law or facts that the parties may not have addressed. In TPL, Inc. v. Taxation & Revenue Dep’t,

4 2000-NMCA-083, ¶19, 129 N.M. 539, 545, 10 P.3d 863, 869, rev’d on other grounds, 2003-

5 NMSC-007, 133 N.M. 447, 64 P.3d 474, the court stated:

6 What the hearing officer did in the case at bar is what we and what
7 all other judges and hearing officers do every day; specifically,
8 decide cases in accordance with the law and the facts as we view
9 them. Neither judges nor hearing officers are limited word-for-
10 word to the parties’ arguments.

11 With respect to the application of Section 7-1-29.1 (C) (2), the Administrative Hearings

12 Office was never required to rule on the legal issues arising in the previous protest, suggesting at

13 the time the protest was withdrawn, that the parties resolved the protest exactly as they

14 anticipated, with the exchange of additional documentation. Comments contained in the record

15 of the hearing occurring on October 18, 2017 demonstrate that counsel for the Department was

16 not merely optimistic, but practically certain that the protest could be resolved in the Taxpayer’s

17 favor so long as it could provide one or more documents that he suggested the parties later

18 discuss off the record. [Administrative File in the Matter of Letter ID No. L2056683056 (Record

19 of Hearing 10/18/2017 – 01:01:50 – 01:02:30)]

20 The refund denial from which the protest arises confirms, at least from the Department’s

21 perspective, that it was resolved consistent with the comments on the record of that hearing. It

22 stated “[o]nce the requested information was provided during protest, the refund was granted.”

23 These circumstances demonstrate a reasonable application of the law, particularly in

24 reference to a requirement that a taxpayer satisfy its burden of establishing entitlement to its

25 claimed deduction. It is well established that where a taxpayer’s claim for relief relies on the

26 application of an exemption or deduction, then “the statute must be construed strictly in favor of

In the Matter of the Protest of Rio Rancho Physical Therapy
Page 13 of 16
1 the taxing authority, the right to the exemption or deduction must be clearly and unambiguously

2 expressed in the statute, and the right must be clearly established by the taxpayer.” See Wing

3 Pawn Shop v. Taxation and Revenue Department, 1991-NMCA-024, ¶16, 111 N.M. 735, 809

4 P.2d 649 (internal citation omitted) (Emphasis Added); See also TPL, Inc. v. N.M. Taxation &

5 Revenue Dep’t, 2003-NMSC-007, ¶9, 133 N.M. 447, 64 P.3d 474

6 This is precisely what occurred in the underlying protest. The Department determined

7 that Taxpayer had not met its burden. Yet, it continued to work with Taxpayer until it was

8 satisfied that Taxpayer established its entitlement to the refund subject of the 2016 Application,

9 and thereafter issued a refund of the requested amount, plus accrued interest.

10 Taxpayer’s Cross Motion should be denied because the fact that it was eventually

11 awarded its full refund does not inevitably mean that it was also “the prevailing party” under

12 Section 7-1-29.1 (C) (2). In fact, the Hearing Officer finds that the Department is also entitled to

13 summary judgment under Section 7-1-29.1, because the position of the “[D]epartment in the

14 [previous] proceeding was based upon a reasonable application of the law to the facts of the

15 case[,]” particularly with respect to the burden that rests on taxpayers to clearly establish the

16 right to a deduction. See Wing Pawn Shop, 1991-NMCA-024, ¶16; TPL, Inc., 2003-NMSC-007,

17 ¶9; See e.g. Regulation 3.1.9.8 NMAC. Although the Department did not specifically move for

18 relief on such basis, Martinez v. Logsdon, 1986-NMSC-056, ¶12, 104 N.M. 479 is instructive

19 because there is no genuine dispute of fact, the Department is entitled to judgment as a matter of

20 law, and Taxpayer was generally on notice of the nonmoving party’s position, as early as July 5,

21 2018, from the explanation the Department provided for denying Taxpayer’s 2018 Application.

22 Taxpayer’s protest should be DENIED.

23 CONCLUSIONS OF LAW

In the Matter of the Protest of Rio Rancho Physical Therapy
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1 A. Taxpayer filed a timely, written protest of the Department’s denial of refund and

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

3 B. A hearing was held within 90 days of Taxpayer’s protest. See NMSA 1978, Section

4 7-1B-6 (D).

5 C. There is no genuine dispute as to any material fact and summary judgment is

6 appropriate in this matter. See Romero v. Philip Morris, Inc., 2010-NMSC-035, ¶7, 148 N.M.

7 713.

8 D. NMSA 1978, Section 7-1-26 (2015) does not establish a procedure for asserting

9 claims to administrative costs and fees incurred in administrative proceedings.

10 E. Taxpayer is not entitled to costs and fees under NMSA 1978, Section 7-1-29.1

11 because the position of the Department in the previously withdrawn proceeding was based upon a

12 reasonable application of the law to the facts of the case. See NMSA 1978, Section 7-1-29.1 (C) (2).

13 F. Taxpayer is not entitled to assert through a separate and distinct protest a claim for

14 costs and fees arising from another protest under NMSA 1978, Section 7-1-29.1.

15 For the foregoing reasons, Taxpayer’s protest is DENIED.

16 DATED: September 13, 2019

17
18 Chris Romero
19 Hearing Officer
20 Administrative Hearings Office
21 P.O. Box 6400
22 Santa Fe, NM 87502
23

In the Matter of the Protest of Rio Rancho Physical Therapy
Page 15 of 16
1 NOTICE OF RIGHT TO APPEAL

2 Pursuant to NMSA 1978, Section 7-1-25 (2015), the parties have the right to appeal this

3 decision by filing a notice of appeal with the New Mexico Court of Appeals within 30 days of the

4 date shown above. If an appeal is not timely filed with the Court of Appeals within 30 days, this

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

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

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

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

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

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

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

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

13 CERTIFICATE OF SERVICE

14 On September 13, 2019, a copy of the foregoing Decision and Order Granting Summary

15 Judgment was mailed to the parties listed below in the following manner:

16 First Class Mail Interagency Mail
17
18 INTENTIONALLY BLANK
19
20 John D. Griego
21 Legal Assistant
22 Administrative Hearings Office
23 Post Office Box 6400
24 Santa Fe, NM 87502
25 PH: (505)827-0466
26 FX: (505)827-9732
27 [email protected]

In the Matter of the Protest of Rio Rancho Physical Therapy
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