Were an enrolled Navajo Nation member's 2012 tribal-government wages exempt from New Mexico income tax when she worked and lived on Navajo lands during the workweek but also maintained an Albuquerque home?

Plain-English summary

Jennifer Skeet's 2012 wages from the Navajo Nation were exempt from New Mexico personal income tax even though she also owned a home and had strong domicile ties in Albuquerque. The Administrative Hearings Office granted her protest and ordered the remaining $5,117.33 assessment—$3,646 tax, $729.20 penalty, and $742.13 interest—abated.

Section 7-2-5.5 exempted income when an enrolled member of a qualifying federally recognized Indian nation earned it from work performed within the member's tribal lands and the member lived within those boundaries or on qualifying trust or restricted land.

Three elements were undisputed: Skeet was an enrolled Navajo Nation member; the Navajo Nation qualified under the statute; and her sole 2012 income came from working as legal counsel for the Navajo Nation's legislative branch in Window Rock, on the reservation.

The dispute was whether she "lives within" the Navajo Nation's boundaries. Skeet rented a residential trailer in Fort Defiance, Arizona, on Navajo Nation land held in trust by the United States. On ordinary weeks she left Albuquerque early Monday, lived in Fort Defiance during the workweek, worked in Window Rock, and returned to Albuquerque Friday evening. She estimated that she spent about 70% of the year on Navajo lands.

"Lives within" did not mean exclusive domicile

The Department pointed to conventional domicile evidence: Skeet and her future husband owned the Albuquerque house, paid its property taxes, and used that address for federal returns, voting, driver's licensing, and vehicle registration.

The AHO found that domicile was not the statutory test. Section 7-2-5.5 said "lives within the boundaries"—not "is domiciled within," "is a resident of," or "lives exclusively within." Prior administrative decisions treated continuing physical presence as more important for this phrase than the single permanent-home intent used in domicile law.

The Department's 2012 return instructions used "domiciled" in describing the exemption, but an instruction could not expand the statute. The AHO held that the statutory language and the federal decisions it reflected controlled.

Federal Indian-tax principles supported the exemption

The decision applied McClanahan v. Arizona State Tax Commission, which barred state income tax on a tribal member's income wholly derived from reservation sources, and Oklahoma Tax Commission v. Sac & Fox Nation, which explained that a member need only live in Indian country, not necessarily on a formal reservation.

Skeet acknowledged that she had worked from the Albuquerque home on rare occasions over the course of her employment. The Department did not establish specific 2012 dates, despite her bringing a day planner to the hearing. The AHO concluded that New Mexico had overreached by taxing all income earned from her Navajo Nation employment without tailoring the tax to any demonstrated off-reservation activity.

Result: protest GRANTED. All outstanding 2012 income tax, penalty, and interest under the assessment were ordered abated.

What this means for you

Enrolled tribal members who live in more than one place

Under this 2012 decision, owning a home and maintaining official records outside Indian country did not automatically defeat Section 7-2-5.5. Actual, continuing life on the member's tribal lands and the source and location of the work were central.

Tribal-government employees

The exemption required both qualifying tribal-land residence and income earned from work on the relevant tribal lands. Membership or tribal employment alone was not the complete test.

Taxpayers with mixed on- and off-reservation work

This decision abated an assessment imposed on all wages when the Department did not establish particular off-reservation work dates. It does not hold that proven off-reservation income is exempt.

Accountants and tax professionals

Do not automatically substitute the single-domicile test for the statute's "lives within" language. Document where the taxpayer actually lives, the status of the land, where services are performed, and the source of the income.

Common questions

Q: Did Skeet have to prove that Fort Defiance was her only home?
A: No. Section 7-2-5.5 did not require exclusive residence or domicile on tribal lands. She proved a continuing physical presence in her rented Fort Defiance home during the workweek.

Q: Why didn't her Albuquerque voter registration and driver's license control?
A: Those facts supported Albuquerque domicile, but the AHO held that domicile was not the statutory question. The relevant phrase was whether she "lives within" the Navajo Nation's boundaries.

Q: Did it matter that the Fort Defiance home was in Arizona?
A: The home was within the Navajo Nation on land held in federal trust, and the decision applied Section 7-2-5.5 to Skeet as an enrolled member of the Navajo Nation. The Department did not dispute the land's qualifying status.

Q: Was every enrolled tribal member's income exempt?
A: No. The decision required membership, qualifying residence on the member's tribal lands, and income from work performed there. Income connected to off-reservation residence or work can be treated differently.

Q: What happened to the assessment?
A: The AHO ordered any outstanding 2012 tax, penalty, and interest abated. The notice had totaled $5,117.33.

Citations and references

Statutes and regulation:

• NMSA 1978, § 7-2-5.5 — qualifying tribal-member income exemption
• NMSA 1978, § 7-2-3 — personal income tax on residents and certain nonresidents
• NMSA 1978, § 7-2-2(Q) and (S) — 2012 resident and nonresident definitions
• NMSA 1978, § 7-1-17(C) — presumption that an assessment is correct
• NMSA 1978, § 9-11-6.2(G) — Department guidance presumed a proper implementation unless inconsistent with controlling law
• Regulation 3.3.1.9 NMAC — residency and domicile

Principal federal authorities discussed:

• McClanahan v. Arizona State Tax Commission, 411 U.S. 164 (1973) — state income tax on reservation-derived income of a tribal member
• Oklahoma Tax Commission v. Sac & Fox Nation, 508 U.S. 114 (1993) — member's residence in Indian country and source of income
• Washington v. Confederated Tribes of the Colville Indian Reservation, 447 U.S. 134 (1980) — state tax must account for off-reservation activity rather than reach untaxed tribal activity wholesale

Source

• Listing: New Mexico Decisions & Orders
• Decision post: Jennifer A Skeet
• Decision PDF: D&O 19-28

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 JENNIFER A. SKEET
6 TO ASSESSMENT ISSUED UNDER
7 LETTER ID NO. L1393543344

8 v. Case Number 19.04-071A,
9 AHO D&O # 19-28

10 NEW MEXICO TAXATION AND REVENUE DEPARTMENT

11 DECISION AND ORDER

12 On September 24, 2019, Hearing Officer Ignacio V. Gallegos, Esq., conducted a merits

13 administrative hearing in the matter of the tax protest of Jennifer A. Skeet (“Taxpayer”) pursuant

14 to the Tax Administration Act and the Administrative Hearings Office Act. At the hearing,

15 Attorney R. Tracy Sprouls (Rodey, Dickason, Sloan, Akin & Robb, P.A.) appeared representing

16 Taxpayer. Taxpayer Jennifer A. Skeet appeared as a witness. Staff Attorney Peter Breen

17 appeared, representing the opposing party in the protest, the Taxation and Revenue Department

18 (“Department”). Department protest auditor Alma Lucero appeared as a witness for the

19 Department. Taxpayer presented an affidavit, which was accepted in lieu of live testimony,

20 which the Department waived the opportunity to cross-examine the affiant/witness. Taxpayer’s

21 and Department’s exhibits were admitted into the record without objection from either party and

22 are more fully described in the Exhibit log.

23 In quick summary, this protest involves Taxpayer’s 2012 personal income tax and her

24 claimed exemption from tax. Taxpayer is an enrolled member of the Navajo Nation, was employed

25 by the Navajo Nation, worked within the Navajo Nation and lived within the Navajo Nation during

26 work days, despite the fact that she maintained a separate residence in Albuquerque, New Mexico.

27 The Department assessed tax, penalty, and interest for unpaid tax, which Taxpayer protested,

In the Matter of the Protest of Jennifer A. Skeet, page 1 of 25.
1 arguing that her wages were exempt from the imposition of personal income tax. Ultimately, after

2 making findings of fact and discussing the issue in more detail throughout this decision, the hearing

3 officer finds that the Taxpayer overcame the presumption of correctness, and Taxpayer’s protest

4 must be granted. IT IS DECIDED AND ORDERED AS FOLLOWS:

5 FINDINGS OF FACT

6 1. On December 18, 2018, under letter id. no. L1393543344, the Department issued

7 a Notice of Assessment of Taxes and Demand for Payment, indicating that Taxpayer owed tax in

8 the amount of $3,646.00, penalty in the amount of $729.20, and interest in the amount of

9 $742.13, for a total tax assessment of $5,117.33 for personal income taxes for the year ending

10 December 31, 2012. [Administrative File].

11 2. The Taxpayer protested the assessment of taxes, penalty and interest in a letter

12 dated January 15, 2019, and stamped as received by the Department on January 22, 2019. The

13 protest letter included Taxpayer’s Certificate of Indian Blood, as well as a copy of her W-2 wage

14 and tax statement from 2012. [Administrative File].

15 3. The Department acknowledged the Taxpayer’s protest, under letter id. no.

16 L0320731312. [Administrative File].

17 4. The Department requested a hearing on the matter by filing a Hearing Request on

18 April 12, 2019. [Administrative File].

19 5. The Administrative Hearings Office issued a Notice of Telephonic Scheduling

20 Hearing on April 15, 2019, setting the matter for a telephonic scheduling conference on May 3,

21 2019. [Administrative File].

22 6. Administrative Hearing Officer DeeDee Hoxie conducted the telephonic

23 scheduling conference on May 3, 2019 with the parties present. Neither the Department nor the

In the Matter of the Protest of Jennifer A. Skeet, page 2 of 25.
1 Taxpayer objected that conducting the scheduling hearing satisfied the 90-day hearing

2 requirements of Section 7-1B-8 (A) (2015). The Administrative Hearings Officer preserved a

3 recording of the conference. [Administrative File].

4 7. The Administrative Hearings Office issued a Scheduling Order and Notice of

5 Administrative Hearing on May 7, 2019, setting discovery deadlines and a date for the merits

6 hearing on September 24, 2019 in Santa Fe, New Mexico. [Administrative File].

7 8. On May 29, 2019, Attorney R. Tracy Sprouls (Rodey, Dickason, Sloan, Akin &

8 Robb, PA) filed an Entry of Appearance on behalf of Taxpayer. [Administrative File].

9 9. A Certificate of Service was filed by Attorney R. Tracy Sprouls on June 17, 2019.

10 [Administrative File].

11 10. On September 24, 2019, the undersigned Administrative Hearing Officer, Ignacio

12 V. Gallegos, Esq. conducted a merits hearing in Santa Fe, New Mexico. The Administrative

13 Hearings Officer preserved a recording of the hearing. [Administrative File].

14 11. Taxpayer is an enrolled member of the Navajo Nation. Her local chapter is the

15 Baahaali Chapter, which is located south of Gallup, New Mexico. [Direct examination of

16 Jennifer A. Skeet, CD 18:20-18:30; Cross examination of Jennifer A. Skeet, CD 47:20-47:45;

17 Administrative File (protest letter); Taxpayer’s Exhibit 2].

18 12. Taxpayer is a registered voter for the Navajo Nation’s Tribal elections. [Direct

19 examination of Jennifer A. Skeet, CD 18:30-18:45; Taxpayer’s Exhibit 2].

20 13. Taxpayer was employed, before, during and after 2012, on the Navajo

21 reservation, by the Navajo Nation’s Office of Legislative Council, the legislative arm of the

22 Navajo Nation tribal government, whose office is in Window Rock, Arizona. This employment

23 was her sole source of income during 2012. [Direct examination of Jennifer A. Skeet, CD 11:00-

In the Matter of the Protest of Jennifer A. Skeet, page 3 of 25.
1 13:35; Cross examination of Jennifer A. Skeet, CD 21:25-22:10; Taxpayer’s Exhibit 3;

2 Administrative File (protest letter, 2012 Form W-2); Department’s Exhibit A].

3 14. Through sworn affidavit, Lorene B. Ferguson, retired Justice of the Supreme

4 Court of the Navajo Nation, affirmed that she rented a residential trailer to Ms. Skeet during the

5 entire year of 2012. The affidavit affirmed that the residential trailer was situated in Ft.

6 Defiance, Arizona, within the boundaries of the Navajo Nation, on lands held in trust by the

7 United States for the benefit of the Navajo Nation, subject to restriction on alienation. [AHO

8 examination of Jennifer A. Skeet, CD 44:30-46:30; Taxpayer Exhibit 1].

9 15. Taxpayer affirmed that in 2012 during the work week she and her future husband,

10 Thomas Teegarden, lived at the residential trailer located in Ft. Defiance, Arizona, within

11 Apache County in order to be close to her work in Window Rock, Arizona. Mr. Teegarden was

12 working in Gallup, New Mexico during that year. The land upon which the trailer is situated is

13 within the Navajo Nation, on land held in trust by the United States government. [Direct

14 examination of Jennifer A. Skeet, CD 11:00-13:50; AHO examination of Jennifer A. Skeet, CD

15 44:30-46:10].

16 16. In the year 2000, Ms. Skeet and Mr. Teegarden purchased a home in

17 Albuquerque, New Mexico, but because both of their work positions took them away from the

18 community home, in 2012, they lived there only part time. On ordinary weeks in 2012,

19 Taxpayer would leave Albuquerque early Monday morning to get to work, stay in Ft. Defiance

20 during the work week, and return to Albuquerque Friday evening, unless she had family matters

21 to attend to over the weekend at her family property outside of Gallup, New Mexico. She

22 estimated the amount of time away from Albuquerque and on lands within the Navajo Nation

In the Matter of the Protest of Jennifer A. Skeet, page 4 of 25.
1 was about seventy percent of the year. [Direct examination of Jennifer A. Skeet, CD 15:00-

2 16:30; 18:50-21:15].

3 17. Taxpayer listed her address on official documents as the Albuquerque address out

4 of convenience. Of all the locations she could receive her mail, the mail delivery service was

5 most reliable at the Albuquerque address. She has tried using post office boxes, including the

6 box her father used in Gallup, New Mexico, one in Fort Defiance, Arizona, and the one assigned

7 to her office in Window Rock, Arizona. [Direct examination of Jennifer A. Skeet, CD 17:00-

8 18:15; Cross examination of Jennifer A. Skeet, CD 22:00-25:00; AHO Examination of Jennifer

9 A. Skeet, CD 46:15-46:30; Department Exhibits A, A-1, A-2, B, C, D, E].

10 18. Taxpayer first moved to Arizona in February of 1998. [Cross examination of

11 Jennifer A. Skeet, CD 25:00-25:20].

12 19. Taxpayer filed her federal income tax returns in 2011, 2012, and 2013 using the

13 Albuquerque address. [Department Exhibit A, A-1, A-2].

14 20. Taxpayer was registered in 2000, was still registered in 2012, and remains

15 registered to vote in federal, state and local elections using the Albuquerque address. Taxpayer

16 does not vote in elections in Apache County or in the State of Arizona. [Cross examination of

17 Jennifer A. Skeet, CD 26:40-27:10, 32:25-35:15; Department Exhibit B, C].

18 21. Taxpayer and her husband pay property taxes for the home in Albuquerque. They

19 claim the head-of-household exemption. [Cross examination of Jennifer A. Skeet, CD 36:30-

20 38:15; Department Exhibit D].

21 22. Taxpayer used the Albuquerque address for her driver’s license registration since

22 at least 2009. Her driver’s license has always been through the State of New Mexico. Her

23 vehicle registrations also have always been through the State of New Mexico. This was out of

In the Matter of the Protest of Jennifer A. Skeet, page 5 of 25.
1 habit, since she grew up on the New Mexico side of the state border, within the Navajo Nation.

2 [Cross examination of Jennifer A. Skeet, CD 38:30-43:05; Department Exhibit E, F].

3 23. Taxpayer’s childhood home, a family ranch, is in the area of Bread Springs, New

4 Mexico, on the lands of the Navajo Nation, south of Gallup, New Mexico. The family ranch is

5 about 26 miles from Window Rock, Arizona. [Direct examination of Jennifer A. Skeet, CD

6 18:10-18:30; Cross examination of Jennifer A. Skeet, CD 23:30-24:10].

7 24. Fort Defiance, Window Rock and Saint Michaels are rural communities in close

8 proximity to one another. [Cross examination of Jennifer A. Skeet, CD 22:35-23:00; 25:15-

9 25:40].

10 25. From Fort Defiance to the home in Albuquerque, the drive takes Ms. Skeet about

11 two hours and 45 minutes. [Cross examination of Jennifer A. Skeet, CD 25:15-25:40].

12 26. Taxpayer acknowledged that over the course of her employment with the

13 Legislative Council, she has worked from the home in Albuquerque on rare occasions. The

14 Department did not ask her to provide definite dates during 2012 that she may have worked from

15 home, despite eliciting testimony that she brought her 2012 day-planner to the hearing. [Cross

16 examination of Jennifer A. Skeet, CD 28:00-30:10].

17 27. When she was in Fort Defiance, she shopped locally, including in Window Rock

18 and Gallup. When she was in Albuquerque, she shopped in the Albuquerque area. [Direct

19 examination of Jennifer A. Skeet, CD 16:05-16:50].

20 28. Taxpayer was, in 2012, and remains a member of the State of New Mexico Bar

21 Association and the Navajo Nation Bar Association. [Cross examination of Jennifer A. Skeet,

22 CD 27:10-27-30, 32:25-33:00].

In the Matter of the Protest of Jennifer A. Skeet, page 6 of 25.
1 29. The Department protest auditor, Alma Lucero, provided an update of the Personal

2 Income Tax liabilities of the Taxpayer. [Department Exhibit G].

3 30. The Department provided a copy of the Navajo Code, Subchapter 15 Voter

4 registration, Section 281. [Department Exhibit H].

5 DISCUSSION

6 Taxpayer claims that her wages in 2012 were exempt from taxation within the State of

7 New Mexico, by virtue of an application of NMSA 1978, Section 7-2-5.5 (1995) for income

8 earned by a member of a federally recognized Indian nation, who lives within the boundaries of

9 the lands held in trust by the United States for the benefit of the member’s nation, and the

10 earnings were gained by employment within the Navajo Nation. The testimony of the Taxpayer

11 was highly credible.

12 Under NMSA 1978, Section 7-1-17 (C) (2007) the assessment issued in this case is

13 presumed correct. Consequently, Taxpayer has the burden to overcome the assessment. See

14 Archuleta v. O'Cheskey, 1972-NMCA-165, ¶11, 84 N.M. 428. Unless otherwise specified, for the

15 purposes of the Tax Administration Act, “tax” is defined to include interest and civil penalty. See

16 NMSA 1978, Section 7-1-3 (X) (2013). Under Regulation 3.1.6.13 NMAC, the presumption of

17 correctness under Section 7-1-17 (C) extends to the Department’s assessment of penalty and

18 interest. See Chevron U.S.A., Inc. v. State ex rel. Dep't of Taxation & Revenue, 2006-NMCA-50,

19 ¶16, 139 N.M. 498, 503 (agency regulations interpreting a statute are presumed proper and are to be

20 given substantial weight). Accordingly, it is Taxpayers’ burden to present some countervailing

21 evidence or legal argument to show that they are entitled to an abatement, in full or in part, of the

22 assessment issued in the protest. See N.M. Taxation & Revenue Dep't v. Casias Trucking, 2014-

23 NMCA-099, ¶8. When a taxpayer presents sufficient evidence to rebut the presumption, the

In the Matter of the Protest of Jennifer A. Skeet, page 7 of 25.
1 burden shifts to the Department to show that the assessment is correct. See MPC Ltd. v. N.M.

2 Taxation & Revenue Dep't, 2003-NMCA-21, ¶13, 133 N.M. 217.

3 The burden is also on taxpayers to prove that they are entitled to an exemption or

4 deduction, if one should potentially apply. See Pub. Serv. Co. v. N.M. Taxation & Revenue Dep't,

5 2007-NMCA-050, ¶141 N.M. 520, 157 P.3d 85; See also Till v. Jones, 1972-NMCA-046, 83

6 N.M. 743, 497 P.2d 745. “Where an exemption or deduction from tax is claimed, the statute must

7 be construed strictly in favor of the taxing authority, the right to the exemption or deduction must

8 be clearly and unambiguously expressed in the statute, and the right must be clearly established

9 by the taxpayer.” See Sec. Escrow Corp. v. State Taxation & Revenue Dep't, 1988-NMCA-068,

10 ¶8, 107 N.M. 540, 760 P.2d 1306. See also Wing Pawn Shop v. Taxation & Revenue Dep't, 1991-

11 NMCA-024, ¶16, 111 N.M. 735, 809 P.2d 649. See also Chavez v. Comm'r of Revenue, 1970-

12 NMCA-116, ¶7, 82 N.M. 97, 476 P.2d 67.

13 Personal Income Tax

14 The New Mexico Income Tax Act, NMSA 1978, Sections 7-2-1 through 7-2-37, reflects the

15 Legislature’s intent to tax the income of New Mexico residents, and certain nonresidents. Section

16 7-2-3 (1981) states: “A tax is imposed at the rates specified in the Income Tax Act upon the net

17 income of every resident individual and upon the net income of every nonresident individual

18 employed or engaged in the transaction of business in, into or from this state, or deriving any

19 income from any property or employment within this state.”

20 For income tax purposes, residency matters. The Income Tax Act definitions in effect in

21 2012 define, in pertinent part, a “resident” as “an individual who is domiciled in this state during

22 any part of the taxable year or an individual who is physically present in this state for one hundred

23 eighty-five days or more during the taxable year.” Section 7-2-2 (S) (2010). And a “nonresident” is

In the Matter of the Protest of Jennifer A. Skeet, page 8 of 25.
1 “every individual not a resident of this state.” Section 7-2-2 (Q) (2010). The evidence showed that

2 Ms. Skeet maintained residences both in New Mexico, and in the Navajo Nation, on the Arizona

3 side of the state border.

4 The claim for exemption in this case stems from Section 7-2-5.5 (1995). The law reads:

5 “Income earned by a member of a New Mexico federally recognized Indian nation, tribe, band or

6 pueblo, his spouse or dependent, who is a member of a New Mexico federally recognized Indian

7 nation, tribe, band or pueblo, is exempt from state income tax if the income is earned from work

8 performed within and the member, spouse or dependent lives within the boundaries of the Indian

9 member’s or the spouse’s reservation or pueblo grant or within the boundaries of lands held in trust

10 subject to restriction against alienation imposed by the United States.” The statutory exemption

11 itself is a modified codification of the Supreme Court’s holding of McClanahan v. Arizona State

12 Tax Comm’n, 411 U.S. 164, 93 S. Ct. 1257 (1973), which overturned a state law imposing a tax on

13 the personal income of reservation Indians which income was wholly derived from reservation

14 sources.

15 There is no dispute that three of the four necessary elements of the statute are satisfied by

16 the evidence. There is no dispute that (1) Ms. Skeet is an enrolled member of the Navajo Nation.

17 There is no dispute that (2) the Navajo Nation is a New Mexico federally recognized Indian nation,

18 tribe, band or pueblo. There is no dispute that (3) the income at issue here was wholly derived from

19 Ms. Skeet’s employment as legal counsel for the legislative arm of the Navajo Nation’s

20 government, while on the reservation of the Navajo Nation, a reservation source. The sole dispute

21 is whether (4) Ms. Skeet qualifies as someone who “lives within the boundaries of the Indian

22 member’s or the spouse’s reservation or pueblo grant or within the boundaries of lands held in trust

23 subject to restriction against alienation imposed by the United States.” Narrowed further, the

In the Matter of the Protest of Jennifer A. Skeet, page 9 of 25.
1 Department does not question the status of the land1, only whether Ms. Skeet was domiciled on the

2 Navajo Nation or in Albuquerque, New Mexico. The Department contends that Taxpayer in 2012

3 did not “live within the boundaries” of the reservation, because she owns a familial residence in

4 Albuquerque, which the Department contends is her domicile. The taxpayer contends that the

5 majority of her time in 2012 was spent on the Navajo Nation, and her residence for work was a

6 rented trailer on lands held in trust, subject to restrictions on alienation, within the Navajo Nation,

7 and domicile is not the relevant inquiry.

8 Domicile

9 The Department argued that whether the exemption applies hinges on a determination of

10 domicile and residency. To examine this argument, one must determine what the legislature

11 intended in writing the statute.

12 When construing statutes, our guiding principle is to determine and give effect to
13 legislative intent. In ascertaining the Legislature's intent, we are aided by classic
14 canons of statutory construction. We look first to the plain language of the statute,
15 giving the words their ordinary meaning, unless the Legislature indicates a different
16 one was intended. In addition, we strive to read related statutes in harmony so as to
17 give effect to all provisions… the provisions of a statute must be read together with
18 other statutes in pari materia under the presumption that the legislature acted with
19 full knowledge of relevant statutory and common law. Thus, two statutes covering
20 the same subject matter should be harmonized and construed together when possible,
21 in a way that facilitates their operation and the achievement of their goals.

1
The language of Section 7-2-5.5 concerning the land status, i.e., a “reservation or pueblo grant or within the
boundaries of lands held in trust subject to restriction against alienation imposed by the United States,” generally
tracks the federal jurisprudence and statutory law defining “Indian country.” “Congress has defined Indian country
broadly to include formal and informal reservations, dependent Indian communities, and Indian allotments, whether
restricted or held in trust by the United States.” Oklahoma Tax Comm’n v. Sac & Fox Nation, 508 U.S. 114, 123,
113 S.Ct. 1985 (1993). See also, 25 U.S.C. 1151 (“ “Indian country”, as used in this chapter means (a) all land
within the limits of any Indian reservation under the jurisdiction of the United States Government, notwithstanding
the issuance of any patent, and, including rights-of-way running through the reservation, (b) all dependent Indian
communities within the borders of the United States whether within the original or subsequently acquired territory
thereof, and whether within or without the limits of a state, and (c) all Indian allotments, the Indian titles to which
have not been extinguished, including rights-of-way running through the same.”).

In the Matter of the Protest of Jennifer A. Skeet, page 10 of 25.
1 N.M. Indus. Energy Consumers v. Pub. Regulation Comm’n, 2007-NMCA-053, ¶ 20, 142 N.M.

2 533, 168 P.3d 105 (quotation marks, citations and ellipsis omitted) (emphasis in original).

3 Likewise, extra words are not to be read into the statute, if it makes sense as written. See Johnson v.

4 N.M. Oil Conservation Comm’n, 1999-NMSC-021, ¶ 27, 127 N.M. 120, 978 P.2d 327.

5 “Domicile” is defined in a subsection of the regulation elucidating “residency.” See

6 Regulation 3.3.1.9 (C) NMAC (12/15/10). “A domicile is the place where an individual has a true,

7 fixed home, is a permanent establishment to which the individual intends to return after an absence,

8 and is where the individual has voluntarily fixed habitation of self and family with the intention of

9 making a permanent home. Every individual has a domicile somewhere, and each individual has

10 only one domicile at a time.” Id. Under the thirteen non-exclusive factors for domicile, the

11 Department established many factors in favor of finding Ms. Skeet’s domicile during 2012 was in

12 Albuquerque, New Mexico, where she maintained a fixed residence since 2000, which she owned

13 by herself and her husband, where she would return to after the work week, the address of which

14 she used for federal income tax returns, driver’s licensing, vehicle registration, voter registration,

15 and other important documents. Ms. Skeet also established that she has lived and worked on the

16 Navajo Nation since 1998, maintaining a rented home there, maintaining community and familial

17 connections there, with a family ranch within the Navajo Nation, near the chapter house where she

18 maintains her member enrollment, she works for and within the Navajo Nation, and she is

19 professionally licensed in New Mexico and with the Navajo Nation bar associations.

20 Nevertheless, whether Ms. Skeet is a statutory “resident” of New Mexico is not the issue to

21 be decided here. The claimed exemption does not use the words “resident of” or “domiciled

22 within” Indian country as a precursor to granting the exemption. Turning to the language of the

23 exemption statute, the element at issue here is whether “the member … lives within the boundaries”

In the Matter of the Protest of Jennifer A. Skeet, page 11 of 25.
1 of Indian country. See Section 7-2-5.5. The applicable phrase is “lives within the boundaries.” The

2 phrase is not “is a resident of” or “is domiciled within” or “lives exclusively within.” The

3 Legislature could have chosen such other language to properly reflect its intent, if its true intent was

4 to conflate “lives within” with “domicile.” As stated in previous decisions of this office, “[n]either

5 the statute nor the regulation interpreting the statute provide a definition, standard, or test to

6 determine what is meant to “live within the boundaries” of tribal land.” See The protest of Aurelia

7 Shorty, Decision and Order #11-17, issued August 17, 2011 (N.M. Taxation and Revenue Dep’t,

8 Hearings Bureau), page 8 (non-precedential); See also, The protest of John and Bonnie Yearley,

9 Decision and Order #11-29, issued December 2, 2011 (N.M. Taxation and Revenue Dep’t, Hearings

10 Bureau), page 10-11 (non-precedential); Accord, The protest of Edward J. Clah and Melvina

11 Murphy, Decision and Order #12-19, issued September 21, 2012, (N.M. Taxation and Revenue

12 Dep’t, Hearings Bureau) (non-precedential). The “lives within” language originates from federal

13 jurisprudence, which the legislators who bore the bill into law, are presumed to be aware of.

14 McClanahan, at 165 (“Appellant is an enrolled member of the Navajo tribe who lives on that

15 portion of the Navajo Reservation located within the State of Arizona”) (emphasis added).

16 Oklahoma Tax Comm’n v. Sac & Fox Nation, 508 U.S. 114, 123, 113 S.Ct. 1985 (1993) (“a tribal

17 member need not live on a formal reservation to be outside the State's taxing jurisdiction; it is

18 enough that the member live in ‘Indian country.’”) (emphasis added).

19 The Department urged the Hearing Officer to use the same standards the Navajo Supreme

20 Court used when determining whether an applicant to be elected as President of the Navajo Nation

21 satisfied the residency requirements of that position. See In re Lee, 2006 Navajo Sup. LEXIS 8, 6

22 American Tribal Law 788. In that instance, the applicable language of the Navajo Nation Code

23 required that the presidential candidate both have “permanent residence” and be “continually

In the Matter of the Protest of Jennifer A. Skeet, page 12 of 25.
1 present” within the Navajo Nation for three years preceding the election. Id. at 4-5. While the

2 Navajo Supreme Court ultimately overturned the permanent residency requirement, allowing the

3 voters to decide who represented their interests, the New Mexico legislature did not use that same

4 language, so the same analysis does not assist us in interpreting what the New Mexico legislature

5 intended. Extra words are not to be read into the statute, if it makes sense as written. See Johnson,

6 at ¶ 27.

7 When interpreting the phrase “lives within the boundaries” of tribal land, this forum has

8 afforded great weight to “a continuing physical presence” as opposed to the person’s intent to

9 return, remain and make a permanent home, which is a guiding principal of “domicile.” See The

10 protest of Aurelia Shorty, Decision and Order #11-17, issued August 17, 2011; See also, The protest

11 of John and Bonnie Yearley, Decision and Order #11-29, issued December 2, 2011; Accord, The

12 protest of Edward J. Clah and Melvina Murphy, Decision and Order #12-19, issued September 21,

13 2012. See also Regulation 3.3.1.9 NMAC. I will continue to do so even though stare decisis does

14 not strictly apply to decisions of this forum. Administrative decisions are not given the weight of

15 precedence. See Hess Corp. v. N.M. Taxation and Revenue Dep’t, 2011-NMCA-043, ¶ 35, 149

16 N.M. 527 (noting that an unpublished decision is written solely for the benefit of the parties and is

17 not controlling precedent). See also Rule 12-405 NMRA (2012) (stating that unpublished decisions

18 are not precedent but may still be persuasive). I continue to do so because the weight of the

19 common law on the subject supports the method of interpretation. See State v. Hubble, 2009-

20 NMSC-014, ¶13, 146 N.M. 70, 206 P.3d 579 (A statutory construction analysis begins by

21 examining the words chosen by the legislature and the plain meaning of those words). See also

22 Johnson v. N.M. Oil Conservation Comm’n, 1999-NMSC-021, ¶ 27, 127 N.M. 120, 978 P.2d 327

In the Matter of the Protest of Jennifer A. Skeet, page 13 of 25.
1 (Extra words should not be read into a statute if the statute is plain on its face, especially if it makes

2 sense as written).

3 Under this standard, Ms. Skeet, who maintains residences on both sides of the state border,

4 one within the Navajo Nation in Arizona, and one outside the Navajo Nation’s boundaries in New

5 Mexico, qualifies as living both within the boundaries and outside the boundaries. Ms. Skeet lives

6 on trust lands within the Navajo Nation while working, and she lives outside the Navajo Nation

7 when not working. She spends seventy percent of her time on the Navajo Nation, either in the Fort

8 Defiance and Window Rock area, or at the family ranch in Bread Springs. For the other thirty

9 percent of her time, she spends time with her husband, primarily in Albuquerque. Where a taxpayer

10 goes on her days off, during paid vacation time or paid sick time is not relevant to the Department in

11 determining the applicability of the exemption. The exemption of Section 7-2-5.5 applies to Ms.

12 Skeet’s income, because during 2012 she lived within the boundaries of the Navajo Nation when

13 she earned her income. See The protest of James and Nora Tutt, Decision and Order #13-36, issued

14 November 27, 2013, (N.M. Taxation and Revenue Dep’t, Hearings Bureau) (non-precedential)

15 (protest granted when taxpayer, a tribal member, showed that his employer, a tribal entity, provided

16 housing for him on tribal lands, despite the fact he maintained a familial residence off of tribal

17 lands).

18 Constitutional law

19 The parties urged the Hearing Officer to consider Supreme Court caselaw, and in doing so

20 suggested that even without the statutory exemption, the income was not taxable by the state. As

21 stated above, the exemption is a modified codification of rules established under constitutional law.

22 Under the United States Constitution, Congress shall have the power “[t]o regulate Commerce with

23 foreign Nations, and among the several States, and with the Indian Tribes.” USCS Const. Art. I, § 8,

In the Matter of the Protest of Jennifer A. Skeet, page 14 of 25.
1 Cl 3. It is longstanding jurisprudence that the Constitution permits Congress alone to regulate trade

2 and intercourse with Indian nations, and to treat them “as distinct political communities, having

3 territorial boundaries, within which their authority is exclusive.” Worcester v. Georgia, 31 U.S. 515,

4 557 (1832).

5 Over the years, the Supreme Court has addressed various states’ attempts to tax gross

6 receipts, property, inheritance, business activity, motor vehicle fuel, tobacco sales, and individual’s

7 income both within and outside Indian country. In the leading case pertinent to income tax,

8 McClanahan v. Arizona State Tax Comm’n, 411 U.S. 164, 93 S. Ct. 1257 (1973), the taxpayer

9 conceded that she was a resident of the state under the Arizona tax law. See Id. at 166, FN 3. The

10 fact that the taxpayer legally qualified as a resident of Arizona played no role in the Supreme

11 Court’s analysis of the issue or its ultimate holding. The relevant inquiry was first, whether the

12 income was wholly derived from “reservation sources”, and second, whether the income was earned

13 by a “reservation Indian.” Id. at 165. Ms. Rosalind McClanahan, the plaintiff-appellant, was an

14 “enrolled member of the Navajo tribe” and she lived “on that portion of the Navajo Reservation

15 located within the State of Arizona.” Id. Further, the entirety of her income was “derived from

16 within the Navajo Reservation.” Id. at 166. By attempting to tax the income earned, the state of

17 Arizona “interfered with matters which the relevant treaty and statutes leave to the exclusive

18 province of the Federal Government and the Indians themselves.” Id. at 165. Yet, the Court

19 explicitly limited its holding, stating: “We are not here dealing with Indians who have left or never

20 inhabited reservations set aside for their exclusive use or who do not possess the usual

21 accoutrements of tribal self-government.” Id. at 167. The Court indicated that “the [Indian

22 sovereignty] doctrine has not been rigidly applied in cases where Indians have left the reservation

23 and become assimilated into the general community.” Id. at 171.

In the Matter of the Protest of Jennifer A. Skeet, page 15 of 25.
1 In the same decision, the Supreme Court used a methodology for analysis of such issues as

2 well as reiterated its clear canon of construction, a rule of leniency, to interpret “doubtful” treaty

3 language to favor the Indian people. Id. at 174. The court reiterated the starting point and general

4 principal of law that, absent an act of Congress, who is empowered by the Constitution to engage in

5 commerce with Indians, Federal law prohibits states from exercising authority over Indians and

6 Indian lands, stating: “State laws generally are not applicable to tribal Indians on an Indian

7 reservation except where Congress has expressly provided that State laws shall apply.” Id. at 170-

8 171. So, to answer the question of taxability, using the methodology used by the Court in

9 McClanahan, and thereafter, we start with the treaty, proceed to subsequent acts of Congress,

10 including enabling legislation of the State of New Mexico, and court precedent.

11 Treaties

12 The Treaty with the Navaho, 1849, Sept. 9, 1849, 9 Stat. 974 (“1849 Treaty”), and the

13 Treaty with the Navaho, 1868, June 1, 1868, 15 Stat. 667 (“1868 Treaty”), are the two treaties

14 providing the entire agreements between Congress and the Navajo Nation. While the 1849 Treaty

15 refers to the laws of New Mexico, the State of New Mexico had not been established, and would not

16 be until 1912. Nevertheless, the 1849 Treaty acknowledges that the government of the United States

17 has “the sole and exclusive right of regulating trade and intercourse with the said Navajoes.” See

18 Art. III. The 1868 Treaty by its terms secured, primarily, a peace between the warring United States

19 and the Navajo Nation and provided protection against acts of “bad men” from either group who

20 crossed boundaries and did harm to members of the other group. See Art. I. The agreement

21 conferred the Navajo Nation the right to reserved lands and described the land with particularity.

22 See Art. II. 2 Yet, perhaps as a warning against interference with westward expansion and a method

2
After 1868, the treaty-making power of Congress was limited, and adjustments to the reservation land boundaries
were made by Executive orders. See Peter Iverson, Diné: A History of the Navajos 71-74 (2002).

In the Matter of the Protest of Jennifer A. Skeet, page 16 of 25.
1 of assimilation, Article XIII, informs the parties that “if any Navajo Indian or Indians shall leave the

2 reservation herein described to settle elsewhere, he or they shall forfeit all the rights, privileges, and

3 annuities conferred by the terms of this treaty.” Id. Art. XIII.

4 Federal decisions have addressed the meaning of Article XIII. One court established that a

5 Navajo victim of assault off the reservation had forfeited her right to government reparations under

6 the “bad men” provision of Article I of the 1868 Treaty. Pablo v. United States, 98 Fed. Cl. 376

7 (2011). Another court established that a Navajo student, residing in a school dormitory controlled

8 by Navajo authorities, but off the reservation, forfeited his right under the same “bad men”

9 provision of Article I of the 1868 Treaty, after an assault by another student. Herrera v. United

10 States, 39 Fed. Cl. 419 (1997). In both instances, the Courts found that the language of the forfeiture

11 provision of Article XIII of the 1868 Treaty was unambiguous, and the territorial scope of the “bad

12 men” provisions strictly limited the application of the protection granted under the 1868 Treaty.

13 Herrera, at 421. See also Pablo, at 382. The protection against state taxation on income, however,

14 does not stem from the treaty exactly, as taxation is never mentioned within the 1868 Treaty. The

15 protection stems from inherent Indian sovereignty and from Congress’s inherent power to regulate

16 commerce with Indians. So, by leaving the lands of the reservation, even with the intent to “settle”

17 elsewhere, there is no presumptive abandonment or forfeiture of the immunity from state taxation

18 for activity wholly conducted on the reservation, by a member of the tribe, especially, since the

19 individual Taxpayer here made a conscious and concerted commitment to return to the reservation,

20 living there several days of every week to earn the income in question.

21 Statehood

22 Next, we turn to era of statehood. New Mexico became a State in 1912. The enabling act,

23 allowing the Territory of New Mexico to form a state constitution was an act of the United States

In the Matter of the Protest of Jennifer A. Skeet, page 17 of 25.
1 Congress, on June 20, 1910. See Statehood of New Mexico and Arizona, 61 P.L. 219, 36 Stat. 557,

2 61 Cong. Ch. 310. Within the enabling act, Congress required that “the people inhabiting said

3 proposed State do agree and declare that they forever disclaim all right and title …to all lands lying

4 within said boundaries owned or held by any Indian or Indian tribes the right or title to which shall

5 have been acquired through or from the United States or any prior sovereignty, and that until the

6 title of such Indian or Indian tribes shall have been extinguished the same shall be and remain

7 subject to the disposition and under the absolute jurisdiction and control of the Congress of the

8 United States.” See Id. Sec. 2, at 558. The enabling act reminds the proposed State of New Mexico

9 that “no taxes shall be imposed by the State upon lands or property therein [within the reservation].”

10 Id. at 559. The New Mexico Constitution then solidified the requirements of the enabling act, by

11 adopting it in its entirety as an article on January 21, 1911. N.M. Const. Art. XXI. The explicit

12 prohibition, required of New Mexico by Congress for statehood, forbids state taxation of “lands or

13 property therein [within the reservation].” Id.

14 Acts of Congress

15 Following New Mexico’s statehood in 1912, Native Americans became United States

16 citizens under the Indian Citizenship Act, 43 Stat. 253 (June 2, 1924), as superseded by Nationality

17 Act of 1940, 54 Stat. 1137, 8 USCS § 1401(b). Both the Indian Citizenship Act and the Nationality

18 Act protected tribal members from impairment of their property rights as members of their tribes.

19 The Indian Reorganization Act did not change any specific tax aspect of the relationship between

20 New Mexico and the Navajo Nation. See 73 P.L.383, 48 Stat. 984 (1934). However, the Indian

21 Reorganization Act did provide a mechanism for tribes to create their own constitutions, and

22 provided that tribal governments created thereby would retain their rights to “negotiate with the

23 Federal, State and local Governments.” 48 Stat. 984, 987. Pursuant to this power to negotiate, the

In the Matter of the Protest of Jennifer A. Skeet, page 18 of 25.
1 Hearing Officer could not discover any compact negotiated between the Navajo Nation and the

2 State of New Mexico affecting income taxation. New Mexico is not a state which has assumed civil

3 or criminal jurisdiction in Indian country pursuant to Public Law 280. P.L. 83-280, 67 Stat. 588

4 (1953).

5 Survey of relevant cases

6 After McClanahan, the Supreme Court addressed another state taxation issue in Oklahoma

7 Tax Comm’n v. Sac & Fox Nation, 508 U.S. 114, 113 S.Ct. 1985 (1993). In the runup to the

8 Supreme Court, as summarized by the Supreme Court, “[t]he District Court ‘did not look to where

9 the tribal members resided; it rested its holding instead only on where they worked.’” Id. at 121.

10 And the Tenth Circuit Court of Appeals “looked only to the status of the land on which the income

11 was earned” and ignored the residence of the income earner. Id. at 122. The Supreme Court

12 determined that not considering where a tribal member lives is error, and that “[t]he residence of a

13 tribal member is a significant component of the McClanahan presumption against state tax

14 jurisdiction. But our cases make clear that a tribal member need not live on a formal reservation to

15 be outside the State’s taxing jurisdiction; it is enough that the member live in Indian country.” Id. at

16 123 (quotation marks omitted). That determination was made in light of the fact that the Oklahoma

17 Tax Commission argued that the reservation had been disestablished pursuant to the terms of the

18 1891 Treaty between the Congress and the Sac and Fox Nation. Nevertheless, the Supreme Court

19 remanded the case for additional evidence of where the tribal employees lived. Id. at 126. It should

20 be noted that even though the Supreme Court used “residence” and “live in” interchangeably, they

21 were not interpreting New Mexico’s or any other state’s definition of residence.

22 Here presents the vexing problem, and a convergence of jurisprudence. There is

23 jurisprudence that covers activity on tribal lands, by tribal members, and there is jurisprudence that

In the Matter of the Protest of Jennifer A. Skeet, page 19 of 25.
1 covers activity by the tribe and tribal members outside the boundaries of tribal lands. Mescalero

2 Apache Tribe v. Jones, 411 U.S.145, 93 S.Ct. 1267 (1973) is a case of the latter sort. The Supreme

3 Court allowed the State of New Mexico to impose a gross receipts tax on the receipts of a ski resort

4 owned by the Mescalero Apache Tribe, where the resort was located off the reservation on land

5 leased from the federal government. The court made it clear that the New Mexico enabling act

6 reserved the right of the State of New Mexico to tax all Indian land and Indian activities located or

7 occurring outside of an Indian reservation. Id. at 149-150.

8 Hence, the relevant inquiry contains not only where the actor was living at the time, but also

9 where the income-generating activity took place. “When on-reservation conduct involving only

10 Indians is at issue, state law is generally inapplicable, for the State's regulatory interest is likely to be

11 minimal and the federal interest in encouraging tribal self-government is at its strongest.” White

12 Mountain Apache Tribe et al. v. Bracker et al., 488 U.S. 136, 144, 100 S. Ct. 2578 (1980). The line

13 of cases involving tribal activity outside of “Indian country” includes a discussion of the possibility

14 of what happens when the taxable activity occurs both within Indian country and outside its

15 boundaries. Washington v. Confederated Tribes of the Colville Indian Reservation, 447 U.S. 134,

16 163-164 (1980) held that when the state motor vehicle use tax is not tailored to the actual amount of

17 off-reservation activity, the tax is invalid. The tax in that instance was based on vehicle value,

18 rather than usage within the state. Id. at 142.

19 These cases encourage lower courts and administrative forums such as this to consider both

20 the location of the tribal member (within the state or in Indian country), and the location of the

21 activity sought to be taxed (within the state, within Indian country). Under the sought exemption,

22 Section 7-2-5.5, there is no requirement of exclusivity of “living within the boundaries” of a

23 reservation, but the Taxpayer in this instance does maintain a residence on the reservation to be

In the Matter of the Protest of Jennifer A. Skeet, page 20 of 25.
1 close to work. The New Mexico personal income tax does not, in such an instance, tailor its scope

2 to exclude activities conducted wholly on the reservation. Hence, the State of New Mexico has

3 overreached in assessing this Taxpayer for all personal income gained wholly on the reservation, by

4 a reservation Indian, who lives within the reservation boundaries.

5 Department Regulations and 2012 PIT-1 Instructions:

6 While the statute does not provide guidance to taxpayers that the Department considered

7 “lives within” to be conflated with “domicile,” the Department’s regulations and instructions for the

8 2012 PIT-13 and PIT-1 EZ4 do. The regulation which covers residency and domicile provides the

9 following example:

10 G is a Native American who lives and works on his tribe’s pueblo in New Mexico.
11 Federal law prohibits the state from taxing income earned by a Native American
12 who lives and works on his tribe’s territory. G joins the marines and is stationed
13 outside New Mexico. Because G’s domicile remains unchanged during his military
14 service, G’s income from military service is treated as income earned on the tribe’s
15 territory by a tribal member living on the tribe’s territory, and is not taxable by New
16 Mexico.

17 Regulation 3.3.1.9 (E)(8) NMAC (12/15/10) (emphasis added). In this example, the physical

18 location of the work does not matter, as long as the domicile (characterized by the intent to return to

19 the pueblo after leaving the military) remains.

20 The PIT-1 instructions provide this guidance:

3
Available online through the New Mexico Taxation and Revenue Department’s website,
http://www.tax.newmexico.gov/forms-publications.aspx at: https://s3.amazonaws.com/realFile34821a95-73ca-43e7-
b06d-fad20f5183fd/85ea18d5-2110-4a0e-971a-3d9e2e5eaae2?response-content-
disposition=filename%3D%222012pit-1-ins.pdf%22&response-content-
type=application%2Fpdf&AWSAccessKeyId=AKIAJBI25DHBYGD7I7TA&Signature=UYOiqCG00d8WW%2Bh
8d%2Fjmnw7eEwU%3D&Expires=1572556562 (last accessed 10/31/2019).
4
Available online through the New Mexico Taxation and Revenue Department’s website,
http://www.tax.newmexico.gov/forms-publications.aspx at: https://s3.amazonaws.com/realFile34821a95-73ca-43e7-
b06d-fad20f5183fd/809f8e9b-065e-41e0-b6cd-01562e09d067?response-content-
disposition=filename%3D%222012pit-ez-ins.pdf%22&response-content-
type=application%2Fpdf&AWSAccessKeyId=AKIAJBI25DHBYGD7I7TA&Signature=iIfwYJAjcnbnkftjWhH0m
2z7LUU%3D&Expires=1572556661 (last accessed 10/31/2019).

In the Matter of the Protest of Jennifer A. Skeet, page 21 of 25.
1 Member of an Indian Nation, Tribe or Pueblo

2 The income of Indians who worked or lived on lands outside the Indian nation, tribe
3 or pueblo of which they are members is subject to New Mexico personal income tax.

4 Enrolled members of an Indian nation, tribe or pueblo who lived on the lands of the
5 Indian nation, tribe or pueblo where they are members and whose entire income was
6 earned from work on those lands do not need to file a New Mexico income tax
7 return. The income of a spouse or dependent of an “Enrolled member” is also
8 exempt, provided the spouse or dependent lives and works within the boundaries of
9 the member’s nation, tribe or pueblo.

10 Lands include formal and informal reservations, dependent Indian communities, and
11 Indian allotments, whether restricted or held in trust by the United States.

12 2012 New Mexico Personal Income Tax (PIT) Form Packet at 1-2 (General Information:

13 Who must file). This informational instruction tracks the statute and Constitutional precedent

14 concerning Indian country. However, the body of the instruction goes on to say:

15 File Schedule PIT-ADJ if you received any of the following income not taxable by
16 New Mexico or if you qualify for one or more of the following deductions or
17 exemptions: … you or your spouse, or both, are members of an Indian nation, tribe
18 or pueblo and your income was wholly earned on the lands of the reservation or
19 pueblo of which the individual is an enrolled member while domiciled on that
20 reservation, tribe or pueblo. (emphasis added)

21 Id. at 6 (Required forms and attachments). This language is repeated in the instructions for Line 15

22 of the 2012 PIT-1 form, Id. at 20, and in the instructions for Line 15 of the 2012 PIT-EZ form, at 3.

23 The use of the word “domiciled” reflects the Department’s intent to conflate “lives within”

24 and “domicile.” NMSA 1978, Section 9-11-6.2 (G) (2015) indicates: “[a]ny regulation, ruling,

25 instruction or order issued by the secretary or delegate of the secretary is presumed to be a proper

26 implementation of the provisions of the laws that are charged to the department, the secretary, any

27 division of the department or any director of any division of the department.” The Department may

28 interpret a tax statute without adopting a rule or regulation related to that statute. See Id. “The

29 legislature may not delegate authority to a board or commission to adopt rules or regulations which

In the Matter of the Protest of Jennifer A. Skeet, page 22 of 25.
1 abridge, enlarge, extend or modify the statute creating the right or imposing the duty.” Rainbo

2 Banking Co. of El Paso, Tex. v. Comm’r of Revenue, 1972 NMCA-139, 84 N.M. 303, 502 P.2d 406.

3 When an agency is charged with the application of a statute, its construction is given some

4 deference, but its construction will be disregarded if its interpretation of the statute is found to be

5 unreasonable or unlawful. See N.M. AG v. N.M. Pub. Regulation Comm’n, 2013-NMSC-042, ¶ 12.

6 When statutes and regulations are inconsistent, the statute prevails. See Picket Ranch, LLC v.

7 Curry, 2006-NMCA-082, ¶ 10, 140 N.M. 49. A regulation cannot overrule a statute. See Jones v.

8 Employment Servs. Div., 1980-NMSC-120, 95 N.M. 97. Here, because the statutory language

9 tracks Supreme Court precedent on constitutional law, which is the supreme law of the land, and the

10 regulation and the instructions expand the meaning of the language used in the statue, the statute

11 and the Supreme Court precedent prevail.

12 CONCLUSIONS OF LAW

13 A. Taxpayer filed a timely, written protest of the Department’s assessment and

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

15 B. The hearing was timely set and held within 90-days of protest under NMSA 1978,

16 Section 7-1B-8 (2015).

17 C. Taxpayer properly claimed that her income from work performed on the Navajo

18 Nation, by an enrolled member of the Navajo Nation, who lives on lands within the Navajo Nation

19 was exempt from taxation under NMSA 1978, Section 7-2-5.5 (1995).

20 D. Taxpayer’s income is exempt from state taxation pursuant to federal jurisprudence.

21 See McClanahan v. Arizona State Tax Comm’n, 411 U.S. 164, 93 S. Ct. 1257 (1973). See also

22 Washington v. Confederated Tribes of the Colville Indian Reservation, 447 U.S. 134, 163-164

23 (1980).

In the Matter of the Protest of Jennifer A. Skeet, page 23 of 25.
1 For the foregoing reasons, the Taxpayer’s protest IS GRANTED. IT IS ORDERED that

2 the Department abate any outstanding 2012 income tax, penalty and interest remaining under the

3 assessment.

4 DATED: November 7, 2019.

5
6 Ignacio V. Gallegos
7 Hearing Officer
8 Administrative Hearings Office
9 P.O. Box 6400
10 Santa Fe, NM 87502

11 NOTICE OF RIGHT TO APPEAL

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

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

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

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

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

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

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

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

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

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

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

23

In the Matter of the Protest of Jennifer A. Skeet, page 24 of 25.
1 CERTIFICATE OF SERVICE

2 On November 7, 2019, a copy of the foregoing Decision and Order was submitted to the

3 parties listed below in the following manner:

4 First Class Mail Interdepartmental Mail

5 INTENTIONALLY BLANK
6
7 John Griego
8 Legal Assistant
9 Administrative Hearings Office
10 P.O. Box 6400
11 Santa Fe, NM 87502

In the Matter of the Protest of Jennifer A. Skeet, page 25 of 25.