Can a New York resident recover New Mexico wage withholding for 2013 when the refund claim was filed about six months after New Mexico's three-year deadline?

Plain-English summary

Roy Charletta's 2013 New Mexico withholding refund was time-barred because he filed the claim in June 2018, approximately six months after the statutory deadline. The Department had granted his refund requests for 2014–2016, but the earlier year fell outside the general three-year window.

Charletta was a New York resident. In February or March 2018, he discovered that an employee handling payroll had inadvertently selected both New Mexico and New York withholding beginning with his 2013 employment. After contacting the Department, he sought and received refunds for 2014, 2015, and 2016, then filed the 2013 return and refund request in June 2018.

The 2013 return and payment were due April 15, 2014. Because the overpayment came from employer withholding rather than an assessment, the general refund deadline was three years after the end of 2014—December 31, 2017. The June 2018 claim was therefore late.

Two 2021 Return Adjustment Notices did not revive the claim. One initially showed a 2013 liability and a later one showed none. But a return adjustment notice is not a statutory assessment, and only an actual assessment can trigger the special one-year refund period described in Section 7-1-26(F)(5).

Charletta also testified that Department employees did not warn him about the deadline and later told him the 2013 year had been reopened, the limitation was void, and the refund would be approved. Equitable estoppel still did not apply. Those later statements occurred more than two years after the refund claim, so he had not relied on them when filing late. The Administrative Hearings Office also lacked statutory authority to grant an equitable remedy.

Result: protest DENIED. The decision did not state the requested refund amount.

Date note

The PDF contains no dated signature line. Its certificate of service states that the decision was sent to the parties on December 15, 2021, which also matches the official post date used for issued_date.

What this means for you

Withholding refunds remain subject to a filing deadline

An employer's withholding mistake does not by itself extend the period for claiming a refund. Each tax year must be checked separately.

A return adjustment notice is not necessarily an assessment

The special post-assessment refund window applies only when the Department has issued an assessment meeting the statutory requirements. A notice saying an assessment might follow does not restart time.

Oral guidance may not overcome a statutory deadline

Estoppel against the state is disfavored in tax matters and cannot override statutory requirements. Reliance and detriment must also be established.

Track refund periods from the controlling statutory date

For this withholding overpayment, the decision measured three years from the end of the calendar year in which the tax was due, not from the later date when Charletta discovered the payroll error.

Common questions

Q: Why were the 2014–2016 refunds granted but not 2013?
A: The 2013 claim was filed after its December 31, 2017 deadline; the later years were within their applicable periods.

Q: Did the 2021 notices reopen the 2013 year?
A: No. They were return adjustment notices, not assessments that could trigger the one-year extension under Section 7-1-26(F)(5).

Q: Did a Department employee promise the refund would be approved?
A: Charletta credibly testified to such a statement, but it came after he had already filed the late claim and did not establish detrimental reliance.

Q: Could the hearing officer grant equitable estoppel anyway?
A: No. The decision held that the Administrative Hearings Office lacked statutory power to award that equitable remedy.

Q: How late was the claim?
A: Approximately six months. The deadline was December 31, 2017 and the claim was filed in June 2018.

Citations and references

Statutes:

• NMSA 1978, § 7-1-26(F)(1) and (5) — general refund deadline and limited extension following an assessment
• NMSA 1978, § 7-2-12 — due date tied to the federal income-tax year and return date
• NMSA 1978, § 7-1-17(B) — statutory notice of assessment
• NMSA 1978, §§ 7-1B-1 through 7-1B-8 — Administrative Hearings Office authority and procedure
• NMSA 1978, § 7-1-25 — appeal right

Cases:

• In re Kilmer, 2004-NMCA-122 — refund deadlines, stale claims, and notices that do not restart limitations
• Wisznia v. State, Human Services Department, 1998-NMSC-011 — demanding standard for estoppel against the state
• Taxation and Revenue Department v. Bien Mur Indian Market, 1989-NMSC-015 — estoppel disfavored in tax cases
• AA Oilfield Service v. New Mexico State Corporation Commission, 1994-NMSC-085 — administrative quasi-judicial power does not include equitable relief absent authority

Source

• Listing: New Mexico Decisions & Orders
• Decision post: Roy A Charletta
• Decision PDF: D&O 21-24

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 ROY A. CHARLETTA
6 TO THE DENIAL OF REFUND
7 ISSUED UNDER LETTER ID NO. L1674236336

8 v. AHO No. 21.10-061R, D&O No. 21-24

9 NEW MEXICO TAXATION AND REVENUE DEPARTMENT

10 DECISION AND ORDER

11 On November 30, 2021, Hearing Officer Dee Dee Hoxie, Esq. conducted a

12 videoconference hearing on the merits of the protest to the denial of refund. The Taxation and

13 Revenue Department (Department) was represented by Richard Pener, Staff Attorney, who

14 appeared by internet. Sonya Varela, Auditor, also appeared by internet on behalf of the

15 Department. Roy Charletta (Taxpayer) appeared by internet and telephone for the hearing. The

16 Taxpayer testified. The Hearing Officer took notice of all documents in the administrative file.

17 No exhibits were submitted.

18 The main issue to be decided is whether the Department properly denied the claim for

19 refund for the 2013 tax year. The Hearing Officer considered all of the evidence and arguments

20 presented by both parties. Because the Taxpayer’s claim for refund was filed beyond the three-

21 year statute of limitations, the Hearing Officer finds in favor of the Department. IT IS

22 DECIDED AND ORDERED AS FOLLOWS:

23 FINDINGS OF FACT

24 1. On March 1, 2021, the Department issued a denial of refund for the 2013 tax year.

25 [Admin. file L1674236336; Testimony of Taxpayer].

Roy A. Charletta
Case No. 21.10-061R
page 1 of 7
1 2. On March 31, 2021, the Taxpayer filed a timely written protest to the denial of

2 refund. [Admin. file protest].

3 3. On April 30, 2021, the Department acknowledged its receipt of the protest.

4 [Admin. file L1781438896].

5 4. On October 25, 2021, the Department filed a request for hearing with the

6 Administrative Hearings Office. [Admin. file request].

7 5. The hearing on the merits occurred on November 30, 2021, which was within 90

8 days of the request as required by statute. [Admin. file].

9 6. In February or March 2018, the Taxpayer discovered that his employer had been

10 withholding New Mexico income tax from his pay since he began employment with them in

11 2013. [Testimony of Taxpayer; Admin. file].

12 7. The Taxpayer is a resident of New York. [Testimony of Taxpayer; Admin. file].

13 8. Apparently, an employee handling the pay for the company had inadvertently

14 checked the boxes for both New Mexico and New York withholding. [Testimony of Taxpayer].

15 9. After communicating with the Department in March or April 2018, the Taxpayer

16 filed requests for refund for the 2014, 2015, and 2016 tax years, which the Department granted.

17 [Testimony of Taxpayer; Admin. file].

18 10. The Department’s employee did not mention the statute of limitations to the

19 Taxpayer during their communications. [Testimony of Taxpayer].

20 11. In June 2018, the Taxpayer filed a return and requested a refund for the 2013 tax

21 year. [Testimony of Taxpayer; Admin. file].

Roy A. Charletta
Case No. 21.10-061R
page 2 of 7
1 12. In January 2021, the Department sent the Taxpayer a return adjustment notice that

2 indicated that the Taxpayer had an outstanding tax liability for the 2013 tax year. [Testimony of

3 Taxpayer; Admin. file L1142690224].

4 13. The Taxpayer did not make any payments to the Department based on this return

5 adjustment notice; rather, the Taxpayer contacted the Department to inquire about the notice. An

6 employee from the Department told the Taxpayer that the notice indicated that his 2013 tax year

7 had been reopened, that the statute of limitations was void, and that his refund would be

8 processed and approved. [Testimony of Taxpayer].

9 14. In February 2021, the Department sent the Taxpayer a return adjustment notice

10 that indicated that the Taxpayer had no outstanding tax liability for the 2013 tax year.

11 [Testimony of Taxpayer; Admin. file L0143839664].

12 15. On March 1, 2021, the Department denied the request for refund based on the

13 statute of limitations. [Testimony of Taxpayer; Admin. file L1674236336].

14 DISCUSSION

15 Statute of Limitations for Filing a Claim for Refund.

16 Generally, a claim for refund may be made “only within three years after the end of the

17 calendar year in which” the tax payment was originally due or when the overpayment resulted from

18 an assessment, whichever is later. See NMSA 1978, § 7-1-26 (F) (1) (2019)1. New Mexico income

19 taxes are generally due on April 15th of the year following the taxable year, in accordance with the

20 federal income taxable year and return due dates. See NMSA 1978, § 7-2-12 (2016). Therefore, the

21 return and taxes for the 2013 taxable year were due on April 15, 2014. See id. The Taxpayer’s

1
For ease of reference, the most current version of the statute is cited. The previous versions of the statute also
contained the general three-year statute of limitations. See generally NMSA 1978, § 7-1-26.
Roy A. Charletta
Case No. 21.10-061R
page 3 of 7
1 overpayment resulted from withholding tax payments made by his company, not from an

2 assessment. [Testimony of Taxpayer]. Three years from the end of 2014 was December 31, 2017.

3 The Taxpayer’s return with the claim for refund was filed in June 2018. [Testimony of Taxpayer;

4 Admin. file]. Therefore, the Taxpayer’s claim for refund of the 2013 taxable year was filed

5 approximately six months beyond the three-year statute of limitations. See NMSA 1978, § 7-1-26.

6 [Testimony of Taxpayer; Admin. file].

7 The Taxpayer argues that the Department’s return adjustment notices in January and

8 February 2021 reopened the 2013 tax year for claims for refund and effectively voided the statute of

9 limitations. The statute provides for an extended statute of limitations for claiming a refund when a

10 taxpayer is assessed for a tax period that occurred more than three years prior to the assessment.

11 See NMSA 1978, § 7-1-26 (F) (5). In that instance, the taxpayer may file a claim for refund within

12 one year of the assessment date for the same tax period assessed or for any period following the

13 assessed tax period. See id.

14 The return adjustment notice is not an assessment. See NMSA 1978, § 7-1-17 (B) (2007)

15 (indicating what constitutes a notice of assessment). The return adjustment notice showing a

16 liability advised that a notice of assessment might be issued in the future. [L1142690224]. A letter

17 that advises a taxpayer of an essential conclusion made by the Department does not restart time

18 limitations. See In Re Kilmer, 2004-NMCA-122, ¶ 43, 136 N.M. 440. The purpose of statutory

19 deadlines for claiming a refund is to avoid stale claims. See id. at ¶ 16. A taxpayer has the

20 burden of claiming the refund within the statutory time limits because the taxpayer is in the best

21 position to know the status of their tax liability. See id.

22 Estoppel.

Roy A. Charletta
Case No. 21.10-061R
page 4 of 7
1 The Taxpayer argues that the Department’s employee also told him that the statute of

2 limitations would be void and that his claim would be processed and approved. The Taxpayer’s

3 argument is essentially one for equitable estoppel. Equitable estoppel may be found against the

4 state where there is “a shocking degree of aggravated and overreaching conduct or where right

5 and justice demand it." Wisznia v. State, Human Servs. Dep't, 1998-NMSC-011, ¶ 17, 125 N.M.

6 140. Equitable estoppel against the state is disfavored, especially in cases involving taxes. See

7 Taxation and Revenue Dep’t v. Bien Mur Indian Market, 1989-NMSC-015, ¶9-10, 108 N.M.

8 228. Equitable estoppel will not apply against the state when it would be contrary to the

9 requirements of statute or law. See Rainaldi v. Pub. Employees Ret. Bd., 1993-NMSC-028, ¶ 18-

10 19, 115 N.M. 650. See also In Re Kilmer, 2004-NMCA-122, ¶ 26.

11 An essential element of equitable estoppel is that the Taxpayer relied on the

12 government’s conduct to his detriment. See In Re Kilmer, 2004-NMCA-122, ¶ 27. The

13 Taxpayer clearly did not rely on the return adjustment notice since it was issued more than two

14 years after he made his claim for refund. [Testimony of Taxpayer; Admin. file L1142690224].

15 Also, the issue of equitable estoppel is moot in the context of this protest because the

16 Administrative Hearings Office has not been granted statutory authority to exercise an equitable

17 judicial remedy. See AA Oilfield Serv. v. N.M. State Corp. Comm’n, 1994-NMSC-085, ¶ 18, 118

18 N.M. 273 (holding that the quasi-judicial powers of an administrative body did not empower it to

19 grant equitable relief, such as estoppel, because the authority is limited to making factual and

20 legal determinations as authorized by the statute). See Gzaskow v. Pub. Employees Ret. Bd.,

21 2017-NMCA-064, ¶35 (recognizing AA Oilfield Serv. for the proposition that an agency with

22 quasi-judicial powers did not have authority to grant an equitable remedy). See also NMSA

23 1978, § 7-1B-1, et seq.

Roy A. Charletta
Case No. 21.10-061R
page 5 of 7
1 CONCLUSIONS OF LAW

2 A. The Taxpayer filed a timely, written protest of the Department’s denial of refund,

3 and jurisdiction lies over the parties and the subject matter of this protest. See NMSA 1978, § 7-1B-

4 8 (2019).

5 B. The hearing was timely set and held within 90 days of the date that the request for

6 hearing was filed. See id.

7 C. The Taxpayer’s claim for refund was not filed within the three-year statute of

8 limitations. See NMSA 1978, § 7-1-26.

9 D. The Department properly denied the claim for refund as it was barred by the statute

10 of limitations. See id. See In Re Kilmer, 2004-NMCA-122.

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

12 Dee Dee Hoxie
13 Dee Dee Hoxie
14 Hearing Officer
15 Administrative Hearings Office
16 P.O. Box 6400
17 Santa Fe, NM 87502

18 NOTICE OF RIGHT TO APPEAL

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

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

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

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

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

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

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

Roy A. Charletta
Case No. 21.10-061R
page 6 of 7
1 Hearings Office may begin preparing the record proper. The parties will each be provided with a

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

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

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

5 CERTIFICATE OF SERVICE

6 On December 15, 2021, a copy of the foregoing Decision and Order was submitted to the

7 parties listed below in the following manner:

8 INTENTIONALLY BLANK

Roy A. Charletta
Case No. 21.10-061R
page 7 of 7