Can New Mexico tax a retirement distribution received while a taxpayer is temporarily in Nevada if the taxpayer spent more than 185 days of that year in New Mexico?

Plain-English summary

Michael Miller owed New Mexico personal income tax on a retirement-account withdrawal he received while living temporarily in Nevada. He spent 247 days in New Mexico during 2016—239 before moving to Nevada on August 27 and eight after returning on December 23—so he was a New Mexico resident under the statutory 185-day test.

Miller had taught in New Mexico for five and a half years and accumulated savings through the Educational Retirement Board. He withdrew $14,487.19 while handling his deceased father's estate in Nevada. Federal tax was withheld, but no state tax was withheld, and the distribution was missing from his original 2016 New Mexico return.

The hearing officer held that Miller's expressed intention to stay in Nevada did not change the result. Once physical presence in New Mexico reached 185 days, a claimed change of domicile during the year did not remove statutory residency. Miller also supplied no documentary proof of a permanent Nevada move, and he returned to New Mexico before year-end.

Retirement income is “compensation” under the Income Tax Act regulations. Compensation of a resident is allocated to New Mexico, including compensation received while temporarily working or living in a state that imposes no income tax. Nevada taxed none of the distribution, so Miller could not claim a credit for tax paid to another state.

Federal law barring a state from taxing a nonresident's retirement income did not protect Miller because he was a New Mexico statutory resident. The decision also rejected his reliance on Comptroller of the Treasury of Maryland v. Wynne: Nevada imposed no competing income tax, and New Mexico was taxing its own resident rather than discriminating against an out-of-state taxpayer.

Miller attempted to file an amended return after assessment, but it was unsigned and undated and the Department rejected it. The protest process was timely: the Department requested a hearing 164 days after the protest, and the merits hearing occurred 57 days after that request.

The assessment was $3,763.14: $2,741 of personal income tax, $548.20 of penalty, and $473.94 of interest. The penalty had already reached its statutory 20% maximum, while interest continued until the tax was fully paid.

Result: protest DENIED.

What this means for you

The 185-day test independently creates residency

Spending at least 185 days in New Mexico makes an individual a resident for the year. A later move or stated intent to remain elsewhere does not undo that physical-presence test.

New Mexico residents generally allocate retirement income to New Mexico

Receiving a distribution while temporarily in another state does not by itself move the income. The decision treated retirement income as resident compensation allocated to New Mexico.

No other-state tax means no credit for tax paid elsewhere

Nevada's lack of a personal income tax prevented double taxation, but it also meant Miller had no Nevada income tax for New Mexico to credit.

Amended returns must satisfy filing requirements

The Department did not accept the unsigned and undated amended PIT-1. A corrective return must be completed and filed in the prescribed form.

Common questions

Q: Why was Miller a New Mexico resident if he moved to Nevada in August?
A: His own credible testimony established 247 days in New Mexico during 2016, exceeding the statutory 185-day threshold.

Q: Did his intention to remain in Nevada matter?
A: Not to the 185-day test. The decision also found no documents corroborating a permanent change of domicile.

Q: Did federal law protect the retirement distribution?
A: No. The cited federal restriction protects retirement income of a person who is not a resident or domiciliary of the taxing state; Miller was a New Mexico resident.

Q: Could Miller claim a credit for Nevada tax?
A: No. Nevada did not impose personal income tax on the distribution.

Q: What liability was upheld?
A: $3,763.14 at assessment: $2,741 tax, $548.20 penalty, and $473.94 interest, with further interest accruing until full payment.

Citations and references

Statutes and regulations:

• NMSA 1978, §§ 7-2-1 through 7-2-39 — New Mexico Income Tax Act
• NMSA 1978, § 7-2-2(S) (2014) — residency through domicile or at least 185 days of physical presence
• NMSA 1978, §§ 7-2-11(A) and 7-2-13 — income allocation and credit for income tax paid to another state
• NMSA 1978, § 7-1-13(B) — return must be filed in the prescribed form
• NMSA 1978, §§ 7-1-17(C) and 7-1-3(Z) — assessment presumption and definition of tax
• NMSA 1978, §§ 7-1-67 and 7-1-69 — interest and penalty
• NMSA 1978, § 7-1B-8 — protest-hearing deadlines
• 4 U.S.C. § 114(a) — limits state taxation of a nonresident's retirement income
• Regulations 3.3.11.11(B) and 3.3.11.13(A) NMAC — allocation of resident compensation and retirement income

Cases:

• Comptroller of the Treasury of Maryland v. Wynne, 575 U.S. 543 (2015) — dormant Commerce Clause and multiple taxation
• Shaffer v. Carter, 252 U.S. 37 (1919) — a state may tax its residents
• New Mexico Taxation & Revenue Department v. Casias Trucking, 2014-NMCA-099 — burden to overcome an assessment
• MPC Ltd. v. New Mexico Taxation & Revenue Department, 2003-NMCA-021 — unsubstantiated statements do not overcome the assessment presumption

Source

• Listing: New Mexico Decisions & Orders
• Decision post: Michael Miller
• Decision PDF: D&O 22-03

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 MICHAEL MILLER
6 TO ASSESSMENT ISSUED UNDER
7 LETTER ID NO. L0913838512

8 v. Case Number 21.08-046A, Decision and Order No. 22-03

9 NEW MEXICO TAXATION AND REVENUE DEPARTMENT

10 DECISION AND ORDER

11 On October 5, 2021, Hearing Officer Ignacio V. Gallegos, Esq., conducted a merits

12 administrative hearing in the matter of the tax protest of Michael Miller (“Taxpayer”) pursuant to

13 the Tax Administration Act and the Administrative Hearings Office Act. At the hearing, Mr.

14 Michael Miller appeared representing himself and testified as Taxpayer’s sole witness. Staff

15 Attorney Kenneth Fladager appeared, representing the opposing party in the protest, the Taxation

16 and Revenue Department (“Department”). Department protest supervisor Patrick Zeller appeared

17 as a witness for the Department. Taxpayer offered exhibits 1 and 2 which were admitted into the

18 record without objection from the Department. The Department offered exhibit A, which

19 Taxpayer objected to, and was not admitted into the record. Exhibits are more fully described in

20 the exhibit log. The administrative file is considered part of the record.

21 In quick summary, this protest involves a Taxpayer’s assertion that the Department

22 improperly assessed an income tax on income received while Taxpayer was living in Nevada, when,

23 prior to retirement, he withdrew retirement funds accumulated from work in New Mexico.

24 Ultimately, after making findings of fact and discussing the issue in more detail throughout this

25 decision, the hearing officer finds that the Taxpayer’s protest must be denied. The assessment of tax

In the Matter of the Michael Miller, page 1 of 16.
1 was proper because Taxpayer was a statutory resident of New Mexico by virtue of having lived in

2 New Mexico more than half the 2016 year. IT IS DECIDED AND ORDERED AS FOLLOWS:

3 FINDINGS OF FACT

4 Procedural Findings

5 1. On November 19, 2020, under Case Id. No. 109008, the Department issued a

6 Notice of Intent to Assess-Personal Income Tax letter to Taxpayer, indicating that Taxpayer’s

7 2016 Federal Income Tax had been adjusted by the IRS, and Taxpayer was required to file an

8 amendment to his 2016 New Mexico Personal Income Tax return (PIT-1) within 180 days of any

9 IRS adjustment. The letter informed the Taxpayer that a response was required by January 18,

10 2021. [Administrative File].

11 2. On February 4, 2021, under Letter Id. No. L0913838512, the Department issued a

12 Notice of Assessment of Taxes and Demand for Payment, in the amount of $2,741.00 of personal

13 income tax, $548.20 in penalty, and $473.94 in interest, with no credits or offsets, for a total tax

14 due of $3,763.14. [Administrative File].

15 3. On February 26, 2021, Taxpayer submitted (by mail) a Formal Protest, Form

16 ACD-31094, challenging the assessment of tax, penalty and interest, alleging that the Taxpayer

17 was missing a 1099 form when he had originally filed his PIT return. The protest was stamped as

18 received by the Department Protest Office on March 2, 2021. [Administrative File].

19 4. On March 31, 2021, under Letter Id. No. L0017574320 the Department issued a

20 letter acknowledging receipt of Taxpayer’s protest. [Administrative File].

In the Matter of the Michael Miller, page 2 of 16.
1 5. On August 9, 2021, the Department, through Attorney Kenneth Fladager,

2 submitted a Request for Hearing to the Administrative Hearings Office, requesting a hearing on

3 the merits of Taxpayer’s protest. [Administrative File].

4 6. On August 9, 2021, the Department, through Attorney Kenneth Fladager, timely

5 submitted the Department’s Answer to Protest to the Administrative Hearings Office.

6 [Administrative File].

7 7. On August 9, 2021, the Administrative Hearings Office sent a Notice of

8 Videoconference Administrative Hearing to the parties, informing them of the merits hearing to

9 take place on October 5, 2021, by Zoom videoconferencing application, using an unique URL

10 provided. The hearing was scheduled pursuant to NMSA 1978 Section 7-1B-8 (2019) and

11 Regulation § 22.600.3.10 NMAC. [Administrative File].

12 8. The undersigned Administrative Hearing Officer Ignacio V. Gallegos conducted

13 the merits hearing on October 5, 2021, with the parties and witnesses present by

14 videoconference. Mr. Miller represented himself. Attorney Kenneth Fladager represented the

15 Department. Department witness Patrick Zeller appeared by videoconference. The Hearing

16 Officer preserved an audio recording of the hearing (“Hearing Record” or “H.R.”). At the

17 conclusion of the hearing, the Hearing Officer allowed 24 hours for the parties to submit

18 additional documentation that had been mentioned in their cases in support of testimony.

19 [Administrative File].

20 9. On October 5, 2021, Taxpayer submitted two exhibits by email. The Department

21 submitted one exhibit by email. Taxpayer submitted objections to the Department’s exhibit, and

22 the Department submitted a response the following day. [Administrative File].

23 Substantive Findings

In the Matter of the Michael Miller, page 3 of 16.
1 10. Taxpayer Michael Miller, in 2016, was an individual physically present in both

2 New Mexico and Nevada. Mr. Miller has been a New Mexico resident since 2007. Mr. Miller

3 resided in New Mexico from the beginning of the 2016 year until August of 2016. In August of

4 2016 and through near the end of the year, Mr. Miller resided in Nevada. The amount of time

5 Taxpayer resided in New Mexico during 2016 was greater than 185 days. [Administrative File;

6 Examination of M. Miller, H.R. 21:30-23:45; Cross examination of M. Miller, H.R. 30:30-

7 31:00].

8 11. Mr. Miller testified that he moved from New Mexico on August 27, 2016, when

9 he took up residence in Nevada to liquidate the estate of his recently deceased father. He

10 returned to live in New Mexico on December 23, 2016. [Examination of M. Miller, H.R. 21:30-

11 23:45].

12 12. Mr. Miller had previously been a teacher for five and a half years in New Mexico

13 and had during that time accumulated retirement savings through the Educational Retirement

14 Board (ERB). He withdrew these savings in the amount of $14,487.19 while living in Nevada in

15 2016. Federal taxes were withheld, but no state tax was withheld. [Administrative File (Form

16 1099-R); Examination of M. Miller, H.R. 21:30-24:15; Cross examination of M. Miller, H.R.

17 31:00-31:30; Re-direct examination of M. Miller, H.R. 31:40-33:00].

18 13. When living in Nevada at the end of 2016, Mr. Miller accepted employment and

19 expressed and intent to remain in Nevada. [Examination of M. Miller, H.R. 22:30-23:00; Cross

20 examination of M. Miller, H.R. 30:30-31:00].

21 14. Mr. Miller’s original PIT-1 did not report the income from the ERB withdrawal.

22 The 1099-R to report the income was sent to Taxpayer’s address on file with ERB in New

In the Matter of the Michael Miller, page 4 of 16.
1 Mexico. [Administrative File; Examination of M. Miller, H.R. 23:00-26:10; Examination of P.

2 Zeller, H.R. 36:25-36:55; Taxpayer Exhibit #1, #2].

3 15. Mr. Miller claimed to have filed an amended 2016 PIT return in January or

4 February of 2021 through his Certified Public Accountant (CPA), after he had received the

5 Notice of Assessment. The amended return was rejected. [Administrative File; Examination of

6 M. Miller, H.R. 26:10-29:05; Taxpayer Exhibit #1, #2; Department exhibit #A].

7 16. The amended return, prepared by a CPA, was not signed or dated by the

8 Taxpayer. The original return did not contain allocation or apportionment of income received in

9 Nevada, and allocation and apportionment claims were first made with the amended return. The

10 Department received but did not accept the amended return1. [Administrative File; Examination

11 of M. Miller, H.R. 26:10-29:05; Re-direct examination of M. Miller, H.R. 33:00-34:00;

12 Examination of P. Zeller, H.R. 36:30-39:20; Rebuttal and AHO examination of M. Miller, H.R.

13 41:05-48:30; AHO examination of P. Zeller, H.R. 50:20-57:15].

14 17. Patrick Zeller is the Department’s tax auditor supervisor assigned to the protest.

15 He reviewed the documentation associated with the protest. He explained that a Taxpayer

16 sending in an unsigned and undated amended return was not proper. He could not explain the

17 absence of a rejection letter in the Taxpayer’s records, which would have explained to Taxpayer

18 both the fact that the return was rejected and the reasons for the rejection. [Administrative File;

19 Direct examination of P. Zeller, H.R. 35:25-36:55; Re-direct examination of P. Zeller, H.R.

20 1:09:25-1:10:10; Re-cross examination of P. Zeller, 1:10:10-1:14:40; AHO examination of P.

21 Zeller, H.R. 1:15:20-1:17:05].

1
Under NMSA 1978, Section 7-1-13 (B), Taxpayer was required to file the amended return in the form prescribed
by the Department’s instructions on the return, which requires a signed return. See also Regulation 3.1.4.8 NMAC.
See also NMSA 1978, Section 9-11-6.2 (G).

In the Matter of the Michael Miller, page 5 of 16.
1 DISCUSSION

2 Taxpayer’s protest poses two main questions. First, whether Taxpayer’s 2016 New Mexico

3 income while a statutory resident of New Mexico, should include the income generated from his

4 liquidated retirement account which he withdrew while living for a short time in Nevada, a state that

5 does not impose a personal income tax. Taxpayer contends that Comptroller of the Treasury of

6 Maryland v. Wynne prevents the State of New Mexico from reaching over state borders to tax the

7 income at issue, even though Nevada declined to tax the income. Second, the Taxpayer contends

8 that New Mexico’s rules concerning allocation of income requires that he allocate all income

9 received while in Nevada in the 2016 year, including employment income, income from the

10 liquidation of his father’s estate, and the income received as withdrawn retirement savings from his

11 New Mexico ERB account to Nevada.

12 New Mexico’s personal income tax is governed by the Income Tax Act, NMSA 1978,

13 Sections 7-2-1 through 7-2-39. Taxpayer’s factual contentions were largely undocumented. The

14 application of accepted facts, interpretation of the New Mexico Income Tax Act, and federal

15 jurisprudence are addressed herein.

16 Presumption of correctness and burden of proof.

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

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

19 Archuleta v. O'Cheskey, 1972-NMCA-165, ¶11, 84 N.M. 428, 504 P.2d 638. Unless otherwise

20 specified, for the purposes of the Tax Administration Act, “tax” is defined to include interest and

21 civil penalty. See NMSA 1978, Section 7-1-3 (Z) (2019); see also Regulation § 3.1.1.16

22 (12/29/2000). Under Regulation § 3.1.6.13 NMAC, the presumption of correctness under Section

23 7-1-17 (C) extends to the Department’s assessment of penalty and interest. See Chevron U.S.A.,

In the Matter of the Michael Miller, page 6 of 16.
1 Inc. v. State ex rel. Dep't of Taxation & Revenue, 2006-NMCA-050, ¶16, 139 N.M. 498, 134

2 P.3d 785 (agency regulations interpreting a statute are presumed proper and are to be given

3 substantial weight). Accordingly, it is a taxpayer’s burden to present some countervailing

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

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

6 NMCA-099, ¶8, 336 P.3d 436. When a taxpayer presents sufficient evidence to rebut the

7 presumption, the burden shifts to the Department to show that the assessment is correct. See

8 MPC Ltd. v. N.M. Taxation & Revenue Dep't, 2003-NMCA-21, ¶13, 133 N.M. 217, 62 P.3d 308.

9 New Mexico residency.

10 It is well understood that New Mexico may tax the income of its residents. See Shaffer v.

11 Carter, 252 U.S. 37 (1919) (“In our system of government, the states have general dominion,

12 and, saving as restricted by particular provisions of the federal Constitution, complete dominion

13 over all persons, property, and business transaction[s] within their borders; they assume and

14 perform the duty of preserving and protecting all such persons, property, and business, and, in

15 consequence, have the power normally pertaining to governments to resort to all reasonable

16 forms of taxation in order to defray the governmental expense.”). See also Lawrence v. State Tax

17 Commission of Mississippi, 286 U.S. 276 (1932). A New Mexico resident is defined under NMSA

18 1978, Section 7-2-2 (S) (2014) as:

19 an individual who is domiciled in this state during any part of the taxable year or an
20 individual who is physically present in this state for one hundred eighty-five days or
21 more during the taxable year; but any individual, other than someone who was
22 physically present in the state for one hundred eighty-five days or more during the
23 taxable year, who, on or before the last day of the taxable year, changed the
24 individual’s place of abode to a place without this state with the bona fide intention
25 of continuing actually to abide permanently without this state is not a resident for the
26 purposes of the Income Tax Act for periods after that change of abode.

In the Matter of the Michael Miller, page 7 of 16.
1 Mr. Miller testified that he had been living in New Mexico off and on since 2007. In 2016,

2 he lived in New Mexico, but because of a death in the family, he left the state and went to live in

3 Nevada on August 27, 2016 and returned December 23, 2016. While his statements are of his own

4 experience, the following calculation of days in the state is based on Mr. Miller’s credible testimony

5 alone. He lived in New Mexico for 239 days at the beginning of 2016 and another 8 days at the end

6 of the year, for a total of 247 days. Using the one hundred eighty-five-day statutory benchmark,

7 Taxpayer was a New Mexico resident regardless of his argument related to his intent to stay in

8 Nevada because he was physically present for 247-days. See §7-2-2 (S).

9 As for the intent to stay in Nevada, this is an element of the consideration of “domicile” and

10 a “bona fide intention.” See Section 7-2-2 (S) (“who, on or before the last day of the taxable year,

11 changed the individual’s place of abode to a place without this state with the bona fine intention of

12 continuing actually to abide permanently without this state”) (emphasis added); see also Regulation

13 3.3.1.9 (C) NMAC (12/15/2010) “Domicile” defined. First, it must be noted that a change of

14 domicile by the end of the calendar year does not change the residency status of a person, like Mr.

15 Miller, who was physically present in New Mexico for 185-days or more. §7-2-2 (S). Even so, as to

16 domicile Mr. Miller provided no documentary proof of the claim of change of address (a rental

17 agreement or sale or purchase of a home), change of employment, a change of location of a spouse

18 or children, change of financial institutions, change of community affiliation or professional

19 organizations, change of voting registration, change of driver’s license or professional licensure,

20 change of location of possessions or other information. What we are left with are the Taxpayer’s

21 assertion alone, and a post office box number placed on the unsigned, undated amended PIT return

22 which was rejected by the Department. Unsubstantiated statements are insufficient to overcome the

23 presumption of correctness that attaches to an assessment. See MPC Ltd. v. N.M. Taxation &

In the Matter of the Michael Miller, page 8 of 16.
1 Revenue Dep’t, 2003-NMCA-021, ¶13, 133 N.M. 217, 62 P.3d 308; see also Regulation 3.1.6.12

2 (A) NMAC (1/15/2001). While Mr. Miller testified credibly, his statements are unsubstantiated by

3 any kind of acceptable documentation. New Mexico law requires that taxpayers retain records used

4 for the taxpayers’ tax reporting so that those records may be used to accurately compute state taxes.

5 NMSA 1978, Section 7-1-10 (A) (2007). New Mexico tax law does not set a specific amount of

6 time for records to be maintained by taxpayers. See Regulation § 3.1.5.15 (I) NMAC (12/29/2000),

7 Regulation § 3.1.5.8 (A) (12/29/2000). Here, Mr. Miller provided neither reliable summary

8 documents nor original documents showing a change of domicile. He was a statutory resident of

9 New Mexico, which makes his uncorroborated testimony as to a change of domicile and a “bona

10 fide intention” to remain outside New Mexico wholly unconvincing in light of the fact that he

11 returned to New Mexico at the end of December of 2016 and remains a New Mexico resident as of

12 the date of the hearing.

13 Federal law.

14 Under Federal law, there is clear law preventing states from imposing an income tax on the

15 retirement income of an individual resident or domiciliary of another state. See 4 U.S.C.S. §114 (a).

16 Mr. Miller resided in New Mexico for more than 185 days, therefore he was a statutory resident of

17 New Mexico in 2016, as explained above. See Section 7-2-2 (S). Even considering at face value

18 Taxpayer’s contention that he moved to Nevada at the end of August of 2016, spending the majority

19 of the remainder of the year in Nevada with the intention to stay, this does not affect the application

20 of New Mexico law as it applies to Federal law.

21 Taxpayer argued that the case of Comptroller of Treasury of Maryland v. Wynne, 575 U.S.

22 543, 135 S.Ct. 1787 (2015) controlled the outcome of this case, as he could have been taxed by the

23 State of Nevada, and a New Mexico tax on the same income would have been two potential taxes.

In the Matter of the Michael Miller, page 9 of 16.
1 The Wynne court follows a line of cases holding generally that the dormant commerce clause

2 disallows any State’s tax scheme “which discriminates against interstate commerce either by

3 providing a direct commercial advantage to local business, or by subjecting interstate commerce to

4 the burden of multiple taxation.” Wynne, at 549-550 (internal quotation marks and citations

5 omitted). The Wynne case addressed a tax scheme that discriminated against out-of-state taxpayers

6 with income from activity within the state. Here, Mr. Miller was not an out-of-state taxpayer, he

7 was a resident of the state which taxed him, New Mexico.

8 Here, the Taxpayer’s argument also fails because Nevada does not impose a personal

9 income tax, so double taxation is not possible. Further, as a statutory resident of New Mexico,

10 Taxpayer is required to report and pay New Mexico personal income tax and report any deviations

11 from the normal course, by reporting claimed deductions, exemptions, or allocation and

12 apportionment. He provided no evidence of such reporting when he originally filed his PIT return,

13 and the only tax return document in the file was the Taxpayer’s rejected amended PIT-1 which

14 contained a 1099-R which contained a New Mexico address for the Taxpayer and reported no state

15 tax withheld.

16 Allocation and apportionment.

17 New Mexico provides a tax credit using income allocation and apportionment. The statute

18 provides that: “Net income of any individual having income that is taxable both within and without

19 this state shall be apportioned and allocated.” NMSA 1978, Section 7-2-11 (A) (2016). The statute

20 goes on to say: “compensation and gambling winnings of a resident taxpayer shall be allocated to

21 this state.” Section 7-2-11 (A) (3). While the term “compensation” is defined at Section 7-2-2 (C),

22 the Department’s regulations add the following: “Retirement income is compensation for purposes

23 of the Income Tax Act.” Regulation 3.3.11.13 (A) NMAC (12/14/2000). The regulations

In the Matter of the Michael Miller, page 10 of 16.
1 interpreting the credit for income allocated to a different state also provide a good example very

2 much like the Taxpayer’s case. Regulation 3.3.11.11 (B) NMAC (12/14/2000) provides the

3 following example:

4 X is a “resident” of New Mexico pursuant to Section 7-2-2 NMSA 1978. For six
5 weeks during the taxable year, X was employed in the state of Nevada where X
6 received compensation for personal services rendered. During this six-week period,
7 X did not return to the state of New Mexico. X points out that inasmuch as Nevada
8 does not impose an income tax, X is not eligible for a tax credit pursuant to Section
9 7-1-13 NMSA 1978. X’s compensation earned in Nevada is allocable to New
10 Mexico. There is no specific exemption or deduction which would authorize X to
11 exclude the compensation earned in Nevada from the New Mexico base income.

12 As the example points out, the allocation of the compensation for a New Mexico resident working

13 in a state that does not tax personal income is still allocated to New Mexico by virtue of the person

14 being a New Mexico resident. Here, the retirement account distribution is “compensation” so, to a

15 statutory New Mexico resident the income is not deducted from the Taxpayer’s base income when

16 calculating tax. The Taxpayer’s argument as to allocation and apportionment of the retirement

17 account distribution which he earned while a New Mexico resident and received while temporarily

18 residing in Nevada is not persuasive.

19 Taxpayer’s concerns over timeliness.

20 The Taxpayer’s concerns over timeliness were multi-fold. First, Mr. Miller, at the outset of

21 the hearing, objected to the fact that the hearing was being held within ninety days of the

22 Department’s request for hearing, as required by NMSA 1978, Section 7-1B-8 (F) (2019). Section

23 7-1B-8 (F) of law requires “[i]f the department files the request for hearing with the answer to the

24 protest, the chief hearing officer shall set a hearing to take place within ninety days of that request.”

25 The Department filed its request for hearing along with its answer to protest on August 9, 2021.

In the Matter of the Michael Miller, page 11 of 16.
1 The first and only hearing was held on October 5, 2021. This was fifty-seven (57) days after the

2 request was filed, so it meets the timeliness requirement of “within ninety days of that [the

3 department’s] request.”

4 Second, Taxpayer raised the issue that the protest had been pending since March, and he had

5 not heard back from the Department, which he called dragging their feet. Section 7-1B-8 (B)

6 requires that the Department request a hearing “[w]ithin one hundred eighty days, but no earlier

7 than sixty days after the date of the protest.” The protest was filed by Taxpayer on February 26,

8 2021, by mail, and stamped as received by the Department on March 2, 2021. The Department’s

9 request for hearing, as noted above, was filed on August 9, 2021. This was one hundred sixty-

10 four (164) days after the protest was filed, so it meets the timeliness requirement of “within one

11 hundred eighty days.”

12 Next, Taxpayer complained that he had first contacted the Department in February of

13 2021 (a fact corroborated in Taxpayer exhibits), and he was concerned that in the time that it has

14 taken to get to hearing the penalty and interest have continued accruing. The Department

15 countered that penalty was fixed at the time of the assessment, to a maximum of twenty percent

16 (20%) and interest was minimal, because it was based on the amount of the assessment. Penalty,

17 pursuant to NMSA 1978, Section 7-1-69 (A)(1) (2007), is fixed at a maximum of twenty percent

18 of the assessment of underlying tax, which accrues from the date the tax was due but not paid, in

19 increments of two percent per month (for up to ten months). Since the tax was due in April of

20 2017 for tax year 2016, the penalty had already peaked at 20% by the time of the issuance of the

21 assessment in 2020 and was no longer accruing additional penalty during the time the protest

22 was pending. As for interest, it is true that interest continues to accrue while an unpaid tax

23 remains unpaid. See NMSA 1978, Section 7-1-67 (2013). With limited exceptions not applicable

In the Matter of the Michael Miller, page 12 of 16.
1 here, it is only through full payment of the underlying tax that interest stops accruing. Section 7-

2 1-67 (A). Interest accumulates to compensate the State of New Mexico for lost revenue earning

3 potential when a tax is unpaid. Under the statute, regardless of the reason for non-payment of the

4 tax, the Department has no discretion in the imposition of interest, as the statutory use of the

5 word “shall” makes the imposition of interest mandatory. See Marbob Energy Corp. v. N.M. Oil

6 Conservation Comm'n, 2009-NMSC-013, ¶22, 146 N.M. 24 (use of the word “shall” in a statute

7 indicates provision is mandatory absent clear indication to the contrary). There was no violation

8 of timeliness requirements in the Department’s processing of Taxpayer’s protest, nor in the

9 administrative hearing proceedings.

10 Conclusion.

11 Mr. Miller’s withdrawn retirement savings were not taxed by Nevada upon withdrawal, so

12 double taxation of retirement income is not evident. Mr. Miller’s withdrawal of retirement savings

13 was not reported to New Mexico on his original 2016 PIT-1. After receiving the assessment, Mr.

14 Miller attempted to amend his 2016 PIT-1 return, but neither signed nor dated the submission. The

15 allocation of retirement savings while living in Nevada was properly allocated to New Mexico

16 because Mr. Miller was a statutory resident of New Mexico and retirement income is

17 “compensation” under the Income Tax Act. Mr. Miller did not pay tax on the amount of the

18 retirement savings when it was due so the assessment of tax, penalty and interest was proper.

19 CONCLUSIONS OF LAW

20 A. Taxpayer filed a timely, written protest of the Department’s, the Department issued

21 a Notice of Assessment of Taxes and Demand for Payment under Letter ID No. L0913838512

22 and jurisdiction lies over the parties and the subject matter of this protest. See NMSA 1978, Section

23 7-1-24 (A) & (D) (2019); see also NMSA 1978, Section 7-1-26 (A) (2019).

In the Matter of the Michael Miller, page 13 of 16.
1 B. The hearing was timely set and held within 90-days of the Department’s request for

2 hearing pursuant to NMSA 1978, Section 7-1B-8 (2019).

3 C. Any assessment of tax made by the Department is presumed to be correct.

4 Therefore, it is the taxpayer’s burden to come forward with evidence and legal argument to establish

5 that the Department’s assessment should be abated, in full or in part. See NMSA 1978, Section 7-1-

6 17 (C) (2007).

7 D. Federal law prohibiting states from imposing an income tax on the retirement

8 income of out-of-state residents does not apply to a statutory limit where Taxpayer is a New Mexico

9 resident temporarily living in another state. It is well-settled that the State of New Mexico can tax

10 the income of its residents. See 4 U.S.C. 114; see also Shaffer v. Carter, 252 U.S. 37 (1919); see

11 also Lawrence v. State Tax Commission of Mississippi, 286 U.S. 276 (1932); see also Comptroller

12 of Treasury of Maryland v. Wynne, 575 U.S. 543, 135 S.Ct. 1787 (2015).

13 E. The credit for allocated and apportioned income taxes paid to another state was

14 properly denied because Nevada does not impose an income tax. The retirement income of a

15 resident of New Mexico is properly allocated to New Mexico, regardless of where the resident

16 visited when the retirement savings distribution took place. See NMSA 1978, Section 7-2-13

17 (2013); see also NMSA 1978, Section 7-2-11 (A) (2016); see also Regulation 3.3.11.13 (A) NMAC

18 (12/14/2000); see also Regulation 3.3.11.11 (B) NMAC (12/14/2000).

In the Matter of the Michael Miller, page 14 of 16.
1 For the foregoing reasons, the Taxpayer’s protest is DENIED. IT IS ORDERED that the

2 Department’s Assessment of tax, penalty and interest for Personal Income Tax year 2016 was

3 correct.

4 DATED: February 10, 2022.

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.

In the Matter of the Michael Miller, page 15 of 16.
1 CERTIFICATE OF SERVICE

2 On February 10, 2022, a copy of the foregoing Decision and Order was submitted to the

3 parties listed below in the following manner:

4 First Class Mail and E-Mail E-Mail
5
6 INTENTIONALLY BLANK

In the Matter of the Michael Miller, page 16 of 16.