Can the state file a tax lien while I'm paying under an installment plan, and can I still challenge the original assessments years later?

Plain-English summary

Raymond Gabaldon owned Movie Land Video in Albuquerque. A New Mexico National Guard member since 1975, he was called to active duty in 1987 and stationed away from Albuquerque, so he hired a manager to run the store — but the manager never filed the store's CRS (gross receipts) returns or paid the taxes. In June 1992 the Department assessed the unpaid taxes for September 1987 through August 1989. Gabaldon didn't protest; he paid the tax and, in August 1994, signed an installment agreement to pay off the remaining penalties and interest at $100 a month. That agreement required him to provide security or the Department would file a lien on his property. His security — the title to a tractor — never reached the Department, and after he missed two monthly payments, the Department filed a tax lien in October 1995. He then asked, in late 1995, for a retroactive extension to protest — and the case reached a hearing.

The Hearing Officer (Ellen Pinnes) denied the protest:

• The lien was required, not optional. An installment agreement (§ 7-1-21) lets a taxpayer pay a tax liability over up to 36 months, but the Department must either obtain security or file a lien (§ 7-1-21(C)). Because Gabaldon's security wasn't received and he had missed two payments, the Department filed the lien exactly as the law and the agreement required. He never resubmitted security to get the lien released.
• The old assessments were off the table. A protest must be filed within 30 days of an assessment, extendable by up to 60 more — 90 days maximum (§ 7-1-24(B)). Gabaldon's late-1995 letter missed that deadline for the June 1992 assessments by more than three years, so the Hearing Officer had no jurisdiction to reconsider them.
• A Department office can't revive an untimely protest. The Protest Office had sent a letter purporting to grant a retroactive extension to protest the 1992 assessments, but that action wasn't authorized by the Tax Administration Act. Only the lien could properly be protested, so only the lien was decided.

What this means for you

A lien under an installment agreement is standard, not a punishment

When you set up an installment plan with New Mexico, the Department is required to secure the debt — either by taking security you provide or by filing a lien (§ 7-1-21(C)). A lien in that situation doesn't mean you did something extra wrong; it's the default the statute mandates when security isn't in place. If you'd rather avoid the lien, make sure acceptable security actually reaches and is accepted by the Department.

Confirm the state received your security — don't assume

Gabaldon believed he'd posted security by mailing a tractor title, but the Department never got it, and the lien followed. Later, even after learning why the lien was filed, he didn't resubmit. If your plan depends on posting collateral, confirm receipt in writing and follow up — a lost document leaves you in the same position as providing nothing.

The 30-day protest clock is strict — and short

You have only 30 days to protest an assessment (up to 90 with an extension). Miss it, and no hearing officer can review whether the assessment was correct, no matter how good your reasons. Here, paying the 1992 assessment instead of protesting it closed the door on ever challenging it. If you disagree with an assessment, protest first, within the deadline.

A helpful-sounding letter from the agency can't override the statute

The Department's own Protest Office told Gabaldon he was getting a retroactive extension to protest the assessments — but that promise had no legal effect because the statute didn't allow it. Don't rely on an informal or unauthorized accommodation to preserve a right the law has already cut off; get the deadline right the first time.

Common questions

Q: I'm paying on an installment plan. Why did the state still file a lien?
A: Because the law requires it. Under § 7-1-21(C), the Department must either hold security you provide or file a lien to secure an installment agreement. If your security isn't in place, the lien is the mandatory alternative.

Q: I mailed in collateral. Doesn't that stop the lien?
A: Only if the Department actually receives and accepts it. Here the tractor title never arrived, so from the Department's side there was no security, and the lien was filed as the agreement provided.

Q: Can I challenge the original tax assessment now?
A: Not if the 30-day protest window (extendable to 90 days) has closed. Once that deadline passes, a hearing officer has no jurisdiction to review the assessment's validity — which is what happened here, more than three years late.

Q: A Department employee said I could still protest late. Isn't that binding?
A: No. An extension the statute doesn't authorize has no legal effect, even in writing from the agency. The only issue that could be heard was the lien, not the time-barred assessments.

Citations and references

Statutes and regulations:

• § 7-1-21 NMSA 1978 — installment agreements to pay a tax liability over up to 36 months; § 7-1-21(C) NMSA 1978 — the Department must either obtain security or file a lien
• § 7-1-38 NMSA 1978 — lien against the taxpayer's property
• § 7-1-24(B) NMSA 1978 — a protest must be filed within 30 days of the assessment notice, with an extension of up to 60 additional days (90 days maximum); Regulation TA 24:2

Source

• Listing: New Mexico Decisions & Orders
• Decision post: Raymond Gabaldon, DBA Movie Land Video
• Decision PDF: D&O 97-19

Original ruling text

BEFORE THE HEARING OFFICER
OF THE TAXATION AND REVENUE DEPARTMENT
OF THE STATE OF NEW MEXICO

IN THE MATTER OF THE PROTEST OF
RAYMOND GABALDON, DBA MOVIE LAND VIDEO No. 97-19
ID NO. 02-018373-00 0
PROTEST TO LIEN NO. 747369-01

DECISION AND ORDER

This matter came on for hearing on April 21, 1997, before Ellen Pinnes, Hearing Officer.

Raymond Gabaldon ("the Taxpayer") appeared on his own behalf. The Taxation and Revenue

Department ("the Department") was represented by Gail MacQuesten, Special Assistant Attorney

General.

Based upon the evidence and arguments presented, IT IS HEREBY DECIDED AND

ORDERED AS FOLLOWS:

FINDINGS OF FACT

1. The Taxpayer was the owner of a business known as Movie Land Video, located in
   Albuquerque.

2. The Taxpayer, who has been a member of the New Mexico National Guard since
   1975, was called to active duty in 1987. He was initially stationed at Fort Bliss, Texas, for

approximately six months, and was then transferred to Rio Rancho, New Mexico.

3. Because the Taxpayer could not handle the day-to-day operation of Movie Land

Video while he was on active duty and stationed at some distance from Albuquerque, he hired a
manager to run the business during his absence.

4. The manager hired by the Taxpayer did not file CRS returns or pay taxes due to the
   Department.

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5. On June 15, 1992, the Department issued assessments for unpaid taxes for the period

from September 1987 to August 1989.

6. The Taxpayer did not file a formal protest of the assessments. Instead, he paid the

amount of tax owed. Subsequently, the Taxpayer on August 11, 1994, entered into a installment

agreement with the Department to pay off the penalties and interest owed under the assessments.

By the terms of that agreement, the Taxpayer agreed to pay $100 per month from August 1994

through July 1997. (Copies of the agreement are included in the record as Enclosure 4 to the

Taxpayer's undated letter to Thomas J. Dillon of the Department's Protest Office and as an

enclosure to Ms. MacQuesten's June 5, 1996, letter to the Taxpayer.)

7. The agreement recited, in paragraph 2, that if the Taxpayer did not furnish security for

payment, a lien against his property would be filed as provided in §7-1-38 NMSA, 1978. The

Department's representative told the Taxpayer that security was required.

8. The Taxpayer did not provide security for payment of the amount covered by the

payment plan. The Taxpayer testified that he sent the Department the title to a tractor he owned,

to serve as security. However, the title was not received by the Department.

9. The Taxpayer made monthly payments of $100 in August, September and October of

1994, as required by the payment plan. In November 1994, he paid $200. No payment was

made in December 1994, but the Department treated the extra $100 paid in November as having

been paid for December, and did not consider the Taxpayer to have missed the December

payment.

10. The Taxpayer made $100 monthly payments in January, March and April of 1995.

However, he made no payments in February or May of that year. He also made no payment in

June, but made two payments in July, one of which was applied by the Department as the

payment for June, which accordingly was not treated by the Department as a missed payment.

(See Department's Exhibit 2.)

11. Because the Taxpayer had twice failed to make payments as required by the payment

plan and had not furnished security under the agreement, a tax lien was requested. The

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Department's records show that the lien was requested on September 28, 1995, and was issued by

the Department on October 4, 1995. (See Department's Exhibit 1.) The lien was filed in Doña

Ana County. Notice of the lien was sent to the Taxpayer. (The notice, along with records

relating to filing of the lien in Doña Ana County, are included in the record as attachments to the

Taxpayer's undated letter requesting a retroactive extension of time to protest the lien.)

12. Upon receiving notice of the lien, the Taxpayer contacted the Department and was

told that the lien was filed because no security had been furnished under the payment plan. The

Taxpayer did not attempt to resubmit the tractor title or any other security to the Department in

order to have the lien released.

13. The Taxpayer continued to make payments as required by the payment plan.

14. On November 28, 1995, the Taxpayer wrote to the Department's Protest Office,

requesting a retroactive extension of time to protest the tax lien.

15. By letter dated December 22, 1995, Rebecca Salazar of the Protest Office responded

to the Taxpayer's November 28 request, granting a retroactive extension to protest the 1992

assessments.

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16. Counsel for the Department subsequently notified the Taxpayer that the

November 1995 protest was untimely as to the 1992 assessments, and that the protest would be

considered as one of the lien only.

DISCUSSION

Jurisdiction

At the hearing, the Taxpayer attempted to challenge not only imposition of the tax lien,

but also the validity of the assessments issued by the Department in 1992. The hearing officer

does not have jurisdiction as to those assessments.1

The assessments were issued on June 15, 1992. The New Mexico Tax Administration

Act provides that protests must be filed within thirty days of the date that notice of the

assessment is mailed to or served on a taxpayer. §7-1-24(B) NMSA, 1978. An extension of up

to sixty days to file the protest may be granted. Id. Thus, the latest date that a protest may be

submitted is ninety days after issuance of the assessment. The Taxpayer's November 1995 letter

here missed that deadline by more than three years. Because the

protest was untimely as to the 1992 assessments, the hearing officer lacks jurisdiction to consider

the validity of those assessments. TRD Regulation TA 24:2.

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The Taxpayer was given considerable latitude to argue and present evidence concerning history both
antedating and concerning the original assessments, which he contended was relevant to his challenge to the
lien itself. However, the hearing officer advised the Taxpayer at the commencement of the hearing that the
hearing would concern only the protest of the lien and that the validity of the underlying assessments was
not at issue.

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The Department's Protest Office, in the December 22, 1995, letter from Ms. Salazar,

informed the Taxpayer that he was being given a retroactive extension of time to protest the 1992

assessments. However, that action was not authorized by the Tax Administration Act. The

only subject of the protest that could properly be accepted by the Department was the tax lien

issued in October 1995. Thus, only that issue will be considered here.

Propriety of the Tax Lien

The Taxpayer in 1994 entered into an installment agreement providing for monthly

payments to pay off the balance he owed pursuant to the 1992 assessments. The Tax

Administration Act expressly authorizes such agreements. §7-1-21 NMSA, 1978. In such an

agreement, a taxpayer admits liability for the amount of tax due and agrees to make monthly

payments, for up to thirty-six months, to pay off that liability. Id. The statute requires that the

Department must either obtain security for payment from the taxpayer or file a lien against the

taxpayer's property. §7-1-21(C) NMSA, 1978.

Here, the Taxpayer apparently attempted to furnish security for payment under the

installment agreement, but the documentation was not received by the Department.

Accordingly, the Department filed a notice of lien as required by the Tax Administration Act.

This was not done until the Taxpayer had missed two of the monthly payments required by the

agreement. Upon learning that the Department had not received his security and had filed a lien

as provided in the installment agreement, the Taxpayer did not resubmit the security as a means

of having the lien released.

The lien issued by the Department was not only proper, but was expressly required by

applicable law.

CONCLUSIONS OF LAW

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1. The Taxpayer filed a timely protest of Lien No. 747369-01. Jurisdiction thus lies

over the parties and the subject matter of the protest insofar as it relates to the validity of the lien.

2. The Taxpayer did not file a timely protest to the assessments underlying the lien.

The hearing officer therefore lacks jurisdiction over the protest insofar as it purports to relate to

the validity of those assessments.

3. The lien issued by the Department, as provided in §7-1-21 NMSA, 1978, was proper.

For the foregoing reasons, the Taxpayer's protest IS HEREBY DENIED.

DONE, this 19th day of May, 1997.

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