New Mexico State Income Tax Protest Letter

FORMAL PROTEST OF NOTICE OF ASSESSMENT — NEW MEXICO PERSONAL INCOME TAX

TABLE OF CONTENTS

1. Caption and Filing Information
2. Identification of Taxpayer and Notice Protested
3. Timeliness
4. Statement of Facts
5. Grounds for Protest and Legal Argument
6. Relief Requested
7. Reservation of Rights
8. Request for Administrative Hearing
9. Verification
10. Signature, Power of Attorney, and Service Block
11. Schedule of Exhibits
12. New Mexico Practice Notes
13. Sources and References

1. CAPTION AND FILING INFORMATION

STATE OF NEW MEXICO

TAXATION AND REVENUE DEPARTMENT — PROTEST OFFICE

FORMAL PROTEST PURSUANT TO NMSA 1978 § 7-1-24

2. IDENTIFICATION OF TAXPAYER AND NOTICE PROTESTED

2.1. Taxpayer [NAME] ("Taxpayer") is [an individual / married couple filing jointly / fiduciary / pass-through entity] residing or domiciled at [ADDRESS, COUNTY], New Mexico.

2.2. By Notice of Assessment / Notice of [DENIAL OF REFUND / ADJUSTMENT / OTHER] dated [__/__/____] (the "Notice"), the New Mexico Taxation and Revenue Department ("TRD" or the "Department") asserted personal income tax liability or disallowance for the tax year(s) ended [__/__/____] in the principal amount of $[__], plus penalty of $[__] and interest of $[__], for a total of $[__].

2.3. Taxpayer hereby formally protests the Notice in its entirety [OR: as to the following items only: (i) [____]; (ii) [____]] pursuant to NMSA 1978 § 7-1-24 and requests an administrative hearing before the New Mexico Administrative Hearings Office ("AHO") pursuant to NMSA 1978 §§ 7-1B-1 through 7-1B-10.

3. TIMELINESS

3.1. The Notice was mailed on [__/__/____]. The 90-day protest period under NMSA 1978 § 7-1-24(B) expires on [__/__/____].

3.2. This protest is delivered to the TRD Protest Office on [__/__/____] by [certified mail return receipt / commercial courier with tracking / hand delivery / TAP electronic submission], which is on or before the statutory deadline. This protest is therefore timely.

4. STATEMENT OF FACTS

4.1. Taxpayer was [a New Mexico resident / a part-year resident from [DATE] to [DATE] / a nonresident with New Mexico-source income] during the tax year(s) at issue.

4.2. Taxpayer timely filed Form [PIT-1 / PIT-110 / PIT-B / OTHER] for tax year [YYYY] on [__/__/____], reporting federal adjusted gross income of $[__], New Mexico modifications of $[__], and New Mexico taxable income of $[__].

4.3. The Department's adjustments arose from [describe trigger — IRS RAR transmittal under NMSA § 7-1-13.4; mismatch with Form W-2/1099 reported to TRD; disallowance of a deduction or credit; nonresident sourcing dispute; domicile audit; other].

4.4. [Describe the underlying transactions, employment, residency facts, or credit claim with specificity. Identify dates, amounts, and supporting documents (W-2s, 1099s, K-1s, federal returns, residency proof, IRS final determinations, etc.). Cross-reference to Exhibits in Section 11.]

4.5. Taxpayer maintains complete books and records substantiating each item challenged in the Notice, as required by NMSA 1978 § 7-1-10, and has produced or stands ready to produce such records to the Department.

5. GROUNDS FOR PROTEST AND LEGAL ARGUMENT

5.1. Ground One — [LEGAL THEORY, e.g., "Income Improperly Sourced to New Mexico"]

5.1.1. Under NMSA 1978 § 7-2-3 and § 7-2-11, only the New Mexico-source portion of a nonresident's income is taxable in New Mexico, computed in accordance with the Income Tax Act and applicable allocation/apportionment rules.

5.1.2. The Department has improperly sourced $[__] of [wages / business income / capital gains / pass-through income] to New Mexico. As shown by Exhibits [__], this income was earned for services performed outside New Mexico [OR: from intangibles with situs outside New Mexico / from real property located outside New Mexico] and is not New Mexico-source income.

5.2. Ground Two — [LEGAL THEORY, e.g., "Disallowed Deduction or Credit"]

5.2.1. The Department disallowed a [describe deduction or credit, e.g., Working Families Tax Credit; Solar Market Development Tax Credit; Low-Income Comprehensive Tax Rebate] in the amount of $[__].

5.2.2. Taxpayer satisfied each statutory element of the credit/deduction under NMSA 1978 § 7-2-[__], as documented by Exhibits [__]. The disallowance is contrary to the plain text of the statute and the implementing regulation at 3.3.[__] NMAC.

5.3. Ground Three — Penalty Abatement

5.3.1. Civil negligence penalty under NMSA 1978 § 7-1-69 is not warranted because Taxpayer's position is supported by substantial authority and was taken in good faith reliance on [professional advice / published Department guidance / FYI publication / federal treatment].

5.3.2. Taxpayer demonstrated reasonable cause and absence of willful neglect under 3.1.11 NMAC and Department FYI-400, warranting penalty abatement.

5.4. Ground Four — Statute of Limitations

5.4.1. Under NMSA 1978 § 7-1-18(A), the Department generally must assess within three (3) years from the end of the calendar year in which the tax was due. The Notice for tax year [YYYY] was mailed on [__/__/____], more than three years after [__/__/____], and is therefore time-barred.

5.4.2. No statutory exception applies: Taxpayer filed a return, did not understate gross receipts/income by 25 percent or more, and did not file a fraudulent return; the seven- and ten-year extensions of § 7-1-18(B)–(D) are inapplicable.

5.5. Ground Five — Interest

5.5.1. Interest under NMSA 1978 § 7-1-67 should be recomputed if the underlying tax assessment is reduced or vacated. To the extent any portion of the assessment is sustained, Taxpayer reserves the right to challenge interest accrual periods and the rate applied.

6. RELIEF REQUESTED

WHEREFORE, Taxpayer respectfully requests that the Department:

• A. Vacate the Notice in its entirety [OR: in the amount of $[__]];
• B. Abate all penalty and corresponding interest;
• C. Issue a Notice of Refund or appropriate credit for any amounts already paid;
• D. In the alternative, refer this protest to the Administrative Hearings Office for a formal hearing pursuant to NMSA 1978 § 7-1B-8; and
• E. Grant such other and further relief as is just and proper.

7. RESERVATION OF RIGHTS

7.1. Taxpayer reserves the right to amend or supplement this Protest as discovery, audit workpaper review, or further investigation may warrant, and to assert additional legal theories or factual defenses not specifically enumerated herein.

7.2. Taxpayer does not waive, and expressly preserves, all constitutional defenses (including due process, Commerce Clause, and equal protection), all statute-of-limitations defenses, and all rights under the New Mexico Taxpayer Bill of Rights, NMSA 1978 § 7-1-4.2.

7.3. Taxpayer requests informal conference with the assigned auditor or protest auditor pursuant to TRD practice prior to formal hearing, without waiver of the right to hearing.

8. REQUEST FOR ADMINISTRATIVE HEARING

8.1. Pursuant to NMSA 1978 §§ 7-1-24(I) and 7-1B-8, in the event this protest is not resolved informally, Taxpayer requests that the matter be set for hearing before a hearing officer of the Administrative Hearings Office within ninety (90) days after a properly filed protest, as required by NMSA 1978 § 7-1B-8(A).

8.2. Taxpayer requests that the hearing be held [in person at the AHO offices in Santa Fe / by videoconference / in [CITY], New Mexico] pursuant to 22.600.3 NMAC.

8.3. Taxpayer estimates the hearing will require approximately [____ hours / days], with [____] witnesses.

8.4. Taxpayer requests issuance of subpoenas pursuant to NMSA 1978 § 7-1B-7 for the witnesses and records identified at Exhibit [__].

8.5. ☐ Taxpayer requests a Spanish-language interpreter.
☐ Taxpayer requests other accommodation: [describe].

9. VERIFICATION

STATE OF NEW MEXICO

COUNTY OF [COUNTY]

I, [TAXPAYER NAME], declare under penalty of perjury under the laws of the State of New Mexico that I have read the foregoing Formal Protest, that I am the taxpayer (or duly authorized representative of the taxpayer), and that the factual statements contained herein are true and correct to the best of my knowledge, information, and belief.

Dated: [__/__/____]

[________________________________]

[TAXPAYER NAME]

Sworn to and subscribed before me this [____] day of [_______________], 20[____].

[________________________________]

Notary Public

(My Commission Expires: [_______________])

10. SIGNATURE, POWER OF ATTORNEY, AND SERVICE BLOCK

Date: [__/__/____]

Respectfully submitted,

[LAW FIRM / CPA FIRM NAME]

By: [________________________________]

[ATTORNEY / CPA NAME], [NM Bar No. / NM CPA No.] [####]

Authorized Representative for Taxpayer

[STREET ADDRESS]

[CITY, STATE ZIP]

Telephone: [__________]

Email: [__________]

Power of Attorney: Form ACD-31102 (Tax Information Authorization Tax Disclosure) is attached as Exhibit A and authorizes the foregoing representative to act on Taxpayer's behalf before the Department and the Administrative Hearings Office.

11. SCHEDULE OF EXHIBITS

12. NEW MEXICO PRACTICE NOTES

• Where to file. Send the protest to: New Mexico Taxation and Revenue Department, Protest Office, P.O. Box 1671, Santa Fe, NM 87504-1671. Electronic filing is also available through the Taxpayer Access Point (TAP) at tap.state.nm.us.
• Ninety-day deadline is jurisdictional. Under NMSA 1978 § 7-1-24(B), failure to file within 90 days of the mailing of the Notice (or 90 days of the date the return was filed for self-assessed disputes) bars the protest. Mailbox-rule treatment is governed by NMSA 1978 § 7-1-9.
• Presumption of correctness. NMSA 1978 § 7-1-17(C) provides that any assessment by the Department is presumed correct, placing the burden of going forward on the taxpayer. Specificity in pleading and supporting evidence is essential.
• Independence of AHO. The Administrative Hearings Office is an independent agency under NMSA 1978 § 7-1B-2 and is administratively separate from TRD. Its hearing officers are not employees of the Department.
• 90-day hearing requirement. Under NMSA 1978 § 7-1B-8(A), AHO must set the hearing within 90 days of a properly filed protest, subject to waiver by the taxpayer. The taxpayer may consent to a longer setting where additional informal discussions are productive.
• Decision and order. AHO must issue a written Decision and Order within 30 days of the hearing, with findings of fact, conclusions of law, and reasoning. NMSA 1978 § 7-1B-8.
• Judicial review. A taxpayer aggrieved by the Decision and Order may appeal to the New Mexico Court of Appeals within thirty (30) days of issuance pursuant to NMSA 1978 § 7-1-25 and NMRA Rule 12-601. The appellate standard is whether the decision is (1) arbitrary, capricious, or an abuse of discretion; (2) not supported by substantial evidence; or (3) otherwise contrary to law.
• Statute of limitations. Generally three years from the end of the calendar year in which the tax was due (NMSA 1978 § 7-1-18(A)); seven years for non-filers (§ 7-1-18(B)); ten years for fraudulent returns (§ 7-1-18(C)). A 25 percent understatement triggers a six-year period (§ 7-1-18(D)).
• Refund claims. A claim for refund must be filed within three years from the end of the calendar year in which the payment was due or made (NMSA 1978 § 7-1-26). A denied refund claim is itself protestable under § 7-1-24.
• Partial payment to stop interest. Taxpayer may pay disputed amounts under protest pursuant to NMSA 1978 § 7-1-26(C) without waiving the protest, in order to halt interest accrual.
• Taxpayer Bill of Rights. NMSA 1978 § 7-1-4.2 enumerates rights, including the right to representation, the right to written explanation of audit results, the right to confidentiality, and the right to a fair hearing. Reference these rights in correspondence where the Department's conduct is at issue.

13. SOURCES AND REFERENCES

• NMSA 1978, Chapter 7, Article 1 (Tax Administration Act) — https://nmonesource.com/
• NMSA 1978, Chapter 7, Article 1B (Administrative Hearings Office Act) — https://nmonesource.com/
• NMSA 1978, Chapter 7, Article 2 (Income Tax Act) — https://nmonesource.com/
• 22.600.3 NMAC (AHO Tax Protest Procedures) — https://www.srca.nm.gov/parts/title22/22.600.0003.html
• 3.1 NMAC (TRD Tax Administration regulations) — https://www.srca.nm.gov/
• TRD Protest Office — https://www.tax.newmexico.gov/about-us/protest-office/
• TRD Form ACD-31094 (Formal Protest) — https://www.tax.newmexico.gov/wp-content/uploads/2023/09/ACD-31094-Formal-Protest_Updated-6.30.23.pdf
• TRD FYI-400 (Tax Audits and Protest Procedures) — https://www.tax.newmexico.gov/wp-content/uploads/sites/6/2020/10/FYI-400-Tax-Audits-and-Protest-Procedures-1.pdf
• TRD FYI-405 (Taxpayer Bill of Rights) — https://www.tax.newmexico.gov/wp-content/uploads/sites/6/2020/10/FYI-405-Taxpayer-Bill-of-Rights-1.pdf
• AHO Tax Protest Hearing Information — https://www.aho.state.nm.us/HearingsConducted/TaxProtestHearingInformation
• AHO Decisions & Orders — https://www.tax.newmexico.gov/all-nm-taxes/tax-decisions-orders/
• Taxpayer Access Point (TAP) — https://tap.state.nm.us/

Disclaimer: This template is provided for informational purposes only and does not constitute legal or tax advice. A New Mexico-licensed tax attorney must review and customize this document before filing. Statutory citations, deadlines, and forms change; verify all authorities and the current version of TRD Form ACD-31094 before use.