Can New Mexico refund an overpayment of gross receipts tax when the claim is filed after the three-year deadline, even if a Department employee never mentioned the deadline and the taxpayer faced serious personal hardship?

Plain-English summary

At Elan Chiropractic could not recover about $3,000 of overpaid gross receipts tax because it filed the refund claim after New Mexico's three-year deadline — and neither the Department's silence about the deadline nor the owner's serious personal hardships could revive the claim. Protest DENIED.

The owner, a chiropractor, closed his practice in 1995 but kept his tax account active to report gross receipts tax on continuing payments for past work. In late 1997 he realized he had overpaid roughly $3,000 of gross receipts tax for March through October 1997. He called the Department, which confirmed the overpayment and told him he could apply for a refund — but the employee did not mention that Section 7-1-26 gives only three years to file. He decided to wait until he wrapped up his business. A series of personal misfortunes followed — his arthritis and PTSD, his wife's request for a divorce after 32 years, and the deaths of his father-in-law, father, and best friend — and he did not file the refund claim until September 15, 2001. The Department denied it as untimely, and he protested.

The three-year limit is firm

Section 7-1-26(D)(1)(a) bars any refund unless the claim is filed "within three years of the end of the calendar year in which" the payment was originally due. For gross receipts tax paid in 1997, that period ended December 31, 2000. The September 15, 2001 claim was outside the window, so the Department properly denied it.

The Department's silence was not estoppel

The owner argued the Department misled him by not warning him about the deadline. Courts are reluctant to estop the state, especially in tax cases, and Section 7-1-60 allows estoppel only where a taxpayer acted on a regulation or a ruling addressed to the taxpayer — not present here. Equitable estoppel also failed: it requires the state to have concealed facts or prevented a timely claim, and New Mexico's tax laws (including the limitations period) are public record, available from the Department, in libraries, and online. An employee's failure to volunteer the deadline in 1997 is not concealment, and the owner had the means to learn the law.

Hardship and service cannot override the statute

The hearing officer acknowledged the owner's genuine suffering and his patriotism — Vietnam service and volunteer work as a lieutenant colonel in the New Mexico State Defense Force — but explained that these are not factors the Department or its hearing officer can consider. The Legislature sets the policy (State ex rel. Taylor v. Johnson); the hearing officer applies the statute as written and cannot waive the three-year limit for personal or financial circumstances.

Result: protest DENIED. The refund claim was time-barred.

What this means for you

File refund claims within three years — do not wait

New Mexico gives you three years from the end of the year a tax was originally due to claim a refund (Section 7-1-26). Once you know you have overpaid, file promptly; waiting to "wrap up" the business or for a better time can cost you the refund entirely.

The Department is not obligated to warn you of the deadline

Confirmation that you overpaid, or being told you "can apply for a refund," does not extend the clock. The limitations period is public law, and the Department's failure to mention it is not a basis to excuse a late claim.

Hardship will not toll the deadline

Even severe personal circumstances — illness, family loss, divorce — do not give a hearing officer power to waive the statutory refund period. The deadline is a legislative choice the agency must follow.

Know the public tax rules yourself

Tax statutes and regulations are available from the Department, in public libraries, and online. Relying on a public deadline you could have looked up will not support an estoppel argument.

Common questions

Q: What was the refund for?
A: About $3,000 of gross receipts tax the chiropractor overpaid for the March–October 1997 reporting periods.

Q: Why was the claim denied?
A: It was filed September 15, 2001, after the three-year limitations period in Section 7-1-26 ended on December 31, 2000.

Q: The Department never told him about the deadline — isn't that unfair?
A: The hearing officer found it was not estoppel. The deadline is public law, the Department concealed nothing, and Section 7-1-60 estoppel applies only to reliance on a regulation or a ruling addressed to the taxpayer.

Q: Didn't his hardships count for anything?
A: The hearing officer was sympathetic but had no authority to waive a statutory deadline based on personal or financial circumstances.

Q: Could the hearing officer have made an exception?
A: No. Only the Legislature can create exceptions to the refund limitations period; the hearing officer must apply the law as written.

Citations and references

Statutes:

• NMSA 1978, § 7-1-26 — three-year limitations period for claiming a refund (subsection (D)(1)(a): within three years of the end of the calendar year in which the payment was originally due)
• NMSA 1978, § 7-1-60 — estoppel against the Department only where the taxpayer acted on a regulation or a ruling addressed to the taxpayer

Cases cited:

• Taxation and Revenue Department v. Bien Mur Indian Market, 108 N.M. 228, 770 P.2d 873 (1989)
• Kerr-McGee Nuclear Corp. v. Property Tax Division, 95 N.M. 685, 625 P.2d 1202 (Ct. App. 1980)
• Kern v. St. Joseph Hospital, Inc., 102 N.M. 452, 697 P.2d 135 (1985)
• Continental Potash, Inc. v. Freeport-McMoran, Inc., 115 N.M. 690, 858 P.2d 66 (1993)
• State ex rel. Taylor v. Johnson, 1998-NMSC-015, 961 P.2d 768

Source

• Listing: New Mexico Decisions & Orders
• Decision post: Elan Chiropractic
• Decision PDF: D&O 02-05

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
AT ELAN CHIROPRACTIC No. 02-05
ID NO. 01-165286-00-1
DENIAL OF CLAIM FOR REFUND

DECISION AND ORDER

A formal hearing on the above-referenced protest was held February 18, 2002, before

Margaret B. Alcock, Hearing Officer. At Elan Chiropractic was represented by Robbie Kip Kipping

(“Taxpayer”), its owner. The Taxation and Revenue Department ("Department") was represented by

Bridget A. Jacober, Special Assistant Attorney General. Based on the evidence and arguments

presented, IT IS DECIDED AND ORDERED AS FOLLOWS:

FINDINGS OF FACT

1. In 1981, the Taxpayer began practice as a chiropractor under the name “At Elan

Chiropractic.”

2. In 1992, the Taxpayer was diagnosed with severe arthritis that interfered with his

ability to continue with his profession as a chiropractor. In addition, the Taxpayer suffers from post-

traumatic stress disorder as a result of his service in Vietnam.

3. The Taxpayer’s wife suffered a nervous breakdown, which was aggravated by her

father’s death from cancer.

4. As a result of these problems, the Taxpayer found it difficult to keep up with his

practice and fell behind in his tax payments.

5. The Taxpayer filed for Chapter 13 bankruptcy and entered into an installment

agreement with the Department to repay his back taxes.

6. In August 1995, the Taxpayer closed his business, but kept his business accounts and

tax identification number active because he was still receiving payments on work done in the past.

The Taxpayer continued to report and pay gross receipts tax on these payments.

7. In late 1997, the Taxpayer realized he had overpaid his gross receipts taxes for the

period March 1997 through October 1997 in the amount of approximately $3,000.

8. The Taxpayer called the Department and confirmed the existence of an overpayment.

The employee with whom the Taxpayer spoke told the Taxpayer he could apply for a refund, but did

not tell him there was a three-year limitations period within which the claim had to be filed.

9. The Taxpayer decided to wait until he wrapped up his business before filing a claim

for refund.

10. In December 2000, the Taxpayer closed his business accounts and retired his

chiropractor’s license. That same month, the Taxpayer’s wife of 32 years told him she wanted a

divorce.

11. In January 2001, the Taxpayer’s father died.

12. In March 2001, the Taxpayer’s best friend died in a diving accident.

13. Because of these misfortunes, the Taxpayer did not get around to filing a claim for

refund of his 1997 gross receipts taxes until September 15, 2001.

14. On October 11, 2001, the Taxpayer’s claim for refund was denied because it was

filed beyond the limitations period set out in Section 7-1-26 NMSA 1978.

15. On October 18, 2001, the Taxpayer filed a written protest to the denial of his claim

for refund.

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DISCUSSION

The issue to be determined is whether the Department properly denied the Taxpayer’s claim

for refund of gross receipts taxes paid for reporting periods March 1997 through October 1997. The

Department’s reason for denying the Taxpayer’s refund claim was the expiration of the limitations

period set out in Section 7-1-26 (D)(1)(a) NMSA 1978, which provides, in pertinent part:

[N]o credit or refund of any amount may be allowed or made to any
person unless as the result of a claim made by that person as provided in
this section:

(1) within three years of the end of the calendar year in which:

(a) the payment was originally due or the overpayment
resulted from an assessment by the department pursuant to Section 7-1-17
NMSA 1978, whichever is later;

In this case, the time within which the Taxpayer could claim a refund of gross receipts taxes paid

during the period March through October 1997 expired on December 31, 2000. The Taxpayer’s

September 15, 2001 refund claim was not filed within the limitations period required by Section 7-1-

26 NMSA 1978 and was properly denied by the Department.

The Taxpayer raises an estoppel argument, asserting that the Department misled the

Taxpayer by not informing him of the three-year limitations period. As a general rule, courts are

reluctant to apply the doctrine of equitable estoppel against the state. This general rule is given even

greater weight in cases involving the assessment and collection of taxes. Kerr-McGee Nuclear Corp. v.

Property Tax Division, 95 N.M. 685, 625 P.2d 1202 (Ct. App. 1980). In such cases, estoppel applies

only pursuant to statute or when “right and justice demand it.” Taxation and Revenue Department v.

Bien Mur Indian Market, 108 N.M. 228, 231, 770 P.2d 873, 876 (1989).

Section 7-1-60 NMSA 1978 provides for estoppel against the Department in two

circumstances: when the taxpayer acted according to a regulation or when the taxpayer acted according

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to a revenue ruling specifically addressed to the taxpayer. Here, the Taxpayer’s payment of gross

receipts taxes was not in accordance with a regulation or revenue ruling, and there is no statutory basis

to estop the Department from applying the limitations period set out in Section 7-1-26 NMSA 1978.

Case law provides for estoppel against the state where right and justice demand its application.

When estoppel is invoked to avoid application of a statute of limitations, the issue is whether the

party to be estopped has taken some action to prevent the other party from bringing suit within the

prescribed period. Kern v. St. Joseph Hospital, Inc., 102 N.M. 452, 455-456, 697 P.2d 135, 138-139

(1985). In Continental Potash, Inc. v. Freeport-McMoran, Inc., 115 N.M. 690, 698, 858 P.2d 66, 74

(1993), the New Mexico Supreme Court emphasized that the party asserting equitable estoppel to

toll a statute of limitations must show not only a lack of knowledge of the truth as to the facts in

question, but also “the lack of means by which knowledge might be obtained.” See also, Bolton v.

Board of County Commissioners of Valencia County, 119 N.M. 355, 369, 890 P.2d 808, 822

(Ct.App. 1994), cert. denied 119 N.M. 311, 889 P.2d 1233 (1995) (estoppel not warranted where

plaintiffs had access to public records that would have provided them with complete information

concerning the bond ordinance at issue).

The facts of this case do not establish a basis for applying equitable estoppel against the

Department. Although the Taxpayer testified that he had no knowledge of the three-year limitations

period, this lack of knowledge cannot be attributed to any act of concealment by the Department.

New Mexico’s tax laws are a matter of public record available to all of the state’s taxpayers. Copies

of the tax statutes and accompanying regulations can be obtained from the Department and are also

available in public libraries and on the internet. The fact that the Department employee with whom

the Taxpayer spoke in 1997 did not specifically advise the Taxpayer that he had to file his claim for

refund by December 31, 2000 does not meet the requirements for equitable estoppel.

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The Taxpayer’s failure to file a timely claim for refund was primarily attributable to a series

of personal misfortunes that distracted him from his business affairs. The Taxpayer asks the

Department to take this into consideration when ruling on his claim for refund. The Taxpayer also

asks the Department to recognize his continuing volunteer work as a lieutenant colonel in the New

Mexico State Defense Force. There is no question that the Taxpayer has suffered many setbacks,

including his illness, his divorce, and the deaths of his father-in-law, his father and his close friend.

It is also without question that the Taxpayer has demonstrated great patriotism, both by serving in

Vietnam and by volunteering his time in the state defense force. Unfortunately, these factors are not

something the Department can consider in determining whether to grant the Taxpayer’s claim for

refund. In State ex rel. Taylor v. Johnson, 1998-NMSC-015 ¶ 022, 961 P.2d 768, 774-775, the

supreme court made the following observations concerning the power of administrative agencies:

Generally, the Legislature, not the administrative agency, declares the policy and
establishes primary standards to which the agency must conform. See State ex rel.
State Park & Recreation Comm'n v. New Mexico State Authority, 76 N.M. 1, 13, 411
P.2d 984, 993 (1966). The administrative agency's discretion may not justify
altering, modifying or extending the reach of a law created by the Legislature.

The job of the Department’s hearing officer is to determine whether the Department has properly

applied the law as written. Neither the Department nor its hearing officer has authority to question

the wisdom of the laws passed by the legislature or modify the application of those laws based on the

financial or personal situations of individual taxpayers. The law enacted by the legislature prohibits

the Department from granting refunds filed beyond the three-year limitations period set out in

Section 7-1-26 NMSA 1978, and the Department must follow the directive of the statute.

CONCLUSIONS OF LAW

1. The Taxpayer filed a timely, written protest to the Department’s denial of his claim for

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

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2. The Taxpayer's claim for refund of gross receipts taxes paid for reporting periods

March 1997 through October 1997 is barred by the limitations period set out in Section 7-1-26 NMSA

1978.

3. The Department is not estopped from denying the Taxpayer's claim for refund.

4. The hearing officer does not have authority to override the provisions of New Mexico’s

tax laws and waive the limitations period set out in Section 7-1-26 NMSA 1978.

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

DATED February 19th, 2002.

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