Could a taxpayer defeat New Mexico assessments based on IRS reports by merely disputing them, challenging information sharing, and then missing the hearing?

Plain-English summary

Ricardo Giron did not rebut New Mexico personal income tax assessments based on IRS Revenue Agent Reports showing substantial unreported income. His unsupported objections did not shift the burden to the Department, and he failed to appear at the hearing after receiving two continuances.

The official decision caption identifies the taxpayer as Ricardo S. Giron. The Department's WordPress post identifies him as Richard S. Giron; this page follows the PDF caption while retaining the official post URL.

The IRS reports found $221,603 of underreported taxable income for 2000 and $124,105 for 2001. Giron's New Mexico returns reported zero taxable income for both years.

The Department assessed:

• 2000: $16,898.95 tax and $8,390.50 interest; and
• 2001: $8,904 tax and $3,092.09 interest.

Giron protested, asserted that the factual dispute shifted the burden to the Department, and raised limitations and federal-disclosure arguments. After two requested continuances, he did not attend the December 1, 2005 hearing.

An assertion did not shift the burden

Section 7-1-17(C) presumed the assessments correct. Regulation 3.1.6.12(A) required countervailing evidence tending to dispute their factual basis; unsupported statements were not enough.

Giron produced no financial records or other evidence contradicting the IRS income figures. His legal arguments therefore did not overcome the assessments.

The 2000 assessment was timely

Section 7-1-18(A) gave the Department three years from the end of the calendar year in which tax was due. The 2000 personal income tax was due April 15, 2001, and the August 2004 assessment fell within the period calculated by the decision.

The information-sharing challenge failed

Giron cited a regulation governing a different federal-state tax-collection program. The decision found it did not govern disclosures under Section 6103(d).

New Mexico's coordination and implementation agreements with the IRS provided for exchange of individual income-tax adjustment reports and met the federal disclosure requirements.

Even if a disclosure had violated federal law, Section 7431 supplied the federal cause of action; suppression and abatement of valid state tax were not available remedies in this proceeding.

The remaining federal-authority arguments lacked merit

The decision rejected Giron's claim that federal tax enforcement had been transferred generally to the Bureau of Alcohol, Tobacco and Firearms. The cited Treasury order transferred only functions related to specified alcohol, tobacco, firearms, and explosives provisions.

Other arguments relied on federal material taken out of context and supplied no factual or legal basis to abate the state assessments.

Result: protest DENIED. Under Section 7-1-16(C), Giron became a delinquent taxpayer when he failed to appear at the hearing.

What this means for you

Taxpayers disputing IRS-derived state assessments

Provide records that specifically contradict the income figures. Simply labeling an assessment factually wrong did not move the evidentiary burden here.

Taxpayers challenging information sharing

Distinguish the legality of disclosure from the correctness of the tax. The decision treated any disclosure remedy as a separate federal matter, not grounds to erase state liability.

Protestants with a scheduled hearing

Appear and present evidence, or follow valid procedures for any further scheduling issue. Missing the hearing left Giron's unsupported record unchanged and triggered delinquency under the cited statute.

Common questions

Q: What income did the IRS reports identify?
A: $221,603 for 2000 and $124,105 for 2001.

Q: What did Giron report to New Mexico?
A: Zero taxable income for both years.

Q: Did his written statement shift the burden to the Department?
A: No. He needed countervailing evidence, not an unsupported assertion.

Q: Were the IRS disclosure agreements valid?
A: The decision held that New Mexico's coordination and implementation agreements met Section 6103(d).

Q: Why does this page say Ricardo when the post says Richard?
A: The official PDF caption says "RICARDO S. GIRON," and that caption controls the metadata here.

Citations and references

Statutes and regulation:

• NMSA 1978, § 7-1-16(C) — delinquency after failure to appear at a protest hearing
• NMSA 1978, § 7-1-17(C) — presumption that an assessment is correct
• NMSA 1978, § 7-1-18(A) — assessment limitation period
• NMSA 1978, § 7-2-12 — personal income tax return filing requirement
• 26 U.S.C. § 6103(d) — federal-state disclosure of tax information
• 26 U.S.C. § 7431 — federal cause of action for improper disclosure
• Regulation 3.1.6.12(A) NMAC — evidence required to rebut an assessment

Cases cited:

• Holt v. New Mexico Department of Taxation & Revenue, 2002-NMSC-034, 133 N.M. 11, 59 P.3d 491
• Grogan v. New Mexico Taxation & Revenue Department, 2003-NMCA-033
• Smith v. United States, 964 F.2d 630 (7th Cir. 1992)
• Taylor v. United States, 106 F.3d 833 (8th Cir. 1997)
• Long v. United States, 972 F.2d 1174 (10th Cir. 1992)
• Nowicki v. Commissioner, 262 F.3d 1162 (11th Cir. 2001)
• United States v. Orlando, 281 F.3d 586 (6th Cir. 2002)

Source

• Listing: New Mexico Decisions & Orders
• Decision post: Richard S. Giron
• Decision PDF: D&O 05-24

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
RICARDO S. GIRON; TO ASSESSMENTS OF No. 05-24
PERSONAL INCOME TAX ISSUED UNDER
LETTER ID NOS. L0619011072 & L0471030784

DECISION AND ORDER

A formal hearing on the above-referenced protest was scheduled for December 1, 2005,

before Albert J. Lama, Hearing Officer. The Taxation and Revenue Department (“Department”)

was represented by Lewis J. Terr, Special Assistant Attorney General. Richard S. Giron failed to

appear for the hearing. Based on the evidence and arguments presented, IT IS DECIDED AND

ORDERED AS FOLLOWS:

FINDINGS OF FACT

1. In April 2004, the Department notified Richard S. Giron that pursuant to section

6103(d) of the Internal Revenue Code, the Department had received copies of two Revenue Agent

Reports (“RAR”) from the Internal Revenue Service. These reports found that Mr. Giron

underreported his 2000 taxable income by $221,603 and his 2001 taxable income by $124,105. See,

April 26, 2004 RAR Personal Income Tax Advisement Letters attached as pages 5 and 6 of Exhibit

D to Mr. Giron’s August 24, 2005 letter to Lewis Terr.

2. The Department’s advisement letters also notified Mr. Giron that a similar

discrepancy was found in his reporting of New Mexico personal income tax since Mr. Giron had

reported zero taxable income for both 2000 and 2001.

3. On August 12, 2004, the Department issued the following assessments of personal

income tax against Ricardo S. Giron:
Assessment Tax Year Tax Principal Interest

L0619011072 2000 $ 16,898.95 $ 8,390.50
L0471030784 2001 $ 8,904.00 $ 3,092.09

4. On August 24, 2004, Mr. Giron filed a protest to the assessments, stating that he

was “disputing the factual correctness of all current assessments” and “therefore, the burden of

proof is properly shifted to the department.” Mr. Giron further asserted that the Department’s

assessments violated the statutory requirements of NMSA 1978, § 7-1-18 (setting out the

limitations period for assessments) and NMSA 1978, § 7-2-12 (setting out the requirement for

filing personal income tax returns).

5. An administrative hearing on Mr. Giron’s protest was scheduled for August 17,

6. At Mr. Giron’s request, the hearing was continued twice, first to November 3, 2005 and then

to December 1, 2005.

6. On October 21, 2005, Mr. Giron submitted additional arguments in support of his

protest.

7. On December 1, 2005 at 9:00 a.m., the Department’s attorney appeared for the

hearing with his witness. Mr. Giron failed to appear for the hearing.

DISCUSSION

NMSA 1978, § 7-1-17(C) states that any assessment of taxes made by the Department is

presumed to be correct, and the burden is on the taxpayer to overcome this presumption. Holt v.

New Mexico Department of Taxation & Revenue, 2002 NMSC 34, ¶ 4, 133 N.M. 11, 59 P.3d 491.

Contrary to the position taken by Mr. Giron in his August 24, 2004 protest letter, a taxpayer cannot

shift the burden of proof to the Department merely by asserting that he is disputing the factual

2
correctness of an assessment. As stated by the New Mexico Court of Appeals in Grogan v. New

Mexico Taxation & Revenue Department, 2003 NMCA 33, ¶ 12, (N.M. Ct. App., 2002):

The Department's assessment is presumed to be correct. NMSA 1978, § 7-1-17(C)
(1992); Carlsberg, 116 N.M. 247 at 249, 861 P.2d at 290. "The effect of the
presumption of correctness is that the taxpayer has the burden of coming forward
with some countervailing evidence tending to dispute the factual correctness of the
assessment made by the secretary. Unsubstantiated statements that the assessment
is incorrect cannot overcome the presumption of correctness." 3.1.6.12(A) NMAC
2001.

In this case, the RARs the Department received from the IRS establish that Mr. Giron had $221,603

of taxable income for the 2000 tax year and $124,105 of taxable income for the 2001 tax year.

Prior to the December 1, 2005 hearing, Mr. Giron raised various legal arguments in support of his

protest, but did not provide any financial records or other evidence to refute the accuracy of the

IRS’s information concerning his 2000 and 2001 income. As set out below, Mr. Giron’s legal

arguments are without merit. Having failed to present evidence to rebut the factual basis for the

Department’s assessments of personal income tax, Mr. Giron has not met his burden of overcoming

the presumption of correctness that attaches to those assessments.

Statute of Limitations. In his August 24, 2004 protest, Mr. Giron maintains that the

Department’s assessment of tax for the 2000 tax year violated the statutory requirements of NMSA

1978, § 7-1-18, which sets out the time limitations for issuing assessments. Mr. Giron is mistaken.

Subsection A of § 7-1-18 gives the Department three years from the end of the calendar year in

which a tax is due to issue an assessment. Personal income taxes for the 2000 tax year were due on

or before April 15, 2001. The August 2004 assessment issued to Mr. Giron was well within the

time limits provided in § 7-1-18(A).

Disclosure Agreements. In his October 18, 2005 supplemental protest, Mr. Giron asserts

that the agreements for disclosure of tax information entered into between the Department and the

3
IRS pursuant to the provisions of 26 U.S.C. § 6103(d) are invalid because the agreements do not

comply with the requirements set out in 26 CFR § 301.6363-1. The problem with Mr. Giron’s

argument is that the cited regulation addresses the requirements for state agreements entered into

pursuant to 26 U.S.C. §§ 6361-6365.1 That regulation has no application to the requirements for

disclosure of tax information under § 6103 of the Internal Revenue Code.

With regard to disclosure agreements, federal courts have consistently held that the

standard-form coordination and implementation agreements the IRS has entered into with each of

the 50 states meet the disclosure requirements of § 6103(d). Smith v. United States, 964 F.2d 630

(7th Cir. 1992), cert. denied, 506 U.S. 1067 (1993); Taylor v. United States, 106 F.3d 833 (8th Cir.

1997); Long v. United States, 972 F.2d 1174 (10th Cir. 1992); Stone v. Commissioner, T.C. Memo

1998-314 (U.S. Tax Court Memos 1998). New Mexico entered into its Agreement on Coordination

of Tax Administration with the Internal Revenue Service in 1988. In 1989 and again in 1999, the

Department entered into an Implementation Agreement setting out the type of information to be

exchanged between the IRS and Department, including examination reports with respect to

individual income tax adjustments. Both of these agreements, copies of which were provided to

Mr. Giron and are attached as exhibits to his supplemental protest, meet the statutory requirements

of 26 U.S.C. § 6103(d).

Even if the IRS’s disclosure of Mr. Giron’s tax information did not meet statutory

requirements, this is not the appropriate forum in which to raise that issue. Instead, Mr. Giron’s

1
Sections 6361-6365 of the Internal Revenue Code were enacted as part of the Federal-State Tax Collection
Act of 1972. These sections provided that a state with a "qualified state individual income tax," i.e., a tax
closely conforming to the model of the federal income tax, could enter into an agreement to have the state's
individual income taxes collected and administered by the federal government. As noted in W. Hellerstein,
Symposium on State and Local Taxation, 39 Vand. L. Rev. 1033, 1055 n. 31 (May 1986), none of the states
chose to enter into such an agreement. Sections 6361-6365 were repealed in November 1990. Public Law
101-508, Title XI, § 11801(a)(45), 104 Stat. 1388-522.

4
remedy is found in 26 U.S.C. § 7431, which creates a federal cause of action for the improper

disclosure of an individual's return information. Suppression of such information is not one of the

remedies provided in § 7431. See, Nowicki v. Commissioner, 262 F.3d 1162, 1163 (11th Cir. 2001)

(imposition of the exclusionary rule is not warranted for a disclosure of return information which

violates § 6103). See also, United States v. Orlando, 281 F.3d 586, 595-596 (6th Cir. 2002). There

is no legal authority to support the argument that improper disclosure under § 6103 warrants

abatement of an otherwise valid state tax assessment.

Title 27 Argument. Mr. Giron contends that the authority for enforcement of federal taxes

has been transferred from the Internal Revenue Service to the Bureau of Alcohol, Tobacco and

Firearms (“BATF”) and that the only taxes remaining in effect are those excise taxes set out in

Title 27 of the Code of Federal Regulations. In support of his argument, Mr. Giron relies on the

following passage in 26 CFR 601.101 (Exhibit D to his supplemental protest):

The regulations relating to the taxes administered by the Service are contained in
Title 26 of the Code of Federal Regulations. The regulations administered by the
Bureau of Alcohol, Tobacco and Firearms are contained in Title 27 of the Code of
Federal Regulations.

and on Treasury Order 120-01 (Exhibit E to his supplemental protest), which concerns the

establishment of the BATF and states, in part:

2. The Director [of BATF] shall perform the functions, exercise the powers, and
   carry out the duties of the Secretary in the administration and enforcement of the
   following provisions of law:

a. Chapters 51, 52, and 53 of the Internal Revenue Code of 1954 and sections
7652 and 7653 of such Code insofar as they relate to the commodities subject to tax
under such chapters;

b. Chapters 61 to 80, inclusive of the Internal Revenue Code of 1954, insofar
as they relate to activities administered and enforced with respect to chapters 51, 52,
and 53;….

5
Mr. Giron misconstrues section 2b of Treasury Order 120-01 to mean that all provisions of chapter

61 of the Internal Revenue Code (which includes § 6103 relating to disclosures of tax information)

are now under the authority of the BATF. Mr. Giron overlooks the second half of Section 2b,

which provides that the transfer of enforcement authority to the BATF is limited to those provisions

of chapter 61 that “relate to activities administered and enforced with respect to chapters 51, 52,

and 53,” i.e., to those provisions relating to alcohol, tobacco, firearms and explosives. There is no

merit to Mr. Giron’s argument that the procedural provisions of the Internal Revenue Code

concerning the disclosure of tax information and the filing of tax returns now apply only to taxes

enforced by the BATF. In Herbst Asset Management Trust v. Commissioner, T.C. Memo 2002-73

and Richards Asset Management Trust v. Commissioner, T.C. Memo 2002-74, the United States

Tax Court dismissed similar arguments as “frivolous and/or groundless.”

Other Arguments. The remaining arguments raised in Mr. Giron’s supplemental protest are

based on portions of federal statutes, regulations, and administrative materials taken completely

out-of-context and applied without regard to the overall statutory scheme of which they are a part.

Because these arguments are virtually unintelligible, a reasoned response is not possible. See,

Clayton v. Trotter, 110 N.M. 369, 373, 796 P.2d 262, 266 (Ct. App. 1990) (the court is unable to

respond to unintelligible arguments). In Crain v. Commissioner, 737 F.2d 1417, 1418 (5th Cir.

1984), the Fifth Circuit Court of Appeals found that Crain’s appeal challenging the validity of the

federal income tax was “a hodgepodge of unsupported assertions, irrelevant platitudes, and

legalistic gibberish.” The court further found that “[t]he government should not have been put to

the trouble of responding to such spurious arguments, nor this court to the trouble of ‘adjudicating’

this meritless appeal.” Id. Mr. Giron’s protest of his liability for New Mexico income tax is

6
similarly devoid of merit and fails to provide any legal or factual basis to justify an abatement of

the Department’s assessments of tax on his 2000 and 2001 income.

CONCLUSIONS OF LAW

A. Pursuant to NMSA 1978, § 7-1-17(C), the Department’s assessment is presumed to

be correct, and it is Mr. Giron’s burden to come forward with evidence and legal argument to

establish that he is entitled to abatement.

B. Mr. Giron failed to meet his burden of proving that the Department’s assessments

of personal income tax for the 2000 and 2001 tax years are incorrect.

C. Pursuant to NMSA 1978 § 7-1-16(C), Mr. Giron became a delinquent taxpayer

upon his failure to appear at the hearing set to consider his protest.

For the foregoing reasons, the taxpayer’s protest is DENIED.

DATED December 6, 2005.

7