Could Western Disposal recover a duplicate 2004 tax payment in 2009 after the Department had misapplied its original payment and lost the report?

Plain-English summary

Western Disposal Services could not recover a duplicate tax payment because its 2009 refund claim was filed after the three-year deadline, even though the Department's own error caused the duplicate payment. The protest was denied.

Western Disposal timely filed a CRS report and paid for the December 2003 reporting period. The Department misapplied that payment to another account and lost the report.

On March 11, 2004, the Department told the company that the report had not been filed. Western Disposal could not then locate its copy or proof of payment, so it filed the report again on March 20 and made a second payment that included penalty and interest.

The duplicate was not discovered until 2009

In March 2009, the Department again said that it was missing the December 2003 report. By then, a change in the company's structure and in the person responsible for records allowed Western Disposal to find both sets of documents:

• The original report and payment made in January 2004.
• The replacement report and additional payment made in March 2004.

The company gave the records to the Department on April 10, 2009. After a Department employee advised it to seek a refund, Western Disposal filed the claim on April 29. The Department denied it on May 20.

The refund period expired at the end of 2007

Section 7-1-26(D) allowed a refund or credit only if claimed within three years of the end of the calendar year in which the original payment was due. A separate three-year period from the overpayment applied when the overpayment resulted from a Department assessment.

The original December 2003 payment was due in January 2004, and the duplicate payment occurred in March 2004. There had been no assessment causing the overpayment, so the assessment-based extension did not apply.

The decision therefore placed the deadline at the end of 2007. The April 2009 claim was too late, and no statutory exception had been established.

The Department's error did not create administrative estoppel

Western Disposal argued that it was unfair to enforce the deadline because the Department had misapplied the first payment and lost the report.

The hearing officer treated that as equitable estoppel. To use estoppel against a limitations period, the taxpayer needed evidence that the Department acted to prevent a timely claim, including affirmative government misconduct. The record showed a serious administrative mistake but no action intended to keep Western Disposal from filing within the allowed period.

The decision also held that even if the facts supported equitable estoppel, an administrative agency could not grant that equitable remedy; the power belonged to the judiciary.

Result: protest DENIED. The refund remained barred by Section 7-1-26(D).

What this means for you

Businesses making a replacement payment

Before paying a second time, preserve the original return, bank record, confirmation number, and all Department correspondence. If you must repay, calendar the refund deadline immediately.

Taxpayers discovering an old Department error

An agency's mistake does not automatically pause or extend a statutory refund period. File a protective refund claim as soon as a potential overpayment is identified.

Accountants and recordkeepers

Keep tax payment evidence accessible for longer than routine operational records when an account discrepancy remains unresolved. The company found the documents only after responsibility for records changed.

Common questions

Q: Did Western Disposal actually pay twice?
A: Yes. The findings say it located both the January 2004 original payment and the March 2004 replacement payment.

Q: Did the Department cause the problem?
A: Yes. It misapplied the first payment to another account and lost the report.

Q: Why did the three-year period run from the original due-date year?
A: The overpayment did not result from a Department assessment, so the assessment-based alternative period did not apply.

Q: When did the decision say the deadline expired?
A: At the end of calendar year 2007.

Q: Could the hearing officer waive the deadline as a matter of fairness?
A: No. The decision found no affirmative misconduct preventing a timely claim and held that the administrative forum could not grant equitable estoppel.

Citations and references

Statute:

• NMSA 1978, § 7-1-26(D) — three-year limitation period for refund and credit claims

Cases cited:

• In re Protest of Kilmer, 2004-NMCA-122
• Wisznia v. State, Human Services Department, 1998-NMSC-011
• Kern v. St. Joseph Hospital, Inc., 102 N.M. 452, 697 P.2d 135 (1985)
• AA Oilfield Service v. New Mexico State Corporation Commission, 118 N.M. 273, 881 P.2d 18 (1994)

Source

• Listing: New Mexico Decisions & Orders
• Decision post: Western Disposal Services
• Decision PDF: D&O 10-11

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
WESTERN DISPOSAL SERVICES, INC. No. 10-11
TO THE DENIAL OF CLAIM FOR REFUND
LETTER ID NO. L1576971392

DECISION AND ORDER

A formal hearing on the above-referenced protest was held August 19, 2010, before Dee

Dee Hoxie, Hearing Officer. The Taxation and Revenue Department ("Department") was

represented by Mr. Peter Breen, Special Assistant Attorney General. Ms. Andrea Umpleby,

Auditor, also appeared on behalf of the Department. Ms. Christy Richardson and Mr. John

Richardson, president and vice-president respectively of Western Disposal Services, Inc.

(“Taxpayer”), appeared for the hearing and represented Taxpayer. The Hearing Officer took

notice of all documents in the administrative file. Based on the evidence and arguments

presented, IT IS DECIDED AND ORDERED AS FOLLOWS:

FINDINGS OF FACT

1. Taxpayer filed a timely CRS report and made payment for the December 2003 reporting

period.

2. The Department misapplied the payment to another account and lost the report.

3. The Department notified Taxpayer on March 11, 2004 that they had failed to file a CRS

report for the December 2003 period.

4. Taxpayer was unable to locate the previously filed report and was unable to find proof of

payment for the December 2003 period. Therefore, Taxpayer filed the report again and made

another payment, which included interest and penalty, on March 20, 2004.

5. In March 2009, Taxpayer was informed during a phone call that the Department was still

missing the December 2003 CRS report.

6. Taxpayer researched their records and found the original CRS report and payment that was

made in January 2004 for that tax period. Taxpayer also located the CRS report and

additional payment that had been made in March 2004 for the same tax period. Taxpayer

was able to locate these records due to a change in its structure and in the person responsible

for maintaining and locating their records. Taxpayer provided copies of these documents to

the Department on April 10, 2009.

7. On April 29, 2009, Taxpayer filed a claim for refund for the payment made in March 2004

after speaking to a Department employee who advised them to do so.

8. On May 20, 2009, the Department denied the claim for refund.

9. On June 17, 2009, Taxpayer filed a formal protest to the denial.

10. On May 21, 2010, the Department filed a Request for Hearing asking that the Taxpayer’s

protest be scheduled for a formal administrative hearing.

DISCUSSION

The issue to be decided is whether the Taxpayer’s claim for refund on the December 2003

tax period was properly denied by the statute of limitations.

Statute of Limitations.

No refund or credit is allowed unless it is claimed within three years of the end of the calendar year

of the original due date of the payment or within three years of the overpayment, if the overpayment

resulted from an assessment by the Department. See NMSA 1978, § 7-1-26 (D). The original

payment was due in January 2004 for the December 2003 reporting period. The overpayment

occurred in March 2004. There was not an assessment in this case, so there would not be any

extension of time to file for the refund. Therefore, the statute of limitations would expire at the end

In the Matter of Western Disposal Services, Inc., page 2 of 4
of the 2007 calendar year. The statute of limitations prevents stale claims and effectively places the

onus on the taxpayer to pursue their claim in a timely manner because the taxpayer is the one who

can more easily keep track of their claims for refund. See In re Protest of Kilmer, 2004-NMCA-122,

¶ 16, 136 N.M. 440, 99 P.3d 690. No exception to the three-year limitation was established. See

NMSA 1978, § 7-1-26.

Equitable Estoppel.

Taxpayer argued that it was unfair for the Department to deny their claim for refund based on the

statute of limitations because the Department’s actions and misapplication of the original payment

are what caused the overpayment. This is essentially an argument for equitable estoppel. Estoppel

may be found against the state where there is “a shocking degree of aggravated and overreaching

conduct or where right and justice demand it." Wisznia v. State, Human Servs. Dep't, 1998-NMSC-

011, ¶ 17, 125 N.M. 140, 958 P.2d 98. 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). There is no evidence that the Department acted in

order to prevent Taxpayer from bringing the claim within the time allowed by the statute. In

addition, the party seeking estoppel must demonstrate “affirmative misconduct on the part of the

government.” Kilmer, 2004-NMCA-122, at ¶ 27. Even if estoppel were to apply, the Hearing Officer

could not grant it. See AA Oilfield Service v. New Mexico State Corp. Comm’n, 118 N.M. 273, 881

P.2d 18 (1994) (holding that an administrative agency cannot grant the equitable remedy of estoppel

because that power is held exclusively by the judiciary).

CONCLUSIONS OF LAW

1. Taxpayer filed a timely written protest to the denial of refund issued under Letter ID

number L1576971392 and jurisdiction lies over the parties and the subject matter of this protest.

In the Matter of Western Disposal Services, Inc., page 3 of 4

2. The claim for refund was not made within three years of the end of the calendar

year in which the original payment was due.

3. The claim for refund was barred by the statute of limitations in NMSA 1978, § 7-1-

26 (D).

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

DATED: September 13, 2010.

In the Matter of Western Disposal Services, Inc., page 4 of 4