Was Club 33's tax protest untimely when it was mailed 91 days after the notices' printed assessment date but the Department could not prove when or where it mailed them?

Plain-English summary

Club 33's first protest had to be accepted as timely because the Department never proved when it mailed the three notices of assessment. The printed August 31, 2010 “Assessment Date” did not by itself start the statutory protest period.

The assessments covered several obligations:

• $620,759.06 of gross receipts and withholding tax, penalty, and interest;
• $14,570.77 of tobacco products tax, penalty, and interest; and
• $3,013.78 of workers' compensation fees, penalty, and interest.

On August 30, 2010, Club 33 filed a Tax Information Authorization naming tax attorney Dan Pick as its representative for all CRS taxes and giving his Albuquerque address. The next day, the Department generated the three assessments but addressed them directly to Club 33 at its previous address.

Pick first learned of the assessments after Club 33 received a lien notice and brought it to him in early November.

A Department employee said the protest could be filed by month-end

Pick called Revenue Agent Brenda Lujan on November 16 and requested more time. After consulting a supervisor, Lujan told him that Club 33 had until the end of November. Her November 18 email put that statement in writing and quoted the protest statute.

Club 33 mailed its protest on November 30. That was 91 days after the notices' printed assessment date.

Nearly a year later, the Department declared the protest one day late because it treated November 29 as the end of a 90-day extension. Club 33 filed a second protest challenging that timeliness determination.

The Department did not establish the date that legally mattered

Section 7-1-24(B) measured the protest period from “the date of mailing” of the assessment. Section 7-1-17 likewise made an assessment effective when mailed or personally delivered.

The Department did not claim personal service and offered no evidence proving mailing on August 31. It produced no:

• postmarked envelope;
• mailing log;
• witness with knowledge of the mailing; or
• evidence connecting the printed assessment date to regular mailing procedures.

Because the Department relied on service by mail, it bore the burden of proving mailing. The hearing officer emphasized that detailed proof was especially important when the Department's position turned on a single day.

Without a proven mailing date, there was no triggering date from which to calculate 90 days. The assessment presumption also did not attach because the Department had not shown that legally effective notices were mailed or personally served.

The address and written extension independently supported Club 33

Section 7-1-9(A) treated a mailed notice as effective when sent to the last address shown in Department records. The decision said the authorization filed on August 30 made Pick's office Club 33's last known address, while the notices generated the next day used the prior address. That made the notices arguably ineffective for a second reason.

The decision also found that Club 33 could reasonably rely on Lujan's written statement that it had until month-end. Although the Department argued that she lacked authority, she said she had consulted a supervisor, and the statute did not expressly limit extensions to the Protest Bureau.

Result: second protest granted. The Department was ordered to accept the November 30 first protest as timely and proceed to the merits of the three assessments. This decision did not determine whether the taxes, fees, penalties, or interest were substantively correct.

What this means for you

Businesses receiving an assessment or lien

Preserve the envelope, notice, and every communication about delivery. The statutory period in this decision depended on proof of mailing, not simply the date printed on the assessment.

Taxpayers appointing a representative

Confirm that the Department's records reflect the representative's address and that future notices go there. Club 33's authorization was filed one day before the assessments were generated.

Tax professionals requesting an extension

Get the extension in writing and retain it. Lujan's email was important evidence that Club 33 had been told it could file by the end of November.

Common questions

Q: Did the hearing officer decide the underlying tax liabilities?
A: No. The decision addressed only whether Club 33's first protest was timely.

Q: Why was the printed assessment date insufficient?
A: The statutes tied effectiveness and the protest deadline to mailing or personal delivery. The Department did not prove either occurred on August 31.

Q: What proof of mailing was missing?
A: There was no postmarked envelope, mailing log, witness testimony, or evidence of routine mailing practices connecting the printed date to actual mailing.

Q: Why did the representative's address matter?
A: Club 33 had filed an authorization showing Pick's address as the current address in Department records, but the assessments used the earlier company address.

Q: What happened after this ruling?
A: The Department had to accept the November 30 protest, consider the three assessments on their merits, and request another hearing when that dispute was ready.

Citations and references

Statutes and regulation:

• NMSA 1978, § 7-1-24(B) — protest deadline measured from mailing and extensions up to 90 days
• NMSA 1978, § 7-1-17(B) and (C) — when an assessment becomes effective and its presumption of correctness
• NMSA 1978, § 7-1-9(A) — effective mailing to the last address shown in Department records
• NMSA 1978, § 7-1-3(T) — definition of the secretary and delegates
• Regulation 3.1.6.11(A) NMAC — assessment presumption

Cases:

• Torridge Corp. v. Commissioner of Revenue, 84 N.M. 610, 612 (Ct. App. 1972) — presumption after delivery of an assessment notice
• Regents of New Mexico College v. Academy of Aviation, 83 N.M. 86, 88-89, 488 P.2d 343, 345-346 (1971) — overcoming the presumption through failure to follow the Tax Administration Act
• Myers v. Kapnison, 93 N.M. 215, 216 (Ct. App. 1979) — burden on the party relying on service by mail

Source

• Listing: New Mexico Decisions & Orders
• Decision post: Club 33, Inc.
• Decision PDF: D&O 12-13

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
CLUB 33, INC. No. 12-13
TO ASSESSMENT ISSUED UNDER LETTER
ID NO. L2111745600

DECISION AND ORDER

A protest hearing occurred on the above captioned matter on May 10, 2012 before Brian

VanDenzen, Esq., Tax Hearing Officer, in Santa Fe. Attorney Paul A. Bleicher appeared in

person, representing Club 33, Inc. (“Taxpayer”). During the protest hearing, Taxpayer called

attorney Dan Pick as witness in this matter. Chief Legal Counsel Nelson J. Goodin represented

the Taxation and Revenue Department of the State of New Mexico (“Department”). Protest

Auditor Andrea Umpelby appeared as a witness for the Department. Taxpayer Exhibits #1-5 and

Department Exhibits A.1, A.2, A.3, and C are admitted into the record, as more thoroughly

described in the Administrative Exhibit Coversheet. The record was left open until May 25, 2012

for the parties to submit proposed findings of fact, conclusions of law, and written argument. On

that date, Taxpayer submitted a supplemental hearing brief, proposed findings of fact and

conclusions of law, which is part of the record of this proceeding. Based on the evidence and

arguments presented, IT IS DECIDED AND ORDERED AS FOLLOWS:

FINDINGS OF FACT

1. At some unspecified point before August 2010, the Department selected Taxpayer

for an audit.

2. On August 30, 2010, Mr. Fredrick S. Kraus, President of Taxpayer, submitted a

Tax Information Authorization to the Department, designating attorney Dan Pick (“Attorney

Pick”), 8500 Menual Blvd. NE, Ste B450, Albuquerque, NM 87112 as Taxpayer’s

representative for CRS taxes in any year.

3. On August 31, 2010, the Department generated three notices of assessment, as

detailed below. The three notices of assessment were addressed directly to Taxpayer at 902 Juan

Tabo Blvd. NE, Albuquerque, NM 87112-5817 rather than to Attorney Pick’s address as

indicated in Taxpayer’s Tax Information Authorization.

a. L0414974528 for CRS reporting periods January 31, 2004 through

January 31, 2010. The total obligation under this assessment for both gross

receipts and withholding tax plus applicable penalty and interest was

$620,759.06. [Department A.1]

b. L1284325952 for Tobacco Products Tax reporting periods November 30,

2005 through January 31, 2010. The total obligation under this assessment for

tobacco products tax plus applicable penalty and interest was $14,570.77.

[Department A.2]

c. L1986085440 for Worker’s Compensation Fee reporting periods March

31, 2004 through December 31, 2009. The total obligation under this assessment

for worker’s compensation fee plus applicable penalty and interest was $3,013.78.

[Department A.3]

4. Although the three notices of assessment listed an “Assessment Date” of August

31, 2010, there is no evidence to establish when the Department mailed the notices of

assessment.

In the Matter of the Protest of Club 33, Inc., page 2 of 11

5. There is no evidence that the Department personally served the notices of

assessment on the listed August 31, 2010 “Assessment Date.”

6. At some point in October 2010, the Department issued Taxpayer a notice of lien.

7. After Taxpayer received the notice of lien, Taxpayer brought the notice of lien to

Attorney Pick in early November.

8. During this meeting in early November with Taxpayer about the notice of lien,

Attorney Pick first learned of the notices of assessment in this matter.

9. Attorney Pick contacted Department employee, Brenda Lujan, via telephone on

November 16, 2010 to express his displeasure that the Department did not send him the notices

of assessment and to ask for extension of time to file a protest to the notices of assessment.

10. At that time, Brenda Lujan worked as a Revenue Agent in the Department’s

Albuquerque Office. Brenda Lujan was not a member of the Department’s Protest Bureau, and

there is no evidence that Brenda Lujan was authorized to grant protest extensions.

11. Brenda Lujan told Attorney Pick that she wanted to consult with a supervisor

about Taxpayer’s requested extension.

12. Later that day, or the next day, Brenda Lujan contacted Attorney Pick over the

phone to inform him that Taxpayer had until the end of November to submit a protest. Attorney

Pick asked that Brenda Lujan reduce that information to writing.

13. On November 18, 2010, Brenda Lujan submitted an email to Attorney Pick,

stating that “(a)fter a discussion with my supervisor you have until the(sic) end of November

2010” to file Taxpayer’s protest to the notices of assessments. Brenda Lujan’s email also quoted

NMSA 1978, Section 7-1-24(B), which addresses protests, in its entirety and referenced FYI 400

for assistance in filing the protest. [Taxpayer Exhibit #1]

In the Matter of the Protest of Club 33, Inc., page 3 of 11

14. Attorney Pick is a tax attorney with 22-years of practice experience. During that

time, Attorney Pick has filed between 10-20 tax protests under the provisions of the Tax

Administration Act. Attorney Pick has previously filed for and been granted extensions of time

to file a protest. Attorney Pick previously filed those requests with the Department’s Protest

Bureau.

15. Taxpayer, through Attorney Pick, mailed its protest letter to the Department on

November 30, 2010. The protest letter included a specific reference to Brenda Lujan’s email.The

Tax Information Authorization, Brenda Lujan’s email, a Tobacco Products Tax Return, and a

cleared check image were attached to Taxpayer’s protest letter as exhibits. [Taxpayer Exhibit #2]

16. November 30, 2010 was 91-days after the August 31, 2010 “Assessment Date”

listed on the three notices of assessment issued in this matter.

17. Other than a status-check call from the Department, Attorney Pick testified that

the Department made no effort to collect on the three assessments after he submitted Taxpayer’s

protest letter.

18. Nearly a year later, on October 7, 2011, the Department sent a letter to Taxpayer

to acknowledge receipt of Taxpayer’s November 30, 2010 protest letter. The Department

informed Taxpayer that it deemed the protest untimely and invalid under the statute because it

was not submitted by November 29, 2010 (90-days after the August 31, 2010 “Assessment

Date”).

19. According to Attorney Pick’s testimony, after this October 7, 2011 letter from the

Department, the Department renewed its collection efforts on the three notices of assessment by

filing a notice of levy.

In the Matter of the Protest of Club 33, Inc., page 4 of 11

20. On October 31, 2011, Taxpayer filed a protest (“second protest”) to the

Department’s denial of the first protest as untimely.

21. On November 9, 2011, the Department acknowledged timely receipt of

Taxpayer’s second protest. The Department informed Taxpayer that the second protest would be

limited strictly to the question of whether the first protest was timely, and not the merits of the

three notices of assessment. The Department informed Taxpayer that only upon a finding by the

hearing officer that the first protest was timely would the Department consider the first protest.

22. On January 9, 2012, the Department filed a request for hearing in this matter.

23. On January 24, 2012, the Department’s Hearing Bureau sent notice of

administrative hearing, scheduling this matter for May 10, 2012.

DISCUSSION

The issue at protest is whether Taxpayer timely filed its first protest with the Department.

Both Taxpayer and the Department makes extensive argument as to the meaning of NMSA 1978,

Section 7-1-24(B) (2003) and whether under that provision the failure to protest an assessment

within 90-days divests the Department of jurisdiction to consider the protest. However, the

resolution of this protest turns on a much narrower factual and legal basis than the parties

competing interpretations of NMSA 1978, § 7-1-24(B) (2003). Factually, the Department never

established the date of mailing of the three notices of assessment and without such proof, there is

no basis to find Taxpayer’s protest untimely under NMSA 1978, § 7-1-24(B) (2003). Legally,

the notices of assessment were arguably ineffective without proof of mailing and because they

were not addressed to Taxpayer’s last known address of record on file with the Department1.

1
Taxpayer’s questions of Attorney Pick, and Attorney Pick’s responses at 18:03-18:27, 19:50-20:05, fairly raised
the issue of effective mailing of assessments.

In the Matter of the Protest of Club 33, Inc., page 5 of 11
Factually, the Department never established the requisite date of mailing necessary to

calculate the beginning of the 90-day time-frame for Taxpayer to file its protest. The question of

timeliness of Taxpayer’s protest under NMSA 1978, § 7-1-24(B) (2003) turns on whether the

protest was submitted within the requisite (30-days or up to 90-days upon appropriately granted

extension) “days of the date of mailing to the taxpayer by the department of the notice of

assessment.” (italics added for emphasis). Similar to the importance of the Department’s mailing

under NMSA 1978, § 7-1-24(B) (2003), under NMSA 1978, Section 7-1-17 (B) (2) (2007), an

assessment of tax is only effective when an appropriately titled document issued under the

secretary’s name “is mailed or delivered in person to the taxpayer…” (italics added for

emphasis). Consequently, to be an effective assessment, the Department must establish that it

either personally served (which it does not allege in this case) or mailed the assessments to

Taxpayer. To determine when Taxpayer was required to file the protest under NMSA 1978, § 7-

1-24(B) (2003), it is first necessary to determine when the Department mailed effective notices

of assessment to Taxpayer.

While typically the Department receives a statutory presumption of correctness to its

assessments under NMSA 1978, § 7-1-17 (2007), conceptually such a presumption of

correctness can only attach upon a mailed or personally delivered legally effective Notice of

Assessment. See NMSA 1978, § 7-1-17 (B) & (C) (2007) and Regulation 3.1.6.11(A) NMAC

(1/15/01). See also Torridge Corp. v. Commissioner of Revenue, 84 N.M. 610, 612 (N.M. Ct.

App. 1972) (“after…notice of assessment of taxes is delivered to a taxpayer, taxpayer must carry

burden of proof in order to negate the presumption of correctness.”). Even if the presumption of

correctness arguably still applies in this circumstance, as will be discussed in greater detail

below, Taxpayer overcomes that presumption by showing that the Department did not comply

In the Matter of the Protest of Club 33, Inc., page 6 of 11
with mailing of notice requirements of NMSA 1978, Section 7-1-9 (A) (1997) under the TAA.

See Regents of New Mexico College v. Academy of Aviation, 83 N.M. 86, 88-89, 488 P.2d 343,

345-346 (N.M. 1971) (a taxpayer can overcome the presumption by showing the Department

failed to follow statutory provisions contained in the TAA). Moreover, like here where the

Department relies on service by mail to establish the notices of assessment, a “party relying on

service by mail has the burden of proving the mailing.” Myers v. Kapnison, 93 N.M. 215, 216

(N.M. Ct. App. 1979). Until the Department can prove mailing the notices of assessment, no

presumption of correctness attaches to those assessments and no triggering date under that

NMSA 1978, § 7-1-24(B) (2003) timeliness of protest requirements can be determined.

In this protest, the Department presented no witness testimony or other evidence

establishing when it mailed the notices of assessment. The closest evidence related to mailing is

the fact that the notices of assessment each list an “Assessment Date” of August 31, 2010.

However, that “Assessment Date” does not necessarily establish the date the Department mailed

the assessments in this case. The Department presented no witness testimony or other evidence

that equated the “Assessment Date” with the actual date of mailing. The Department presented

no evidence related to proof of actual mailing of the three assessments such as a copy of the

postmarked envelope or a mailing log. In the absence of actual proof of mailing, the Department

did not attempt to present any testimony or evidence regarding the Department’s assessment

mailing procedures, practices, routines, or policies that might have established that these three

assessments were mailed in conformance therewith.

That is not to say that this type of detailed evidence of mailing is always required.

However, considering that in this protest the Department avers that Taxpayer’s protest letter was

one-day late, detailed evidence and proof of actual date of mailing is critical to the question of

In the Matter of the Protest of Club 33, Inc., page 7 of 11
timeliness and/or jurisdiction in this specific case. Under the specifics of this case, there is not

enough evidence of the actual, triggering date of mailing to find Taxpayer’s November 30, 2010

protest untimely under the 90-day limit articulated by NMSA 1978, § 7-1-24(B) (2003).

The other reason why Taxpayer’s protest is persuasive in this matter turns on a narrow

legal analysis of whether the notices of assessment were effective under the TAA on August 31,

2010. It is worth repeating that under NMSA 1978, § 7-1-17, the notices of assessment are only

effective upon either mailing or personal delivery. Since, as discussed above, the Department did

not establish either mailing or personal service on August 31, 2010, there is no basis on this

record to find that the assessments were legally effective on that date.

Moreover, the notices of assessment are also arguably ineffective under the TAA because

they were not addressed or mailed to Taxpayer at Attorney Pick’s address. NMSA 1978, Section

7-1-9 (A) (1997) discusses what constitutes effective mailing under the under the TAA: “a notice

required or authorized…is effective if mailed or served by the secretary or the secretary's

delegate to the taxpayer or person at the last address shown on his registration certificate or

other record of the department.” (italics added for emphasis). The evidence in this protest

established that on August 30, 2010, Taxpayer filed a “Tax Information Authorization” to the

Department, designating Attorney Pick, 8500 Menual Blvd. NE, Ste. B450, Albuquerque, NM

87112 as Taxpayer’s representative for CRS taxes in any year. On that date, Taxpayer’s last

address shown for the purposes of NMSA 1978, § 7-1-9 (A) (1997) became Attorney Pick’s

address in Albuquerque.

The day after Taxpayer changed its last known address by filing the “Tax Information

Authorization,” the Department generated notices of assessment listing Taxpayer’s previous

address of record rather Attorney Pick’s address. Since the Department generated the notices of

In the Matter of the Protest of Club 33, Inc., page 8 of 11
assessment using Taxpayer’s previous address rather than Taxpayer’s correct, last known address

at Attorney Pick’s office, the notices of assessment in this matter were arguably ineffective under

the mailing of notice requirements of NMSA 1978, § 7-1-9 (A) (1997).

To the extent that the Department argues or suggests that Taxpayer never requested a

written retroactive extension in this matter, whether requested or not, the evidence is clear that

the Department in fact granted a retroactive extension on November 18, 2010 based on the

written email of Brenda Lujan. Taxpayer could reasonably rely on her representation to

determine that the Department had granted a retroactive extension. The Department itself

appeared to act in reliance upon the extension and Taxpayer’s subsequent November 30, 2010

protest letter by stopping all enforcement action against Taxpayer for nearly a year after receipt

of Taxpayer’s protest.

The Department’s assertion that any extension was ineffective in this case because

Brenda Lujan lacked authority to grant an extension is not persuasive under the facts of this case.

While internally Department employees may be quite familiar with the specific duties and

responsibilities of each of the Department’s respective divisions, a member of the public may not

be aware of the Department’s myriad divisions let alone the specific decision making authority

of each respective division within the Department. NMSA 1978, §7-1-24(B) (2003) does not

explicitly state that an extension may only be granted by the Department’s Protest Bureau; rather

it references the secretary directly, which by definition under NMSA 1978, Section 7-1-3(T)

(2009) would include the secretary, deputy secretary, or division directors delegated by the

secretary. Even if Attorney Pick knew based on his experience that extensions usually came from

the Protest Bureau, the fact that Ms. Lujan told Attorney Pick that she consulted with a

supervisor before informing Taxpayer of the extension certainly could leave Attorney Pick with

In the Matter of the Protest of Club 33, Inc., page 9 of 11
the reasonable inference that Ms. Lujan may have consulted with an individual designated by the

secretary under NMSA 1978, § 7-1-3(T) (2009) with authority to grant extensions on the

secretary’s behalf.

In summary, because the Department did not demonstrate a date of mailing that serves as

a trigger to Taxpayer’s timeliness of protest requirement under NMSA 1978, § 7-1-24(B) (2003),

and because the notices of assessment were ineffective without proof of mailing on August 31,

2010 and without mailing to Taxpayer’s last known address at Attorney Pick’s office,

Taxpayer’s second protest is granted. The Department shall accept Taxpayer’s November 30,

2010 first protest to the underlying assessments as timely filed within the requisite 90-day

extension period. As discussed at the conclusion of the hearing, and as the parties agreed, the

parties will submit a new request for hearing when the protest involving the three underlying

Notices of Assessment is ripe for hearing.

CONCLUSIONS OF LAW

A. Taxpayer filed a timely, written second protest to the denial of the initial first protest

letter. Jurisdiction lies over the parties and the subject matter of this protest.

B. No presumption of correctness attached in this case because the Department did not

show that it had mailed or personally served effective notices of assessment on August 31, 2010.

C. There is no basis to conclude that Taxpayer’s protest was untimely without proof of

mailing. Consequently, Taxpayer’s protest was timely filed under NMSA 1978, §7-1-24(B) (2003).

For the foregoing reasons, the Taxpayer's protest IS GRANTED. The Department should

accept Taxpayer’s initial November 30, 2010 protest as timely, proceed to address the three

notices of assessment on the merits, and submit a request for hearing when that protest is ripe for

a formal hearing.

In the Matter of the Protest of Club 33, Inc., page 10 of 11
DATED: June 11, 2012.

Brian VanDenzen, Esq.
Tax Hearing Officer
Taxation & Revenue Department
Post Office Box 630
Santa Fe, NM 87504-0630

In the Matter of the Protest of Club 33, Inc., page 11 of 11