Did an ambiguous letter saying assessments were sent in error and asking for confirmation of zero tax count as a timely protest, and did it prove claimed business losses?

Plain-English summary

Collin Sanchez filed a timely protest, despite using an ambiguous first letter, but he did not prove the business losses needed to reduce his 2003-2007 personal income tax assessments. Winning the procedural question did not overcome the evidentiary burden on the merits.

The Department disallowed losses Sanchez had claimed for Enchanted Holdings, LLC, a real-estate-management business. It assessed five years of tax, penalty, and interest in November 2010.

Within 30 days, Sanchez wrote that the assessments had been sent “in error,” said prior refunds should offset the amounts, and asked for confirmation that “zero taxes are owed.” The Department later treated his more detailed February and April 2011 letters as untimely.

The first letter was enough to start a protest

Section 7-1-24 required a written protest identifying the tax, grounds, and requested relief, while allowing amendments before the hearing. The Department's regulations also allowed it to request more specificity from an ambiguous protest.

The decision read Sanchez's first letter broadly in light of the Taxpayer Bill of Rights. Unlike a letter acquiescing in an audit, his letter clearly disagreed with the assessments and asked for zero liability.

Because the Department received it within 30 days, it was timely. The later detailed letters supplemented and amended the original grounds rather than starting a new, late protest.

No records supported the claimed losses

On the merits, Sanchez had the burden to overcome the assessment presumption. He said Enchanted Holdings had startup-related business losses, including meals, transportation, and gasoline costs.

But at the hearing he produced no:

• New Mexico or federal income-tax returns;
• Schedule C forms;
• incorporation or continuing-business records;
• receipts or business-expense documentation;
• business tax filings; or
• financial statements.

He was vague about the audit and repeatedly said the Department should first explain the assessments. The Department had already sent an explanation and adjustment spreadsheet, and the hearing officer gave Sanchez an opportunity to question the protest auditor. He declined to ask his remaining questions.

Regulation 3.1.6.12(A) said unsubstantiated statements that an assessment was wrong could not overcome its presumed correctness.

Result: protest denied on the merits. Sanchez remained liable for $16,750 in personal income tax, $3,350 in penalty, and accrued interest until payment. The five original notices listed $7,225.37 in interest, but the final order did not state an updated interest total. The source PDF is marked “UNOFFICIAL UNSIGNED COPY.”

What this means for you

Taxpayers writing a protest without a lawyer

Express disagreement, identify the assessment, and request specific relief by the deadline. A timely but imperfect letter may be amendable, but specificity is safer.

Businesses claiming losses

Keep transaction-level records. A valid procedural protest does not prove deductions or losses.

Taxpayers seeking explanations from the Department

Use the hearing to question the Department's witness, but also bring affirmative records supporting your position. The assessment presumption places an initial evidentiary burden on the taxpayer.

Common questions

Q: Why did the December 2010 letter count as a protest?
A: It was timely, said the assessments were erroneous, and asked for confirmation that no tax was owed.

Q: Could Sanchez add details later?
A: Yes. The statute allowed supplementation, and the February and April letters amended the timely protest.

Q: Why did he still lose?
A: He supplied no documentary evidence substantiating the claimed business losses.

Q: How much tax and penalty were upheld?
A: $16,750 in tax and $3,350 in penalty, plus accrued interest.

Q: Was the source decision signed?
A: No. The published PDF ends with the marker “UNOFFICIAL UNSIGNED COPY.”

Citations and references

Statutes and regulations:

• NMSA 1978, § 7-1-24(A), (B), and (J) and Regulations 3.1.7.10-.12 NMAC — protest timing, substance, and amendment
• NMSA 1978, §§ 7-1-4.1 and 7-1-4.2 — Taxpayer Bill of Rights
• NMSA 1978, § 7-1-17(C) and Regulation 3.1.6.12(A) NMAC — assessment presumption and substantiation
• NMSA 1978, § 7-1-67 — continuing interest

Cases cited:

• Lopez v. New Mexico Department of Taxation & Revenue, 1997-NMCA-115
• MPC Ltd. v. New Mexico Taxation and Revenue Department, 2003-NMCA-021
• Tiffany Construction Co. v. Bureau of Revenue, 90 N.M. 16 (Ct. App. 1976)

Source

• Listing: New Mexico Decisions & Orders
• Decision post: Collin Sanchez
• Decision PDF: D&O 13-08

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
COLLIN SANCHEZ No. 13-8
TO ASSESSMENTS ISSUED UNDER LETTER
ID NO.’s L1950894656, L1816676928, L0330601024,
L1733694016, L0196383296, and L1899644480

DECISION AND ORDER

A protest hearing occurred on the above captioned matter on January 29, 2013 before

Brian VanDenzen, Esq., Tax Hearing Officer, in Santa Fe. Collin Sanchez (“Taxpayer”)

appeared pro se. Staff attorney Cordelia Friedman appeared, representing the Taxation and

Revenue Department of the State of New Mexico (“Department”). Protest Auditor Milagros

Bernardo appeared as a witness for the Department. Taxpayer Exhibits #2-4 and Department

Exhibits A, B, C, D, E, F, and H are admitted into the record, as more thoroughly described in

the Administrative Exhibit Coversheet. Based on the evidence and arguments presented, IT IS

DECIDED AND ORDERED AS FOLLOWS:

FINDINGS OF FACT

1. On November 24, 2010, the Department mailed notices of assessment for

personal income tax to Taxpayer as follows:

a. Under letter id. no. L1950894656, the Department assessed Taxpayer for

$3,562.00 in tax principal, $712.40 in penalty, and $2,469.33 in interest for the

personal income period ending December 31, 2003.
b. Under letter id. no. L1816676928, the Department assessed Taxpayer for

$4,743.00 in tax principal, $948.60 in penalty, and $2,578.26 in interest for the

personal income period ending December 31, 2004.

c. Under letter id. no. L0330601024, the Department assessed Taxpayer for

$3,352.00 in tax principal, $670.40 in penalty, and $1,317.75 in interest for the

personal income period ending December 31, 2005.

d. Under letter id. no. L1733694016, the Department assessed Taxpayer for

$2,062.00 in tax principal, $412.40 in penalty, and $502.89 in interest for the

personal income period ending December 31, 2006.

e. Under letter id. no. L0196383296, the Department assessed Taxpayer for

$3,031.00 in tax principal, $606.20 in penalty, and $357.14 in interest for the

personal income period ending December 31, 2007.

2. The Department assessed Taxpayer for the above-described personal income tax

during the relevant years because the Department’s disallowed Taxpayer’s claimed business

losses. [Department Exhibit F].

3. On December 15, 2010, Taxpayer submitted a letter to the Department.

[Department Exhibit E]. In pertinent part, that letter read:

I am in receipt of your letter. As per our conversation, I am sending this
letter as confirmation that the notice was sent in error. Thank you for
explaining how you are going to remove the interest and penalties to settle
the discrepancy by offsetting the previous years refunds that were owed to
me. I want to clear this matter up in your computers as I live out of state.
Please send me confirmation that zero taxes are owed.

4. Taxpayer’s December 15, 2010 letter to the Department enclosed a copy of the

Department’s assessment of personal income tax for the period ending on December 31, 2003

under letter id. no. L19508946565. [Department Exhibit E].

In the Matter of the Protest of Collin Sanchez, page 2 of 15

5. While Taxpayer’s December 15, 2010 letter is generally ambiguous, because the

letter does state that the assessment was sent in “error” and that Taxpayer was waiting for

confirmation that “zero taxes” were owed, that letter constituted a protest.

6. Taxpayer’s December 15, 2010 letter was filed within thirty days of the

Department’s notices of assessment.

7. To the extent that Taxpayer’s December 15, 2010 lacked specificity, Taxpayer’s

subsequent letters (addressed in more detail below) in this matter served as amendments to the

December 15, 2010 protest.

8. On February 23, 2011, Taxpayer submitted a letter to the Department’s Connie

Dayton, protesting all of the Department’s assessments for personal income tax from 2003-2007.

In that letter, Taxpayer argued that he had been targeted for an audit, that he had been arbitrarily

and unfairly assessed personal income tax, penalty, and interest, that he wanted an explanation

for the assessments and for the Department’s denial of tax refunds in the same years at issue, that

he was seeking necessary corrections in order to make the assessments fair and impartial, and

that he was asserting his rights under the Tax Administration Act to seek review. [Taxpayer

Exhibit #3].

9. On March 4, 2011, under letter id. no. L189964480, the Department informed

Taxpayer that his February 23, 2011 protest letter was untimely under NMSA 1978, Section 7-1-

24 (2003).

10. On March 7, 2011, the Department’s Barry Wilson sent Taxpayer a letter

explaining the basis for the adjustments to Taxpayer’s New Mexico taxable personal income in

years 2003 through 2007 that resulted in the Department’s assessments. Mr. Wilson’s letter

included a spreadsheet detailing the Department’s adjustments. [Department Exhibit F].

In the Matter of the Protest of Collin Sanchez, page 3 of 15

11. On March 15, 2011, Taxpayer filed a protest of the Department’s denial of

protests articulated under letter id. no. L189964480. In this letter, Taxpayer stated he challenged

the Department’s determination that no timely protest letter had been received given Taxpayer’s

December 15, 2010 letter to the Department which Taxpayer contended constituted a protest.

12. On March 15, 2011, Taxpayer submitted a letter to the Department’s Steven

Ocszewski indicating he was making payments under protest to the assessments, expressing his

frustrations with the Department’s actions, and making disturbing comments/threats. [Taxpayer

Exhibit #2].

13. On April 26, 2011, Taxpayer responded to the Department’s Barry Wilson’s

March 7, 2011 letter. This letter provided a thorough and detailed basis for protest, again serving

as an amendment to the protest. [Taxpayer Exhibit #4].

14. On January 3, 2012, the Department acknowledged receipt of Taxpayer’s March

15, 2011 protest letter. [Department Exhibit H].

15. On January 25, 2012, the Department filed a request for hearing in this matter.

16. On February 2, 2012, the Hearing Bureau sent notice of administrative hearing,

scheduling this matter for a hearing on October 18, 2012 at 10:30 AM.

17. On October 16, 2012, Taxpayer moved to continue the October 18, 2012 hearing

because he lived out of state and was unable to make the scheduled hearing.

18. On October 17, 2012, the Hearing Bureau issued an order continuing the October

18, 2012 hearing until later on that same day, at 1:30 PM.

19. On October 18, 2012, Taxpayer appeared in person for a hearing, and the

Department appeared through staff attorney Cordelia Friedman. At the hearing, Taxpayer asked

In the Matter of the Protest of Collin Sanchez, page 4 of 15
for a continuance so that he could consult with an attorney. That request for continuance was

granted.

20. On October 19, 2012, the Hearing Bureau issued a Continuance Order and

Amended Notice of Hearing, scheduling the continued hearing for January 29, 2013 at 1:30 PM.

Of relevance to this case, that order in part read

Under NMSA 1978, Section 7-1-24(A) (2003), the protest hearing is
limited only to the grounds stated in Taxpayer’s protest letter, subject to
Taxpayer’s amendment up to 10-days before the scheduled hearing. In the
March 15, 2011 protest letter, Taxpayer both claims that he timely
protested the assessment issued in this matter, and that those assessments
are “false and inaccurate.” Consequently, the parties should be prepared to
address both issues during the hearing.

21. On January 28, 2013, Taxpayer submitted a request to appear telephonically at the

January 29, 2013 hearing.

22. On January 28, 2013, the Hearing Bureau issued an order denying the request for

a telephonic appearance at the January 29, 2013 hearing.

23. At the hearing, Taxpayer was generally non-responsive or vague in responding to

questions about the origins of the assessment, whether an audit had occurred, and the merits of

the underlying assessment. Rather than providing much information in response to those

questions, Taxpayer’s answers generally returned to Taxpayer’s contention that he was entitled

to an explanation from the Department as to why he was being assessed. [Compact Disc, January

29, 2013, counter 00:40:00 through 00:41:45, 00:44:00-00:45:41, 00:46:30-00:48:02, 00:48:02-

00:48:42, 00:55:45-00:57:00].

24. Taxpayer’s testimony that no audit occurred in this matter was contradicted by his

own correspondence with the Department, Taxpayer Exhibit #4, where Taxpayer referenced a

forensic audit. [CD, 01-29-13,00:55:45-00:57:00].

In the Matter of the Protest of Collin Sanchez, page 5 of 15

25. Taxpayer had income from Enchanted Holdings, LLC during the relevant tax

years. [CD, 01-29-13, 00:46:02-00:46:30, 00:57:00-00:57:30].

26. Enchanted Holdings, LLC was incorporated in New Mexico in 2002. Enchanted

Holdings, LLC is in the business of real estate management. [CD, 01-29-13, 00:46:02-00:46:30,

00:57:00-00:57:30].

27. Taxpayer filed a Schedule C for his Enchanted Holdings, LLC, income with his

Federal income tax returns during the relevant tax years. [CD, 01-29-13, 01:00:35-01:00:45].

28. Taxpayer claimed business losses for the costs of starting a business, including

meals, transportation, gas, etc., on his personal income tax returns during the relevant period

[CD, 01-29-13, 01:02:47-01:03:15, 01:07:25-01:08:10].

29. The Department asked Taxpayer for records to substantiate that the Enchanted

Holdings, LLC, business existed, but Taxpayer felt he first was entitled to an explanation as to

why he was being assessed before providing such information. [CD, 01-29-13, 00:46:30-

00:48:02].

30. At hearing, Taxpayer presented no records of his personal income tax filings, his

Federal Schedule C’s, business incorporation, his claimed business losses, business receipts,

business tax filings, or financial statements related to his business that would substantiate the

claimed business losses on his personal income taxes during the relevant tax years.

31. Taxpayer was given an opportunity to ask the Department’s Protest Auditor

Milagros Bernardo any of his unanswered questions about this matter. Taxpayer acknowledged

he had unanswered questions but choose not to ask any of those unanswered questions to Ms.

Bernardo. [CD, 01-29-13, 01:21:15 through 01:22:21].

In the Matter of the Protest of Collin Sanchez, page 6 of 15
DISCUSSION

There are two main issues at protest. First, there is a genuine question whether Taxpayer

timely filed a valid protest to the Department’s assessments in this case. The second issue is

whether Taxpayer overcame the presumption of correctness attached to the assessments. In short

answer, while Taxpayer did file a timely protest that was twice amended, Taxpayer nevertheless

did not overcome the presumption of correctness that attached to the Department’s assessments.

I. Validity of Protest.

NMSA 1978, Section 7-1-24 (2003) governs the substance and timing for the filing of a

protest. Under NMSA 1978, § 7-1-24(B) (2003), a taxpayer “shall” file a protest “within thirty

days of the date of mailing to the taxpayer by the department of the notice of assessment.”

NMSA 1978, § 7-1-24(B) (2003) allows a taxpayer to make a written request to extend the

period to file a protest by 60-days. If a taxpayer demonstrates substantial merit to the protest

grounds and an inability to timely file a protest or a written request for extension within thirty

days, the secretary is also empowered under NMSA 1978, § 7-1-24(B) (2003) to grant a taxpayer

a retroactive extension of no more than 60-days after the expiration of the initial thirty day period

to file a protest. In other words, including the possibility of an extension or retroactive extension,

a taxpayer has at most 90-days under the statute to file a protest.

Department Regulation 3.1.7.11 NMAC (01/15/01) states that the 90-day period

articulated under NMSA 1978, § 7-1-24(B) (2003) is jurisdictional. Department regulations

interpreting a statute are presumed proper and are to be given substantial weight. See Chevron

U.S.A., Inc. v. State ex rel. Dep't of Taxation & Revenue, 139 N.M. 498, 503, 2006 NMCA 50, 16,

134 P.3d 785, 790 (N.M. Ct. App. 2006). Under Regulation 3.1.7.11 NMAC (01/15/01), the

In the Matter of the Protest of Collin Sanchez, page 7 of 15
secretary is without authority to consider any protest filed after the 90-day period (including

possible extensions) has expired.

Turning to the substance of a protest, NMSA 1978, § 7-1-24(A) (2003) articulates what

constitutes a protest. In pertinent part, NMSA 1978, § 7-1-24(A) (2003) reads

[a]ny taxpayer may dispute the assessment to the taxpayer of any amount
of tax…by filing with the secretary a written protest against the
assessment… Every protest shall identify the taxpayer and the tax
involved and state the grounds for the taxpayer's protest and the
affirmative relief requested. The statement of grounds for protest shall
specify individual grounds upon which the protest is based and a summary
statement of the evidence expected to be produced supporting each ground
asserted, if any; provided that the taxpayer may supplement the statement
at any time prior to ten before any hearing conducted on the protest…
(italics for emphasis).

The way NMSA 1978, § 7-1-24(A) (2003) is structured, the legislature recognized the

importance of a timely, detailed protest, but also allowed a taxpayer the ability to supplement the

initial protest letter at any time up to ten-days before the hearing.

Two Department regulations address what is substantively required of a protest. To be an

effective protest under Department Regulation 3.1.7.10 NMAC (01/15/01), the purported protest

must be in writing, filed with the secretary, identify the taxpayer and taxes at issue, state the

grounds of protest, and state the affirmative relief requested. Under Department Regulation

3.1.7.10 (C) NMAC (01/15/01), while a document not complying with the statute is not

considered a protest, the Secretary may require more specificity from a taxpayer in those

instances where a protest letter lacks sufficient grounds for protest. The second regulation

addressing the substantive requirements of a protest is Department Regulation 3.1.7.12 NMAC

(08/30/01). Department Regulation 3.1.7.12 (A) NMAC (08/30/01) requires a statement of the

grounds of protest, an explanation of the law and facts supporting the protest, a legal basis to

In the Matter of the Protest of Collin Sanchez, page 8 of 15
challenge the assessment, and a summary of the evidence expected to be produced. Further,

Regulation 3.1.7.12 (C) NMAC (08/30/01) provides an example of an appropriate protest.

In addition to the statute and the regulations, the Department relies on Lopez v. New

Mexico Dep't of Taxation & Revenue, 124 N.M. 270, 1997-NMCA-115, 949 P.2d 284 (N.M. Ct.

App. 1997) to argue that Taxpayer did not timely file an affective protest letter. In Lopez v. New

Mexico Dep't of Taxation & Revenue, 124 N.M. 270, 1997-NMCA-115, 949 P.2d 284 (N.M. Ct.

App. 1997), the Court of Appeals had an opportunity to consider whether a taxpayer timely filed

a protest against the Department’s notice of audit. At the administrative tax protest hearing, the

tax hearing officer found that the Lopez taxpayer had failed to timely protest the Department’s

audit under NMSA 1978, § 7-1-24. See id. at 271, ¶6, 286. The Lopez taxpayer appealed that

hearing officer’s decision and order, arguing in part that he had “actually or constructively”

protested the audit within the required time. See id. at 271, ¶7, 286. The Court of Appeals in

Lopez noted that NMSA 1978, § 7-1-24 imposed a 30-day time restriction on a protest. See id. at

271, ¶6, 286. The taxpayer in Lopez only submitted one letter within that 30-day window under

NMSA 1978, § 7-1-24. See id. at 272, ¶9, 286. The Court of Appeals found that that the letter the

Lopez taxpayer submitted did not identify the tax protested, the grounds for protest, the relief

requested, and “even more damaging” suggested acquiescence to the Department’s proposed

audit. See id. The Court of Appeals in Lopez affirmed that hearing officer’s conclusion that the

Lopez taxpayer did not timely protest the Department’s audit. See id.

However, Lopez must be read within its specific context. In Lopez, the Court of Appeals

was considering the evidence in a light most favorable to the agency’s decision and using an

arbitrary, capricious or an abuse of discretion appellate review standard. See id. at 271, ¶4, 285.

Under this deferential review standard, the Court of Appeals in Lopez affirmed the hearing

In the Matter of the Protest of Collin Sanchez, page 9 of 15
officer’s determination that the protest letter was untimely. However, that does not necessarily

mean that the Lopez Court of Appeals was making a broad statement of law on the required

substance of a protest letter under NMSA 1978, § 7-1-24.

Additionally, it must be noted that since the Court of Appeals decision in Lopez, the

Legislature has promulgated a taxpayer Bill of Rights. See NMSA 1978, Section 7-1-4.1 et. seq.

(2003). The taxpayer Bill of Rights gives taxpayers a right of review, formally or informally, of

audit decisions. See NMSA 1978, Section 7-1-4.2(G) (2003). The taxpayer Bill of Rights entitles

a taxpayer to nontechnical explanations of tax processes, rights, and remedies. See NMSA 1978,

Section 7-1-4.2(E) (2003). The taxpayer Bill of Rights also affords taxpayers the right to prompt

and courteous tax assistance. See NMSA 1978, Section 7-1-4.2(A) (2003).

Before depriving a taxpayer a merits protest hearing that a taxpayer is otherwise entitled

to under the taxpayer Bill of Rights, any timely filed letter should be given its broadest possible

reading. Supporting this notion of reading a protest letter broadly are the facts that NMSA 1978,

§7-1-24 (2003) gives a taxpayer the ability to amend a protest and that Regulation 3.1.7.10(C)

NMAC (01/15/01) gives the Department the ability to demand more details in a situation where

it finds a taxpayer letter ambiguous.

Reading Taxpayer’s December 15, 2010 letter broadly, it qualifies as a protest letter.

Unlike the “more damaging” acquiescence expressed by the Lopez taxpayer’s letter, see id. at

272, ¶9, 286, Taxpayer in this case expressed no sentiment that might be considered acceptance

of the Department’s action. In Taxpayer’s December 15, 2010 letter, Taxpayer expressed that he

believed the assessment was “sent in error.” Taxpayer expressed that it was his understanding

that previous year’s refunds would offset and remove the discrepancies, penalty, and interest.

Taxpayer asked for a remedy when he stated that he awaited confirmation that “zero taxes are

In the Matter of the Protest of Collin Sanchez, page 10 of 15
owed.” A reasonable, nontechnical reading of these statements shows that Taxpayer was not in

agreement with the Department’s assessments and was in fact attempting to contest the

assessments.

To the extent that Taxpayer’s December 15, 2010 letter was lacking in specific grounds

and factual details, it must be noted that the Department took no action under Regulation

3.1.7.10(C) NMAC (01/15/01) to request more specificity from Taxpayer. This is not an instance

where Taxpayer made no efforts to express timely his disagreement with the assessed tax. Given

that assessments had been issued to Taxpayer, and Taxpayer’s December 15, 2010 letter was

received within 30-days of those assessments, that letter from Taxpayer indicating that the

assessments were sent in error and asking for confirmation that zero taxes were owed should

have reasonably triggered a follow-up request from the Department for more detailed protest

information, as permitted under Regulation 3.1.7.10(C) NMAC (01/15/01).

Further, while the December 15, 2010 letter may have technically been lacking in

specific details, Taxpayer’s later letters on February 23, 2011, and April 26, 2011 supplemented

the grounds of the protest, as permitted under NMSA 1978, §7-1-24 (2003). There is no doubt

that those later February 23, 2011 and April 26, 2011 letters contained sufficient details and

grounds for protest. Taxpayer’s December 15, 2010 letter constituted a timely protest. Taxpayer

timely supplemented the grounds of protest on February 23, 2011 and April 26, 2011.

II. Merits of Protest.

In the October 19, 2012 Continuance Order and Amended Notice of Hearing, the

undersigned hearing officer gave notice to all parties that the January 29, 2012 protest hearing

would address both the question of the timeliness of Taxpayer’s protest and the merits of

Taxpayer’s challenge of the assessments as “false and inaccurate.” There were three purposes for

In the Matter of the Protest of Collin Sanchez, page 11 of 15
this Order. First, the hearing officer desired to comply with NMSA 1978, § 7-1-24 (J) (2003) by

making a complete record both on the procedural issue and the merits in this matter so that in

event of appeal, all issues would be developed for review. Second, Taxpayer was traveling from

out of state and it seemed unnecessarily burdensome to bifurcate the hearing between a

procedural issue hearing and a possible later merits hearing. Finally, considering that the matter

had already been continued once to afford Taxpayer the opportunity to arrange for

representation, in order to avoid any further delay it was more efficient to conduct one hearing

addressing both issues. See Regulation 3.1.8.9(B) NMAC (8/30/01) (directing a hearing officer

to avoid delay in the proceedings and to regulate the course of the hearing). Despite both parties

reluctance to address the merits issue during the hearing, both parties had clear notice well before

the hearing date that the merits of the protest were at issue.

Under NMSA 1978, Section 7-1-17(C) (2007), the Department’s assessments issued in

this case are presumed correct. Accordingly, it is Taxpayer’s burden to present evidence and

legal argument to show that Taxpayer is entitled to an abatement, in full or in part, of the

assessments issued against him. See TPL, Inc. v. Taxation and Revenue Dep’t, 2000-NMCA-083,

¶8, 129 N.M. 539, 542, 10 P.3d 863, 866, cert. granted, 129 N.M. 519, 10 P.3d 843, rev’d on

other grounds, 2003-NMSC-7, 133 N.M. 447, 64 P.3d, 474. Taxpayer has the burden to

overcome the assessment of personal income tax. See Archuleta v. O'Cheskey, 84 N.M. 428, 431,

504 P.2d 638, 641 (NM Ct. App. 1972). When a taxpayer presents sufficient evidence to rebut the

presumption, the burden shifts to the Department to show that the assessments are correct. See

MPC Ltd. v. N.M. Taxation and Revenue Dep’t., 2003-NMCA-021, ¶ 13, 133 N.M. 217, 219-

220, 62 P.3d 308, 310-311; Grogan v. New Mexico Taxation and Revenue Dep’t, 133 N.M. 354,

357-58, 62 P.3d 1236, 1239-40 (2002).

In the Matter of the Protest of Collin Sanchez, page 12 of 15
Taxpayer did not overcome that burden in this case. Under regulation 3.1.6.12(A) NMAC

(01/15/01), “[u]nsubstantiated statements that the assessment is incorrect cannot overcome the

presumption of correctness.” Therefore, Taxpayer’s unsubstantiated claims that the assessments

were unfair, arbitrary, and erroneous are not enough without specific evidence to overcome the

presumption of correctness.

The only documentary evidence Taxpayer presented related to the merits of the assessment

was the April 26, 2011 letter he submitted in response to Barry Wilson’s explanation of the

assessments, Taxpayer Exhibit #4. Taxpayer made no effort to substantiate the claims he made in

that letter regarding Enchanted Holdings, LLC’s business losses supporting deductions on his New

Mexico personal income tax obligations. Taxpayer did not present any personal income tax filings

into the record (like W2’s or Schedule C’s, etc.), did not present any evidence to substantiate his

claimed business loss deductions for each personal income tax year, any financial records related to

Taxpayer’s business, or proof that Taxpayer’s business was still in operation during the years at

issue.

Taxpayer was generally non-responsive or vague in response to questions related to the

origins of the assessments, the merits of the assessments, and whether this case resulted from an

audit. Taxpayer generally answered such questions by referring to his belief that he was entitled to

answers from the Department for why he was being assessed. While it certainly understandable that

Taxpayer might want answers from the Department, ultimately under the presumption of

correctness, Taxpayer had an obligation at the hearing to overcome the assessments by showing he

was entitled to the claimed business losses.

Taxpayer argued that he felt he did everything he could do to prepare his taxes correctly

and that the Department has neglected to provide him with answers during this process. At the

In the Matter of the Protest of Collin Sanchez, page 13 of 15
hearing, Taxpayer was given a specific opportunity to ask the Department’s witness, Protest Auditor

Milagros Bernardo, any unanswered questions about this matter. Taxpayer acknowledged that he

still had unanswered questions in this matter but inexplicably declined to ask them of Ms. Bernardo.

Further, the Department’s Mr. Wilson attempted to explain the basis of the underlying

assessments to Taxpayer in Department Exhibit F. While Taxpayer disagreed with Mr. Wilson’s

explanation, as discussed above, Taxpayer did not provide the substantiating evidence at the hearing

to support his contention that he was entitled to personal income tax deductions. Although

Taxpayer argued he did the best he could with his laymen’s knowledge of tax law, under New

Mexico's self-reporting tax system, every person is charged with the reasonable duty to ascertain

the possible tax consequences of his or her actions. See Tiffany Construction Co. v. Bureau of

Revenue, 90 N.M. 16, 558 P.2d 1155 (Ct. App. 1976), cert. denied, 90 N.M. 255, 561 P.2d 1348

(1977).

Although Taxpayer’s December 15, 2010 letter qualified as a protest letter, the absence of

factual detail in that letter ultimately was consistent with the absence of information presented to the

Department throughout this process and at the hearing to substantiate Taxpayer’s protest of the

assessments. Without more detailed evidence, Taxpayer did not present sufficient evidence to

overcome the presumption of correctness that attached to the Department’s assessments.

Consequently, Taxpayer is liable for the assessed personal income tax, penalty, and interest.

CONCLUSIONS OF LAW

A. Taxpayer filed a timely, written protest of the assessments of personal income taxes,

penalty, and interest. Taxpayer timely amended that protest twice. Jurisdiction lies over the parties

and the subject matter of this protest.

In the Matter of the Protest of Collin Sanchez, page 14 of 15
B. Taxpayer did not present sufficient evidence to overcome the presumption of

correctness under NMSA 1978, §7-1-17 (2007). See Archuleta v. O'Cheskey, 84 N.M. 428, 431,

504 P.2d 638, 641 (NM Ct. App. 1972).

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

payment of $16,750.00 in personal income tax, $3,350.00 in penalty, and any accrued interest until

the tax principal is satisfied under NMSA 1978, Section 7-1-67 (2007).

DATED: April 9, 2013.

UNOFFICIAL UNSIGNED COPY
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 Collin Sanchez, page 15 of 15