Could a nonfiler recover penalty and interest taken by levy because he asked about 2010 tax amnesty but an employee never followed up?

Plain-English summary

Alan Uffenheimer could not recover gross-receipts-tax penalty and interest that the Department collected by bank levy. The charges were properly assessed, he never applied for the 2010 amnesty program, and assessments issued before that program began made him ineligible anyway.

The Department treated Uffenheimer as a gross receipts tax nonfiler for 2005 and 2006 and assessed tax, penalty, and interest on April 28, 2010. It later partially abated both assessments after he supplied NTTCs.

On March 5, 2012, the Department levied his bank account for enough to satisfy the remaining tax, penalty, and interest. He then sought a refund of the penalty and interest.

Mistaken belief supported the penalty

Uffenheimer admitted that he lacked NTTCs for some claimed deductions and said he did not know additional tax was due until the 2010 assessments.

The decision treated lack of knowledge or an erroneous belief that no tax was owed as negligence under Section 7-1-69 and the cited regulation. Because the gross receipts tax was not paid when due in 2005 and 2006, the penalty was proper and was not an overpayment eligible for refund.

Interest likewise was mandatory under Section 7-1-67. It compensated the state for the time value of unpaid revenue and was not refundable while the underlying tax had been paid late.

The 2010 amnesty program did not apply

Uffenheimer testified that, after assessment, he visited the Department's Albuquerque office to ask about the New Mexico Tax Relief program. An employee did not know the details, said she would investigate, and never contacted him again. Uffenheimer took no further action.

The amnesty program ran from June 7 through September 30, 2010. Uffenheimer never applied. More importantly, Section 7-1-11.1 excluded the liabilities because the Department had already assessed them in April, before the program began.

No estoppel against the state

The employee's failure to follow up did not force the Department to grant amnesty. Estoppel against the state required affirmative misconduct or a shocking degree of aggravated and overreaching conduct—something more than mere negligence.

Result: protest denied. The seized penalty and interest were not refunded. The decision did not state the dollar amounts collected by levy.

What this means for you

Taxpayers considering an amnesty program

Check the statutory eligibility rules and submit the required application. An informal inquiry does not itself enroll a taxpayer.

Businesses claiming gross receipts deductions

Keep the NTTCs needed to support each deduction. Uffenheimer received partial abatements only after providing certificates.

Taxpayers relying on promised follow-up

An employee's failure to call back was not enough to estop the Department. Follow up independently and preserve written guidance.

Common questions

Q: Why was the negligence penalty upheld?
A: Uffenheimer's mistaken belief that no additional tax was due qualified as negligence under the cited law.

Q: Why was interest not refunded?
A: Interest was mandatory because the gross receipts tax had not been paid when due.

Q: Did Uffenheimer apply for amnesty?
A: No. And even an application would have failed because the liabilities had already been assessed.

Q: Did the employee's promise to investigate bind the Department?
A: No. The facts did not show affirmative misconduct sufficient for estoppel against the state.

Citations and references

Statutes and regulation:

• NMSA 1978, §§ 7-1-17 and 7-1-3 — assessment presumption and definition of tax
• NMSA 1978, § 7-1-69(A) and Regulation 3.1.11.10 NMAC — negligence penalty
• NMSA 1978, § 7-1-67(A) — mandatory interest
• NMSA 1978, § 7-1-26 — refunds of amounts exceeding liability
• NMSA 1978, § 7-1-11.1 — 2010 tax-amnesty eligibility

Cases cited:

• Tiffany Construction Co. v. Bureau of Revenue, 90 N.M. 16 (Ct. App. 1976)
• Wisznia v. State, Human Services Department, 1998-NMSC-011
• In re Kilmer, 2004-NMCA-122

Source

• Listing: New Mexico Decisions & Orders
• Decision post: Alan Uffenheimer
• Decision PDF: D&O 13-34

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
ALAN UFFENHEIMER, No. 13-34
TO THE DENIAL OF REFUND
LETTER ID NO. L0267090240

DECISION AND ORDER

A formal hearing on the above-referenced protest was held October 24, 2013, before Dee

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

represented by Mr. Nelson Goodin, Chief Counsel, and Ms. Elena Morgan, Staff Attorney. Mr.

Tom Dillon, Auditor, also appeared on behalf of the Department. Mr. Alan Uffenheimer

(Taxpayer) appeared for the hearing and represented himself. 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. The Taxpayer was engaged in business in New Mexico in 2005 and 2006.

2. The Department determined that Taxpayer was a non-filer on gross receipts tax for 2005

and 2006.

3. On April 28, 2010, the Department assessed the Taxpayer for gross receipts tax, penalty,

and interest for the tax period ending on December 31, 2005.

4. On April 28, 2010, the Department assessed the Taxpayer for gross receipts tax, penalty,

and interest for the tax period ending on December 31, 2006.

5. On August 20, 2010, the Department partially abated the assessment for 2005 because the

Taxpayer provided non-taxable transaction certificates (NTTCs).

6. On August 20, 2010, the Department partially abated the assessment for 2006 because the

Taxpayer provided NTTCs.

7. At some point in 2010 after he was assessed, the Taxpayer went to the Department’s

office in Albuquerque, New Mexico and spoke to an employee there about the amnesty

program. The employee did not know the specifics of the program. The employee

advised the Taxpayer that she would look into it and would get back in touch with the

Taxpayer. The employee never contacted the Taxpayer, and the Taxpayer took no other

action.

8. The Taxpayer’s bank account was levied by the Department on March 5, 2012. The

amount seized pursuant to the levy was sufficient to satisfy the outstanding assessments

for gross receipts tax, penalty, and interest for 2005 and 2006.

9. On May 14, 2012, the Taxpayer filed a request for refund on the amount of penalty and

interest seized by the levy.

10. On May 29, 2012, the Department denied the request for refund.

11. On June 22, 2012, the Taxpayer filed a formal protest letter.

12. On July 29, 2013, the Department filed a Request for Hearing asking that the Taxpayer’s

protest be scheduled for a formal administrative hearing.

13. One July 31, 2013, the Department refiled its Request for Hearing and provided a more

current address for the Taxpayer.

DISCUSSION

The issue to be decided is whether the Taxpayer is entitled to a refund of the penalty and

interest that was seized by levy to satisfy assessments for 2005 and 2006.

Burden of Proof.

Alan Uffenheimer
Letter ID No. L0267090240
page 2 of 6
Although the protest in this case is for a denial of refund, the denial was based on the fact that

the funds were seized pursuant to assessments. Assessments by the Department are presumed to

be correct. See NMSA 1978, § 7-1-17. Tax includes, by definition, the amount of tax principal

imposed and, unless the context otherwise requires, “the amount of any interest or civil penalty

relating thereto.” NMSA 1978, § 7-1-3. See also, El Centro Villa Nursing Center v. Taxation

and Revenue Department, 108 N.M. 795, 779 P.2d 982 (Ct. App. 1989). Therefore, the

assessment issued to the Taxpayer is presumed to be correct, and it is the Taxpayer’s burden to

present evidence and legal argument to show that he is entitled to an abatement of penalty and

interest.

Assessment of Penalty.

Generally, a taxpayer is subject to penalty when a tax is not paid when it is due, and the

failure to pay is caused by negligence. See NMSA 1978, § 7-1-69 (A). The Taxpayer argued

that he should have been able to deduct his gross receipts, but admitted that he did not have

NTTCs to support his claim for deductions. The Taxpayer disputed that he was negligent in

paying his gross receipts taxes for 2005 and 2006. The Taxpayer argued that he did not know

that he owed additional tax until the assessments were made in 2010.

A taxpayer’s lack of knowledge or erroneous belief that the taxpayer did not owe tax is

considered to be negligence for purposes of assessment of penalty. See Tiffany Const. Co., Inc.

v. Bureau of Revenue, 90 N.M. 16, 558 P.2d 1155 (Ct. App. 1976). See also 3.1.11.10 NMAC

(indicating that erroneous belief is negligence for purposes of penalty assessment). The gross

receipts tax was not paid when it was due in 2005 and in 2006 because the Taxpayer erroneously

believed that he did not owe any additional taxes. Therefore, penalty was properly assessed.

Alan Uffenheimer
Letter ID No. L0267090240
page 3 of 6
Consequently, the Taxpayer is not entitled to a refund of the penalty. See NMSA 1978, § 7-1-26

(allowing refunds only when an amount paid was in excess of a taxpayer’s liability).

Assessment of Interest.

Interest “shall be paid” on taxes that are not paid on or before the date on which the tax is

due. NMSA 1978, § 7-1-67 (A). The word “shall” indicates that the assessment of interest is

mandatory, not discretionary. See State v. Lujan, 90 N.M. 103, 105, 560 P.2d 167, 169 (1977).

The assessment of interest is not designed to punish taxpayers, but to compensate the state for

the time value of unpaid revenues. Because the gross receipts tax was not paid when it was due,

interest was properly assessed. Consequently, the Taxpayer is not entitled to a refund of the

interest. See NMSA 1978, § 7-1-26.

Amnesty.

The Taxpayer argued that he should have been granted amnesty from penalty and interest

under the New Mexico Tax Relief program that was in effect in 2010. The Taxpayer argued that

talking to a Department employee should have been sufficient to grant him amnesty.

The Department argued that the Taxpayer’s testimony was not credible. The Department

pointed out that the New Mexico Tax Relief program did not go into effect until June 7, 2010

and ended September 30, 2010. The Taxpayer claimed that he inquired about the amnesty

program in January or February of 2010. The Taxpayer objected to the Department’s exhibit “E”

because he felt that it was not accurate. Exhibit “E” is the press release that announced the

beginning of the New Mexico Tax Relief program. The press release indicates that the program

began on June 7, 2010 and would end on September 30, 2010. The Taxpayer later admitted that

he must have inquired about the amnesty program sometime after he was assessed in April 2010.

Alan Uffenheimer
Letter ID No. L0267090240
page 4 of 6
In light of all of the evidence, I do not find the Taxpayer’s testimony to be credible. The

Taxpayer still felt that he should have been granted amnesty.

The Department pointed out that the Taxpayer did not apply for amnesty and was not

eligible for the amnesty program. To qualify for the amnesty program in 2010, a taxpayer must

not have been assessed for the taxes on which the taxpayer was requesting relief from penalty

and interest. See NMSA 1978, § 7-1-11.1 (2010). The amnesty program began in June 2010,

and the Taxpayer was assessed in April 2010. Therefore, the Taxpayer was not eligible for the

amnesty program in 2010 because he had already been assessed. Moreover, the Taxpayer never

filed an application for amnesty when the program was available.

Estoppel.

The Taxpayer also argued that the employee was negligent in failing to contact him again

after saying she would check on the amnesty program and get back to him. The Taxpayer argued

that the employee’s negligence should be sufficient to grant him amnesty. 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. In addition, the

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

government.” See In re Kilmer, 2004-NMCA-122, ¶ 27, 136 N.M. 440. Affirmative misconduct

is something more than mere negligence. See id. The Taxpayer’s argument is without merit, and

estoppel does not apply.

CONCLUSIONS OF LAW

Alan Uffenheimer
Letter ID No. L0267090240
page 5 of 6

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

Letter ID number L0267090240, and jurisdiction lies over the parties and the subject matter of this

protest.

2. The Taxpayer was properly assessed for gross receipts tax, penalty, and interest

for 2005 and 2006.

3. As the penalty and interest were properly assessed, the Taxpayer is not entitled to a

refund of the funds levied and seized for payment of the penalty and interest.

4. The Taxpayer did not apply for amnesty in 2010. Even if the Taxpayer had applied for

amnesty when it was available, he would not have been granted amnesty because he was not eligible for

amnesty as he had already been assessed.

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

DATED: November 6, 2013.

Dee Dee Hoxie
DEE DEE HOXIE
Hearing Officer
Taxation & Revenue Department
Post Office Box 630
Santa Fe, NM 87504-0630

Alan Uffenheimer
Letter ID No. L0267090240
page 6 of 6