Could New Mexico levy a joint senior checking account used by a taxpayer's mother when he was listed only for emergencies and did not spend its funds?

Plain-English summary

New Mexico lawfully levied funds from a joint account that Marcus Scott shared with his mother because he held ownership and access rights in the account. His emergency-only purpose, lack of personal withdrawals, and the source of most deposits did not remove those property rights.

The Department issued a warrant to Los Alamos National Bank for $114,824.22 of Scott's unpaid tax liability. The bank surrendered $1,464.71, including $638.19 from the senior checking account shared with his 82-year-old mother, Mary Haley.

The account documents created joint property rights

Scott and Haley had opened the account in 2008 as “Multiple-party With Right of Survivorship.” Both were listed as account holders and signed the application.

Haley's retirement and Social Security checks went into the account. Scott said he was listed only for emergencies given her age and health, did not write checks or withdraw money, and used none of the funds personally.

But he maintained internet-banking access and sometimes deposited money to help with rent and other needs. His name also appeared on the account statements.

Those facts established a joint ownership interest and property rights within the levy statute.

The bank had to surrender property it held for Scott

The levy provisions allowed collection from all property or rights to property of a delinquent taxpayer. A financial institution served with a valid warrant had to surrender taxpayer property it held on the service date.

The warrant listed Scott, the outstanding liability, and original due dates in a detailed schedule, satisfying the statutory content requirements. Because Scott also did business banking at Los Alamos National Bank, serving that institution was logical.

The bank's records showed him as a joint owner. It therefore had no choice under the statute and regulation but to include the shared account funds.

No exemption or fiduciary document applied

None of the property exemptions in Section 7-1-36 covered this account.

Scott argued that he acted only as a fiduciary and that the money contractually belonged exclusively to Haley. But no agreement or other document establishing such a relationship was placed in the record, and the bank apparently knew of none when it honored the levy.

The hearing officer ordered account records after the hearing out of caution. They supported Scott's description but did not change his legal ownership rights. The Department filed no response suggesting a discretionary adjustment.

After the levy, Scott transferred money from his separate account to replace the $638.19 so Haley could pay bills. The decision noted that the practical effect was for Scott's own funds to absorb the levy loss.

A levy was not a new assessment

The decision rejected prior reasoning that an assessment's presumption of correctness automatically attached to a levy. A warrant was a collection mechanism for a liability already established by an earlier assessment or demand, not itself an assessment or demand for payment.

The Department did not need to relitigate the underlying tax debt in the levy protest. It needed a valid warrant and proof that the targeted property rights belonged to Scott, both of which were established.

Result: protest DENIED. The Department retained the $638.19 seized from the joint senior account as part of the $1,464.71 bank surrender.

What this means for you

People added to a relative's bank account

Joint-owner status can expose the account to your creditors even when you were added only for convenience or emergencies. Review the legal ownership form, not just the family's informal understanding.

Families managing an older person's finances

Consider an arrangement that gives needed authority without unintended ownership, and document any fiduciary capacity. Obtain banking and legal advice before changing account title.

Taxpayers contesting a levy

Separate the validity of the prior tax liability from whether the warrant met statutory requirements and whether the seized asset was legally your property or exempt.

Common questions

Q: Did Scott use his mother's money for himself?
A: The decision found that he did not write checks, withdraw funds, or use the account for personal purposes.

Q: Why did the levy still reach the account?
A: He was a signed joint owner with survivorship and access rights, which constituted rights to property.

Q: Were Social Security and retirement deposits enough to exempt the account?
A: Not under the New Mexico levy exemptions analyzed in this decision.

Q: Did the levy establish the underlying $114,824.22 debt?
A: No. The levy collected an already established delinquent liability; it was not a new assessment.

Citations and references

Statutes and regulation:

• NMSA 1978, §§ 7-1-31 through 7-1-36 — levy authority, warrant contents, surrender, and exempt property
• NMSA 1978, §§ 7-1-16, 7-1-17(C), and 7-1-3(G) — delinquent taxpayer, assessment presumption, and levy definition
• Regulation 3.1.10.9(B) NMAC — financial institution's duty to surrender taxpayer property

Source

• Listing: New Mexico Decisions & Orders
• Decision post: Marcus E. Scott
• Decision PDF: D&O 14-06

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
MARCUS E. SCOTT No. 14-6
TO LEVY ISSUED UNDER LETTER
ID NO. L1048234448

DECISION AND ORDER

A protest hearing occurred on the above captioned matter on February 3, 2014 before

Brian VanDenzen, Esq., Hearing Officer, in Santa Fe. Marcus E. Scott (“Taxpayer”) appeared

along with attorney Bridget Jacober. Staff Attorney Peter Breen appeared representing the State

of New Mexico Taxation and Revenue Department (“Department”). Protest Auditor Thomas

Dillon appeared as a witness for the Department. All documents contained in the administrative

protest file are part of the record in this matter. Neither party tendered any exhibits at the

hearing. On February 7, 2014, at the direction of the hearing officer and over Taxpayer’s

objection, Taxpayer submitted an application for a senior checking account at Los Alamos

National Bank and bank account statements encompassing the months of September through

December 2013. The Department was given until February 21, 2014 to file a response to the late

filed exhibits. As of the date of this decision, no response has been filed. Based on the evidence

and arguments presented, IT IS DECIDED AND ORDERED AS FOLLOWS:

FINDINGS OF FACT

1. On September 16, 2013, the Department issued Warrant of Levy #196018 against

Taxpayer’s property rights and interest to the Los Alamos National Bank. The levy was for

$114,824.22 in Taxpayer’s unpaid tax liability. [Letter id #L1048234448].

2. On October 7, 2013, pursuant to Warrant of Levy # 196018, the Department

secured $1,464.71 from Los Alamos National Bank. [Letter id #L0249395664].

3. As part of the total $1,464.71 in surrendered funds, $638.19 came from the senior

checking account of Mary A. Haley, Taxpayer’s 82-year old mother. [September 12, 2013

through October 11, 2013 bank statement of Los Alamos National Bank].

4. On October 18, 2013, the Department sent Taxpayer a Notice of Levy, listing the

property it had seized under Warrant of Levy #196018, and demanding payment of remaining

outstanding liability. [Letter id #L0249395664].

5. On November 5, 2013, Taxpayer protested the warrant of levy.

6. On December 18, 2013, the Department requested a hearing on this matter.

7. On December 19, 2013, the Hearings Bureau sent Notice of Administrative

Hearing, scheduling this matter for a hearing on February 3, 2014.

8. On September 4, 2008, Mary Haley and Taxpayer opened a senior checking

account at Los Alamos National Bank. The ownership type of the account was listed as

“Multiple-party With Right of Survivorship.” Both Mary Haley and Taxpayer were listed as

account holders, and both signed the application for the account.

9. Mary Haley receives retirement income and social security checks, which are

deposited into the senior checking account that she and Taxpayer own.

10. Taxpayer deposits money into the senior checking account to assist his mother

with rent and other needs.

11. Taxpayer only listed himself on the senior checking account for emergency

purposes given his mother’s advanced age and medical conditions.

12. Taxpayer maintains access to the senior checking account for Internet banking.

In the Matter of the Protest of Marcus E. Scott, page 2 of 9

13. Taxpayer does not write checks from the senior checking account, does not make

any withdrawals from that account, and does not use the money in the account for any personal

purpose.

14. Taxpayer also does his business banking at Los Alamos National Bank.

15. To address the loss of $638.19 from the senior checking account, Taxpayer

transferred in additional money from his separate account into the account he shares with Ms.

Haley so that she could still pay her bills.

DISCUSSION

Although Taxpayer certainly presented sympathetic facts at hearing, this protest turns on

the straightforward legal requirements of what property is subject to levy. The Department

properly issued warrant of levy in this case. Pursuant to that levy, Los Alamos National Bank

surrendered Taxpayer’s funds to the Department. Some of the funds that the Los Alamos

National Bank surrendered to the Department were drawn from Mary Haley’s senior checking

account. Ms. Haley is Taxpayer’s 82-year old mother. Ms. Haley lives on her retirement income,

her social security checks, and Taxpayer’s occasional financial support, all of which is deposited

into her Los Alamos National Bank senior checking account. Given that Taxpayer is only an

account holder on Ms. Haley’s senior checking account for emergency purposes, Taxpayer

argued that the Department should return any of the funds seized from the senior checking

account under the warrant of levy.

Under the Tax Administration Act (“TAA”), warrants of levy are governed by NMSA

1978, Section 7-1-31 to -36 (1993). Section 7-1-31 allows the Department to “collect tax from a

delinquent taxpayer by levy upon all property or rights to property of such person.” (emphasis

added). Any property for which a delinquent taxpayer has rights to is subject to levy under the

In the Matter of the Protest of Marcus E. Scott, page 3 of 9
plain language of Section 7-1-31. Section 7-1-34 requires that a person served with a levy

surrender any obligated property or rights subject to the levy to the Department. Under

Regulation 3.1.10.9 (B) NMAC (01/15/01), upon service of a warrant of levy, a financial

institution served with a warrant of levy “must immediately surrender to the department any

property or rights to property of the taxpayer which that institution possesses or holds as of the

date of service of the warrant.” Section 7-1-36 articulates which property is exempt from a

Departmental levy. However, none of the property exempted from levy under Section 7-1-36 is

applicable to the facts of this protest.

In order to have a valid warrant of levy seizing a person’s property, the Department must

make a threshold showing that its warrant of levy complied with the content requirements of

Section 7-1-32. The Department need not establish the substantive validity of the outstanding

liability, only the factual particulars of the tax liability as required under Section 7-1-32 (B). That

total liability drawn from the previous notice of assessment or demand for payment is conclusive

for purposes of the warrant of levy. In this case, the Department’s warrant of levy complied with

the content requirements of Section 7-1-32 in this case. In particular, the warrant of levy listed

Taxpayer’s name, and Taxpayer’s outstanding tax liability and original due dates in the form of a

comprehensive spreadsheet. The warrant of levy was legally valid under Section 7-1-32.

The Department sought to collect delinquent Taxpayer’s outstanding tax liability through

its September 16, 2013 warrant of levy, which it served upon Los Alamos National Bank along

with a detailed schedule of Taxpayer’s outstanding tax liability. Upon receipt of the warrant of

levy, the Los Alamos National Bank was compelled by Section 7-1-31, Section 7-1-34, and

Regulation 3.1.10.9 (B) NMAC (01/15/01) to search for and surrender any of Taxpayer’s

property held at that institution. Taxpayer testified that he was a co-applicant on the senior

In the Matter of the Protest of Marcus E. Scott, page 4 of 9
checking account for emergency purposes. According to the senior checking account application,

Taxpayer was an account holder and maintained joint ownership with the right of survivorship

on that account. Taxpayer was also listed as an accountholder on the bank statements for the

senior checking account. Because Taxpayer was an account holder, maintained joint ownership

interest in the account, and had a property right to the account, Los Alamos National Bank had

no choice but to surrender the funds in the senior checking account to the Department.

Taxpayer argued that it was improper and unfair of the Department to seize funds out of

Ms. Haley’s senior checking account, that Taxpayer merely served as a fiduciary for his mother,

and that it was the contractual understanding of the parties that the money in Ms. Haley’s senior

checking account came from her retirement income and social security checks and was

exclusively her money. However, there is nothing under the Section 7-1-36 that would exempt

the property contained in the senior checking account, for which Taxpayer was a joint

accountholder and for which he shared an ownership interest, from the Department’s lawful levy.

Taxpayer acknowledged that he maintained his business account at Los Alamos National Bank,

making it logical for the Department to serve a levy on that bank. As required by operation of

Regulation 3.1.10.9 NMAC, Los Alamos National Bank searched its own records, found that

Taxpayer was an accountholder with shared ownership on the senior checking account, and

surrendered that property to the Department. Los Alamos National Bank apparently was unaware

of a contractual or fiduciary relationship between the parties when it surrendered the funds to the

Department. And no contract or other form was tendered into the record in this matter to

establish a contractual fiduciary relationship. The Department lawfully obtained the funds from

Los Alamos National Bank pursuant to warrant of levy.

In the Matter of the Protest of Marcus E. Scott, page 5 of 9
The Department asked that Taxpayer be ordered to provide detailed banking records as a

late-filed exhibit in this matter so that it could consider whether any adjustments were necessary.

Taxpayer objected to the Department’s request for the presentation of the bank records. In

support of this objection, counsel argued that Taxpayer’s uncontroverted testimony, in the

absence of any countervailing evidence from the Department, was sufficient for Taxpayer to

rebut the presumption of correctness and shift the burden back to the Department to establish the

legality of the levy from the senior checking account. Since the Department presented no

evidence, Taxpayer argued that the protest should be granted and that Taxpayer should not have

to produce any banking records. Taxpayer’s objection and argument is unpersuasive for two

reasons.

First, while Taxpayer argued that it had rebutted the presumption of correctness, the

presumption of correctness only attaches to an assessment or demand for payment under NMSA

1978, Section 7-1-17 (C) (2007). Although not formally an assessment or demand for payment,

the Department asserted that the presumption of correctness nevertheless carries over from the

original assessment and applies to the warrant of levy. There have been previous decisions and

orders finding that the presumption of correctness does attach to a warrant of levy. However,

upon further consideration and review of the relevant statutory provisions, a warrant of levy is

not an assessment of tax or a demand for payment for the purposes of NMSA 1978, Section 7-1-

17 (C) (2007), but an attempt to collect on a delinquent taxpayer’s previously established tax

liability.

Assessments and demands for payment are distinct legal documents discussed under

Section 7-1-17. In order to be effective, an assessment must be mailed or delivered to the

taxpayer against whom the liability is asserted. See §7-1-17 (B). In contrast, under Section 7-1-

In the Matter of the Protest of Marcus E. Scott, page 6 of 9
31, a warrant of levy may be served on someone other than a taxpayer against whom the liability

is asserted. Moreover, both Section 7-1-31 addressing warrants of levy and NMSA 1978, Section

7-1-3 (G) (2013) defining the term “levy” for the purposes of the TAA, refer to the property of a

“delinquent taxpayer.” By definition, under NMSA 1978, Section 7-1-16 (2013), a “delinquent

taxpayer” is a person who has already received their assessment or demand for payment but

failed to respond in a statutorily appropriate manner. Because that person failed to act

appropriately within the statutory deadlines to the assessment or demand for payment, the total

amount previously assessed or the total amount of the demand for payment becomes the

delinquent taxpayer’s liability. See §7-1-16 (A) (1). By Section 7-1-31’s use of “delinquent

taxpayer”, a definition predicated on a previously issued assessment or demand for payment, the

warrant of levy is not itself an assessment or demand for payment covered by Section 7-1-17

(C)’s presumption of correctness but a collection mechanism after those precursor documents

have already established the tax liability. The facts of this case illustrate this point: in its October

18, 2013 Notice of Levy sent to Taxpayer, the Department made a separate demand for payment

to Taxpayer, a step unnecessary if the earlier warrant of levy served on Los Alamos National

Bank rather than Taxpayer constituted a demand for payment.

The second reason why Taxpayer’s objection to the production of the bank records was

unpersuasive is because even without those records, and without the Department presenting any

evidence, Taxpayer’s testimony established he had a property interest in the senior checking

account. While Taxpayer provided a well-intentioned explanation for why his name was on the

senior checking account, Taxpayer clearly testified that he applied for the senior checking

account along with Ms. Haley, that he had access to the account, and that his name remained on

the senior checking account for emergency purposes. On that testimony alone, Los Alamos

In the Matter of the Protest of Marcus E. Scott, page 7 of 9
National Bank had no choice under Section 7-1-31, Section 7-1-34, and Regulation 3.1.10.9 (B)

NMAC (01/15/01) but to surrender those funds to the Department pursuant to the levy. However,

out of an abundance of caution given the sympathetic financial arrangement that Taxpayer

described, the undersigned hearing officer wanted to review the account application and the bank

statements before making a final ruling in this matter on the day of the hearing.

As part of its proposal to accept the banking records as a late-filed exhibit, the

Department expressed the possibility of returning funds to the senior checking account if the

account paperwork and bank statements substantiated Taxpayer’s testimony. The Department

was directed to submit a written response to bank account records by February 21, 2014. As of

the date of this decision, the Department has not done so. The hearing officer certainly

understands and shares the Department’s sympathy for Ms. Haley. However, the sympathy for

Ms. Haley is mitigated by the fact that after the levy, Taxpayer deposited money from his

separate banking account into the account he shared with Ms. Haley so that she could pay her

bills. The practical effect of this transfer is that the levy came from Taxpayer’s funds versus

funds shared with his mother in the senior checking account. Moreover, despite any sympathy

for Ms. Haley, under the language of the relevant statutes and regulation, Taxpayer’s joint

ownership of the senior checking account subjected that account to the Department’s warrant of

levy. Because Taxpayer had rights to the funds in that account, there was nothing legally

improper about the warrant of levy in this matter and the TAA provides no basis at this time to

return the funds to the senior checking account. Taxpayer’s protest is denied.

CONCLUSIONS OF LAW

A. Taxpayer filed a timely, written protest to the Department’s warrant of levy.

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

In the Matter of the Protest of Marcus E. Scott, page 8 of 9
B. Taxpayer is a delinquent taxpayer with an outstanding tax liability.

C. Pursuant to its authority under Section 7-1-31, the Department served Los Alamos

National Bank with a warrant of levy bearing the required contents under Section 7-1-32 for any

of Taxpayer’s property.

D. Since Taxpayer is a joint accountholder and shares an ownership interest in the

senior checking account at Los Alamos National Bank, Taxpayer had rights to property in that

account for the purposes of Section 7-1-31.

E. Because Taxpayer had a right to the property in senior checking account, the Los

Alamos National Bank lawfully seized funds in that account and surrendered them to the

Department, as required under Section 7-1-31, Section 7-1-34, and Regulation 3.1.10.9 (B) NMAC

(01/15/01).

F. The funds in the senior checking account were not exempt from levy under

Section 7-1-36.

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

DATED: February 24, 2014.

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

In the Matter of the Protest of Marcus E. Scott, page 9 of 9