Could Irasema Cervantes Pettibone preserve a timely 2008 refund claim after Department inaction when she missed the 210-day challenge deadline because of disability and lack of notice?

Plain-English summary

Irasema Cervantes Pettibone's timely 2008 refund claim became stale because she did not protest or sue within 210 days after the Department failed to act. Her later refiling was outside the general limitation period, and the AHO found no disability exception that could revive either claim.

Pettibone filed her 2008 New Mexico personal income tax return on December 24, 2012, including a refund claim. That was before the December 31, 2012 deadline.

The Department neither granted nor denied the claim by April 22, 2013, the 120th day. Section 7-1-26 then gave Pettibone 90 days to file an administrative protest or district-court action.

The timely claim was not preserved

Pettibone did not use either remedy by July 21, 2013, the 210th day from filing. Under the statute and Kilmer v. Goodwin, that inaction abandoned the claim and left the Department without authority to approve or deny it later.

Her lack of knowledge about the preservation rule did not extend it. The AHO applied New Mexico's self-reporting principle that taxpayers must determine the consequences and deadlines associated with their filings.

The 2014 refiling was independently too late

Pettibone refiled the 2008 return at an unspecified point in 2014. The three-year refund limitation had already ended on December 31, 2012, so the Department also lacked express or implied authority to grant the new claim.

The medical evidence did not establish a legal extension

A physician stated that Pettibone had a condition preventing her from managing financial affairs for at least 12 continuous months. The statement did not say when the condition was diagnosed or identify the affected 12-month period.

More fundamentally, the AHO found no Tax Administration Act provision or controlling case allowing a stale refund claim because of medical disability. The Department's failure to tell Pettibone about the action deadline also did not create authority to disregard the statute.

Result: protest DENIED. The December 2012 claim was stale, and the 2014 claim was time-barred.

What this means for you

Taxpayers filing near the refund deadline

An on-time claim can still be lost through later inaction. Calendar the 120-day Department response point and the 210-day outside date for a formal challenge.

Taxpayers affected by illness or disability

Do not assume a medical condition tolls a tax deadline. Identify an actual statutory extension and preserve dated medical evidence showing when incapacity began and ended.

Taxpayers waiting for Department instructions

The agency's silence or failure to explain remedies may not extend statutory deadlines. Seek advice and use formal protest or court procedures before time expires.

Common questions

Q: Was the December 2012 refund claim timely filed?
A: Yes.

Q: When did the Department's 120-day action period end?
A: April 22, 2013.

Q: What was Pettibone's deadline to protest or sue?
A: July 21, 2013.

Q: Why did the medical statement not save the claim?
A: It did not date the incapacity, and the AHO found no legal disability exception for the stale claim.

Q: Could the 2014 refiling restart the process?
A: No. It was already beyond the December 31, 2012 general refund deadline.

Citations and references

Statutes:

• NMSA 1978, § 7-1-26 — refund limitation, Department inaction, and protest or civil-action deadlines
• NMSA 1978, § 7-2-12 — due date used to calculate the 2008 refund limitation

Cases cited:

• Kilmer v. Goodwin, 2004-NMCA-122 — stale claims and lack of agency authority to waive refund deadlines
• Unisys Corp. v. New Mexico Taxation and Revenue Department, 1994-NMCA-059 — exclusive remedies for Department inaction
• Tiffany Construction Co. v. Bureau of Revenue, 1976-NMCA-127 — taxpayer duty to ascertain tax consequences

Source

• Listing: New Mexico Decisions & Orders
• Decision post: Irasema Cervantes Pettibone
• Decision PDF: D&O 15-38

Original ruling text

STATE OF NEW MEXICO
ADMINISTRATIVE HEARINGS OFFICE
TAX ADMINISTRATION ACT

IN THE MATTER OF THE PROTEST OF
IRASEMA CERVANTES PETTIBONE No. 15-38
TO DEPARTMENT’S FAILURE TO GRANT OR DENY A REFUND

DECISION AND ORDER

A protest hearing occurred on the above captioned matter on November 24, 2015 before

Brian VanDenzen, Esq., Interim Chief Hearing Officer, in Santa Fe. At the hearing, Irasema

Cervantes Pettibone (“Taxpayer”) appeared pro se telephonically. Rosea Marshall was also

present with Taxpayer. Staff Attorney Melinda Wolinsky appeared representing the State of New

Mexico Taxation and Revenue Department (“Department”). Protest Auditor Sonya Varela

appeared as a witness for the Department. Taxpayer Exhibits #1.1 through 1.4 were admitted into

the record. Based on the evidence and arguments presented, IT IS DECIDED AND ORDERED

AS FOLLOWS:

FINDINGS OF FACT

1. On July 7, 2015, Taxpayer submitted a protest to the Department seeking

approval of a claim for refund of 2008 personal income tax, a claim in which the Department

never took any action to grant or deny.

2. On July 22, 2015, the Department’s protest office acknowledged receipt of a valid

protest.

3. On September 25, 2015, the Department filed a request for hearing in this matter

with the Administrative Hearings Office.

4. On September 28, 2015, the Administrative Hearings Office set this matter for a

telephonic scheduling hearing on October 13, 2015.

5. A scheduling hearing in fact was held on October 13, 2015. Neither party
   objected that holding the scheduling hearing satisfied the 90-day hearing requirement of the
   statute.
6. On October 15, 2015, the Administrative Hearings Office issued Notice of

Administrative Hearing, setting a merits hearing in this matter on November 24, 2015 at 10:00

a.m.

7. On November 6, 2015, Taxpayer filed a packet of exhibits for the scheduled

hearing and a request to appear at the hearing telephonically in light of a medical condition, as

supported by a statement of a physician.

8. On November 9, 2015, the Department submitted an email in opposition to

Taxpayer’s requested telephonic appearance.

9. On November 13, 2015, the Administrative Hearings Office issued an order

allowing Taxpayer to appear telephonically in light of the documented medical condition and the

generally straightforward factual timeline nature of a statute of limitations, refund protest case.

10. Taxpayer submitted her 2008 New Mexico personal income tax return to the

Department on December 24, 2012, which included a claim for refund. [Taxpayer Ex. 1-2 and 1-

3].

11. The Department took no action to grant or deny the claim for refund by April 22,

2013, within 120-days of December 24, 2012. [Taxpayer Ex. 1-3].

12. Taxpayer did not file a civil action or a protest against the Department’s inaction

on her claim for refund by July 21, 2013, or 90-days after the Department’s failure to act and

In the Matter of the Protest of Irasema Cervantes-Pettibone, page 2 of 8
210-days after Taxpayer’s December 24, 2012 filing of her 2008 personal income tax return.

[Taxpayer Ex. 1-3].

13. At some unspecified point in 2014, Taxpayer refiled her 2008 personal income

tax return. [Taxpayer Protest Letter].

14. Taxpayer’s 2014 refiling occurred after the lapse of the statute of limitations for a

claim for refund of 2008 personal income tax.

15. When the Department still took no action on her claim for refund in the 2008

personal income tax return, Taxpayer filed her protest letter referenced in finding of fact #1.

16. Taxpayer submitted a statement of her doctor that she had a medical condition

that “prevented her from managing her financial affairs and this condition has lasted for a

continuous period of no less than 12 months.” [Taxpayer Ex. 1-4].

17. The statement of Taxpayer’s doctor does not specify when this condition was

diagnosed and when the 12-month period of inability to manage financial affairs occurred.

DISCUSSION

At issue in this protest is whether Taxpayer’s claim for refund was barred under the

statute of limitations. Taxpayer argues that since she initially submitted her 2008 New Mexico

personal income tax returns within the permissible three-year period, since the Department failed

to inform her of her obligations to challenge the Department’s inaction by the deadline, and since

she subsequently suffered from a medical disability, Taxpayer’s refund claim should be granted.

Because no assessment was issued in this case, other than Taxpayer’s self-assessment of

tax in her 2008 PIT-1 return, no presumption of correctness attaches in this protest. See NMSA

1978, § 7-1-17 (2007) and Regulation 3.1.6.10 NMAC. Nevertheless, for reasons that will be

discussed in more detail throughout the decision, under the relevant statute and controlling case

In the Matter of the Protest of Irasema Cervantes-Pettibone, page 3 of 8
law, Taxpayer had the obligation to both timely file her claim for refund and preserve their claim

through resolution of the claim.

In pertinent part under NMSA 1978, Section 7-1-26 (D) (1) (2007), no refund can be

granted unless as a result of a claim made within three-years of the end of the calendar year in

which the tax was due. At issue in this protest is the payment of 2008 personal income tax.

Under NMSA 1978, Section 7-2-12 (2003), 2008 personal income tax returns were due on April

15, 2009, making December 31, 2012 the end of the calendar year from which the taxes were

due. Therefore, under Section 7-1-26 (D) (1), Taxpayer had until December 31, 2012 to make

any claim for refund to the Department for 2008 personal income taxes.

In this case, Taxpayer did in fact file her 2008 New Mexico personal income taxes, which

included the claim for refund, on December 24, 2012, before the expiration of the statute of

limitations. However, for unexplained reasons, the Department took no action to either approve

or deny Taxpayer’s December 24, 2012 claim for refund within 120-days, which occurred on

April 22, 2013.

Under Section 7-1-26 (B)(2), when the Department takes no action on a claim for refund

within 120-days from that claim for refund, a taxpayer has 90-days to either file a protest or

commence a civil action in the Santa Fe County District Court. In other words, in the face of

Department inaction, a taxpayer has 210-days from the original filing date of the claim for refund

to preserve their claim by either filing a protest or a civil action. See Unisys Corp. v. N.M.

Taxation & Revenue Dep't, 1994-NMCA-059, 117 NM 609 (Section 7-1-26 gives taxpayers a

method to challenges the Department’s inaction on a claim for refund).

Reading Section 7-1-26 (B) (2) in conjunction with relevant case law establishes that a

taxpayer’s failure to preserve the claim for refund divests the Department of authority to act on

In the Matter of the Protest of Irasema Cervantes-Pettibone, page 4 of 8
the stale claim. In Kilmer v. Goodwin, 2004-NMCA-122, 136 N.M. 440, the New Mexico Court

of Appeals addressed claims for refunds under Section 7-1-26. The facts in Kilmer established

that the Department took no action on the Kilmer taxpayer’s claim for refund within 120-days of

the initial filing of that claim. See id. ¶9, 444. The Kilmer taxpayer failed to preserve her claim

for refund within 90-days of the Department’s inaction by either filing a protest or a civil suit.

See id. ¶15, 445. The expiration of the statute of limitations prevented the Kilmer taxpayer from

refilling a new claim for refund. See id. The New Mexico Court of Appeals noted in Kilmer that

the Legislative purpose of the deadlines under Section 7-1-26 is “to avoid stale claims, which

protects the Department's ability to stabilize and predict, with some degree of certainty, the funds

it collects and manages.” id. ¶16, 446. The Kilmer court further found that the Legislature placed

the responsibility on a taxpayer to maintain an active claim and to timely confront the

Department’s inactions on a claim. See id. The Kilmer court ultimately held that the Department

lacked either express statutory authority under Section 7-1-26 or implied authority as an

administrative agency to grant that taxpayer’s stale claim for refund beyond the 210-days from

the initial filing of that refund. See id. ¶19-24, 445-446.

Applying Section 7-1-26 (B) and the rationale of Kilmer to this protest, under the

statutory 210-day deadline, when the Department failed to act on Taxpayer’s December 24, 2012

claim for refund by April 22, 2013, Taxpayer needed to either file a written protest or commence

a civil action by July 21, 2013. Taxpayer did not pursue either option by that July 21, 2013

deadline. By not filing either a protest or a civil action, Taxpayer abandoned her December 24,

2012 claim for refund and the Department was prohibited under Section 7-1-26 (B) (2) from

either approving or disapproving that claim for refund. Thus, like in Kilmer, Taxpayer’s claim

In the Matter of the Protest of Irasema Cervantes-Pettibone, page 5 of 8
for refund became stale and the Department was statutorily barred from considering that claim

for refund any further.

Taxpayer’s 2014 resubmission of her 2008 New Mexico personal income tax return

which included a claim for refund was made after the December 31, 2012 expiration of the

statute of limitations contained under Section 7-1-26 (D) (1). Under the plain language of

Section 7-1-26 (D) (1), the Department had no statutory authority to grant a claim for refund

made after three years from the end of the calendar year in which the tax was due. The reasoning

the Court of Appeals cited in Kilmer, as discussed above, equally applies to a claim for refund

filed after the expiration of statute of limitation under Section 7-1-26 (D) (1). Pursuant to Kilmer,

the Department further lacks any implied authority that might allow it to waive or otherwise find

a manner to approve a claim for refund after the expiration of the statute of limitations. See id.

¶24, 446. See also Unisys Corp., ¶3 (refund claims made after Section 7-1-26’s statute of

limitations are time-barred). Taxpayer did not establish any other provision of Section 7-1-26

that might allow the Department to consider her 2014 claim for refund after expiration of the

standard statute of limitations.

Taxpayer nevertheless argued that her refund claim should be allowed in light of her

disability and the Department’s failure to take action on her initial timely claim or communicate

with her about the deadlines she needed to follow to preserve her refund claim. Regarding the

Department’s lack of communication with Taxpayer, 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, 1976-

NMCA-127, ¶5, 90 N.M. 16. It is somewhat unclear why it took Taxpayer until December 24,

2012 to file her 2008 personal income tax return (neither party addressed this issue at the hearing

In the Matter of the Protest of Irasema Cervantes-Pettibone, page 6 of 8
and Taxpayer’s doctor did not specify when Taxpayer’s condition began to affect her). By waiting

until that late date, Taxpayer ran the risk of running out of time on her refund claim. By not

following up on the Department’s inaction on her refund claim, as required under the statute,

Taxpayer did not meet her obligation to ascertain the consequences of her actions under Tiffany

Construction Co. Under the principal expressed in Tiffany Construction Co., Taxpayer’s lack of

knowledge of this requirement does not relieve her of her obligation to preserve the claim. Nor is

there any provision of the Tax Administration Act or case law allowing the granting of a stale

claim for refund because of Taxpayer’s medical condition. Despite sympathy for Taxpayer’s

situation, the statute and controlling case law discussed above dictates that the Department cannot

grant Taxpayer’s stale claim for refund or the 2014 post-statute of limitations, time-barred refund

claim. For the foregoing reasons, Taxpayer’s protest IS DENIED.

CONCLUSIONS OF LAW

A. Taxpayer filed a timely, written protest to the Department’s inaction on her claim for

refund, and jurisdiction lies over the parties and the subject matter of this protest.

B. Holding the October 13, 2015 Scheduling Hearing satisfied the 90-day hearing

requirement of NMSA 1978, Section 7-1B-8 (2015).

C. Taxpayer failed to either protest or file a civil action challenging the Department’s

inaction on her December 24, 2012 claim for refund within 210-days, rendering that claim stale.

The Department lacks either express or inherent authority to grant Taxpayer’s stale claim for refund.

See Kilmer v. Goodwin, 2004-NMCA-122, 136 N.M. 440.

D. Taxpayer’s 2014 claim for refund of 2008 personal income tax was beyond the

three-year statute of limitations deadline for the filing of a claim for refund under NMSA 1978,

Section 7-1-26 (D) (1) (2007).

In the Matter of the Protest of Irasema Cervantes-Pettibone, page 7 of 8
For the foregoing reasons, the Taxpayers’ protest IS DENIED.

DATED: December 16, 2015.

Brian VanDenzen
Interim Chief Hearing Officer
Administrative Hearings Office
P.O. Box 6400
Santa Fe, NM 87502

In the Matter of the Protest of Irasema Cervantes-Pettibone, page 8 of 8