Was A Team Productions' protest timely when Department mail records showed a June 15 assessment mailing and the company hand-delivered its protest on September 14?

Plain-English summary

A Team Productions filed its assessment protest one day late. The AHO upheld the Department's refusal to consider the merits of a $193,585.91 gross receipts tax, penalty, and interest assessment.

The Department dated the assessment June 15, 2016. A Team believed the envelope was postmarked June 17, which would have made September 15 the 90-day deadline. It hand-delivered its protest on September 14.

The only issue before the AHO was whether the assessment had actually been mailed on June 15 or June 17.

Department records proved the June 15 mailing

The Department presented a detailed mailing trail:

• GenTax created the assessment file at 2:14 a.m. on June 15.
• The batch of 802 assessment notices was printed at 7:34 a.m.
• The envelopes passed through an optical sorter that created a USPS postage statement and postmarks.
• The Department delivered the batch to USPS at 1:55 p.m.
• It paid an additional postage amount at 1:57 p.m. that same day.

The mailroom manager did not personally create every computer record, but the records were maintained in the regular course of Department business and the process occurred under his supervision. The AHO found him qualified to authenticate them and found the documents detailed, probative, and reliable.

A Team noted the additional-postage charge and argued that some mail could have been returned. The AHO found no evidence of returned notices; the record instead showed payment and mailing on June 15.

The missing envelope undermined A Team's proof

A Team's managing member, a CPA, testified that he remembered a June 17 postmark. The company's CPA submitted an affidavit saying the same thing.

But neither could produce the envelope. The AHO found their recollections less reliable than the Department's contemporaneous printing, sorting, postage, and USPS records.

The decision also distinguished other Department letters that had later postmarks: those letters were manually sent to the mailroom, while GenTax assessment notices followed the automated same-day process proved here.

The 90-day deadline was jurisdictional

The June 15 mailing made the assessment effective and started the statutory protest period. Ninety days expired on September 13, 2016.

Section 7-1-24(C) required filing within that period, and Regulation 3.1.7.11 treated the deadline as jurisdictional. Because A Team filed on September 14, the Department had no authority to accept the protest.

The AHO admitted A Team's exhibits about the underlying assessment only as an offer of proof. It could not reach whether the company had a meritorious tax case.

Result: protest DENIED. The Department properly rejected the underlying assessment protest as untimely.

What this means for you

Businesses receiving an assessment

Calculate the protest deadline from the legally effective mailing or personal-service date, not from when internal review begins. Preserve the envelope and proof of receipt if the postmark differs from the notice date.

Taxpayers disputing the Department's mailing date

Contemporaneous documentary evidence is critical. Testimony and affidavits about a postmark may not overcome automated mailroom and USPS records when the original envelope is unavailable.

Taxpayers with strong underlying defenses

Merits do not cure an untimely protest. A Team was allowed to show that it believed its underlying case was valid, but the AHO lacked jurisdiction to decide it.

Common questions

Q: When did the Department mail the assessment?
A: June 15, 2016, according to GenTax, print, sorter, postage, and USPS records.

Q: When was the protest due?
A: September 13, 2016, 90 days after mailing.

Q: When did A Team file?
A: It hand-delivered the protest on September 14, one day late.

Q: Why did A Team believe it was timely?
A: Its managing member and CPA remembered a June 17 postmark, but they could not produce the envelope.

Q: Did the AHO decide whether the assessment itself was correct?
A: No. The jurisdictional deadline prevented consideration of the underlying merits.

Q: How large was the assessment?
A: $193,585.91 in gross receipts tax, penalty, and interest for 2010-2013.

Citations and references

Statutes and regulations:

• NMSA 1978, § 7-1-17(B) and (C) — when an assessment becomes effective and its presumption of correctness
• NMSA 1978, § 7-1-24(C) — 90-day assessment protest deadline
• NMSA 1978, § 7-1B-6(D) — evidence rules in Tax Administration Act hearings
• Regulation 3.1.6.11(A) NMAC — effective notice of assessment
• Regulation 3.1.7.11 NMAC — jurisdictional protest period

Cases cited:

• Associated Petroleum Transport v. Shepard, 1949-NMSC-002 — failure to follow the protest procedure deprived the tax tribunal of jurisdiction
• Lopez v. New Mexico Department of Taxation & Revenue, 1997-NMCA-115 — mandatory tax protest deadline
• Chan v. Montoya, 2011-NMCA-072 — dismissal under statutory tax deadlines
• New Mexico Taxation & Revenue Department v. Casias Trucking, 2014-NMCA-099 — taxpayer's burden to counter an assessment

Source

• Listing: New Mexico Decisions & Orders
• Decision post: A Team Productions
• Decision PDF: D&O 17-26

Original ruling text

STATE OF NEW MEXICO
ADMINISTRATIVE HEARINGS OFFICE
TAX ADMINISTRATION ACT

IN THE MATTER OF THE PROTEST OF
A TEAM PRODUCTIONS No. 17-26
TO DENIAL OF PROTEST
ISSUED UNDER LETTER
ID NO. L0508248368

DECISION AND ORDER

A protest hearing occurred on the above captioned matter May 1, 2017 before David

Buchanan, Esq., Hearing Officer, in Santa Fe. Attorney S. Thomas Overstreet appeared for the

hearing representing A Team Productions (“Taxpayer”). Managing Member of A Team

Productions John Overstreet appeared and testified as a witness for Taxpayer. Staff Attorney

Melinda Wolinsky appeared representing the State of New Mexico Taxation and Revenue

Department (“Department”). Protest Auditor Andrea Umpleby and Staff Manager of the

Department’s Mail Room Gene Fulgenzi appeared and testified as witnesses for the Department.

Department Exhibits A-E were admitted into the record. Taxpayer Exhibits 1 and 2 were

admitted into the record. Taxpayer Exhibits 3 – 11 were admitted into the record only as part of

Taxpayer’s offer of proof that Taxpayer has a meritorious protest of the underlying assessment in

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

AS FOLLOWS:

FINDINGS OF FACT

1. On October 21, 2016, under letter id. no. L0508248368, the Department denied

Taxpayer’s September 14, 2016 submission of a written protest of an assessment as untimely.

2. On November 10, 2016, Taxpayer submitted a formal protest of the Department’s

denial of protest.

3. On November 15, 2016, the Department acknowledged receipt of a valid protest

to its denial of protest.

4. On December 29, 2016, the Department filed a request for hearing in this matter

with the Administrative Hearings Office, a separate agency from the Department.

5. On January 4, 2017, the Administrative Hearings Office issued a Notice of

Administrative Hearing, setting this matter for a hearing on January 26, 2017.

6. On January 13, 2017, Taxpayer filed a Notice of Unavailability, Motion to

Vacate, Request for Telephonic Setting and Waiver of Ninety (90) Day Time Limit.

7. On January 4, 2017, the Administrative Hearings Office issued an Amended

Notice of Administrative Hearing, vacating the hearing set for January 26, 2017 and setting this

matter for a hearing on March 16, 2017.

8. On January 30, 2017, Taxpayer filed a Certificate of Service regarding discovery.

9. On February 24, 2017, Taxpayer filed a Motion to Vacate and Reschedule

Hearing.

10. On March 1, 2017, the Department filed a Certificate of Service regarding

discovery.

11. On March 3, 2017, the Administrative Hearings Office issued an Amended Notice

of Administrative Hearing, vacating the hearing set for March 16, 2017 and setting this matter

for hearing on May 1, 2017.

12. On April 19, 2017, the Administrative Hearings Office issued a Notice of

Reassignment of Hearing Officer for Administrative Hearing.

In the Matter of the Protest of A Team Productions, page 2 of 10

13. On May 1, 2017, a formal hearing regarding the protest was held. Taxpayer had

waived the requirement that the hearing be held within 90-days of the Department’s

acknowledgment of receipt of a valid protest.

14. On June 15, 2016, through letter id. no. L0129164848, the Department assessed

Taxpayer for outstanding gross receipts tax, penalty and interest totaling $193,585.91 for the

CRS reporting periods from January 1, 2010 through December 31, 2013.

15. Gene Fulgenzi is the Staff Manager of the Department’s mailroom. Part of Mr.

Fulgenzi’s duties are to track every Notice of Assessment that is generated by the Department

and to ensure that the Notice of Assessments are properly mailed through the United States

Postal Service (USPS).

16. Every night the Department’s GenTax computer system indicates when a Notice

of Assessment is generated and placed into a folder for printing. The Notice of Assessment to

Taxpayer was created in the GenTax computer system and placed in a folder with an identifying

number of 326009344 at 2:14 a.m. on June 15, 2016. [Dept. Ex. D-6]. The only documents

placed into that folder were Notice of Assessments to various taxpayers.

17. The Notice of Assessment to Taxpayer and the other Notice of Assessments

contained in that folder were printed at 7:34 a.m. on June 15, 2016. [Dept. Ex. D-2 and 3].

18. The Notice of Assessment to Taxpayer and the other Notice of Assessments that

had been printed were sent through a postal sorter optical reader and a USPS Postage Statement

was automatically created. The 802 envelopes containing the various Notice of Assessments

were postmarked at that time. Department employee Robert CdeBaca signed his initials on the

USPS Postage Statement for Gene Fulgenzi. [Dept. Ex. D-4].

In the Matter of the Protest of A Team Productions, page 3 of 10

19. The 802 envelopes containing the Notice of Assessments were then delivered to

the USPS at 1:55 p.m. on June 15, 2016. PS Form 3607R – Mailing Transaction Receipt was

created to prove that the letters were delivered to USPS and mailed. [Dept. Ex. D-5].

20. An additional amount of postage was due when the 802 letters including the

Notice of Assessment to Taxpayer were delivered to the USPS. Payment for the mailing of the

documents was made on June 15, 2016 at 1:57 p.m. [Dept. Ex. D-6].

21. John Overstreet is the Managing Member of A Team Productions. Mr. Overstreet

has been a CPA for a number of years and has received many Notice of Assessments from the

Department on behalf of clients. He testified that he recalled seeing the Notice of Assessment to

Taxpayer and was shocked that it went to Taxpayer. Mr. Overstreet testified that the postmark

date on the envelope was June 17, 2016 and therefore the deadline for the protest was 90-days

later on September 15, 2016.

22. Mr. Overstreet delivered the Notice of Assessment and the envelope to Donald W.

Kluesner, the CPA for Taxpayer. Mr. Overstreet testified that Mr. Kluesner was unable to locate

the envelope with the postmark to include with their protest.

23. The affidavit of Donald W. Kluesner was submitted with Taxpayer’s protest.

[Taxpayer Ex. 1-18]. Mr. Kluesner is a licensed CPA in New Mexico. He swore that on or about

June 20, 2016, John Overstreet gave him the Notice of Assessment dated June 15, 2016 and that

based on the postmark on the envelope the deadline to file a timely protest was September 15,

2016. Mr. Kluesner was unable to locate the envelope.

2017. There have been other instances where the postmark on envelopes containing

letters sent by the Department were two or three days after the date of the letter.

In the Matter of the Protest of A Team Productions, page 4 of 10

25. 90-days from the Department’s June 15, 2016 mailing of the Notice of

Assessment was September 13, 2016.

26. On September 14, 2016, Taxpayer prepared and hand-delivered a protest letter to

challenge the Department’s assessment. [Dept. Ex. C].

DISCUSSION

This case involves the straightforward issue of whether Taxpayer timely protested the

underlying assessment and whether the Department has jurisdiction to entertain a protest not

timely received. While 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.

See also Torridge Corp. v. Commissioner of Revenue, 172-NMCA-171, ¶13, 84 N.M. 610

(“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.”). 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 (C) (2015), it is first necessary to

determine when the Department mailed the notice of assessment to Taxpayer.

Taxpayer asserted that the evidence of mailing by the Department was unreliable and

lacked foundation. Taxpayer noted that the evidence was computer generated by employees

other than Mr. Fulgenzi and that the only human involved with the mailing of the Notice of

Assessment was Robert CdeBaca. Taxpayer noted that Mr. CdeBaca was not present to testify at

the hearing. Taxpayer further noted that Dept. Ex. D-6 showed that additional postage was due

In the Matter of the Protest of A Team Productions, page 5 of 10
for 802 letters and that some letters would have been returned due to the incorrect postage.

Taxpayer asserted that the testimony of Mr. Overstreet and the affidavit of by Donald W.

Kluesner submitted with the protest [Taxpayer Ex. 1-18] established that the postmark on the

envelope containing the Notice of Assessment was after the date on the letter itself and that the

protest was timely filed on September 14, 2016. Taxpayer noted that other letters sent by the

Department have had postmarks that were after the date of the letters.

Although Mr. Fulgenzi did not create the documents contained in Department Exhibit D,

the documents are kept in the regular course of the Department’s business to track the creation

and mailing of Notice of Assessments and the printing, processing and mailing of the Notice of

Assessment was done under his supervision. The Hearing Officer found that Mr. Fulgenzi was an

appropriate witness to lay a proper foundation for the authentication of Department Exhibit D.

The Hearing Officer further notes that the Rules of Evidence do not apply to hearings conducted

pursuant to the Tax Administration Act. See NMSA 1978, § 7-1B-6 (D) (2015). Nonetheless, the

Hearing Officer found the Department’s evidence regarding the mailing of the Notice of

Assessment on June 15, 2016 to be detailed, probative and reliable.

Department Exhibit D-6 does show that an additional amount of postage was due when

the 802 letters including the Notice of Assessment in this matter were delivered to the USPS.

However, there was no evidence to indicate that any of the 802 documents were returned and

were not mailed at that time. Instead, the document indicates that the payment for the mailing of

the documents was made on June 15, 2016 at 1:57 p.m. Thus, the Hearing Officer was persuaded

that the Notice of Assessment to Taxpayer was properly mailed on June 15, 2016.

Although there have been other instances where the envelopes containing letters from the

Department bore a different date than the letter itself, the evidence established that the mailing

In the Matter of the Protest of A Team Productions, page 6 of 10
process for those letters differed from the process for mailing the GenTax generated Notice of

Assessments. The other letters referenced by Taxpayer were generated directly by Department

employees who then had to provide the letters to the mailroom. The evidence presented by the

Department established that the Notice of Assessment in this case was printed, postmarked and

given to the USPS all on the same day.

The evidence provided by Taxpayer regarding the date of the postmark on the envelope

containing the Notice of Assessment was less reliable than the evidence presented by the

Department. Taxpayer depended on testimonial evidence and an affidavit to prove that the date

was June 17, 2016 rather than June 15, 2016. Taxpayer did not provide the actual envelope to

support the testimony. The Hearing Officer was persuaded by the preponderance of the evidence

presented at the hearing that the Department mailed Taxpayer the Notice of Assessment on June 15,

2016 and that the envelope was postmarked June 15, 2016.

On June 15, 2016, when the Department mailed the Notice of Assessment, it became

effective under Section 7-1-17 (B) (2) (Notice of Assessment effective when it “is mailed or

delivered in person.”). Once the Department properly mailed the assessment on June 15, 2016,

under Section 7-1-17 (C) that assessment is presumed correct. Consequently, Taxpayer has the

burden to overcome the assessment. See Archuleta v. O'Cheskey, 1972-NMCA-165, ¶11, 84 N.M.

428. Accordingly, it is Taxpayer’s burden to present some countervailing evidence or legal

argument to show that it is entitled to an abatement, in full or in part, of the assessments issued

against him. See N.M. Taxation & Revenue Dep't v. Casias Trucking, 2014-NMCA-099, ¶8.

In order to challenge the Notice of Assessment, Taxpayer needed to file a timely written

protest with the Department’s Secretary. See NMSA 1978, § 7-1-24 (2015). In pertinent part

under Section 7-1-24 (C) (emphasis added), such protest “shall be filed within ninety days of the

In the Matter of the Protest of A Team Productions, page 7 of 10
date of the mailing to or service upon the taxpayer by the department…” Regarding interpreting

the “or” provision of this section, this section must be read in conjunction with Section 7-1-17

(B) (2), which defines the assessment as effective upon mailing or delivery in person. See State v.

Trujillo, 2009-NMSC-012, ¶22, 146 NM 14 and Hayes v. Hagemeier, 1963-NMSC-095, ¶9, 75

N.M. 70 (Statutes are to be read in harmony with other provisions of the law dealing with the

same subject matter). In conjunction with the two options the Department has to issue an

effective assessment under Section 7-1-17 (B), Section 7-1-24 (C) requires a taxpayer to file

their protest within 90-days of the Department’s mailing if that is the method of service the

Department used or within 90-days of the Department’s personal delivery if the Department used

that method. In either case, Section 7-1-24 (C)’s use of the word “shall” makes it an absolute

requirement that a taxpayer file a protest within 90-days. See Marbob Energy Corp. v. N.M. Oil

Conservation Comm'n, 2009-NMSC-013, ¶22, 146 N.M. 24 (use of the word “shall” in a statute

indicates provision is mandatory absent clear indication to the contrary). Accordingly, Department

Regulation 3.1.7.11 NMAC finds that the 90-day protest period 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, 2006-NMCA-50, ¶16, 139 N.M.

498.

Case law further affirms this approach. In Associated Petroleum Transp. v. Shepard,

1949-NMSC-002, ¶6 & ¶11, 53 N.M. 52, the New Mexico Supreme Court noted that a

taxpayer’s inability to timely follow the then-in-place designated protest procedure deprived the

State Tax Commission of jurisdiction over the protest. More recently, the New Mexico Court of

Appeals ordered the dismissal of a property tax taxpayer’s complaints for refund when such

complaints were not timely filed in compliance with the Legislature’s statutorily imposed

In the Matter of the Protest of A Team Productions, page 8 of 10
deadlines. See Chan v. Montoya, 2011-NMCA-72, 150 N.M. 44. In Lopez v. New Mexico Dep't

of Taxation & Revenue, 1997-NMCA-115, 124 N.M. 270, the Court of Appeals had opportunity

to consider whether a taxpayer timely and properly 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 Section 7-1-24 (which

then required a protest within 30-days rather than 90-days under the current statute). See id., ¶6.

The Court of Appeals in Lopez noted that Section 7-1-24 imposed a 30-day time restriction on a

protest. See id., ¶6. 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., ¶9.

In this case, applying this 90-day period to protest, Taxpayer had until September 13,

2016 to file a protest with the Department’s secretary. Taxpayers protest was filed September 14,

2016. Therefore the protest was not timely filed. In light of Section 7-1-24 (C)’s mandatory 90-

day requirement, Regulation 3.1.7.11 NMAC, Associated Petroleum Transp and Lopez,

Taxpayer’s protest filed with the Department after the 90-day deadline cannot be accepted as a

valid protest in this case.

CONCLUSIONS OF LAW

A. Taxpayer filed a timely, written protest to the Department’s denial of protest, and

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

B. Taxpayer waived the requirement that the hearing be held within 90-days of the

Department’s acknowledgment of receipt of a valid protest under NMSA 1978, Section 7-1B-8

(2015).

C. Taxpayer’s failure to timely submit a protest letter by September 13, 2016, within

the 90-day jurisdictional limit articulated under NMSA 1978, Section 7-1-24 (C) (2015), deprived

In the Matter of the Protest of A Team Productions, page 9 of 10
the Department of authority to consider Taxpayer’s September 14, 2016 submission of the protest

letter. See Associated Petroleum Transp. v. Shepard, 1949-NMSC-002, ¶6 & ¶11, 53 N.M. 52;

See also Chan v. Montoya, 2011-NMCA-72, 150 N.M. 44; See also Lopez v. New Mexico Dep't

of Taxation & Revenue, 1997-NMCA-115, 124 N.M. 270.

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

denied Taxpayer’s protest of the underlying assessment as untimely.

DATED: May 31, 2017.

David Buchanan___
David Buchanan
Hearing Officer
Administrative Hearings Office
P.O. Box 6400
Santa Fe, NM 87502

NOTICE OF RIGHT TO APPEAL

Pursuant to NMSA 1978, Section 7-1-25 (1989), the parties have the right to appeal this

decision by filing a notice of appeal with the New Mexico Court of Appeals within 30 days of the

date shown above. See Rule 12-601 NMRA. If an appeal is not filed within 30 days, this

Decision and Order will become final. Either party filing an appeal shall file a courtesy copy of

the appeal with the Administrative Hearings Office contemporaneous with the Court of Appeals

filing so that the Administrative Hearings Office may being preparing the record proper.

In the Matter of the Protest of A Team Productions, page 10 of 10