Could Kenneth White's estate recover a valid $1,000 income tax overpayment after waiting until 2016 to pursue the Department's inaction on the 2007 refund claim?

Plain-English summary

Kenneth White's estate could not recover a valid $1,000 personal income tax overpayment because it missed both statutory deadlines for pursuing the refund. The Department's unexplained failure to act did not keep the claim alive indefinitely.

White died on October 13, 2006. His daughter, Judith Page, served as personal representative of the estate.

The original refund claim was timely and valid

With a CPA's assistance, Page filed White's 2006 PIT-1 return after an extension. The Department received it on October 15, 2007.

The return reported $1,000 of “Other payments” as an overpayment and requested a refund. Under Regulation 3.1.9.8(A), the completed return itself constituted a refund claim.

The Department's protest auditor agreed there was no reason the claim should have been denied when filed. The AHO found that the estate had established entitlement to the claimed refund.

Department inaction shifted responsibility to the estate

The Department neither paid nor denied the claim within 120 days. The evidence offered no apparent reason for that inaction.

Section 7-1-26(B)(2), however, did not require the Department to act. After 120 days without action, the claimant had another 90 days to choose a statutory remedy, including a protest or civil action.

That made May 12, 2008 the 210-day deadline for forcing action on the original claim. The estate did not protest or sue by then, so the original claim was lost.

A second deadline to refile expired in 2010

Section 7-1-26(D)(1)(a) allowed the estate to reassert the refund claim within three years after the end of the calendar year in which the payment was due.

The 2006 personal income tax payment was due in 2007, making December 31, 2010 the refiling deadline. The estate did not refile by that date.

Page lived outside New Mexico, her siblings also lived outside the state, and White had several business entities to wind down. The AHO acknowledged those complications but held that the Legislature created firm limits so the state could close its books and avoid stale claims.

The 2016 application could not revive the claim

Page began asking about the refund in January 2016. After an unidentified Department employee suggested applying again by telephone, she submitted another application on January 20, 2016.

That filing came more than five years after the refiling period expired.

Statutory estoppel did not apply because the estate had not relied on an effective regulation or a written ruling personally addressed to White.

Equitable estoppel also failed. Department silence did not prevent the estate from learning or exercising its remedies; Page had filed the original return with a CPA's help and had means to investigate. The estate also could not substitute oral employee advice for its own analysis of the statutes and regulations.

Result: protest DENIED. The AHO found the $1,000 claim originally valid but barred by the missed 210-day and three-year deadlines.

What this means for you

Taxpayers awaiting a refund

Do not assume silence means the claim remains pending forever. Calendar the 120-day Department action period and the following 90-day remedy period.

Estates and personal representatives

Refund deadlines continue while an estate is being administered. Out-of-state representatives and complicated business wind-downs did not extend the statutory periods here.

Claimants with an otherwise valid overpayment

Substantive entitlement does not excuse procedural delay. A valid claim can still become uncollectible when protest, suit, or refiling deadlines expire.

Taxpayers receiving oral agency guidance

Document advice, but do not rely on an employee's oral suggestion to revive an expired claim. The statutory estoppel rule required reliance on an applicable regulation or a personal written ruling.

Common questions

Q: How much refund did the estate claim?
A: $1,000.

Q: Was the original refund claim valid?
A: Yes. The timely 2006 PIT-1 return established a legitimate overpayment claim.

Q: Did the Department deny the original claim within 120 days?
A: No. It neither paid nor denied the claim, for no apparent reason shown in the record.

Q: When did the 210-day period expire?
A: May 12, 2008.

Q: When did the separate refiling period expire?
A: December 31, 2010.

Q: Why did the 2016 application fail?
A: It was filed years after both deadlines and neither statutory nor equitable estoppel revived the claim.

Q: Did the Department employee's oral advice bind the Department?
A: No. The AHO held that a taxpayer may not rely on oral advice as a substitute for analyzing the governing law.

Citations and references

Statutes and regulations:

• NMSA 1978, § 7-1-26(B)(2) — 120 days of Department inaction plus 90 days to elect a remedy
• NMSA 1978, § 7-1-26(D)(1)(a) — three-year refiling period
• NMSA 1978, § 7-1-60 — statutory estoppel
• NMSA 1978, § 7-2-12 — personal income tax payment due date
• Regulation 3.1.8.10(A) NMAC — refund claimant's burden
• Regulations 3.1.9.8(A) and 3.1.9.9(C) NMAC — income tax return as a refund claim and refiling after inaction

Cases cited:

• Unisys Corp. v. New Mexico Taxation & Revenue Department, 117 N.M. 609, 874 P.2d 1273 — Department may choose whether to act, and an untimely claim is barred
• Kilmer v. Goodwin, 2004-NMCA-122 — 210-day outer limit, stale-claim policy, and oral agency advice
• Taxation & Revenue Department v. Bien Mur Indian Market, 108 N.M. 228, 770 P.2d 873 (1989) — estoppel against the state is rare
• Continental Potash, Inc. v. Freeport-McMoran, Inc., 115 N.M. 690, 858 P.2d 66 (1993) — equitable-estoppel claimant must lack both knowledge and means to obtain it

Source

• Listing: New Mexico Decisions & Orders
• Decision post: Kenneth W. White
• Decision PDF: D&O 17-48

Original ruling text

STATE OF NEW MEXICO
ADMINISTRATIVE HEARINGS OFFICE
TAX ADMINISTRATION ACT

IN THE MATTER OF THE PROTEST OF
KENNETH W. WHITE No. 17-48
TO REFUND DENIAL
ISSUED UNDER LETTER
ID NO. L0728093232

v.

TAXATION AND REVENUE DEPARTMENT

DECISION AND ORDER

A protest hearing occurred in the above-captioned protest on November 16, 2017 before

Ignacio V. Gallegos, Esq., Hearing Officer, in Santa Fe. New Mexico. At the hearing, Kenneth

W. White (“Taxpayer”), deceased, was represented by his daughter, Judith M. Page, as Personal

Representative of the Estate and successor in interest. Staff Attorney Cordelia Friedman

appeared representing the State of New Mexico Taxation and Revenue Department

(“Department”). Protest Auditor Thomas Dillon appeared as a witness for the Department. The

contents of the Administrative File were admitted into the record at hearing by stipulation.

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

FOLLOWS:

FINDINGS OF FACT

1. On January 27, 2016, the Department sent Taxpayer a letter denying the

Taxpayer’s claim for refund. [Letter ID # L0728093232].

2. The denial letter was directed to the address of Ms. Page, the Taxpayer’s Estate’s

Personal Representative and successor in interest, but addressed to Taxpayer. Ms. Page testified
that she did not receive the letter of denial until she inquired again in February of 2017.

[Testimony of J. Page]

3. Ms. Page protested the initial denial of refund on March 16, 2017. [First protest

letter]

4. On March 24, 2017 the Department denied Taxpayer’s protest of the initial denial

of refund letter. [Letter ID # L0259425584].

5. The Department denied Taxpayer’s protest because the protest letter was received

by the Department beyond the 90-day window for receipt of a protest of Departmental action

taken January 27, 2016.

6. Ms. Page protested the second denial (of protest) on June 13, 2017, stating by

sworn declaration that she did not receive the January 27, 2016 denial letter until February 28,

2017, at which point the protest of March 16, 2017 would have been within the 90-day window.

[Second protest letter; Declaration of J. Page]

7. On July 12, 2017, the Department issued a letter acknowledging receipt of a

timely protest to the denial of protest letter issued under Letter ID L0259425584 [Letter ID

L1686326576].

8. On August 14, 2017, the Department submitted a request for hearing to the

Administrative Hearings Office and the hearing was scheduled within 90-days of receipt of the

second protest.

9. Ms. Page requested necessary continuances, waived the 90-day requirement of

NMSA 1978, Section 7-1B-8, and requested that she be permitted to appear by telephone.

Because the material facts were not in dispute and only the application of the law was in dispute,

In the Matter of the Protest of Kenneth W. White
Page 2 of 12
Ms. Page was allowed to appear by telephone. A hearing on the merits took place November 16,

2017.

10. On or about October 15, 2007, Taxpayer, through a CPA and his Personal

Representative, filed a timely (after extension) PIT-1 tax return for tax year ending December 31,

2006, asserting a claim for refund for the overpayment of taxes paid in the amount of $1,000.00.

11. The claim for refund appeared to be a valid claim. [Testimony of T. Dillon]

12. Testimony revealed there was no apparent reason for the Department’s inaction,

but the Department did not take action to either refund the claimed amount, or issue a denial on

the claim within 120 days of the filing of the claim. [Testimony of T. Dillon; Testimony of J.

Page]

13. Taxpayer did not either protest or file a civil action within 210 days of the

protested inaction.

14. Documents submitted by Ms. Page revealed that Taxpayer died on October 13,

2006, leaving a will appointing his daughter Ms. Judith M. Page as a personal representative.

15. Many years passed and Ms. Page began to inquire about the lack of refund in

January of 2016. [Testimony of J. Page]

16. Complicating the matter of closing the Taxpayer’s Estate, Ms. Page lives outside

New Mexico and her siblings who were assisting her were also living outside of New Mexico.

Taxpayer had several business entities that required winding down. [Testimony of J. Page]

17. After speaking with an unknown Department employee who encouraged her to re-

apply for the refund, Ms. Page re-submitted an “application for refund” on January 20, 2016.

[Testimony of J. Page; no document contained in the file]

In the Matter of the Protest of Kenneth W. White
Page 3 of 12
DISCUSSION

This protest involves three questions, first, whether the Taxpayer was entitled to a refund,

second, what responsibility rests with the Taxpayer’s Personal Representative and the

Department when a valid claim for refund is received, and finally, whether the Taxpayer’s

Personal Representative may revive a valid claim for refund after the expiration of the three-year

statute of limitation on a claim for refund has expired.

Taxpayer has the burden of establishing it was entitled to the claimed refund at issue. See

Regulation 3.1.8.10 (A) NMAC. Taxpayer’s claim for refund is premised on an overpayment of

tax. “Where an exemption or deduction from tax is claimed, the statute must be construed strictly

in favor of the taxing authority, the right to the exemption or deduction must be clearly and

unambiguously expressed in the statute, and the right must be clearly established by the

taxpayer.” Wing Pawn Shop v. Taxation and Revenue Department, 1991-NMCA-024, ¶16, 111

N.M. 735 (internal citation omitted); See also TPL, Inc. v. N.M. Taxation & Revenue Dep't,

2003-NMSC-7, ¶9, 133 N.M. 447; See also Corr. Corp. of Am. of Tenn. v. State, 2007-NMCA-

148, ¶17 & ¶29, 142 N.M. 779 (Court of Appeals reviewed a refund denial through “lens of

presumption of correctness” and applied the principle that deductions underlying the claim for

refund are to be construed narrowly). Consequently, Taxpayer must show that it is entitled to its

claim for refund.

Was taxpayer entitled to the refund of overpaid 2006 taxes?

Mr. Kenneth W. White, Sr., died October 13, 2006. During the 2006 tax year Taxpayer

paid “Other payments” of one thousand dollars ($1,000.00). [2006 PIT-1, Image 1 of 18]. The

Taxpayer’s PIT-1 2006 tax return was completed by Ms. Page with the assistance of a Certified

Public Accountant (CPA) and was delivered to the Department timely in 2007, stamped received

In the Matter of the Protest of Kenneth W. White
Page 4 of 12
on October 15, 2007. This constituted a timely request for refund. See Regulation 3.1.9.8 (A)

(“The filing of a fully completed income…tax return … showing an overpayment of tax, a credit

or rebate claimed will constitute the filing of a claim for refund and no separate claim for refund

is required.”). Through testimony, Ms. Page and Mr. Dillon agreed that there was no reason the

claim for refund of the 2006 tax overpayment should have been denied at the time it was filed.

The claim for refund claimed within the PIT-1 tax return was a legitimate claim.

What responsibilities do the parties bear to act on the valid refund claim?

The second question of what responsibilities the parties bear once the valid claim for

refund is delivered to the Department then rests on statutory interpretation. New Mexico law

does not require the Department to act on claims of refunds. NMSA 1978 Section 7-1-26 (B)

states: “[t]he secretary or the secretary's delegate may allow the claim in whole or in part or may

deny the claim.” The statute uses the word “may” rather than the word “shall.” New Mexico

courts have interpreted this to mean that “the word "may" in the sentence allowing the secretary

to grant or deny a claim should be construed as permissive.” Unisys Corp. v. New Mexico

Taxation & Revenue Dep't, 117 N.M. 609, 874 P.2d 1273; Thriftway Marketing Corp. v. State,

114 N.M. 578, 844 P.2d. 828 (Ct. App. 1992). Although Subsection B of the statute only allows

two options (to allow or to deny), the Unisys court determined that “Section 7-1-26(A) gives the

Secretary the choice of whether or not to act upon a refund claim.” Unisys Corp. v. New Mexico

Taxation & Revenue Dep't, 117 N.M. 609, 874 P.2d 1273. The statute then anticipates three

possibilities: that the Department deny the claimed amount, that the Department refund the

claimed amount, or that the Department take no action on the claim. See NMSA 1978, Section

7-1-26 (B)(2). The evidence showed that the Department did not deny the original claim for

In the Matter of the Protest of Kenneth W. White
Page 5 of 12
refund, and did not pay out the claimed refund amount, therefore this case is one in which the

Department did not take any action on the original claim for refund submitted with the

Taxpayer’s 2006 PIT-1 personal income tax return.

In the event of Departmental inaction, the responsibility then shifts to the Taxpayer to

force the Department to take action where none was taken. “If the department has neither

granted nor denied any portion of a claim for refund within one hundred twenty days of the date

the claim was mailed or delivered to the department, the person may refile it within the time

limits set forth in Subsection D of this section or may within ninety days elect to pursue one, but

only one, of the remedies in Subsection C of this section. After the expiration of the two

hundred ten days from the date the claim was mailed or delivered to the department, the

department may not approve or disapprove the claim unless the person has pursued one of the

remedies under Subsection C of this section.” NMSA 1978, Section 7-1-26 (B)(2).

When the tax return was filed, delivered October 15, 2007, the Taxpayer’s successor in

interest had until May 12, 2008 to take action to force the Department to pay out or reject the

original claim for refund filed with the tax return. That did not occur within the statutory time-

frame. “[T]he legislature intended a clear and definite outer limit, of 210 days, on the

Department's authority to act on a claim for refund.” Kilmer v. Goodwin, 2004-NMCA-122, 136

N.M. 440, 99 P.3d 690. The original claim was lost after May 12, 2008.

Subsection D then allows taxpayers to take corrective action for an additional three years

from “the end of the calendar year in which (a) the payment was originally due…” NMSA 1978,

Section 7-1-26 (D)(1)(a). The Taxpayer’s successor in interest then could have reasserted or

revived the claim for refund within Section 7-1-26 (D)(1)(a)’s time limitation. Typically,

personal income tax payments are due by April 15 of the year following the reporting period.

In the Matter of the Protest of Kenneth W. White
Page 6 of 12
See NMSA 1978, Section 7-2-12 and 24 U.S.C. Section 6072 (a). This tax payment for 2006

would have been due in 2007, and the end of that year was December 31, 2007. Under Section

7-1-26 (D), the third year from the year the tax was originally due expired December 31, 2010.

The Taxpayer’s successor did not reassert the claim for refund within that time. The original

claim and subsequent ability to reassert the claim was lost after that time. Unisys Corp. v. New

Mexico Taxation & Revenue Dep't, 117 N.M. 609, 874 P.2d 1273 (Court of Appeals held that a

claim for refund was time barred when taxpayer did not confront the department inaction by

timely filing either a protest or a civil action).

The hearing officer is not unsympathetic to the estate’s claim, particularly in light of the

Department’s unexplained failure to act on a claim it acknowledges was proper. Estates can be

complicated to wind down, and it appears to be so in this case. Nevertheless, the legislature has

established a statute of limitation on refund claims so that the state will not be held liable for

late-asserted claims so the ledger books may be closed after a finite amount of time. The limits

set out in NMSA 1978, Section 7-1-26 were intended “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.” Kilmer v. Goodwin, 2004-NMCA-122, 136 N.M. 440, 99 P.3d 690.

Was taxpayer’s reassertion of the claim in 2016 sufficient to revive the claim for refund

under the doctrine of estoppel?

The Taxpayer’s successor in interest, Ms. Page, inquired about the missing refund in

2016, and filed an “Application for refund” on January 20, 2016, after the idea was suggested to

her by a Department employee over the phone. The application for refund was not filed within

the three-year statute of repose, which had expired at the end of 2010.

In the Matter of the Protest of Kenneth W. White
Page 7 of 12
New Mexico statutes provide no permissive method of revivor of claims, even valid

claims, that may allow for a re-opening of a claim nine years after filing. “A claimant may…

refile a claim within the statutory period [three years] if the department has not denied the claim

in whole or in part and has taken no action on that claim within 120 days from the filing of the

claim.” Regulation 3.1.9.9 (C) NMAC.

However, under particular circumstances, the law allows revivor of stale claims under the

doctrines of statutory estoppel or equitable estoppel. Statutory estoppel is determined by

applying NMSA 1978, Section 7-1-60 to the facts of the case. The statute reads:

In any proceeding pursuant to the provisions of the Tax Administration Act,
the department shall be estopped from obtaining or withholding the relief
requested if it is shown by the party adverse to the department that the party's
action or inaction complained of was in accordance with any regulation
effective during the time the asserted liability for tax arose or in accordance
with any ruling addressed to the party personally and in writing by the
secretary, unless the ruling had been rendered invalid or had been superseded
by regulation or by another ruling similarly addressed at the time the asserted
liability for tax arose. NMSA 1978, § 7-1-60 (1993).

The facts of this case do not show the Taxpayer’s reliance on a Department regulation

effective at the time the tax arose, nor on a ruling addressed to the party personally and in

writing. Statutory estoppel does not prevent the Department from denying this claim.

The doctrine of equitable estoppel has an even more limited application. As a general

rule, estoppel is rarely applied against the state, and is applied only when “right and justice

demand it.” Taxation and Revenue Department v. Bien Mur Indian Market, 108 N.M. 228, 231,

770 P.2d 873, 876 (1989). When estoppel is raised to avoid application of a statute of

limitations, the issue is whether the party to be estopped has taken some action to prevent the

other party from bringing suit within the prescribed period. Kern v. St. Joseph Hospital, Inc.,

1985-NMSC-031, ¶10, 102 N.M. 452, 697 P.2d 135. The Kern court acknowledged that

In the Matter of the Protest of Kenneth W. White
Page 8 of 12
“Silence may sometimes constitute fraudulent concealment” Id. at ¶11. The evidence of this case

indicates that the Department’s inaction is equivalent to silence. In Continental Potash, Inc. v.

Freeport-McMoran, Inc., 115 N.M. 690, 698, 858 P.2d 66, 74 (1993), the New Mexico Supreme

Court emphasized that the party asserting equitable estoppel to toll a statute of limitations must

show not only a lack of knowledge of the truth as to the facts in question, but also “the lack of

means by which knowledge might be obtained.” Here, the Taxpayer’s 2006 tax return was filed

by Ms. Page with assistance of a CPA who prepared the return. The CPA could have advised

Ms. Page on a course of action if the refund was not immediately paid out. See Kilmer v.

Goodwin, 2004-NMCA-122, ¶ 41. The Taxpayer’s successor had adequate means of obtaining

the knowledge necessary to force the Department to act on the request for refund, or to re-assert

the claim within the applicable statute of limitations for claims for refund of three years. The

Department’s inaction did not prevent the Taxpayer’s successor from acting.

Additionally, a taxpayer is not entitled to rely on the oral advice of a Department

employee as a substitute for conducting its own analysis of New Mexico’s tax statutes and

regulations. Kilmer v. Goodwin, 2004-NMCA-122, ¶ 42, 136 N.M. 440, 99 P.3d 690. The

evidence showed that Ms. Page submitted an application for refund in 2016, after speaking with

a Department employee over the phone. However, there was no indication in the evidence that

Ms. Page was led to believe the application would be granted. Equitable estoppel is not

warranted in this circumstance and cannot overcome the application of the three-year statute of

limitation on a claim for refund in this case. Despite sympathizing with Taxpayer’s successor’s

position, controlling precedent dictates the outcome of this protest.

For the stated reasons, the Taxpayer’s protest should be denied.

CONCLUSIONS OF LAW

In the Matter of the Protest of Kenneth W. White
Page 9 of 12
A. Taxpayer filed a timely, written protest to the Department’s March 13, 2017 denial

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

B. A hearing was timely set and 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 established that it was entitled to the claimed refund submitted through

the 2006 PIT-1 tax return.

D. The Department took no action on the claim for refund within 120 days.

E. Taxpayer did not timely protest the Department’s inaction within 210 days of the

original claim for refund. Section 7-1-26 (B)(2).

F. Taxpayer did not timely re-submit a request for payment of the refund within three

years of the end of the calendar year the payment would have been due. Section 7-1-26 (D)(1).

G. Taxpayer’s late actions to reassert the claim were untimely and were barred by the

statute of limitations for refunds under Section 7-1-26.

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

Dated: December 11, 2017.

Ignacio V. Gallegos
Hearing Officer
Administrative Hearings Office
Post Office Box 6400
Santa Fe, NM 87502

In the Matter of the Protest of Kenneth W. White
Page 10 of 12
NOTICE OF RIGHT TO APPEAL

Pursuant to NMSA 1978, Section 7-1-25 (2015), 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. If an appeal is not filed with the Court of Appeals within 30 days, this

Decision and Order will become final. Rule of Appellate Procedure 12-601 NMRA articulates

the requirements of perfecting an appeal of an administrative decision with the Court of Appeals.

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 begin preparing the record proper. The parties will each be provided with a

copy of the record proper at the time of the filing of the record with the Court of Appeals, which

occurs within 14 days of the Administrative Hearings Office’s receipt of the docketing statement

from the appealing party. See Rule 12-209 NMRA.

In the Matter of the Protest of Kenneth W. White
Page 11 of 12
CERTIFICATE OF SERVICE

On December 11, 2017, a copy of the foregoing Decision and Order was submitted to the

parties listed below in the following manner:

In the Matter of the Protest of Kenneth W. White
Page 12 of 12