Which parts of Par Five Energy Services' disputed $135,792.11 High-Wage Jobs Tax Credit qualified under New Mexico law?

Plain-English summary

Par Five Energy Services won $33,335.65 of a disputed $135,792.11 High-Wage Jobs Tax Credit claim but lost $102,456.46. The AHO denied credit for employees hired into preexisting jobs, allowed credit for a genuine new job filled by internal promotion, and accepted the evidence that another employee was domiciled in New Mexico.

Par Five's full application covered 213 qualifying periods from January 10, 2011 through July 8, 2015 and sought $2,025,595.84. The Department granted $1,889,803.73 and denied $135,792.11.

The denied amount involved:

• $68,699.68 for six employees hired into positions the Department treated as preexisting jobs;
• $24,000 for an employee promoted internally into a new job that had not been publicly advertised; and
• $43,092.43 for three employees the Department treated as nonresidents.

At the hearing, Par Five withdrew $33,756.78 involving two of the three residency claims. The remaining residency dispute was $9,335.65.

Replacement employees did not create new jobs

The 2013 statute awarded credit for each “new high-wage economic-based job.” It separately required the employer to meet a headcount increase.

Par Five argued that a position ceased to exist when vacant, so any new employee who filled it occupied a new job. It also argued that satisfying the statutory headcount test established that new jobs existed.

The AHO rejected both arguments. A headcount increase was an additional limitation, not the definition of a new job. Treating every vacancy and refill as a new job would make the word “new” meaningless.

The Department had compared job titles, job totals, and the 48-week requirement. Par Five supplied no evidence about changed functions or responsibilities that would show the positions themselves were newly created. The six employees were new hires, but they filled jobs that already existed.

A new position could qualify even when filled by promotion

The Department agreed that the promoted employee moved into a genuinely new job but denied the claim solely because Par Five had not publicly advertised the position or offered it to competing candidates.

The statute contained no public-posting, competitive-interview, or lower-position-replacement requirement. Because the position itself was new, the internal promotion qualified for $24,000 of credit.

Par Five proved the remaining employee's New Mexico domicile

The Department relied on confidential database information to conclude that one employee was not a New Mexico resident. It refused to consider Par Five's additional records and could not disclose its own information.

Par Five produced a 2011 W-4, 2012 W-2, 2013 earnings statement, and 2014 W-4, all showing the same New Mexico address. Its representative also spoke with the employee and confirmed residency during the qualifying period.

The Department conceded that the employee had been domiciled in New Mexico before the relevant period. Under Hagan v. Hardwick, an established domicile is presumed to continue until a change is shown.

The AHO found Par Five's evidence sufficient. The Department could have subpoenaed the employee or presented nonconfidential rebuttal evidence, but it did not. The $9,335.65 residency claim qualified.

The accounting firm could file the protest

The Department argued that Par Five's accounting firm was not an authorized representative and could not file the protest. The AHO rejected that after-the-fact challenge.

Par Five had executed the Department's Tax Information Authorization form for the firm. The statutes, regulations, and form allowed an authorized person—including a business entity—to act directly with the Department, and the Department's own referral of the protest for hearing showed that it had treated the filing as proper.

Par Five did not recover administrative costs

The AHO counted Par Five as prevailing on $33,335.65, approximately 24.5% of the disputed credit and 20% of the employees at issue. It therefore had not substantially prevailed on either the amount or the issues and was not entitled to administrative costs.

Result: protest GRANTED IN PART and DENIED IN PART. Credit was allowed for $33,335.65 and denied for $102,456.46; administrative costs and fees were denied.

What this means for you

Employers claiming credit for replacement hires

Separate a new employee from a new position. A hire into an existing vacancy may not qualify even when total high-wage headcount increases.

Employers promoting from within

A genuinely new job does not lose eligibility merely because it was filled internally. Under the version applied here, no public advertisement or competitive hiring process was required.

Employers proving employee residency

Keep consistent W-4s, W-2s, earnings statements, and address records for each qualifying period. Once domicile is established, evidence of a change matters.

Businesses using outside tax representatives

Maintain a written Tax Information Authorization that identifies the firm and scope of authority. The AHO treated Par Five's accounting firm as an authorized person under the governing statutes and Department form.

Common questions

Q: How much of Par Five's application had the Department already approved?
A: $1,889,803.73 of the $2,025,595.84 application.

Q: Why were the replacement-employee claims denied?
A: The employees filled jobs that already existed, and Par Five did not show that the positions' functions or responsibilities were new.

Q: Did satisfying the headcount test prove a job was new?
A: No. The AHO treated headcount as a separate limitation that applies after a new job exists.

Q: Did an internally promoted employee qualify?
A: Yes. The job itself was new, and the statute did not require public advertising or competing applicants.

Q: What proved the disputed employee's residency?
A: Four years of tax and earnings records showed the same New Mexico address, and the Department did not rebut the continuing-domicile evidence.

Q: Why could the accounting firm file the protest?
A: Par Five had given it a Tax Information Authorization, and the governing provisions did not limit authorized persons to individual employees, lawyers, or CPAs.

Q: Why were administrative costs denied?
A: Par Five prevailed on only about 24.5% of the amount and 20% of the employees in dispute, so it did not substantially prevail.

Citations and references

Statutes and regulations:

• NMSA 1978, § 7-9G-1(A), (B), (E), (F), (G), and (M) (2013) — High-Wage Jobs Tax Credit purpose, new-job definition, headcount, merger rules, and employee eligibility
• NMSA 1978, §§ 7-1-3, 7-1-8, and 7-1-8.1 — authorized persons and confidential taxpayer information
• NMSA 1978, §§ 7-1-24 and 7-1B-8 — protests and hearing referral
• NMSA 1978, § 7-1-29.1 — administrative costs
• Regulations 18.19.5.16 and 3.3.1.9 NMAC — residency evidence and factors

Cases cited:

• Team Specialty Products v. New Mexico Taxation & Revenue Department, 2005-NMCA-020 — credit claimant's burden of proof
• MPC Ltd. v. New Mexico Taxation & Revenue Department, 2003-NMCA-021 — burden shifts after sufficient evidence
• Hagan v. Hardwick, 1981-NMSC-002 — domicile continues until a change is shown
• State ex rel. Helman v. Gallegos, 1994-NMSC-023 — statutory words should not be treated as surplus

Source

• Listing: New Mexico Decisions & Orders
• Decision post: Par Five Energy Services, LLC
• Decision PDF: D&O 18-10

Original ruling text

STATE OF NEW MEXICO
ADMINISTRATIVE HEARINGS OFFICE
TAX ADMINISTRATION ACT

IN THE MATTER OF THE PROTEST OF
PAR FIVE ENERGY SERVICES, LLC, D&O No. 18-10
TO THE DENIAL OF HIGH WAGE JOB TAX CREDIT
LETTER ID NO. L0944891440

v.

NEW MEXICO TAXATION AND REVENUE DEPARTMENT

DECISION AND ORDER

A formal hearing on the above-referenced protest was held on January 18 and 19, 2018

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

was represented by Ms. Tonya Noonan Herring, Acting Chief Legal Counsel. Mr. Danny Pogan,

Auditor, also appeared on behalf of the Department. Ms. Elizabeth Florence, Audit Supervisor,

and Mr. Steven Valenzuela, Auditor, also appeared as witnesses for the Department. Par Five

Energy Services, LLC (Taxpayer) appeared for the hearing through its representatives, Mr. Keith

Mier, Attorney, Mr. Robert Johnston, Attorney, and Mr. Wade Jackson, Attorney. Ms. Melanie

Hall, CPA, also appeared on behalf of the Taxpayer. Mr. Everett Trujillo, Mr. Ron Saavedra,

and Mr. Steven Bartlett also appeared as potential witnesses for the Taxpayer.

Mr. Bartlett, Mr. Valenzuela, and Ms. Florence testified at the hearing. The Hearing

Officer took notice of all documents in the administrative file. The Taxpayer’s exhibits #5, #6,

7, #8, and #9 were admitted. The Department’s exhibit “A” was admitted. A more detailed

description of exhibits submitted at the hearing is included on the Administrative Exhibit

Coversheet. The Taxpayer’s Exhibit 7 was admitted for purposes of the record over objection,
but was not reviewed. The Taxpayer understood that Exhibit 7 would not be reviewed due to the

volume of pages. The Taxpayer was given the opportunity to point out any relevant sections of

Exhibit 7 and to argue for its review, but did not do so. The Taxpayer explained that Exhibit 7

was proffered to illustrate the unreasonableness of the Department’s demand for records.

The Taxpayer requested the opportunity to submit final arguments in writing. The

Department objected. The parties were given the opportunity to file proposed findings of fact

and conclusions of law no later than February 19, 2018, but were not required to do so. Both

parties submitted timely proposals. Based on the evidence and arguments presented, IT IS

DECIDED AND ORDERED AS FOLLOWS:

FINDINGS OF FACT

1. On June 3, 2016, the Department denied the Taxpayer’s application for $135,792.11 of

the high wage jobs tax credit (HWJTC). The Taxpayer’s application was granted for

$1,889,803.73 of the HWJTC.

2. On June 20, 2016, the Taxpayer filed a formal protest letter to the denial of $135,792.11

of the HWJTC.

3. Included with the protest was a Tax Information Authorization (TIA) that authorized an

accounting firm to act on the Taxpayer’s behalf through the course of the protest.

4. On June 24, 2016, the Department acknowledged the protest by letter.

5. On August 8, 2016, the Department filed a Request for Hearing asking that the

Taxpayer’s protest be scheduled for a formal administrative hearing.

6. On August 9, 2016, the Administrative Hearings Office issued a notice of telephonic

scheduling hearing.

Par Five Energy Services, LLC
Letter ID No. L0944891440
page 2 of 18

7. The telephonic scheduling hearing was conducted on September 16, 2016. The hearing

was held within ninety days of the protest.

8. On September 22, 2016, the notice for a second telephonic scheduling hearing was

issued.

9. On December 19, 2016, the amended notice for the second telephonic scheduling hearing

was issued.

10. On January 30, 2017, the second telephonic scheduling hearing was conducted.

11. On February 1, 2017, the scheduling order and notice of hearing was issued.

12. On January 3, 2018, the Taxpayer’s attorneys entered their appearance.

13. On January 3, 2018, the parties filed their joint prehearing statement.

14. The Taxpayer filed an application for the HWJTC on December 7, 2015.

15. The application covered periods from January 10, 2011 through July 8, 2015.

16. The application was for $2,025,595.84 of HWJTC, and the credit was claimed for 213

qualifying periods.

17. The Department requested more documentation, which the Taxpayer provided.

18. The Department granted $1,889,803.73 of HWJTC, and denied $135,792.11 of HWJTC.

19. The Department denied the HWJTC for six employees over seven qualifying periods.

For those six employees, it determined that the jobs were not new and had previously

been filled by other employees (the replacements). The total denied credit for the

replacements was $68,699.68.

20. The Department denied the HWJTC for one employee over two qualifying periods. For

that employee, it determined that the employee was promoted in-house and the Taxpayer

Par Five Energy Services, LLC
Letter ID No. L0944891440
page 3 of 18
did not advertise publicly for that position to be filled competitively (the promotion).

The total denied credit for the promotion was $24,000.00.

21. The Department denied the HWJTC for three employees because it determined that they

were not New Mexico residents (the residents). The total denied credit for these

employees was $43,092.43.

22. The Taxpayer withdrew the protest on $33,756.78 as to two of the residents. The

remaining resident at issue is for a total denied credit of $9,335.65.

23. The Department reviewed its database. Using confidential information that it cannot

disclose, it determined that the resident was not a New Mexico resident.

24. The Taxpayer offered to provide additional proof of the resident’s domicile. The

Department refused to accept or to consider any other evidence after its database review.

25. In support of the claim on the resident, the Taxpayer provided copies of a W-4 from

2011, a W-2 from 2012, an earnings statement from 2013, and a W-4 from 2014 to show

that the resident had the same address in New Mexico.

26. The Taxpayer is an employer eligible to claim the HWJTC.

27. The jobs at issue were created on or after July 1, 2004.

28. The jobs at issue satisfy the wage requirements.

29. The jobs at issue satisfy the 48-week requirement.

30. The qualifying periods at issue satisfy the headcount requirement.

31. The employees at issue satisfy the employee eligibility requirements.

DISCUSSION

There are three distinct substantive issues within this protest. The first is whether the

Taxpayer is entitled to the HWJTC as to the replacements. The second is whether the Taxpayer

Par Five Energy Services, LLC
Letter ID No. L0944891440
page 4 of 18
is entitled to the HWJTC as to the promotion. The third is whether the Taxpayer is entitled to the

HWJTC as to the resident. The parties agreed that the controlling statute is the 2013 version of

Section 7-9G-1. See NMSA 1978, § 7-9G-1 (2013). References to the statute throughout the

decision are made to the 2013 version. The Department also raises issues as to the protest itself.

Validity of protest.

The Department argues that the Taxpayer’s protest is invalid because the accounting firm

filed the protest, not the Taxpayer. The Department argues that the accounting firm is not an

authorized representative and cannot act on behalf of the Taxpayer. The Department may only

reveal taxpayer information “to the taxpayer or to the taxpayer’s authorized representative”. See

NMSA 1978, § 7-1-8.1 (2009). Nowhere in the statute is “authorized representative” defined.

See id. See also NMSA 1978, § 7-1-3. However, taxpayer information may be disclosed “to a

person specifically authorized…and the employees, directors, officers, and agents of such

person”. NMSA 1978, § 7-1-8 (B) (emphasis added). A “person” is defined to include various

business entities. See NMSA 1978, § 7-1-3. Therefore, any person who is authorized by a

taxpayer may receive information from the Department, including an accounting firm and its

employees and agents.

Historically, the Department has disclosed information to any person who was authorized

by a taxpayer via the Department’s form entitled “Tax Information Authorization” (TIA). The

Department now argues that an authorized person may only be an employee, an attorney, or a

CPA. Nowhere is such a restriction made in the statute. See NMSA 1978, § 7-1-8. At a

hearing, a taxpayer may appear on his/her own behalf or “be represented by a bona fide

employee, an attorney, a certified public accountant, or … an enrolled agent”. NMSA 1978, § 7-

1B-8. Nowhere in the statute does it convey an intent to restrict all interactions with the

Par Five Energy Services, LLC
Letter ID No. L0944891440
page 5 of 18
Department to only those persons. See id. The Department’s own TIA form indicates that the

taxpayer “[h]ereby authorizes [the accounting firm] to represent me and/or my business

pertaining to taxes administered by the New Mexico Taxation and Revenue Department.” See

TIA attached to protest. The TIA form also allows a taxpayer to limit the scope of authorization

to particular information or tax types “to be handled by the authorized person.” See id.

(emphasis added). The Department’s regulations require written authorization for any person “to

be a representative of a taxpayer” other than an attorney, CPA, or enrolled agent. 3.1.3.13

NMAC (2000). It appears from the statutes, the regulations, and the Department’s own forms,

that any person who is authorized by a taxpayer may act on the taxpayer’s behalf in dealing

directly with the Department. The accounting firm had a TIA from the Taxpayer. Therefore, the

accounting firm was authorized to act on behalf of the Taxpayer.

Protests must be filed with the Department. See NMSA 1978, § 7-1-24. The Department

must initially determine if the protest was filed appropriately. See id. If a protest is filed

appropriately, the Department then refers the protest to the Administrative Hearings Office for

hearing. See id. See 3.1.7.10 NMAC (2001). See also NMSA 1978, § 7-1B-8. Any protest that

was filed and determined to be invalid will not be accepted. See 3.1.7.10 NMAC. Only protests

filed appropriately under the statute will be referred for hearing. See NMSA 1978, § 7-1B-8.

Therefore, the Department’s referral of this protest for hearing is evidence that it determined that

the protest was filed appropriately by the Taxpayer’s properly authorized representative. See id.

See also NMSA 1978, § 7-1-24. The Department’s after-the-fact argument on the validity of the

filed protest is not persuasive.

Procedural issues.

Par Five Energy Services, LLC
Letter ID No. L0944891440
page 6 of 18
The Department made various objections to the Taxpayer’s presentation of evidence and

representation at the hearing. The Taxpayer complained of the Department’s requests for

information throughout the course of the application and protest.

The Department moved to invoke the rule of exclusion. See Rule 11-615 NMRA (2012).

The request was denied as rules of evidence do not apply to the hearing. See NMSA 1978, § 7-1B-

6 (2015). Moreover, the Taxpayer had only one witness. See State v. Ortiz, 1975-NMCA-112,

88 N.M. 370 (indicating that the purpose of the rule is to prevent the possibility of a witness

tailoring his/her testimony to match that given by another witness).

The Department also moved to exclude everyone from the hearing room that was not a

bona fide employee or authorized representative of the Taxpayer. The Taxpayer affirmatively

expressed its desire to have all parties remain in the hearing. The Department’s motion was

denied. See NMSA 1978, § 7-1B-8 (2015) (allowing a taxpayer to request that the hearing be

made open to members of the public).

The Department moved to exclude the Taxpayer’s sole witness on the basis that he is not

an employee or authorized representative of the Taxpayer. The motion was denied. The

Department cited no authority, and the Hearing Officer is aware of none, that prohibits a party

from calling a witness on the basis that the witness is not an employee or representative of the

calling party.

The Department moved to exclude the Taxpayer’s witness because his name was not

disclosed prior to the hearing. The Taxpayer’s witness, Mr. Bartlett, was a member of the

accounting firm hired by the Taxpayer to deal with its HWJTC application and subsequent

protest. Another member of the accounting firm’s name was disclosed as a witness, and the

nature of the testimony from the disclosed witness would be the same as that of Mr. Bartlett.

Par Five Energy Services, LLC
Letter ID No. L0944891440
page 7 of 18
There was no prejudice demonstrated in allowing Mr. Bartlett to testify in place of the other

disclosed member of the accounting firm. The Department’s motion was denied.

The Department argued that the witness has financial incentive because the accounting

firm sometimes makes agreements with its customers to work on a contingency fee basis. There

was no evidence that the Taxpayer and the accounting firm had entered into a contingency fee

agreement in this case. However, even if they had, contingency fee agreements compensate the

agent for services rendered and generally are not treated as an impermissible intermeddling of

their affairs. See Quality Chiropractic, PC v. Farmers Ins. Co., 2002-NMCA-080, ¶ 27, 132

N.M. 518. Therefore, the Department’s argument is not persuasive of bias.

The Taxpayer complained that the Department requested an inordinate amount of

information to prove its claim for the credit. See Exhibit 7. The Taxpayer argues that the

Department’s conduct is unreasonable, especially in light of its lack of regulations or instructions

on this credit provision. The Department correctly pointed out that the Taxpayer has the burden

of proving that it is entitled to the credit. The Department also noted that the Taxpayer chose to

file an application that covered multiple employees and 213 qualifying periods. The Department

is authorized to investigate claims and to inspect taxpayers’ records. See NMSA 1978, § 7-1-4

(2005). Every qualifying period requires a headcount at its conclusion and the day before its

inception, requires eligible employees, requires wage minimums, and requires that each new job

be filled for at least 48 weeks. See NMSA 1978, § 7-9G-1. The Taxpayer helped to create the

burden of which it now complains by applying for the credit over a broad amount of time and

personnel. Given the vast amount of qualifying periods and personnel involved in the claim, the

Department’s request to see payroll and employment records was understandable and reasonable.

Burden of Proof.

Par Five Energy Services, LLC
Letter ID No. L0944891440
page 8 of 18
Credits are similar to deductions and are considered legislative graces that should be

construed narrowly. See Team Specialty Prods. v. N.M. Taxation and Revenue Dep’t, 2005-

NMCA-020, 137 N.M. 50. See also Murphy v. Taxation and Revenue Dep’t, 1979-NMCA-065,

94 N.M. 90. Therefore, the burden is on the Taxpayer to show that it was entitled to claim the

credit. When a taxpayer presents sufficient evidence, the burden shifts to the Department. See MPC

Ltd. v. N.M. Taxation and Revenue Dep’t., 2003-NMCA-021, ¶ 13, 133 N.M. 217 (filed October 2,

2002). Most of the facts were largely undisputed, including the Taxpayer’s eligibility as an

employer, the headcount satisfaction, and the reasons for the denial on each of the employees.

Statutory interpretation.

The Taxpayer argues that the Department’s analyses on the replacements and on the

promotion are inappropriate, as there are no written rules or regulations detailing them. The

Department argues that its analyses are an appropriate interpretation of the statute and that

published rules or regulations are not required.

It is the duty of the Department to administer and enforce the tax statutes. See NMSA

1978, § 9-11-1, et seq. The Department has the authority to promulgate regulations, rules, and

instructions to implement and enforce the tax statutes. See NMSA 1978, § 9-11-6.2. The

Department may interpret a tax statute without adopting a rule or regulation related to that

statute. See id. When an agency is charged with the application of a statute, its construction is

given some deference, but its construction will be disregarded if its interpretation of the statute is

found to be unreasonable or unlawful. See N.M. AG v. N.M. Pub. Regulation Comm’n, 2013-

NMSC-042, ¶ 12. Even if an agency’s interpretation of a statute should have been codified

under the State Rules Act, its interpretation is not void if it is a correct interpretation of the law.

Par Five Energy Services, LLC
Letter ID No. L0944891440
page 9 of 18
See Dir., Labor & Indus. Div., N.M. DOL v. Echostar Communs. Corp., 2006-NMCA-047, ¶ 13-

14, 139 N.M. 493.

The Taxpayer’s argument that the Department’s interpretation is invalid without

published rules and regulations is not persuasive. The Department must interpret the tax statutes,

and while rules and regulations would be beneficial, their absence does not invalidate a correct

interpretation of the law. See id. Moreover, the protest process gives taxpayers the opportunity

to challenge the Department’s interpretation.

High wage jobs tax credit.

“The purpose of the high-wage jobs tax credit is to provide an incentive for urban and

rural businesses to create and fill new high-wage jobs in New Mexico.” NMSA 1978, § 7-9G-1

(B) (emphasis added). A taxpayer who satisfies all of the statutory criteria may apply for “a tax

credit for each new high-wage economic-based job.” NMSA 1978, § 7-9G-1 (A) (emphasis

added). There was no dispute that the Taxpayer satisfied most of the criteria of the statute. In

fact, the Taxpayer was afforded $1,889,803.73 of the HWJTC. For seven of the eight employees

in dispute, the crux of the issue is what meaning to afford the term “new” in the statute. See id.

The final employee in dispute hinges on whether she is an “eligible employee”, specifically

whether she “is a resident of New Mexico”. NMSA 1978, § 7-9G-1 (M) (2).

The first step in statutory interpretation is to look at the plain language of the statute and

to refrain from further interpretation if the plain language is not ambiguous. See Marbob Energy

Corp. v. N.M. Oil Conservation Comm’n., 2009-NMSC-013, 146 N.M. 24. Statutes are to be

applied as written unless a literal use of the words would lead to an absurd result. See New

Mexico Real Estate Comm’n. v. Barger, 2012-NMCA-081, ¶ 7. If a statute is ambiguous or

would lead to an absurd result, then it should be construed in accordance with the legislative

Par Five Energy Services, LLC
Letter ID No. L0944891440
page 10 of 18
intent or spirit and reason for the statute, even though it may require a substitution or addition of

words. See id. See also State ex rel. Helman v. Gallegos, 1994-NMSC-023, 117 N.M. 346. See

also Kewanee Indus., Inc. v. Reese, 1993-NMSC-006, 114 N.M. 784. When a statute is

ambiguous or would lead to an absurd result, it should be construed according to its obvious

purpose. See T-N-T Taxi Co. v. N.M. Pub. Regulation Comm’n, 2006-NMSC-016, ¶ 5, 139 N.M.

550.

The replacements.

The Taxpayer argues that the Department places a time limitation on when an employer

must hire an employee into a new high-wage economic-based job (new job). The Taxpayer

argues that the Department restricts the definition of “new job” to the title of a position even

though the statute does not mention position titles. The Taxpayer argues that a “new job” is

determined by the headcount. The Taxpayer argues that the Department may only use a

replacement analysis when there is a merger.

The Department argues that hiring to fill a vacant job that already existed during the

qualifying period is not the creation of a new job. The Department argues that the headcount

does not automatically signify that a new job was created.

A “new high-wage economic-based job” is defined in the statute as “a new job created in

New Mexico by an eligible employer on or after July 1, 2004 and prior to July 1, 2020 that is

occupied for at least forty-eight weeks of a qualifying period by an eligible employee who is paid

wages” that meet the statutory criteria. See NMSA 1978, § 7-9G-1 (M) (5) (emphasis added).

“New” means “recently come into being”. Black’s Law Dictionary, p. 1141 (9th ed. 2009). To

“create” means “to bring into existence”. See Merriam-Webster, n.d. Web. (2018) at

http://www.merriam-webster.com/dictionary/create. “Preexisting” means “existing at an earlier

Par Five Energy Services, LLC
Letter ID No. L0944891440
page 11 of 18
time”. See Merriam-Webster, n.d. Web. (2018) at http://www.merriam-

webster.com/dictionary/preexisting. Therefore, a new job is one that recently came into being

and did not exist at an earlier time. The headcount is satisfied if “the eligible employer’s total

number of employees with high-wage economic-based jobs on the last day of the qualifying

period…is at least one more than the number on the day prior to the date the new high-wage

economic-based job was created.” NMSA 1978, § 7-9G-1 (E) (emphasis added).

The Department determined, based on the Taxpayer’s records, that the replacements were

hired to fill jobs that already existed during the qualifying period. The Department based its

determinations on the job titles, job totals, and the 48-week requirement. The Department

allowed for two employees in the same job to fulfill the 48-week requirement as long as the job

was filled for at least 48 weeks during the qualifying period. Mr. Valenzuela would have

considered other evidence from the Taxpayer in determining whether a particular job was

actually a new job, even though there was a preexisting job with the same title that had been

recently vacated. No such evidence was provided. Rather, the Taxpayer’s position is that there

is no such thing as a vacant or preexisting job. Mr. Bartlett explained that a job ceases to exist

once it is vacant, and that hiring a new employee to do the exact same job that another employee

was previously doing should be treated as a new job. The Taxpayer argues that there must be a

new job if the headcount requirement is met. The Taxpayer argues that the Department can only

look at preexisting jobs and their replacements in the context of a merger.

The Taxpayer’s argument conflates the definition of a new job with two statutory

limitations on the credit. Even when a taxpayer creates new jobs, it will not be eligible for the

credit unless it satisfies the headcount. See NMSA 1978, § 7-9G-1 (E). This subsection is not

providing the criterion for determining if something is a new job, but is placing a limitation on

Par Five Energy Services, LLC
Letter ID No. L0944891440
page 12 of 18
the credit even when there are new jobs. See id. Even when a taxpayer technically creates new

jobs, it will not be afforded the credit if the new jobs are the result of a merger and the new jobs

are actually the functional equivalent of the jobs that existed prior to the merger. See NMSA

1978, § 7-9G-1 (F). However, even in a merger, if the new job is actually a new job that was

created within the qualifying period surrounding the merger, the credit may be afforded. See

NMSA 1978, § 7-9G-1 (G). These subsections make clear that the credit is for the creation of

new jobs, not for preexisting jobs with new employers or new employees. See id.

The Taxpayer objects to the Department using the Taxpayer’s own job titles to determine

if a job was preexisting, but provides no alternative criteria. The Taxpayer provides no evidence

on the actual function and responsibilities of the jobs. The Taxpayer’s position that jobs

automatically cease to exist when they are vacated is not reasonable. The Taxpayer’s

interpretation would render the word “new” in the statute meaningless because every job would

be “new” when it was filled. See id. See also State ex rel. Helman v. Gallegos, 1994-NMSC-

023, ¶ 32 (noting that each word in a statute is presumed to have meaning and should not be

construed to be surplus). The Department’s method of determining whether the replacements

were new jobs was reasonable. Based upon the totality of the evidence presented, the

replacements were new employees hired into jobs that already existed. Therefore, the

replacements did not satisfy the statutory requirement that a new job be created. See NMSA

1978, § 7-9G-1.

The promotion.

The Taxpayer argues that the Department impermissibly restricts how an employer may

hire to fill a new job. The Taxpayer argues that the statute does not require a new job to be

posted publicly or to be offered to competing candidates. The Department argues that an in-

Par Five Energy Services, LLC
Letter ID No. L0944891440
page 13 of 18
house promotion cannot be a new job unless someone is hired to replace the lower position. The

Department argues that an in-house promotion cannot be a new job unless the employer publicly

advertises and allows for competitive candidates to interview.

There was no dispute that the promotion was actually a new job. The Department

admitted that it denied the credit as to the promotion solely because the position was not publicly

advertised and made available to competing candidates. Again, the criterion is whether the job is

new. See NMSA 1978, § 7-9G-1. There is no requirement that a job must be advertised publicly

or offered to competing candidates in order to be considered a new job. See id. There is no

requirement that a job previously filled by one employee must be filled by a new employee

before the first employee’s movement to a new job will qualify. See id. Therefore, the

Department’s denial of the credit on the promotion is not reasonable. The promotion was a new

job, and is eligible for the credit.

The resident.

The Taxpayer argues that there is sufficient evidence to establish that the resident was a

resident of New Mexico. The Department argues that its undisclosed information from its

database should be trusted to show that the resident was not domiciled in New Mexico.

The Taxpayer provided tax documents from before and during the qualifying period that

showed the resident’s address was in New Mexico. Mr. Bartlett had also spoken to the resident

and verbally confirmed with her that she was a resident of New Mexico during the qualifying

period. The Taxpayer also provided an earnings statement that showed the resident’s address in

New Mexico during the qualifying period. The documents all show the same address for the

resident in New Mexico before and during the qualifying period.

Par Five Energy Services, LLC
Letter ID No. L0944891440
page 14 of 18
The Department refused to accept or to consider any of the Taxpayer’s evidence because

it located contrary information in its database. The Department could not disclose the

information it found in its database on the resident. See NMSA 1978, § 7-1-8 (prohibiting

disclosure of confidential taxpayer information). The Department offered to present its evidence

for in camera review, which was denied. The purpose of in camera review is not to prove the

substance of one’s case, but to determine if the evidence is material and should be disclosed. See

State v. Garcia, 2013-NMCA-064. See also Santa Fe Pac. Gold Corp. v. United Nuclear Corp.,

2007-NMCA-133, 143 N.M. 215. Even if the evidence was material, the Hearing Officer could

not order its disclosure. See NMSA 1978, § 7-1-8 and § 7-1B-6 (C) (7). The Department was

aware that it could not reveal the resident’s confidential information to rebut the Taxpayer’s

evidence. See NMSA 1978, § 7-1-8. Nevertheless, the Department took no action to present

evidence that would not violate its statutory obligation, such as subpoenaing and eliciting

testimony on residency from the resident herself.

The Department typically accepts the type of evidence presented by the Taxpayer on the

resident. See 18.19.5.16 NMAC (indicating that the Department will accept a pay stub with a

person’s name and address as one proof of residency for purposes of issuing a driver’s license).

See also 3.3.1.9 NMAC (indicating several factors of residency, including the location of one’s

home and the address used for federal tax purposes). Moreover, the Department conceded that

the resident was domiciled in New Mexico before the qualifying period at issue. Residence is

synonymous with domicile. See Hagan v. Hardwick, 1981-NMSC-002, ¶ 10, 95 N.M. 517.

Once domicile is established, it is presumed to continue until it is shown to have changed. See

id. at ¶ 11. The evidence presented by the Taxpayer was sufficient to establish by preponderance

that the resident was domiciled in New Mexico. The Department had the opportunity to rebut

Par Five Energy Services, LLC
Letter ID No. L0944891440
page 15 of 18
the Taxpayer’s evidence, but failed to do so. Therefore, the Taxpayer was entitled to the credit

as to the resident.

Costs and fees.

The Taxpayer moves for an award of administrative costs and fees. A taxpayer who has

substantially prevailed with respect to the amount or issues may be entitled to an award of

administrative costs. See NMSA 1978, § 7-1-29.1 (2015). The Taxpayer originally protested

$135,792.11 on 10 employees. The Taxpayer withdrew at the hearing on two of the employees. The

Taxpayer has not prevailed as to six employees. Consequently, the total amount of credit

appropriately denied was $102,456.46. The Taxpayer has prevailed as to two employees.

Consequently, the total amount of credit improperly denied was $33,335.65. The Taxpayer prevailed

with respect to approximately 24.5% of the credit in dispute, and as to 20% of the employees in

dispute. Therefore, the Taxpayer did not substantially prevail on either the amount or the issues.

Accordingly, the Taxpayer’s request for administrative costs and fees is denied.

CONCLUSIONS OF LAW

A. The Taxpayer filed a timely written protest to the denial of credit issued under Letter

ID number L0944891440, and jurisdiction lies over the parties and the subject matter of this protest.

B. The Taxpayer is not entitled to the HWJTC as to the replacements because they

were hired to fill preexisting jobs, not new jobs. See NMSA 1978, § 7-9G-1.

C. The Taxpayer is entitled to the HWJTC as to the promotion because the employee

was hired into a new job, and there is no statutory requirement that a job must be publicly

advertised and offered to competing candidates in order to be considered “new”. See id.

D. The Taxpayer is entitled to the HWJTC as to the resident because there was

sufficient evidence to prove that the resident was domiciled in New Mexico during the qualifying

Par Five Energy Services, LLC
Letter ID No. L0944891440
page 16 of 18
period. See id. See also 18.19.5.16 and 3.3.1.9 NMAC. See also Hagan v. Hardwick, 1981-

NMSC-002.

E. The Taxpayer has prevailed as to $33,335.65, and the credit is granted in that

amount. The Taxpayer has not prevailed as to $102,456.46, and the credit is denied in that

amount.

F. The Taxpayer has not substantially prevailed; therefore, the Taxpayer is not

entitled to an award of administrative costs and fees. See NMSA 1978, § 7-1-29.1.

For the foregoing reasons, the Taxpayer's protest is DENIED IN PART AND GRANTED

IN PART.

DATED: March 23, 2018.

Dee Dee Hoxie
DEE DEE HOXIE
Hearing Officer
Administrative Hearings Office
Post Office Box 6400
Santa Fe, NM 87502

NOTICE OF RIGHT TO APPEAL

Pursuant to NMSA 1978, § 7-1-25, 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. A copy of the Notice of Appeal should be mailed to John Griego,

P. O. Box 6400, Santa Fe, New Mexico 87502. Mr. Griego may be contacted at 505-827-0466.

Par Five Energy Services, LLC
Letter ID No. L0944891440
page 17 of 18
CERTIFICATE OF SERVICE

I hereby certify that I mailed the foregoing Decision and Order to the parties listed below this 23rd
day of March, 2018 in the following manner:

Par Five Energy Services, LLC
Letter ID No. L0944891440
page 18 of 18