Did Mosaic Potash prove entitlement to $1,772,593.89 of denied High-Wage Jobs Tax Credit for claimed new jobs, resident employees, and later qualifying periods?

View original ruling (PDF)

Plain-English summary

Mosaic Potash Carlsbad did not prove entitlement to $1,772,593.89 of denied High-Wage Jobs Tax Credit. The Department could test whether claimed positions were genuinely new, require proof of employee domicile, and examine later qualifying periods without treating an earlier settlement as an admission that the underlying jobs qualified.

Mosaic operated a mining and manufacturing facility in Carlsbad. Its December 2015 application sought $2,644,923.51 for 336 periods from January 2010 through February 2015.

The Department approved $872,329.62 and denied $1,772,593.89.

Mosaic did not challenge the Department's underlying factual determinations. It instead brought three legal and methodological challenges:

• whether the Department could use a replacement analysis to decide if jobs were new;
• whether the Department's residency-verification method was lawful; and
• whether later periods could be denied after overlapping periods appeared in an earlier application resolved by settlement.

Headcount growth did not prove a position was new

The Department's replacement analysis reviewed employee names, job titles, hire dates, and termination dates to identify positions that might have existed before the claimed creation date.

It identified 60 claimed jobs covering 92 qualifying periods as replacement positions. Mosaic was given draft workpapers and an opportunity to provide additional evidence but did not submit documentation refuting the analysis.

Mosaic argued that the statute allowed replacement scrutiny only in specified merger and government-contract situations and that an increase in headcount by itself showed a new job.

The AHO disagreed. Section 7-9G-1 awarded credit only for a job that recently came into being. The headcount rule was a separate limitation, not the definition of a new job. A growing headcount could not turn an already existing position into a newly created one.

The Department's authority to administer the credit and examine relevant records allowed it to investigate whether positions were new. Restricting that review would conflict with the statute and improperly construe the tax credit in Mosaic's favor.

Residency meant domicile, not only physical presence

Five qualifying periods involving employees C.E., J.S., and W.S. were denied because residency was not established. The periods for W.S. and C.E. were also denied as replacement positions.

When Department databases did not establish residency, the Department requested federal Forms I-9. Mosaic could not produce I-9s for the three employees.

Mosaic argued that payroll records showing at least 185 days of physical presence satisfied the Income Tax Act's resident definition in Section 7-2-2(S).

The AHO held that the cited definition was expressly limited to the Income Tax Act. The High-Wage Jobs Tax Credit already required an employee to be employed in New Mexico; treating “resident” as only physical presence would make the additional word redundant.

Relying on Hagan v. Hardwick, the AHO treated residence as domicile: past physical presence together with an intent to make New Mexico one's home. Mosaic did not substantiate that requirement for the disputed employees.

The earlier settlement did not prove later periods qualified

Mosaic's 2013 application had sought $9,230,646.54 for 1,302 periods. It was initially denied in full, including because Mosaic had not supplied a complete employee list that would allow the Department to determine whether jobs were newly created.

The parties later settled that protest without either side conceding its legal or factual position. Mosaic received $5,538,387.92, equal to 60% of the earlier claim.

Mosaic argued that the settlement approved the underlying jobs and that each later qualifying period stood independently.

The AHO agreed with the limited proposition that the statute did not require credit to have been claimed or allowed for every earlier period before a later period could qualify. But the employer still had to establish when the job was created and that it was genuinely new before identifying the initial and three consecutive qualifying periods.

The settlement letter said the amount was approved pursuant to a closing agreement, but Mosaic did not place that agreement in evidence. Because the settlement expressly involved no concessions, the AHO would not infer that the Department had accepted any job's creation date or eligibility.

The Department conducted a full review of the new application and did not mechanically deny periods merely because they had been denied earlier. Mosaic again failed to establish entitlement.

Result: protest DENIED. The $1,772,593.89 denied portion of the application remained disallowed.

What this means for you

Employers claiming credit for expanded operations

Show that each position itself was created, not merely refilled. Preserve dated job descriptions, organization charts, budget approvals, facility-expansion records, and payroll history that distinguish new roles from vacancies.

Employers documenting worker residency

Physical presence and New Mexico employment may not establish domicile. Keep address records and other evidence showing the employee intended New Mexico to be home during each claimed period.

Taxpayers with earlier settled credit claims

Do not assume a percentage settlement establishes the underlying eligibility elements for later years. The closing agreement's actual language controls, and a no-concession settlement may prove little beyond the agreed payment.

Businesses claiming consecutive qualifying periods

Later periods can stand independently from whether earlier periods were claimed, but they still depend on proof of the original job-creation date and the statutory sequence.

Common questions

Q: How much credit did Mosaic request in the application at issue?
A: $2,644,923.51 for 336 qualifying periods.

Q: How much did the Department approve?
A: $872,329.62.

Q: How much remained denied?
A: $1,772,593.89.

Q: How many positions did the replacement analysis flag?
A: 60 claimed jobs covering 92 qualifying periods.

Q: Did increased headcount establish new jobs?
A: No. The AHO treated headcount as a separate eligibility limit, not proof that a position was newly created.

Q: Was 185 days of New Mexico presence enough to prove residency?
A: No. That definition came from the Income Tax Act; the AHO required proof of domicile for this credit.

Q: Did an I-9 automatically control residency?
A: The Department used I-9s as one suitable way to verify a New Mexico address when databases were inconclusive. Mosaic could not produce the requested forms and did not otherwise prove domicile.

Q: Did the earlier 60% settlement prove the jobs were approved?
A: No. The closing agreement was not in evidence, and the parties had stipulated that neither conceded its legal or factual position.

Citations and references

Statutes:

• NMSA 1978, § 7-9G-1(A), (B), (C), (D), (E), (F), (G), (I), (J), (K), and (M) (2013) — High-Wage Jobs Tax Credit requirements, periods, headcount, exclusions, certification, administration, and definitions
• NMSA 1978, § 7-2-2(S) — Income Tax Act's limited resident definition
• NMSA 1978, §§ 7-1-2(A)(16) and 7-1-4 — Tax Administration Act coverage and examination authority

Cases cited:

• Team Specialty Products v. New Mexico Taxation & Revenue Department, 2005-NMCA-020 — credit claimant's burden and narrow construction
• Hagan v. Hardwick, 1981-NMSC-002 — residence as domicile and continuing-domicile presumption
• Katz v. New Mexico Department of Human Services, Income Support Division, 1981-NMSC-012 — avoiding statutory surplusage
• Morningstar Water Users Association v. New Mexico Public Utility Commission, 1995-NMSC-062 — deference involving agency expertise and policy

Source

• Listing: New Mexico Decisions & Orders
• Decision post: Mosaic Potash Carlsbad Inc.
• Decision PDF: D&O 18-13

Original ruling text

STATE OF NEW MEXICO
ADMINISTRATIVE HEARINGS OFFICE
TAX ADMINISTRATION ACT

IN THE MATTER OF THE PROTEST OF
MOSAIC POTASH CARLSBAD INC.
TO DENIAL OF HIGH WAGE JOB TAX CREDIT
ISSUED UNDER LETTER
ID NO. L0946274608

v. D&O No. 18-13

NEW MEXICO TAXATION AND REVENUE DEPARTMENT

DECISION AND ORDER

A hearing in the above-captioned protest occurred on January 4, 2018 before Chris

Romero, Hearing Officer, in Santa Fe, New Mexico. Attorneys, Mr. Wade Jackson, Esq. and Mr.

Robert Johnston, Esq. (Sutin, Thayer & Browne, PC), appeared representing Mosaic Potash

Carlsbad Inc. (“Taxpayer”). Mr. Steven Bartlett of Axiom Certified Public Accountants and

Business Advisors, L.L.C. (“Axiom”), and Ms. Rebecca Contreras, Site Finance Manager for

Taxpayer, appeared in person as witnesses for Taxpayer. Also appearing to observe, but not

called to testify were Shannon Kelly of Taxpayer, and Everett Trujillo and Ron Saavedra of

Axiom. Attorney, Mr. Marek Grabowski, Esq., appeared representing the Taxation and Revenue

Department of the State of New Mexico (“Department”). Mr. Danny Pogan and Ms. Joan Wittig

appeared in person as witnesses for the Department. Taxpayer Exhibits 1 through 9 and

Department Exhibits A through E were admitted into the evidentiary record. All exhibits are

more thoroughly described in the Administrative Exhibit Log. Upon Taxpayer’s request, the

Hearing Officer permitted the parties through February 23, 2018 to file written closing

arguments, proposed findings of fact, and proposed conclusions of law. Based on the evidence

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

General Background and Procedural History

1. On December 27, 2012, Taxpayer executed a Tax Information Authorization

(“TIA”) allowing Axiom to represent it in matters pertinent to compensating taxes and the High

Wage Jobs Tax Credit. [See Administrative File].

2. On December 13, 2015, Taxpayer, by and through Mr. Everett Trujillo of Axiom,

executed an Authorization to Provide Tax Information by Facsimile and E-Mail. [See

Administrative File].

3. On December 15, 2015, Taxpayer hand-delivered to the Department an

Application for High Wage Jobs Tax Credit for the periods of January of 2010 through February

of 2015, seeking a total high wage jobs tax credit in the amount of $2,644,923.51 for 336 periods

(“Application”). [See Joint Prehearing Statement, Stip. 2.a; Taxpayer Ex. 1].

4. The Department partially approved the Application on October 5, 2016 under

Letter ID No. L0946274608. The approved credit was $872,329.62. The disallowed credit was

$1,772,593.89, which represents the amount in dispute in this protest. [See Joint Prehearing

Statement, Stip. 2.b; Taxpayer Ex. 2; Taxpayer Ex. 3].

5. On January 5, 2017, the Department’s Protest Office received Taxpayer’s protest

of the partial denial of the Application. Taxpayer’s protest was dated December 26, 2016. [See

Joint Prehearing Statement, Stip. 2.c; Taxpayer Ex. 2; Administrative File].

6. On January 6, 2017, the Department under Letter ID No. L0735693104

acknowledged receipt of Taxpayer protest. [See Administrative File].

7. On February 16, 2017, the Department filed a Hearing Request in which it

requested a scheduling hearing for the purpose of setting a date for a hearing on the merits of

In the Matter of Mosaic Potash Carlsbad, Inc.
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Taxpayer’s protest and establishing other associated deadlines. [See Administrative File].

8. On February 17, 2017, the Administrative Hearings Office entered a Notice of

Telephonic Scheduling Conference that set a telephonic scheduling hearing for March 13, 2017.

[See Administrative File].

9. On March 13, 2017, a telephonic scheduling hearing occurred at which time the

parties did not object that the hearing was within 90 days of the date of Taxpayer’s protest and

that the hearing satisfied the 90-day hearing requirement. [See Record of Telephonic Scheduling

Hearing (3/13/2017); Administrative File].

10. On March 13, 2017, the Administrative Hearings Office entered a Scheduling

Order and Notice of Administrative Hearing, which in addition to establishing various

prehearing deadlines, set a hearing on the merits of Taxpayer’s protest for November 21, 2017.

[See Administrative File].

11. On June 26, 2017, the Administrative Hearings Office entered a Notice of

Reassignment of Hearing Officer for Administrative Hearing that assigned the above-captioned

protest to the undersigned Hearing Officer. [See Administrative File].

12. On September 13, 2017, the Department filed an Unopposed Motion for a

Continuance. [See Administrative File].

13. On October 12, 2017, the Administrative Hearing Office entered an Order

Granting Continuance, Amended Scheduling Order, and Second Notice of Administrative

Hearing, which in addition to establishing various prehearing deadlines, also set a hearing on the

merits of Taxpayer’s protest for January 4, 2018. [See Administrative File].

14. On October 20, 2017, Taxpayer, by and through Axiom, filed a Certificate of

Service of Discovery indicating that it served its First Set of Interrogatories, Requests to Admit,

In the Matter of Mosaic Potash Carlsbad, Inc.
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and Request for the Production of Documents on the Department. [See Administrative File].

15. On November 22, 2017, the Department filed a Certificate of Service indicating

that it served Taxpayer with its responses to its First Set of Interrogatories, Requests to Admit,

and Request for the Production of Documents. [See Administrative File].

16. On December 20, 2017, Taxpayer’s counsel of record, entered their appearance

on Taxpayer’s behalf. [See Administrative File].

17. On December 20, 2017, the parties filed their Joint Prehearing Statement. [See

Administrative File].

18. On January 3, 2018, the Department filed an Emergency Motion for a

Continuance or to Hold Hearing Open. Taxpayer also filed Taxpayer’s Response to New Mexico

Taxation and Revenue Department’s Emergency Motion for a Continuance or to Hold Hearing

Open. [See Administrative File].

The Application

19. Taxpayer operates a mining and a manufacturing facility in Carlsbad, New

Mexico. [See Joint Prehearing Statement, Stip. 2.d; Taxpayer Ex. 3.4 – 3.5].

20. Mr. Steven Bartlett is an accountant employed by Axiom. He has been an

accountant for five years and has participated in the preparation of dozens of applications for the

high wage job tax credit on behalf of various Axiom clients, including the Application on behalf

of Taxpayer the current protest. [Testimony of Mr. Bartlett].

21. Mr. Bartlett prepared the entirety of Taxpayer’s Application in reliance on the

records Taxpayer provided to Axiom for that purpose. [Testimony of Mr. Bartlett; Taxpayer Ex.

1].

22. Ms. Rebecca Contreras is the Site Finance Manager for Taxpayer. In that

In the Matter of Mosaic Potash Carlsbad, Inc.
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capacity, she has personal knowledge regarding Taxpayer’s records. [Testimony of Ms.

Contreras].

23. All records provided to Axiom, which were thereafter relied upon in preparing

and submitting Taxpayer’s Application were authentic, were kept in the ordinary course of

business, and accurately reflected the records maintained by Taxpayer. [Testimony of Ms.

Contreras].

24. Ms. Contreras had no involvement in the preparation of Taxpayer’s Application.

[Testimony of Ms. Contreras].

25. In support of its Application, Taxpayer with assistance from Axiom provided an

employee list dating back to 1968, a payroll dump, and two I-9 forms. [See Joint Prehearing

Statement, Stip. 2.f; Taxpayer Ex. 1]

26. Mr. Bartlett created the employee list from payroll and employee information

provided by Taxpayer. The payroll and employee information relied upon is provided in

Taxpayer Ex. 1-C.1 – 1-C.134. The resulting employee list is provided at Taxpayer Ex. 1-E.1 –

1-E.11. [Testimony of Mr. Bartlett].

27. Mr. Bartlett relied on the resulting employee list to identify those jobs for which

Taxpayer would claim the credit. [Testimony of Mr. Bartlett].

28. Mr. Bartlett also utilized the employee list to generate a headcount list at

Taxpayer Ex. 1-D.1 – 1-D.10. [Testimony of Mr. Bartlett].

29. The names of employees or jobs Mr. Bartlett concluded should qualify for the

Credit were then identified on RPD – 41376 which was subsequently attached to Taxpayer’s

Application. [Testimony of Mr. Bartlett; See Taxpayer Ex. 1-B].

30. Mr. Bartlett’s analysis concluded that all jobs claimed in the Application: (1)

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satisfied the minimum wage requirements; (2) were created on or after July 1, 2004; (3) were

occupied by eligible employees for the minimum duration of time; (4) were eligible employees;

and (5) the Application satisfied the headcount calculation. [Testimony of Mr. Bartlett].

31. Mr. Bartlett also relied on his interpretation of the definition of “new high-wage

economic-based job” provided in of NMSA 1978, Section 7-1G-1 (M) (5) (2013) in preparing

Taxpayer’s Application. [Testimony of Mr. Bartlett].

32. Ms. Joan Wittig is presently employed as the chief internal auditor of the

administrative services division of the New Mexico department of health. She was previously

employed by the Department where she most recently served as deputy director of the business

credit bureau. [Testimony of Ms. Wittig].

33. During her employment with the Department, Ms. Wittig has reviewed and

supervised the review of numerous business credit applications, including Taxpayer’s

Application. [Testimony of Ms. Wittig].

34. Ms. Wittig personally supervised and reviewed the work of Ms. Marti Rodriguez,

the Department’s auditor assigned to the Application. [Testimony of Joan Wittig].

35. According to the most recent federal decennial census, at the time of the

Application’s review, Carlsbad had a population less than 60,000. [See Joint Prehearing

Statement, Stip. 2.e; Taxpayer Ex. 3.6]

36. Taxpayer was an “eligible employer” as defined by NMSA 1978, Section 7-9G-1

(M) (3) (2013). [See Joint Prehearing Statement, Stip. 2.i; Taxpayer Ex. 3.6].

37. Taxpayer provided certification required by NMSA 1978, Section 7-9G-1 (I). [See

Joint Prehearing Statement, Stip. 2.m; Taxpayer Ex. 3.5 – 3.6]

38. Each employee for whom Taxpayer claimed credit on the Application was paid

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the minimum amount of wages required by NMSA 1978, Section 7-9G-1 (M) (5) (a) (2). [See

Joint Prehearing Statement, Stip. 2.j; Taxpayer Ex. 3.6].

39. The Department has not promulgated any rules specific to the High Wage Jobs

Tax Credit, NMSA 1978, Section 7-1G-1 (2013) (hereinafter the “Act”).

New High Wage Jobs

40. Essential duties in evaluating Taxpayer’s Application, as well as any application

under the Act, oblige the Department to scrutinize and verify whether claimed jobs are newly

created or not. [Testimony of Ms. Wittig].

41. The term, “replacement analysis,” refers to the method by which the Department

evaluates whether a claimed position is genuinely new, or perhaps a replacement of a previous

job. [Testimony of Ms. Wittig].

42. The “replacement analysis” begins with a taxpayer’s employee list which enables

the auditor to observe claimed jobs by various categories including job titles, names of

occupying employees, hire and termination dates. [Testimony of Ms. Wittig].

43. The Department has been using the “replacement analysis,” as a method of

evaluating whether a job is genuinely “new,” for at least the previous seven years. [Testimony of

Joan Wittig].

44. The Department explains the “replacement analysis” to taxpayer-applicants.

[Testimony of Joan Wittig].

45. After conducting its evaluation of the Taxpayer’s Application, the Department

identified sixty claimed new high-wage economic-based jobs as “replacement positions”

representing ninety-two corresponding qualifying periods. [See Department Ex. D].

46. The Department provided draft work papers to Mr. Bartlett on August 24, 2016

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who thereafter expressed disagreement with the conclusions of the auditor. [See Taxpayer Ex.

3.9; Department Ex. B].

47. Taxpayer was provided the opportunity to refute the Department’s initial

determinations by providing relevant information to establish that a particular position was

genuinely new contrary to the inferences arising from the so-called “replacement analysis.”

[Testimony of Ms. Wittig].

48. Taxpayer did not provide additional information or documentation to refute the

Department’s “replacement analysis.” [Testimony of Ms. Wittig].

49. The Department thereafter formalized its denial of that portion of the Application

giving rise to this protest, in part due to its conclusion that several positions were not genuinely

new. [Testimony of Ms. Wittig; See Taxpayer Ex. 3; Department Ex. B].

50. Despite his prior experience in assisting businesses seeking the New High Wage

Jobs Tax Credit, and numerous conversations with Department personnel regarding the so-called

“replacement analysis,” Mr. Bartlett expressed confusion regarding its use. [Testimony of Mr.

Bartlett].

51. No job for which Taxpayer claimed the credit on the Application was ineligible

because it was created due to a business merger or acquisition or other change in business

organization pursuant to NMSA 1978, Section 7-9G-1(F). [See Joint Prehearing Statement, Stip.

2.k].

52. No job for which Taxpayer claimed the credit on the Application was ineligible

because it was created due to Taxpayer entering into a contract or becoming a subcontractor to a

contract with a governmental entity that replaces one or more entities performing functionally

equivalent services for the governmental entity pursuant to NMSA 1978, Section 7-9G-1(H).

In the Matter of Mosaic Potash Carlsbad, Inc.
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[See Joint Prehearing Statement, Stip. 2.l].

Residency

53. The Application included two qualifying periods for employee C.E., two

qualifying periods for employee J.S., and a qualifying period for W.S., which were denied

because residency could not be established for these employees during the relevant periods. The

qualifying periods for W.S. and C.E. were also denied because their positions were deemed to be

replacement positions. [See Department Ex. D-004; D-009 – D-010; Taxpayer Exhibit 4-E]. 1

54. Residency is not defined in the statute. The Department evaluates residency in

reliance on the employee’s social security number and reference to various government

databases to which the Department has access. [Testimony of Ms. Wittig].

55. If the Department is otherwise unable to verify residency, it may rely on a Form I-

9 in order to establish whether the employee’s address is in New Mexico. The Department has

considered Form I-9 as a suitable method of verifying residency because it is a form that every

employer should possess and maintain for every individual employee. [Testimony of Ms.

Wittig].

56. To verify residency in the present matter, the Department requested that Taxpayer

provide Forms I-9 for employees C.E., J.S., and W.S. [See Department Ex. C-007 – C-008].

57. Taxpayer was unable to produce I-9 forms for employees C.E., J.S., and W.S.

[Testimony of Ms. Wittig; See Department Ex. C-009].

Previous Application

58. On or about June 13, 2013, Taxpayer submitted another application for the High

Wage Jobs Tax Credit (“Previous Application”). The Previous Application sought a credit in the

1
The full names of the employees relevant to this finding are contained in the record.

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amount of $9,230,646.54 for 1,302 qualifying periods. [See Department Ex. A-002 – A-040].

59. The Previous Application was initially denied in its entirety on June 26, 2014.

[See Department Ex. A-001].

60. Underlying some of the stated reasons for the complete denial of its Previous

Application was the Department’s determination that Taxpayer had failed to provide a complete

employee listing. [Testimony of Ms. Wittig; See Department Ex. A-002 – A-008].

61. Since Taxpayer failed to provide a complete employee listing, the Department

was unable to evaluate and verify whether the claimed jobs were newly created. [See Department

Ex. A-007; Testimony of Ms. Wittig].

62. Some of the positions included in the Previous Application were also included,

for different qualifying periods, in the Application subject of the current protest. [See Joint

Prehearing Statement, Stip. 2.g].

63. Taxpayer’s Previous Application was also initially rejected in its entirety by the

Department because it failed to establish that it was an eligible employer. [See Department’s

Exhibit A].

64. Although Taxpayer protested the denial, the Previous Application was eventually

resolved through a settlement in which neither party was required to concede their respective

legal or factual contentions. [See Joint Prehearing Statement, Stip. 2.h].

65. Pursuant to a closing agreement resolving the protest of the denial of Taxpayer’s

Previous Application, the Department issued Letter ID No. L1426944048, dated September 9,

2015, indicating that the Previous Application was partially approved. [See Taxpayer Exhibit 5].

66. Pursuant to the settlement, Taxpayer received a credit of $5,538,387.92,

representing 60% of the amount claimed on the Previous Application. [See Taxpayer Ex. 5;

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Taxpayer Ex. 9].

67. Although the Taxpayer failed to provide a complete job listing to permit the

Department to perform the “replacement analysis” for the Previous Application, the Department

performed a full review of the new Application, testing every qualifying period against every

criteria in the statute. [Testimony of Ms. Wittig].

68. Qualifying periods claimed in the Application were not automatically denied

purely because they were earlier denied in the Previous Application. [Testimony of Ms. Wittig].

DISCUSSION

The issues presented in this protest concern the application of NMSA 1978, Section 7-9G-

1 (2013) which establishes the High Wage Job Tax Credit (also referred to as the “Act”). Taxpayer

presents three issues for consideration, each of which challenges the Department’s interpretation

and implementation of the Act: (1) whether the Department exceeded its statutory authority in

evaluating whether individual jobs for which Taxpayer sought credit were genuinely new; (2)

whether the methods by which the Department sought to verify the residency of employees

offended the law, and (3) whether the Department improperly denied a portion of the Application

on the basis that prior qualifying periods for claimed jobs had been earlier denied in its Previous

Application.

Burden of Proof.

Although the current protest does not arise from an assessment, but rather from a partial

denial of a credit application, Taxpayer bears the burden of establishing entitlement to the credit

central to its protest. The New Mexico Court of Appeals has found that tax credits are legislative

grants of grace to a taxpayer that must be narrowly interpreted and construed against a taxpayer.

See Team Specialty Prods. v. N.M. Taxation & Revenue Dep’t, 2005-NMCA-020, ¶9, 137 N.M.

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50, 107 P.3d 4 (internal citations omitted). Accordingly, Taxpayer carries the burden of proving

that it is entitled to the claimed Credit.

Although, pursuant to Team Specialty, a credit must be narrowly interpreted and

construed against a taxpayer, the credit must also be construed in a reasonable manner consistent

with legislative language. See Sec. Escrow Corp. v. State Taxation & Revenue Dep’t, 1988-

NMCA-068, ¶9, 107 N.M. 540, 760 P.2d 1306 (although construed narrowly against a taxpayer,

deductions and exemptions—similar to credits—are still to be construed in a reasonable

manner).

High Wage Job Tax Credit – NMSA 1978, Section 7-9G-1 (2013)

Although the Act was revised in 2016 during the Second Special Session of the 52nd

Legislature of the State of New Mexico, the parties do not dispute that the Application at issue in

this protest is governed by the 2013 enactment, which was applicable until October 19, 2016. See

2016 (2nd S.S.), ch. 3, § 6.

The Act provides that “[a] taxpayer who is an eligible employer may apply for, and the

taxation and revenue department may allow, a tax credit for each new high-wage economic-based

job. The credit provided in this section may be referred to as the ‘high-wage jobs tax credit’.” See

NMSA 1978, Section 7-9G-1 (A) (2013) (Emphasis Added). The Act states that “[t]he 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.” See NMSA 1978, Section 7-9G-1 (B) (2013) (Emphasis

Added).

In summary, eligible employers that create new high-wage jobs may apply for credit against

gross receipts tax, compensating tax, withholding tax, Emergency 911 Service Surcharges (E911),

and Telecommunications Relay Service Surcharges. See NMSA 1978, Section 7-9G-1 (K) and (M)

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(4) (2013).

To establish its status as an eligible employer, an applicant must demonstrate that it “made

more than fifty percent of its sales of goods or services produced in New Mexico to persons outside

New Mexico during the applicable qualifying period” or that it “is certified by the economic

development department to be eligible for development training program assistance pursuant to

Section 21-19-7 NMSA 1978[.]” See NMSA 1978, Section 7-9G-1 (M) (3) (a) and (b) (2013).

The Act thereafter permits a credit in the amount of 10 percent of wages and benefits for

eligible employees that are employed in eligible high-wage jobs, not to exceed $12,000 per job per

qualifying period. See NMSA 1978, Section 7-9G-1 (C) (2013). The number of qualifying periods

for which an eligible employer may obtain credit for a new high-wage economic-based job consists

of the initial one-year period beginning on the date in which the job was created, provided the date

falls on or after July 1, 2004, and three consecutive one-year periods thereafter. See NMSA 1978,

Section 7-9G-1 (D) (2013).

The Act further provides that for jobs created prior to July 1, 2015, the job must be occupied

for at least 48 weeks during a qualifying period, and the eligible employee must be compensated

with wages and benefits of $40,000 or more if the job is performed or established in a municipality

having a population of at least 60,000 residents, or within ten miles of the external boundary of such

a municipality. If the job is performed or established in an area of New Mexico not satisfying those

population requirements, then the minimum wage-threshold increases to $28,000. For new high

wage jobs created after July 1, 2015, the minimum compensation increases to $60,000 within a

municipal area and $40,000 elsewhere in the state. See NMSA 1978, Sections 7-9G-1 (M) (5) and

(M) (1) (2013). Eligible employees must be New Mexico residents who have no relationship to the

eligible employer or to any entity owning stock in the employer. See NMSA 1978, Section 7-9G-1

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(M) (2) (2013).

The evidence established that: (1) Taxpayer was an eligible employer under Section 7-1G-1

(M) (3); (2) each job for which Taxpayer claimed credit was created after July 1, 2004 under

Section 7-9G-1 (M) (5) (2013); (3) employees subject of the protest were eligible under Section 7-

9G-1 (M) (2) (2013); (4) each job for which the credit was claimed satisfied the minimum wage

requirements under Section 7-9G-1 (M) (5) (a) (2013); (5) each job for which the credit was

claimed was occupied for the minimum period of time necessary to establish a qualifying period

under Sections 7-9G-1 (M) (5) and (6) (2013); and (6), that the total number of employees with

high-wage economic-based jobs on the last day of the qualifying period at the location at which the

job was performed or based increased by at least one more than the number on the day prior to the

date the new high-wage economic-based job was created under Section 7-9G-1 (E) (2013).

Accordingly, Taxpayer argued that it satisfied all of the essential elements necessary to

qualify for the credit, but that it was nevertheless partially denied because the Department imposed

requirements that were not authorized by the Act. In fact, Taxpayer’s evidence and argument did not

challenge the Department’s underlying conclusions that gave rise to the partial denial of its refund.

Instead, Taxpayer presented what it characterized as a facial challenge to the methods employed by

the Department in its evaluation, and asserted with respect to each of the three distinct issues, that

the Department’s methods of evaluation were not supported by law.

Consequently, the fundamental question at hand is whether the Department acted within its

statutory authority with respect to each of the issues raised by Taxpayer. Those determinations turn

on the question of statutory construction to determine whether the Act permits, or precludes, the

Department’s methods of evaluation in regards to (1) replacement analysis, (2) residency, (3) the

effects of a prior application denied.

In the Matter of Mosaic Potash Carlsbad, Inc.
Page 14 of 30
It is a canon of statutory construction in New Mexico to adhere to the plain wording of a

statute except if there is ambiguity, error, an absurdity, or a conflict among statutory provisions.

See Regents of the Univ. of N.M. v. N.M. Fed’n of Teachers, 1998-NMSC-020, ¶28, 125 N.M. 401,

962 P.2d 1236. In Wood v. State Educ. Ret. Bd., 2011-NMCA-020, ¶12, 149 N.M. 455, 250 P.3d

881 (internal quotations and citations omitted), the New Mexico Court of Appeals stated:

the guiding principle in statutory construction requires that we look
to the wording of the statute and attempt to apply the plain
meaning rule, recognizing that when a statute contains language
which is clear and unambiguous, we must give effect to that
language and refrain from further statutory interpretation.

Extra words should not be read into a statute if the statute is plain on its face, especially if it

makes sense as written. See Johnson v. N.M. Oil Conservation Comm’n, 1999-NMSC-021, ¶27,

127 N.M. 120, 978 P.2d 327; see also Amoco Prod. Co. v. N.M. Taxation & Revenue Dep’t, 1994-

NMCA-086, ¶8 & ¶14, 118 N.M. 72, 878 P.2d 1021. Only if the plain language interpretation

would lead to an absurd result not in accord with the legislative intent and purpose is it necessary

to look beyond the plain meaning of the statute. See Bishop v. Evangelical Good Samaritan

Soc’y, 2009-NMSC-036, ¶11, 146 N.M. 473, 212 P.3d 361. Because this case also involves a tax

credit, which is an act of legislative grace, the language of the credit statute must be narrowly

construed. See Team Specialty Prods, 2005-NMCA-020, ¶9.

“Replacement Analysis”

Applying these principles to the Act, the Hearing Officer is persuaded that it is not

beyond the authority of the Department to examine whether a claimed position is newly created

or a “replacement.”

The Legislature has clearly stated that the purpose of the Act is to permit “a tax credit for

each new high-wage economic-based job.” See NMSA 1978, Section 7-9G-1 (A) (2013) (Emphasis

In the Matter of Mosaic Potash Carlsbad, Inc.
Page 15 of 30
Added). Since permitting a credit for any other type of job under the Act would contradict the

statute and the Legislature’s clearly expressed intentions, it is reasonable to imply a grant of

authority that empowers the Department to examine whether a high-wage job is genuinely “new”

within the meaning of the statute. With regard for such an implication, “[i]t is, of course, a

fundamental principle of administrative law that the authority of the agency is not limited to those

powers expressly granted by statute, but includes, also, all powers that may fairly be implied

therefrom.” See Wimberly v. N.M. State Police Bd., 1972-NMSC-034, ¶6, 83 N.M. 757, 758, 497

P.2d 968, 969.

Notwithstanding the authority recognized in Wimberly, the Legislature has also expressly

authorized the Department, for the purpose of enforcing any statute administered under the

provisions of the Tax Administration Act, to examine and require the production of pertinent

records, books, information or evidence concerning the subject matter of its inquiry. See NMSA

1978, Section 7-1-4 (2005). In this case, the Act clearly comes within the provisions of the Tax

Administration Act. See NMSA 1978, 7-1-2 (A) (16). Moreover, the Legislature has also expressed

its intention that taxpayers seeking the credit apply on forms and in the manner prescribed by the

Department. See NMSA 1978, Section 7-1G-1 (J) (2013).

Nevertheless, Taxpayer correctly notes that the process by which the Department

evaluates whether a high-wage job is new, has not been promulgated in conformity with the State

Rules Act, NMSA 1978, Sections 14-4-1 to – 11. This raises the question of whether or not the

analysis is a “rule” under NMSA 1978, Section 14-4-2. Once again, the meaning of a statute is

derived from the plain meaning of the words selected by the Legislature.

The definition of “rule” is broad. See State v. Ellis, 1980-NMCA-187, ¶11, 95 N.M. 427,

622 P.2d 1047 cert. denied, 95 N.M. 426, 622 P.2d 1046 (1981). Excluding specific exceptions not

In the Matter of Mosaic Potash Carlsbad, Inc.
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applicable to the matter at hand, a “rule” is defined as follows at NMSA 1978, Section 14-4-2 (C):

“rule” means any rule, regulation, or standard, including those that
explicitly or implicitly implement or interpret a federal or state legal
mandate or other applicable law and amendments thereto or repeals
and renewals thereof, issued or promulgated by any agency and
purporting to affect one or more agencies besides the agency issuing
the rule or to affect persons not members or employees of the issuing
agency, including affecting persons served by the agency.

The Hearing Officer is not persuaded that the analysis described by the testimony comes

within the definition of “rule” under the State Rules Act. Despite the informal use of a somewhat-

sounding formal and technical term, “replacement analysis,” the testimony described a process that

was neither. Ms. Wittig testified that the auditor in this matter, consistent with all other applications

for which she had personal knowledge, relied on information provided by Taxpayer in its employee

list, admitted as Taxpayer Exhibit 1-E. The employee list consisted of a spreadsheet that organized,

by various categories, all of Taxpayer’s employees since 1968. Among the specific categories

included in the employee list were employee identification numbers, names, job titles, partial social

security numbers, hire dates, termination dates, and wages.

By reviewing this information, Ms. Wittig explained, the Department identified jobs that

might not be new. However, identifying a job as potentially not new did not mechanically result in

the denial of any credit claimed for that job. Instead, it merely identified the job as suitable for

further investigation or inquiry. Only if the Taxpayer was thereafter unable or unwilling to provide

additional information to substantiate its claim as to that job, did the Department deny the credit in

reference to the particular job. [Testimony of Ms. Wittig]. In this case, the Taxpayer did not attempt

to rebut any of the Department’s specific findings that contributed to the partial denial of its

Application, including its findings that various jobs were not new.

In contrast to a rule, the so-called “replacement analysis” does not explicitly or implicitly

In the Matter of Mosaic Potash Carlsbad, Inc.
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implement or interpret law in a manner that affects one or more agencies or persons not members or

employees of the issuing agency. It is merely a method utilized for evaluating data from a

spreadsheet in aid of perceiving indicators of whether a high-wage job, for which a tax credit is

claimed, is genuinely new or perhaps a replacement. The authority to conduct that analysis is

express and implied because whether or not a high wage job is new is a threshold inquiry under the

Act. In other words, even if a taxpayer satisfied all of the other conditions for eligibility, the

Legislature has only permitted “a tax credit for each new high-wage economic-based job.” See

NMSA 1978, Section 7-9G-1 (A) (2013).

Even if there were some aspect of the Department’s evaluation that came within the

definition of “rule,” the Department’s implementation of the law in the absence of rules

promulgated under the State Rules Act would not be void absent some contradiction of the

controlling law. See Dir., Labor & Indus. Div., N.M. DOL v. Echostar Communs. Corp., 2006-

NMCA-047, ¶14, 139 N.M. 493, 134 P.3d 780, citing Tidewater Marine W., Inc. v. Bradshaw, 14

Cal.4th 557, 59 Cal.Rptr.2d 186, 927 P.2d 296 (1996) (“If, when we agreed with an agency’s

application of a controlling law, we nevertheless rejected that application simply because the agency

failed to comply with [required administrative procedures], then we would undermine the legal

force of the controlling law.”) Under the facts of this protest, the Hearing Officer still perceives no

contradiction of the controlling law, even if there were some aspect of the Department’s evaluation

that required promulgation under the State Rules Act or the Taxation and Revenue Department Act,

NMSA 1978, Section 9-11-1 to – 15.

Rather, scrutinizing and challenging the contents of an application, as in the present protest,

is the essential function of an audit, and the responsibility of an auditor. “‘To audit’ means to

examine and verify, as an account or accounts. In its broad sense ‘audit’ means to hear, examine,

In the Matter of Mosaic Potash Carlsbad, Inc.
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and determine a claim or claims by their allowance or disallowance or rejection in toto, or in part.”

See State ex rel. Heglar v. Wheeler, 146 Wash. 513, 514, 263 P. 946 (1928); See also Black’s Law

Dictionary, 150 (9th ed. 2009) (“Audit” is “[a] formal examination of an individual’s or

organization’s accounting records, financial situation, or compliance with some other set of

standards.”).

As previously stated, Taxpayer’s evidence and arguments did not attempt to rebut the

Department’s underlying conclusion which resulted in the partial denial of its Application. Instead,

Taxpayer challenged the Department’s interpretation and implementation of the law. However,

Courts not only confer a greater weight to an agency’s interpretation of a statute, but give a

heightened degree of deference to an agency’s interpretation if the statute implicates special

agency expertise or reference to an agency’s policies. See Morningstar Water Users Ass’n v.

New Mexico Pub. Util. Comm’n, 1995-NMSC-062, ¶12, 120 N.M. 579, 904 P.2d 28.

Accordingly, the Department should be entitled to a heightened degree of deference in its

evaluation of Taxpayer’s Application in this protest.

In this case, the Department has determined that verifying whether or not a high-wage job

is new is essential for the purpose of determining whether a taxpayer is entitled to the credit. The

Department’s perception of its duty to verify such information is reasonable and consistent with

its grant of authority provided in the statute, requiring that “an eligible employer shall apply to

the taxation and revenue department on forms and in the manner prescribed by the department.”

See NMSA 1978, Section 7-9G-1 (J) (2013) (Emphasis Added).

Nevertheless, Taxpayer asserted that the plain language of the Act permits evaluation of

“replacement” criteria in only two situations specifically enumerated in the Act, neither which

are present under the facts of this protest. See NMSA 1978, Section 7-9G-1 (F) (2013). For that

In the Matter of Mosaic Potash Carlsbad, Inc.
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reason, Taxpayer argues that whether a job is new within the facts of this protest should be

determined by reference to the headcount calculation alone. See NMSA 1978, Section 7-9G-1

(E) (2013). Mr. Bartlett testified that, in his opinion, the creation of a new high-wage economic-

based job was obvious if there was also an increase in headcount. The Hearing Officer was

unpersuaded by Mr. Bartlett’s opinion regarding the weight the Department should give to an

increase in headcount while evaluating whether a particular job is new or not. Ms. Wittig

credibly testified that an increase in headcount could not always be relied upon for determining

whether a particular job was new and therefore eligible for the credit.

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, Section 7-9G-1 (M) (5) (2013). “New”

means “recently come into being.” Black’s Law Dictionary, p. 1141 (9th ed. 2009). “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 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. Meanwhile, the headcount requirement is satisfied when “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.” See NMSA 1978, Section 7-9G-1 (E) (2013) (emphasis

added).

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

In the Matter of Mosaic Potash Carlsbad, Inc.
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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, Section 7-9G-1 (E) (2013). This subsection is not

providing the criterion for determining whether a job is new. Rather, it establishes a limitation on

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, Section 7-9G-1 (F) (2013). 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 nevertheless

be afforded. See NMSA 1978, Section 7-9G-1 (G) (2013). These subsections clearly provide that

the credit is for the creation of new jobs, not for preexisting jobs with new employers or new

employees. See id.

The Department’s interpretation of the law, and its method of identifying jobs that may

not be new within the purpose of the law is reasonable and well within the margins of what the

law provides. Interpreting the Act in a manner that restricts the Department’s ability to scrutinize

whether a job is genuinely new, or not, is inconsistent with the plain meaning of the statute, and

would require that the Act be construed in favor of Taxpayer contrary to the directive in Team

Specialty.

Residency

Taxpayer argued that it provided sufficient evidence to establish that the three employees

occupying five qualifying periods were residents of New Mexico despite the Department’s

conclusions to the contrary. In evaluating residency, the Department refers to information

contained in various databases to which it has access. If the information obtained from those

databases is inconclusive, then it may request additional information as it did in the current

In the Matter of Mosaic Potash Carlsbad, Inc.
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Application. In the present matter, the Department requested federal Forms I-9 (Employment

Eligibility Verification) which would indicate the employee’s place of residence. However,

Taxpayer did not produce Forms I-9 for these employees.

Taxpayer argued that the Department exceeded its authority by imposing such additional

requirement, because residency could be determined by the number of days an employee was

physically present in New Mexico, consistent with NMSA 1978, Section 7-2-2 (S) (2014):

7-2-2. Definitions.

For the purpose of the Income Tax Act and unless the context
requires otherwise:

...

“resident” means an individual who is domiciled in this state
during any part of the taxable year or an individual who is
physically present in this state for one hundred eighty-five days or
more during the taxable year; but any individual, other than
someone who was physically present in the state for one hundred
eighty-five days or more during the taxable year, who, on or before
the last day of the taxable year, changed the individual's place of
abode to a place without this state with the bona fide intention of
continuing actually to abide permanently without this state is not a
resident for the purposes of the Income Tax Act for periods after
that change of abode[.]

(Emphasis Added)

Therefore, Taxpayer argued that residency could be established from payroll records

indicating that the employees were physically present in this state for 185 days or more during

the taxable year. However, the definition to which Taxpayer refers also states that it is applicable

to the provisions of the Income Tax Act and there is no indication that the Legislature intended

this definition to apply to elsewhere.

In fact, construing “resident” as used in the Act, in the manner suggested by Taxpayer,

In the Matter of Mosaic Potash Carlsbad, Inc.
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actually tends to render the term superfluous contrary to the rules of statutory construction. See

Katz v. N.M. Dep’t of Human Servs., Income Support Div., 1981-NMSC-012, ¶18, 95 N.M. 530,

624 P.2d 39 (a statute must be construed so that no part of the statute is rendered surplusage or

superfluous). In this case, the Legislature already imposed the requirement that the individual be

physically present in New Mexico when it required that the individual be “employed in New

Mexico[.]” See Section 7-1G-1 (M) (2) (2013). By adding the requirement that the individual

also be a resident, the Legislature clearly intended something in addition to physical presence.

Since the definition of resident under the Income Tax Act is limited to that act, the

Hearing Officer refers instead to Hagan v. Hardwick, 1981-NMSC-002, ¶10, 95 N.M. 517, 624

P.2d 261 which held that residence was synonymous with domicile, and that “domicile” does not

require physical presence, “but rather physical presence in the state at some time in the past, and

concurrent intention to make the state one’s home.” See id. citing Worland v. Worland, 1976-

NMSC-027, 89 N.M. 291, 551 P.2d 981. Once domicile is established, it is presumed to continue

until it is shown to have changed. See Hagan, 1981-NMSC-002, ¶11.

Therefore, by utilizing the terms “employed in New Mexico” and “resident,” the statute

embodied the Legislature’s intention that employees be employed and domiciled in New Mexico.

Construing “resident” to be synonymous with mere physical presence would render the term

meaningless within the context of the statute which already addresses physical presence in the

form of a requirement that the individual be “employed in New Mexico.” This conclusion is

further supported by the policy underlying the Act which is to create and fill new high wage jobs

in New Mexico, which might also simultaneously provide a corresponding economic benefit to

those communities in which the eligible employees reside and consume goods and services.

Moreover, interpreting the Act as suggested by Taxpayer would once again require that

In the Matter of Mosaic Potash Carlsbad, Inc.
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the Act be construed in favor of Taxpayer contrary to the directive in Team Specialty, which

requires that the Act be construed against it.

The Previous Application

Taxpayer asserted that the Department denied a portion of its Application solely on the

basis that prior qualifying periods for jobs in the current Application had been previously denied

as part of its Previous Application. [Taxpayer Ex. 3.7 – 3.8]. Taxpayer asserted error in the

Department’s evaluation because the Act does not require a taxpayer to claim the credit for each

prior qualifying period for that job in order for a subsequent qualifying period to be eligible,

because each qualifying period is independent from every other. Section 7-9G-l (D) of the Act

provides:

The high-wage jobs tax credit may be claimed by an eligible
employer for each new high-wage economic-based job performed
for the year in which the new high-wage economic-based job is
created and for the three consecutive qualifying periods.

The Hearing Officer concurs with Taxpayer’s interpretation of the Act. However, the

critical issue with respect to the Application in this protest relies on the Taxpayer’s inability to

establish, as a matter of foundation, the date on which the relevant jobs were created, which in

turn would establish additional qualifying periods for which the credit may also be claimed under

the Act.

This analysis is aided by a brief reiteration of the facts. Taxpayer submitted its Previous

Application on or about June 13, 2013 which was denied in its entirety. Among various reasons

for the complete denial was the Department’s determination that Taxpayer had failed to provide

a complete employee listing which, consequently, precluded the Department from evaluating

whether the jobs claimed were newly created or not. Therefore, as of the date the Department

In the Matter of Mosaic Potash Carlsbad, Inc.
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denied the Previous Application, it had not found that any of the claimed jobs were newly

created. Taxpayer Ex. 9 and Department Ex. A illustrate, within the column reserved for

comments, that every claimed period in the Previous Application was denied because the

Department was “[u]nable to determine if newly created position[.]”

Referring back to Section 7-9G-l (D) (2013), the credit may be claimed “by an eligible

employer for each new high-wage economic-based job performed for the year in which the new

high-wage economic-based job is created and for the three consecutive qualifying periods.”

Consequently, the statute requires that the Taxpayer establish the period in which the new high-

wage economic-based job was created as a prerequisite to identifying any subsequent

consecutive qualifying periods. This would include establishing that the job was also genuinely

new. However, according to Department Ex. A and Taxpayer Ex. 9, and the testimony of Ms.

Wittig, the Department was unable to verify at the time it considered the Previous Application

whether any of the claimed jobs were genuinely new or not. Therefore, because the Taxpayer

was unable to establish that a job was new, or when it was created, it was therefore precluded

from receiving credit for subsequent periods, unless or until, the Taxpayer could establish the

period in which the job was newly created.

In contrast, Taxpayer asserted that the Department actually approved all the claimed jobs

by virtue of its settlement nearly 15 months after its initial denial. By referring to Taxpayer Ex.

9, Mr. Bartlett asserted that the Department assented to Taxpayer’s position by approving a

percentage of the credit claimed for each job within its Previous Application. Indeed, Taxpayer

Ex. 5 reflects the fact that Taxpayer was awarded a credit in the amount of $5,538,387.92

representing 60 percent of the amount it originally claimed for each qualifying period

corresponding with Taxpayer Ex. 9 and Department Ex. A.

In the Matter of Mosaic Potash Carlsbad, Inc.
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However, that alone fails to establish what, if any conclusions the parties reached in

reference to whether the jobs claimed therein were newly created or not, their initial qualifying

periods, or any subsequent consecutive qualifying periods. Taxpayer’s reliance on Taxpayer Ex.

5.1 as an indicator that the jobs subject of the Previous Application were approved is

unpersuasive. Although the correspondence states that “[Taxpayer’s] Application for High Wage

Job Tax Credit for the periods of 2005 – 2012 has been approved[,]” Taxpayer seemed to ignore

the next sentence which explained that the amount approved was determined “[p]ursuant to the

Closing Agreement entered into between the Department and Taxpayer[.]” However, Taxpayer

did not seek to introduce that agreement which would have established the terms and conditions

of the settlement. Instead, the parties stipulated that neither party to the settlement of the

Previous Application conceded its legal or factual positions. Accordingly, the Hearing Officer

will not attempt to deduce how or why the parties resolved their differences as they chose to do

so, nor will the Hearing Officer ascribe any legal or factual significance to a closing agreement

that is not part of the record of this proceeding.

Despite the foregoing, Ms. Wittig credibly testified that the Department performed a full

review of the new Application, evaluating every claimed period against every criteria in the

statute, and that no period was mechanically denied purely because it was denied in the Previous

Application. [Testimony of Ms. Wittig]. Instead, periods were denied because Taxpayer once

again failed to establish entitlement to the credit.

As previously stated, Taxpayer did not challenge the Department’s underlying factual

conclusions. Instead, it mounted a “facial challenge” to the Department’s interpretation of the

Act, and the methodology employed in evaluating the Application. However, the Hearing Officer

was persuaded that the Department acted within its statutory authority, consistent with the Act,

In the Matter of Mosaic Potash Carlsbad, Inc.
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and properly denied the disputed credit when it determined that the Taxpayer failed to establish

an entitlement to the credit.

For the reasons discussed herein, the protest should be denied.

CONCLUSIONS OF LAW

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

Application for high wage jobs tax credit, and jurisdiction lies over the parties and the subject matter

of this protest.

B. A scheduling hearing occurred on March 13, 2017 that satisfied the 90-day hearing

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

C. Taxpayer did not establish entitlement to the portion of the High Wage Jobs Tax

Credit that the Department denied on October 5, 2016 under Letter ID No. L0946274608, or

otherwise establish that the Department’s interpretation or implementation of the Act was not in

accordance with the law. See Team Specialty Prods. v. N.M. Taxation & Revenue Dep’t, 2005-

NMCA-020, ¶9, 137 N.M. 50, 107 P.3d 4 (Tax credits are legislative grants of grace to a

taxpayer that must be narrowly interpreted and construed against a taxpayer).

D. Taxpayer did not establish entitlement to the credit under the Act where it failed to

substantiate that the jobs claimed were newly created as required by NMSA 1978, Section 7-9G-1

(2013).

E. Taxpayer did not establish entitlement to the credit under the Act where it failed to

substantiate that claimed employees were eligible as residents of the state as required by NMSA

1978, Section 7-9G-1 (M) (2013).

F. Taxpayer failed to establish that the Department’s evaluation of the Application in

light of its Previous Application and subsequent settlement was contrary to NMSA 1978, Section 7-

In the Matter of Mosaic Potash Carlsbad, Inc.
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9G-1 (D) (2013).

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

DATED: April 11, 2018

Chris Romero
Hearing Officer
Administrative Hearings Office
P.O. Box 6400
Santa Fe, NM 87502

In the Matter of Mosaic Potash Carlsbad, Inc.
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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 timely 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 proper with the Court of Appeals,

which occurs within 14-days of the Administrative Hearings Office receipt of the docketing

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

In the Matter of Mosaic Potash Carlsbad, Inc.
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CERTIFICATE OF SERVICE

On April 11, 2018, a copy of the foregoing Decision and Order was submitted to the parties

listed below in the following manner:

First Class Mail Interagency Mail

In the Matter of Mosaic Potash Carlsbad, Inc.
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