Could New Mexico place a tax lien on a deceased business owner's estate and spouse when the underlying assessments named only the business?

Plain-English summary

New Mexico had to release a $29,776.04 tax lien against the Estate of Richard Shoudt and Diane K. Shoudt because the Department had never issued either of them the required notice of assessment and demand for payment. The underlying assessments named only Richard Shoudt's business, Special Events Marketing Tal.

In July 2012, the Department issued 42 assessments for gross receipts tax, penalty, and interest to “Special Events Marketing Tal.” The business was registered with the Department, and Richard Shoudt owned it. No individual, estate, or spouse was named as a taxpayer on those assessments.

Richard Shoudt later died. In October 2016, the Department sent a notice of intent to lien naming the estate, Diane Shoudt, and other parties. On May 15, 2017, it filed the $29,776.04 lien against the estate and Diane Shoudt based on the business's 2012 assessments.

A lien required an assessment against the person pursued

Section 7-1-37 created a lien only when a person liable for tax neglected or refused to pay after assessment and demand for payment under Section 7-1-17.

A valid assessment required a document denominated “notice of assessment of taxes” that stated the nature and amount of tax, demanded immediate payment, and informed the taxpayer of available remedies.

The notice of intent to lien did not satisfy that rule. It was not labeled a notice of assessment and did not demand payment. The Department therefore could not treat it as the missing assessment.

The business's CRS number did not assess the estate or spouse

The Department argued that the business was a sole proprietorship and that the lien followed the names associated with its CRS number.

The AHO treated the issue narrowly. It did not decide whether Richard Shoudt, his estate, or Diane Shoudt might ultimately be liable for the business's tax. It decided only whether the lien procedure followed the statutes.

Under the statutory definitions, a taxpayer was a person to whom an assessment had been made. A CRS number was not itself a person. The assessments named Special Events Marketing Tal as the firm and taxpayer; they did not name Richard Shoudt, his estate, or Diane Shoudt.

The Department also offered no basis for treating an assessment of the husband's business as notice to his wife.

Collection could not bypass the right to protest

An assessment gives the named taxpayer a procedural safeguard: 90 days to protest. By filing a lien against the estate and spouse five years after assessments directed only to the business, the Department pursued collection against people who could not have timely protested assessments that were never issued to them.

A lien protest could not be used to amend, validate, or relitigate the original assessment. Because assessment was a necessary prerequisite and none had been issued to the lien targets, the lien did not follow the requirements of law.

Result: protest GRANTED on summary judgment. The Department was ordered to file a release of the lien. The decision did not cancel or adjudicate the underlying business assessments.

What this means for you

Estates and surviving spouses

Check the exact name on every assessment before accepting that a later lien is procedurally valid against an estate or spouse. Ownership or family relationship does not replace statutory notice.

Sole proprietors

A sole proprietor may face personal responsibility for business tax, but the Department still must follow the required assessment and collection steps against the person it seeks to pursue.

Taxpayers receiving a notice of intent to lien

A collection notice is not necessarily the same document as a notice of assessment. Review whether the agency previously issued a formal assessment and demand for payment to the same taxpayer.

Tax professionals handling liens

Keep the substantive liability question separate from procedural validity. This ruling granted relief because the lien prerequisites failed, not because the underlying gross receipts tax was proved incorrect.

Common questions

Q: Who was named on the 42 assessments?
A: Special Events Marketing Tal, the registered business.

Q: Who was named on the later lien?
A: The Estate of Richard Shoudt and Diane K. Shoudt.

Q: Did the notice of intent to lien count as an assessment?
A: No. It was not denominated a notice of assessment and did not contain the required demand for payment.

Q: Did the CRS number make the estate and spouse assessed taxpayers?
A: No. A CRS number was not a statutory person, and their names did not appear on the assessments.

Q: Did the AHO decide whether the estate owed the business's tax?
A: No. It expressly treated substantive liability as outside the narrow lien-validity issue.

Q: Why did the missing assessment matter?
A: An assessment is required before collection and gives the named taxpayer a timely opportunity to protest.

Q: What relief did the AHO order?
A: It granted summary judgment and ordered the Department to file a release of the $29,776.04 lien.

Citations and references

Statutes and regulation:

• NMSA 1978, § 7-1-17(B)(2) — notice of assessment and demand for payment
• NMSA 1978, §§ 7-1-37 through 7-1-39 — tax-lien creation, notice, and release
• NMSA 1978, § 7-1-3(P) and (AA) — person and taxpayer
• NMSA 1978, § 7-1-24 — right and deadline to protest an assessment
• NMSA 1978, § 7-1-12 and Regulation 3.1.1.15 NMAC — business registration

Cases cited:

• Bank of Commerce v. Department of Taxation and Revenue, 1998-NMCA-063 — assessment as prerequisite to collection and delinquent-taxpayer status
• Breen v. State Taxation and Revenue Department, 2012-NMCA-101 — one spouse was not the taxpayer for the other spouse's business gross receipts tax
• Severns v. New Mexico Taxation and Revenue Department, No. 31,817 — assessment directed to one spouse did not make the other a party
• Elane Photography, LLC v. Willock, 2013-NMSC-040 — summary judgment where no genuine material-fact dispute exists

Source

• Listing: New Mexico Decisions & Orders
• Decision post: Estate of Richard and Diane Shoudt (official post title)
• Decision PDF: D&O 18-39

Original ruling text

STATE OF NEW MEXICO
ADMINISTRATIVE HEARINGS OFFICE
TAX ADMINISTRATION ACT

IN THE MATTER OF THE PROTEST OF
ESTATE OF RICHARD SHOUDT AND
DIANE K. SHOUDT D&O No. 18-39
TO THE NOTICE OF CLAIM OF TAX LIEN
ISSUED UNDER LETTER ID NO. L0468477232

v.

NEW MEXICO TAXATION AND REVENUE DEPARTMENT

DECISION AND ORDER

On October 10, 2018, Hearing Officer Dee Dee Hoxie, Esq. conducted a telephonic

hearing on the Taxpayers’ motion for summary judgment. The Administrative Hearings Office

provided a toll-free phone number to the parties with instructions on how to appear for the

hearing by telephone. Mr. David Mittle, Staff Attorney for the Taxation and Revenue Department

(Department), appeared by telephone. Mr. Ben Roybal, attorney for Diane K. Shoudt and the

Estate of Richard Shoudt (Taxpayers), appeared by telephone for the hearing.

The dispositive issue to be decided is whether the lien against the Taxpayers followed the

requirements of the law. The Taxpayers contend that the lien did not follow the requirements of

law because “no assessment and demand for payment has been issued by the Department to

Richard Shoudt, the Estate or to Protestant”. See the Taxpayer’s motion for summary judgment.

The Department contends that the lien is valid because Richard Shoudt was operating a sole

proprietorship and “the lien or assessment was entered against the names associated with the

CRS number.” See the Department’s response.
Whether a lien followed the requirements of the law is a very narrow issue. See NMSA

1978, § 7-1-37 thru 7-1-39. The parties made several arguments about the type of business and

the Taxpayers’ liability. These issues are moot since they do not address the statutory validity of

the lien. The parties also made several arguments and objections regarding the other side’s

failure to follow the rules of civil procedure. Rules of civil procedure do not apply to the

hearing. See NMSA 1978, § 7-1B-6 (2015). The Hearing Officer considered all of the evidence

and arguments presented by both parties. The Hearing Officer finds in favor of the Taxpayers.

The decision and order is as follows:

FINDINGS OF FACT

1. On May 15, 2017, the Department filed a Notice of Claim of Tax Lien against the

Taxpayers for a total of $29,776.04 for taxes owed under the combined reporting system (CRS).

2. On August 1, 2017, the Taxpayers filed a formal protest letter.

3. On October 4, 2017, the Administrative Hearings Office first learned of the

Taxpayers’ protest when the Department filed a Request for Hearing asking that the Taxpayer’s

protest be scheduled for a formal administrative hearing. On October 5, 2017, the

Administrative Hearings Office issued a notice of hearing.

4. The Taxpayers requested a scheduling conference, and a telephonic scheduling

hearing was conducted on October 30, 2017. The hearing was held within 90 days of the protest.

5. The parties filed various motions and responses throughout the course of the

protest, and hearings were conducted on some of the motions.

6. On July 5, 2018, the Taxpayers filed their motion for summary judgment with

exhibits attached.

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Letter ID No. L0468477232
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7. On July 13, 2018, the Department filed its response to the motion with exhibits

attached.

8. On July 23, 2018, the parties filed the joint prehearing statement.

9. On July 23, 2018, an order vacating the hearing on the merits and notice of

reassignment was issued.

10. On September 4, 2018, the Department filed a request for a hearing on the merits.

11. On September 5, 2018, the notice of telephonic hearing on the motion for

summary judgment was issued.

12. On October 10, 2018, the telephonic hearing on the motion was conducted. The

Hearing Officer explained that a final decision and order would be issued if there were no

disputes as to the material facts. The parties did not object.

13. In July of 2012, the Department issued 42 assessments to “Special Events

Marketing Tal” (the business) for gross receipts taxes, penalties and interest. See the Taxpayer’s

motion for summary judgment Exhibit D.

14. “Special Events Marketing Tal” was registered with the Department as a taxpayer

doing business in New Mexico.

15. No other taxpayer was identified on the assessments.

16. Richard Shoudt was the owner of the business.

17. Richard Shoudt was the spouse of Diane Shoudt.

18. Richard Shoudt is now deceased.

19. On October 20, 2016, the Department issued a Notice of Intent to Lien to the

Taxpayers and others. The Taxpayers were identified by name and partial social security

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Letter ID No. L0468477232
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numbers. The others were identified by name and CRS numbers, one of which included the

business. See the Department’s response Exhibit D.

20. The lien filed in May of 2017 against the Taxpayers was based on the tax liability

from the assessments issued in July of 2012 to the business.

DISCUSSION

Burden of Proof.

Assessments by the Department are presumed to be correct. See NMSA 1978, § 7-1-17

(2007). An assessment becomes a lien when the person liable for the tax neglects or refuses to

pay after the assessment is made. See NMSA 1978, § 7-1-37 (1993). Therefore, it is the

Taxpayers’ burden to present evidence and legal argument to show that the lien should be

released.

Motions for summary judgment are appropriate when there is no genuine issue of

material fact and the judgment is a matter of law. See Elane Photography, LLC v. Willock, 2013-

NMSC-040, ¶ 12. See also Roth v. Thompson, 1992-NMSC-011, 113 N.M. 331. See also Ute

Park Summer Homes Ass’n v. Maxwell Land Grant Co., 1967-NMSC-086, 77 N.M. 730. If the

material facts are not in dispute and only their legal effect remains to be determined, summary

judgment is appropriate. See Roth, 1992-NMSC-011 at ¶ 17.

Liens.

In order to have a valid lien, the lien filed must comply with the requirements of the

statutes. See NMSA 1978, §§ 7-1-37 thru 7-1-39. The substantive validity of the underlying tax

liability need not be shown. See id. The previous notices of assessment and demands for

payment would be conclusive for purposes of filing a lien. See id. A lien should be released

when it does “not follow requirements of law”. See NMSA 1978, § 7-1-39 (B) (2013).

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Letter ID No. L0468477232
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To follow the requirements of the law, a notice of lien must be provided for by statute,

must identify the taxpayer who is liable for the taxes, must identify the dates that the tax became

due, and must state that New Mexico claims a lien for the amount due. See NMSA 1978, § 7-1-

38 (1996). The main issue of this protest is whether the lien was provided for by statute.

A lien is provided for by statute when “any person liable for any tax neglects or refuses to

pay the tax after assessment and demand for payment as provided in Section 7-1-17 NMSA

1978”. NMSA 1978, § 7-1-37 (A) (emphasis added). The Department contends that “[n]otice of

assessment of taxes were sent to Taxpayer” because the Notice of Intent to Lien serves that

function. See the Department’s response and its Exhibit D.

An assessment is effective “when a document denominated ‘notice of assessment of

taxes’, issued in the name of the secretary, is mailed or delivered in person to the taxpayer

against whom the liability for tax is asserted, stating the nature and amount of the taxes

assertedly owed by the taxpayer to the state, demanding of the taxpayer the immediate payment

of the taxes and briefly informing the taxpayer of the remedies available to the taxpayer”.

NMSA 1978, § 7-1-17 (B) (2) (emphases added). The Notice of Intent to Lien is not

denominated anywhere as a “notice of assessment of taxes” and does not state a “demand” for

payment. See the Department’s response Exhibit D. Therefore, the Notice of Intent to Lien does

not satisfy the statutory requirements for an assessment. See id. See also NMSA 1978, § 7-1-17

(B) (2).

The Department contends that “[t]he assessment and subsequent lien were predicated on

the CRS number associated the Taxpayer [sic]” and was sufficient notice to the Taxpayers of

their personal liability for the taxes of the business, even though their names did not appear on

the assessments. See the Department’s response. “Special Events Marketing Tal” was clearly a

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Letter ID No. L0468477232
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taxpayer who was registered with the Department and had been issued a CRS number. See

NMSA 1978, § 7-1-12. See also 3.1.1.15 NMAC (2000). Again, the Taxpayers’ liability is not

the issue. The only issue is whether the lien is valid under the statute. See NMSA 1978, § 7-1-

39.

The applicable definition of taxpayer in this protest is “a person to whom an assessment

has been made”. NMSA 1978, § 7-1-3 (AA) (2017). A person is “any individual, estate, trust,

receiver, cooperative association, club, corporation, company, firm, partnership, limited liability

company, limited liability partnership, joint venture, syndicate, other association or gas, water or

electric utility”. NMSA 1978, § 7-1-3 (P). Even though the business is identified by the

Department as a “proprietor”, it is also identified in the same document as a “firm”. See the

Department’s response Exhibit A. A CRS number is not a person or a taxpayer under the

statutes. See NMSA 1978, § 7-1-3 and § 7-1-17. Therefore, the CRS number on the assessments

is not “a person to whom an assessment has been made”. See NMSA 1978, § 7-1-17. The

Department issued a notice of assessment and demand for payment to “Special Events Marketing

Tal”. As a firm, “Special Events Marketing Tal” is the “person to whom an assessment has been

made”. See NMSA 1978, § 7-1-3. The Department did not issue a notice of assessment and

demand for payment to Richard Shoudt, to his estate, or to Diane Shoudt.

Richard Shoudt was the owner of “Special Events Marketing Tal”. The Department

contends that “Special Events Marketing Tal” was the sole proprietorship of Richard Shoudt.

The Department cited to the proposed summary disposition in Casias v. N.M. Taxation and

Revenue Dep’t for the proposition that an individual owner of a sole proprietorship is liable for

its gross receipts taxes and that a lien is an appropriate collection action against the individual

owner. See Casias v. N.M. Taxation and Revenue Dep’t, No. A-1-CA-36489, mem. op. (N.M.

Estate of Richard Shoudt and Diane K. Shoudt
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Ct. App. October 29, 2018) (non-precedential) (affirming the decision). In that case, the issue

was whether the taxpayer was “personally responsible for the tax liability of his business, and to

what extent the [t]axpayer may protest the assessment that was the subject of a previous protest

and withdrawal.” See In the Matter of the Protest of Louie Casias, Decision and Order #17-25

(N.M. Admin. Hearings Office, May 30, 2017) (non-precendential). Liability is not the issue of

this protest; rather, it is whether the lien followed the requirements of law. See NMSA 1978, §§

7-1-37 thru 7-1-39. Moreover, the Department offered no justification for deeming notice to

Diane Shoudt based on the assessments made to her husband’s business. See Breen v. State

Taxation and Revenue Dep’t, 2012-NMCA-101, ¶ 31 (holding that a husband was not the

taxpayer with respect to his wife’s business’s gross receipts taxes).

In another case, an assessment was made for personal income taxes against a husband.

See Severns v. N.M. Taxation and Revenue Dep’t, No. 31,817, mem. op. (N.M. Ct. App. April 1,

2013) (non-precedential). The assessment did not identify the wife as a taxpayer, even though

the couple filed joint returns. See id. The court agreed with the husband’s argument that his

wife was not a party “because the Department’s assessments were directed solely to him and he

was the sole protestant.” Id. at ¶ 28.

In another protest with a similar issue, the Hearing Officer found that the Department

could not pursue collection action, in that case a levy, against an individual taxpayer who had not

been assessed. See In the Matter of the Protest of Anthony Tafoya, Decision and Order #99-19

(N.M. Taxation and Revenue Dep’t Hearing Office 1, April 30, 1999) (non-precedential). In that

case, as in this one, the underlying business had been assessed, but the individual taxpayer had

1
The Administrative Hearings Office became an agency independent of the Taxation and Revenue Department in
2015. See NMSA 1978, § 7-1B-1, et. seq.
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Letter ID No. L0468477232
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not. See id. The Hearing Officer concluded that “[n]othing in Section 7-1-17 indicates that an

assessment issued to one taxpayer is effective as to all other persons who may be liable for the

same tax.” See id. The same holds true now. See NMSA 1978, § 7-1-17.

An assessment is an important and necessary step before the Department may pursue

collection. See Bank of Commerce v. Dep’t of Taxation and Revenue, 1998-NMCA-063, 125

N.M. 183, cert. denied 125 N.M. 145. The Court noted that the only circumstance that allowed

the Department to demand payment without first issuing an assessment involved the transfer of a

business 2. See id. at ¶ 5. In that case, the Court found that not everyone who owes tax is a

delinquent taxpayer. See id. at ¶ 2. The Court found that a person can only be a delinquent

taxpayer under the statute after the person had been assessed. See id. at ¶ 9. An assessment

provides a procedural safeguard to taxpayers. See NMSA 1978, § 7-1-24 (giving taxpayers the

right to protest an assessment made against them, but requiring protests to be made within 90

days of the assessment). In this case, the Department issued the assessments to the business in

2012. The Department then pursued collection against the Taxpayers by lien in 2017, several

years later. The Taxpayers are well outside of the 90-day limit to protest the assessments and

would not have been able to protest assessments that were not made to them. See NMSA 1978, §

7-1-24. Again, the issues that may be protested with respect to a lien are very narrow. See

NMSA 1978, § 7-1-37 thru 7-1-39. It does not afford the parties an opportunity to challenge, to

amend, to validate, or to otherwise litigate the original assessment. See id. The Department’s

decision to proceed to collection without first making an assessment serves to circumvent the

Taxpayers’ rights to procedural safeguards. See NMSA 1978, § 7-1-24. See also In the Matter

2
The statute regarding successors in business was amended after the circumstances that led to that case and now
requires an assessment to be issued. See NMSA 1978, § 7-1-63 (1997).
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Letter ID No. L0468477232
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of the Protest of Anthony Tafoya, Decision and Order #99-19. See also Bank of Commerce,

1998-NMCA-063 (holding that the Department’s refusal to issue clearance of a liquor license

transfer because of unpaid taxes was improper because the original licensee had not been

assessed and was, therefore, not a delinquent taxpayer).

An assessment is a necessary prerequisite to filing a lien. See NMSA 1978, §§ 7-1-37

and 7-1-38. The only “taxpayer” identified on the assessments was “Special Events Marketing

Tal”. The Taxpayers were never assessed. Therefore, the lien did not follow the requirements of

law. See NMSA 1978, § 7-1-39.

CONCLUSIONS OF LAW

A. The Taxpayers filed a timely written protest to the notice of claim of tax lien issued

under Letter ID number L0468477232, and jurisdiction lies over the parties and the subject matter

of this protest.

B. The Department issued notices of assessment to the business, but did not issue a

notice of assessment to the Taxpayers. See NMSA 1978, § 7-1-17. See also Severns, No. 31,817,

mem. op. See also Breen, 2012-NMCA-101. See also Bank of Commerce, 1998-NMCA-063.

C. The lien did not follow the requirements of law since the Department did not first

issue a notice of assessment to the Taxpayers. See NMSA 1978, §§ 7-1-17, 7-1-37, and 7-1-38.

See also Severns, No. 31, 817 mem. op. See also Breen, 2012-NMCA-101. See also Bank of

Commerce, 1998-NMCA-063.

D. The Taxpayers are entitled to summary judgment as a matter of law. See NMSA

1978, §7-1-38. See also Elane Photography, LLC, 2013-NMSC-040. See also Roth, 1992-

NMSC-011. See also Ute Park Summer Homes Ass’n, 1967-NMSC-086.

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Letter ID No. L0468477232
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For the foregoing reasons, the Taxpayer's protest is GRANTED, and the Department is

HEREBY ORDERED TO FILE A RELEASE OF THE LIEN.

DATED: November 21, 2018.

Dee Dee Hoxie
Dee Dee Hoxie, Esq.
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.

Estate of Richard Shoudt and Diane K. Shoudt
Letter ID No. L0468477232
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CERTIFICATE OF SERVICE

I hereby certify that I mailed the foregoing Order to the parties listed below this 21st day of
November, 2018 in the following manner:

First Class Mail Interoffice Mail

INTENTIONALLY BLANK

John D. Griego
Legal Assistant
Administrative Hearings Office
Post Office Box 6400
Santa Fe, NM 87502
PH: (505)827-0466
FX: (505)827-9732

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