Could a New Mexico grandmother claim four grandchildren as dependents without a formal custody order when they lived with her full time and she provided all their support?

Plain-English summary

Candice Dubois could claim her four grandchildren as dependents on her 2019 New Mexico personal income tax return. The grandchildren lived with her full time, and she was their sole source of support. The Administrative Hearings Office granted her protest and ordered an additional $588 refund.

The Department had reduced Dubois's refund claim to $965.42 after disallowing the grandchildren. The auditor wanted formal court or Children, Youth, and Families Department custody papers, an affidavit showing that both parents agreed to the tax claim, and more financial documentation.

The hearing officer instead applied the five dependency criteria incorporated from federal law:

• the dependent must be the taxpayer's child or grandchild;
• the dependent must share the taxpayer's principal home for more than half the year;
• the dependent must meet the age requirement;
• the dependent must not provide more than half of their own support; and
• the dependent must not file a joint return with a spouse for that year.

Dubois proved each element. The children were her grandchildren and had lived with her continuously since June 2017. They were minors attending a Santa Fe charter school. She housed, clothed, fed, educated, and took them to medical appointments, and neither parent gave her financial assistance.

Her testimony was credible and was corroborated by four notarized statements from charter-school employees. A school doctor, counselor, teacher, and instructor or adviser described the grandchildren living at Dubois's address and her acting as their full-time guardian, school contact, and caregiver. Dubois also supplied birth certificates, Social Security cards, and a notarized letter from her daughter authorizing educational and medical decisions.

The lack of a formal custody agreement did not defeat the claim because the evidence established the statutory facts. The relationship, shared residence, age, support, and joint-return criteria were all satisfied.

Result: protest GRANTED. The Department was ordered to issue Dubois the additional $588 refund.

What this means for you

Dependency turns on statutory criteria, not one preferred document

A custody order can be useful evidence, but this decision did not treat it as an independent prerequisite. The taxpayer prevailed by proving the actual relationship, residence, age, support, and filing facts.

Third-party statements can corroborate household facts

Notarized statements from people with direct knowledge—here, school employees who knew the family and observed the caregiving arrangement—helped establish where the children lived and who cared for them.

Keep records covering every dependency element

Birth certificates, school records, Social Security information, caregiving authorizations, support records, and statements from knowledgeable witnesses can work together to prove a claim.

Sole support was important

Dubois testified that neither parent contributed financially and that she met all educational, medical, housing, clothing, and food needs. The hearing officer found that evidence sufficient and corroborated.

Common questions

Q: Did Dubois have a formal court custody order?
A: The decision does not identify one. The Department wanted court or CYFD paperwork, but the hearing officer found the testimony and corroborating records sufficient to prove the federal dependency criteria.

Q: How long had the grandchildren lived with her?
A: Full time since June 2017, including throughout the 2019 tax year at issue.

Q: What evidence corroborated her testimony?
A: Four notarized statements from charter-school employees, birth certificates, Social Security cards, and her daughter's notarized authorization for educational and medical decisions.

Q: Did the parents provide support?
A: No. Dubois testified that neither her daughter nor the children's father contributed financially, and the hearing officer found that she provided full and sole support.

Q: What refund did she win?
A: The order required the Department to issue an additional $588, the amount removed when it disallowed the dependent claims.

Citations and references

Statutes:

• NMSA 1978, §§ 7-2-3 and 7-2-2(N) — New Mexico personal income tax and net income excluding exemptions claimed under the Internal Revenue Code
• NMSA 1978, § 7-2-39 (2019) — dependency defined by the Internal Revenue Code
• NMSA 1978, § 7-1B-8 (2019) — jurisdiction and hearing timing
• 26 U.S.C. §§ 151-152 — dependent exemptions and the qualifying-child criteria

Cases:

• Public Services Co. v. New Mexico Taxation and Revenue Department, 2007-NMCA-050 — taxpayer's burden to prove an exemption or deduction
• Sec. Escrow Corp. v. State Taxation and Revenue Department, 1988-NMCA-068 — exemptions and deductions strictly construed and clearly established
• Wing Pawn Shop v. Taxation and Revenue Department, 1991-NMCA-024 — strict construction of deductions
• Till v. Jones, 1972-NMCA-046 — taxpayer's burden

Source

• Listing: New Mexico Decisions & Orders
• Decision post: Candice S Dubois
• Decision PDF: D&O 21-11

Original ruling text

1 STATE OF NEW MEXICO
2 ADMINISTRATIVE HEARINGS OFFICE
3 TAX ADMINISTRATION ACT

4 IN THE MATTER OF THE PROTEST OF
5 CANDICE S. DUBOIS & GUILLERMO CASTRO-GARCIA
6 TO THE RETURN ADJUSTMENT NOTICE
7 ISSUED UNDER LETTER ID NO. L2044333744

8 v. AHO No. 21.02-007R, D&O No. 21-11

9 NEW MEXICO TAXATION AND REVENUE DEPARTMENT

10 DECISION AND ORDER

11 On April 15, 2021, Hearing Officer Dee Dee Hoxie, Esq. conducted a videoconference

12 hearing on the merits of the protest of Candice Dubois (Taxpayer 1) to the return adjustment notice.

13 The Taxation and Revenue Department (Department) was represented by Kenneth Fladager, Staff

14 Attorney, who appeared by videoconference. Alma Tapia, Auditor, also appeared by videoconference

15 on behalf of the Department. The Taxpayer appeared by telephone and represented herself. The

16 Taxpayer and Ms. Tapia testified. The Hearing Officer took notice of all documents in the

17 administrative file. No exhibits were submitted.

18 The main issue to be decided is whether the Taxpayer is entitled to claim her grandchildren

19 as dependents. The Hearing Officer considered all of the evidence and arguments presented by both

20 parties. Because the Taxpayer’s grandchildren reside with her full-time and the Taxpayer is their

21 sole means of support, the Hearing Officer finds in favor of the Taxpayer. IT IS DECIDED AND

22 ORDERED AS FOLLOWS:

23 FINDINGS OF FACT

1
Throughout this decision, references to the Taxpayer include her husband, who was also named on the return
adjustment notice and whose name appears in the caption of this case. The Taxpayer’s husband was tragically killed
in a motor vehicle accident in 2019.
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1 1. On August 4, 2020, under letter id. no. L2044333744, the Department issued a return

2 adjustment notice to the Taxpayer. The Taxpayer’s refund claim for the 2019 tax year was reduced

3 to $965.42 because the Department disallowed the Taxpayer’s claim of her grandchildren as

4 dependents. [Admin. file L2044333744].

5 2. The difference between the Taxpayer’s claimed refund and the return adjustment

6 amount is $588.00. [Testimony of Ms. Tapia].

7 3. On August 12, 2020, the Taxpayer filed a timely written protest to the return

8 adjustment notice. [Admin. file protest].

9 4. On August 31, 2020, the Department acknowledged its receipt of the protest.

10 [Admin. file L2091470512].

11 5. On February 22, 2021, the Department filed a request for hearing with the

12 Administrative Hearings Office. [Admin. file request].

13 6. On March 12, 2021, a telephonic scheduling hearing was conducted, which was

14 within 90 days of the request as required by statute. [Admin. file].

15 7. The Taxpayer is a resident of New Mexico and is subject to the personal income tax

16 (PIT). [Admin. file; Testimony of Taxpayer; Testimony of Ms. Tapia].

17 8. The Taxpayer filed a PIT return for the 2019 tax year and claimed an exemption for

18 her four grandchildren as dependents. [Admin. file; Testimony of Taxpayer; Testimony of Ms.

19 Tapia].

20 9. The Taxpayer is the grandparent of the children that she claimed as dependents on her

21 PIT return. [Admin. file; Testimony of Taxpayer; Testimony of Ms. Tapia].

22 10. The grandchildren are minors who attend a charter school in Santa Fe, New Mexico.

23 [Testimony of Taxpayer; Admin file].

24 11. The Department follows the federal statutes for determining whether someone is a

25 dependent for income tax purposes. [Testimony of Ms. Tapia].
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1 12. The Taxpayer’s daughter is the mother of the grandchildren. [Testimony of

2 Taxpayer].

3 13. In 2017, the Children, Youth, and Families Department (CYFD) became involved in

4 the grandchildren’s lives. Their involvement concluded when the grandchildren were placed into the

5 Taxpayer’s custody. [Testimony of Taxpayer].

6 14. The Taxpayer provided the Department with a copy of the notarized letter from her

7 daughter that gave the Taxpayer the power to make educational and medical decisions on behalf of

8 the grandchildren. [Testimony of Taxpayer; Testimony of Ms. Tapia].

9 15. The notarized letter did not mention financial decisions. [Testimony of Ms. Tapia].

10 16. The Taxpayer also provided copies of the grandchildren’s birth certificates and social

11 security cards. [Testimony of Ms. Tapia].

12 17. Since June 2017, the grandchildren have resided full-time with the Taxpayer.

13 [Admin. file; Testimony of Taxpayer].

14 18. Since they moved in with the Taxpayer, the Taxpayer has provided their full-time

15 care, including taking them to school, meeting with teachers and counselors, taking them to the

16 doctor, housing them, clothing them, and feeding them. [Admin. file; Testimony of Taxpayer].

17 19. Since they moved in with the Taxpayer, the Taxpayer has provided their full

18 financial support. [Testimony of Taxpayer].

19 20. The Taxpayer has never received any financial assistance from her daughter or the

20 grandchildren’s father. [Testimony of Taxpayer].

21 DISCUSSION

22 Burden of proof.

23 The burden is on the Taxpayer to prove that she is entitled to an exemption or deduction. See

24 Public Services Co. v. N.M. Taxation and Revenue Dep’t., 2007-NMCA-050, ¶ 32, 141 N.M. 520.

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1 See also Till v. Jones, 1972-NMCA-046, 83 N.M. 743. “Where an exemption or deduction from tax

2 is claimed, the statute must be construed strictly in favor of the taxing authority, the right to the

3 exemption or deduction must be clearly and unambiguously expressed in the statute, and the right

4 must be clearly established by the taxpayer.” Sec. Escrow Corp. v. State Taxation and Revenue

5 Dep’t., 1988-NMCA-068, ¶ 8, 107 N.M. 540. See also Wing Pawn Shop v. Taxation and Revenue

6 Dep’t., 1991-NMCA-024, ¶ 16, 111 N.M. 735. See also Chavez v. Commissioner of Revenue, 1970-

7 NMCA-116, ¶ 7, 82 N.M. 97. See also Pittsburgh and Midway Coal Mining Co. v. Revenue

8 Division, 1983-NMCA-019, 99 N.M. 545.

9 Deduction for a dependent.

10 Every resident is subject to a tax on her net income. See NMSA 1978, § 7-2-3 (1981). Net

11 income excludes exemptions claimed under the Internal Revenue Code. See NMSA 1978, § 7-2-2

12 (N) (2014). The Internal Revenue Code allows for exemptions from income on claimed dependents.

13 See 26 USCA § 151. See also 26 USCA § 152 (2017) (defining dependent). See also NMSA 1978,

14 § 7-2-39 (2019) (indicating that a dependent is defined by the Internal Revenue Code). A dependent

15 may be the child or grandchild 2 of the person claiming the exemption. See 26 USCA § 152. In

16 general, to claim a child as a dependent, five criteria must be met. See id. The dependent must be

17 the taxpayer’s child or grandchild, the dependent must have “the same principal place of abode as the

18 taxpayer for more than one-half of such taxable year”, the dependent must not be past a certain age,

19 the dependent must not have provided more than one-half of his or her own support, and the

20 dependent must not have filed a joint return with a spouse for that taxable year. Id.

21 The Department argues that the auditor really needs to see some court documents or the

22 CYFD paperwork to prove that the grandchildren are in the Taxpayer’s custody. Ms. Tapia was

23 concerned that the Taxpayer did not have a formal custody agreement with the grandchildren’s father

2
That is “a child of the taxpayer or a descendant of such a child”. 26 USCA § 152.
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1 and did not have an affidavit from him or her daughter stating that they agreed to allow the Taxpayer

2 to claim the grandchildren as her dependents on her taxes. Ms. Tapia felt that the Taxpayer should

3 have provided more documents to show that she is financially supporting her grandchildren, such as

4 insurance claims. Ms. Tapia also testified that the Taxpayer had not provided any documentation to

5 show that the grandchildren lived with her more than six months out of the year and denied that the

6 Taxpayer provided statements from people at the grandchildren’s school. In an exemplary show of

7 professionalism, Mr. Fladager immediately advised that the notarized statements were part of the

8 protest and had been included in the documents when the request for hearing was filed. Ms. Tapia

9 was then able to refresh her memory and explained that she had seen the statements, but she had not

10 reviewed them.

11 The first criterion is that the dependent is the child or grandchild of the taxpayer. See 26

12 USCA § 152. The Taxpayer testified that the dependents claimed are her grandchildren. There was

13 no dispute that the claimed dependents are the Taxpayer’s grandchildren. Therefore, the first

14 criterion for claiming a dependent is satisfied. See id.

15 The second criterion is that the dependent has the same residence as the taxpayer for more

16 than half of the year. See id. The Taxpayer testified that her grandchildren live with her full-time

17 and have since 2017. The Taxpayer’s testimony was credible on this issue, particularly as it was

18 supported by four notarized statements from employees of the charter school where the grandchildren

19 attend. The first was from a doctor at the charter school. [Admin. file]. The doctor attests that the

20 Taxpayer is the sole guardian of the grandchildren and that they live with the Taxpayer full-time.

21 [Admin. file]. The doctor has known the family for years, has visited their home several times, and

22 is in touch with the Taxpayer on a regular basis. [Admin. file].

23 The second statement is from a school counselor at the charter school. [Admin. file]. The

24 counselor attests that the Taxpayer lives at her address with her grandchildren full-time. [Admin.

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1 file]. The counselor is familiar with the family and has witnessed the Taxpayer caring for her

2 grandchildren in the wake of the tragic loss of her husband. [Admin. file].

3 The third statement is from a teacher at the charter school. [Admin. file]. The teacher is

4 familiar with the grandchildren, and three of them have been students in her classes. [Admin. file].

5 The teacher knows that the Taxpayer attends all of the parent-teacher conferences for her

6 grandchildren, that the Taxpayer is the point of contact for anything related to her grandchildren, and

7 that the grandchildren live with the Taxpayer full-time. [Admin. file]. The teacher is aware that the

8 school has provided food services to the grandchildren at the Taxpayer’s residence. [Admin. file].

9 The final statement is from an instructor and advisor at the charter school. [Admin. file].

10 The instructor verifies that the Taxpayer’s address is the address listed on the grandchildren’s school

11 records. [Admin. file]. The instructor also attests that she has been to the Taxpayer’s residence to

12 drop off or pick up materials for the grandchildren, that the grandchildren reside there, and that the

13 Taxpayer is the only person who picks them up from school and attends school functions with them.

14 [Admin. file].

15 In addition to the Taxpayer’s testimony and the corroborating notarized statements, the

16 Department acknowledged that the Taxpayer’s daughter granted the Taxpayer the power to make

17 educational and medical decisions for the grandchildren. [Testimony of Ms. Tapia]. Based on the

18 totality of the evidence, there is sufficient proof that the grandchildren reside full-time with the

19 Taxpayer and have since 2017. Therefore, the second criterion for claiming a dependent is satisfied.

20 See 26 USCA § 152.

21 The third criterion is that the dependent must be under the age of 19 at the beginning of the

22 taxable year or a student who is under the age of 24 at the end of the taxable year. See id. The

23 teacher’s notarized statement indicated that the oldest grandchild was in her 10th grade class. [Admin

24 file]. The Taxpayer also provided copies of the grandchildren’s birth certificates to the Department.

25 [Testimony of Taxpayer; Testimony of Ms. Tapia]. Consequently, there was no dispute that the
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1 grandchildren are still school-age children and attend the charter school. Therefore, the

2 grandchildren are below the age threshold required, and the third criterion for claiming a dependent

3 was satisfied. See 26 USCA § 152.

4 The fourth criterion is that the dependent did not provide more than half of his or her own

5 support for the taxable year. See id. The Taxpayer testified that she provided the sole financial

6 support for her grandchildren. The Taxpayer testified that her daughter and her grandchildren’s

7 father do not contribute financially. The Taxpayer testified that she takes care of all the educational,

8 medical, and physical needs of her grandchildren and has done so since they moved in with her in

9 2017. The Taxpayer is in possession of the grandchildren’s birth certificates and social security

10 cards. [Testimony of the Taxpayer; Testimony of Ms. Tapia]. Again, the notarized statements from

11 the school employees corroborate the Taxpayer’s claims. [Admin. file]. There was sufficient

12 evidence to establish that the Taxpayer provides full and sole financial support of the grandchildren,

13 which satisfies the fourth criterion for claiming a dependent. See 26 USCA § 152.

14 The final criterion is that the dependent did not file a joint return with a spouse for the taxable

15 year. See id. There was no evidence that any of the grandchildren filed a joint return with a spouse.

16 Consequently, the fifth and final criterion for claiming a dependent was satisfied. See id.

17 Since the Taxpayer provided sufficient evidence to satisfy all five criteria for claiming a

18 dependent, the Taxpayer has met her burden and established that she is entitled to claim her

19 grandchildren as her dependents on her PIT return. See id. Consequently, the Taxpayer’s protest

20 should be granted.

21 CONCLUSIONS OF LAW

22 A. The Taxpayer filed a timely, written protest of the Department’s return adjustment

23 notice, and jurisdiction lies over the parties and the subject matter of this protest. See NMSA 1978, § 7-

24 1B-8 (2019).

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1 B. The hearing was timely set and held within 90 days of the request for hearing. See id.

2 C. The Taxpayer provided sufficient evidence to prove that she is entitled to claim her

3 grandchildren as dependents for an exemption on her net income. See 26 USCA §§ 151-152. See

4 NMSA 1978, § 7-2-2. See Public Services Co., 2007-NMCA-050, ¶ 32. See also Till, 1972-NMCA-

5 046. See also Sec. Escrow Corp., 1988-NMCA-068, ¶ 8. See also Wing Pawn Shop, 1991-NMCA-

6 024, ¶ 16. See also Chavez, 1970-NMCA-116, ¶ 7. See also Pittsburgh and Midway Coal Mining

7 Co., 1983-NMCA-019.

8 For the foregoing reasons, the Taxpayer’s protest IS GRANTED. IT IS ORDERED that the

9 Department issue the additional $588.00 refund to the Taxpayer.

10 DATED: May 5, 2021.

11 Dee Dee Hoxie
12 Dee Dee Hoxie
13 Hearing Officer
14 Administrative Hearings Office
15 P.O. Box 6400
16 Santa Fe, NM 87502

17 NOTICE OF RIGHT TO APPEAL

18 Pursuant to NMSA 1978, Section 7-1-25 (2015), the parties have the right to appeal this
19 decision by filing a notice of appeal with the New Mexico Court of Appeals within 30 days of the
20 date shown above. If an appeal is not timely filed with the Court of Appeals within 30 days, this
21 Decision and Order will become final. Rule of Appellate Procedure 12-601 NMRA articulates the
22 requirements of perfecting an appeal of an administrative decision with the Court of Appeals. Either
23 party filing an appeal shall file a courtesy copy of the appeal with the Administrative Hearings Office
24 contemporaneous with the Court of Appeals filing so that the Administrative Hearings Office may
25 begin preparing the record proper. The parties will each be provided with a copy of the record proper
26 at the time of the filing of the record proper with the Court of Appeals, which occurs within 14 days
27 of the Administrative Hearings Office receipt of the docketing statement from the appealing party.
28 See Rule 12-209 NMRA.

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1 CERTIFICATE OF SERVICE

2 On May 5, 2021, a copy of the foregoing Decision and Order was submitted to the parties listed

3 below in the following manner:

4 Email and First Class Mail Email

5 INTENTIONALLY BLANK
6
7 John Griego
8 Legal Assistant
9 Administrative Hearings Office
10 P.O. Box 6400
11 Santa Fe, NM 87502

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