Can I use a timely amended return for an open year to fix apportionment or net operating loss numbers from earlier years that are now closed to amendment?

Plain-English summary

Columbia Associates, Inc. is a foreign corporation that held New Mexico real estate through an LLC (Sarex Setai, LLC) and later directly. Its outside accountants made mistakes on its New Mexico apportionment factors for the 2016–2018 and 2020 loss years — for example, reporting a 0% New Mexico factor for 2016 that the company says should have been about 27%. Those errors understated the New Mexico portion of its net operating losses (NOLs). The problem surfaced in 2021, when the company sold the New Mexico property and the size of its NOL carryforward directly affected the taxable gain.

Rather than amend the old returns, Columbia filed a timely amended 2021 return that recalculated the loss-year apportionment factors and claimed a much larger NOL carryforward — about $117,087 (which would have wiped out its 2021 tax) versus the Department's $23,976 (which left tax of $1,398.52 plus interest). The math itself wasn't disputed; the fight was purely legal: may a taxpayer revise closed loss years by folding corrected numbers into a later, still-open year?

The Hearing Officer said no and denied the protest. New Mexico defines an "NOL carryover" (NMSA 1978, Section 7-2A-2(N)) as the apportioned net loss "properly reported" on an original or amended return. Read together with the limitation periods in Sections 7-1-13, 7-1-18, and 7-1-26, "properly reported" means reported within the time the law allows for amending that year. Because Columbia never amended 2016, 2017, 2018, or 2020 within those windows, the apportionment factors and NOL amounts on the original returns became final and couldn't be changed indirectly through the 2021 return. The Hearing Officer contrasted the federal rule (26 U.S.C. Section 172), under which a closed loss year can be recomputed as a computational step, and explained that New Mexico's Legislature deliberately tied the carryover to what was legally reported. Statutory interest under Section 7-1-67 is mandatory and can't be abated for Department delay; the company's February 2025 payment stopped further accrual but left $390.97 of already-accrued interest due.

What this means for you

Businesses carrying forward net operating losses

In New Mexico, your NOL carryforward is only as good as what you properly reported for the loss year, within that year's amendment window. If an apportionment factor or loss figure was wrong, fix it by amending that specific year before the limitation period closes. You cannot bank a correction and deploy it years later on the return where it finally matters.

Anyone who discovers a preparer error in an old return

Discovering that a CPA understated a loss doesn't reopen a closed year. Watch the clock: Sections 7-1-13 and 7-1-18 set the exclusive periods to amend, and once they expire the reported numbers are locked in — even if everyone agrees they were mathematically wrong. New Mexico's rule is stricter here than the federal treatment of carryovers.

Multistate corporations with apportionment factors

Because the New Mexico share of an NOL depends on the loss-year apportionment factor (not the factor for the year you use the loss), errors in those factors carry forward. Reconcile and, if needed, amend loss-year apportionment promptly rather than relying on a later "true-up."

Taxpayers frustrated by Department delays

Administrative backlogs and slow communication — even conflicting notices — do not extend the limitation periods or authorize interest abatement. Interest under Section 7-1-67 is mandatory. Paying the disputed principal under protest (as Columbia did) stops further interest from accruing, but doesn't erase interest that already accrued, and isn't an admission of liability.

Common questions

Q: My old return understated my New Mexico loss. Can I just claim the correct, bigger loss on a later year's return?
A: No. New Mexico ties the NOL carryover to the loss "properly reported" for the loss year. If you didn't amend that year within its limitation period, the reported figure is final and can't be revised through a later year's amended return.

Q: The amended return for the open year was filed on time. Why doesn't that help?
A: Timeliness for 2021 only lets you revise 2021's own attributes. It cannot reach back and re-report the apportionment factors or losses for 2016–2018 and 2020, which each had their own (now expired) amendment windows.

Q: Doesn't federal law let you recompute a closed loss year?
A: Under 26 U.S.C. Section 172, federal courts allow recomputing a closed loss year as a computational step toward the correct tax in an open year. New Mexico chose different statutory language — Section 7-2A-2(N) conditions the carryover on what was "properly reported" — so the federal approach doesn't control here.

Q: The Department was slow and sent conflicting notices. Can interest be abated for that?
A: The Hearing Officer acknowledged the delays but found no statutory basis to abate interest for administrative slowness. Interest under Section 7-1-67 is mandatory; the Taxpayer Bill of Rights (Section 7-1-4.2) doesn't create a separate remedy or expand the tribunal's authority.

Q: Can I rely on this decision for my own situation?
A: Not directly. A Decision and Order resolves one taxpayer's protest on its specific facts and is not a general ruling or advisory opinion of the Department. It does show how strictly New Mexico enforces the loss-year amendment deadlines.

Citations and references

Statutes and rules:

• NMSA 1978, § 7-2A-2(N) — "net operating loss carryover" is the apportioned net loss properly reported on an original or amended return
• NMSA 1978, § 7-1-13 — periods for filing and amending returns
• NMSA 1978, § 7-1-18 — limitation period for assessment/revision
• NMSA 1978, § 7-1-26 — limitation period for refund claims
• NMSA 1978, § 7-1-67 — interest on unpaid tax is mandatory ("shall")
• NMSA 1978, § 7-1-4.2 — Taxpayer Bill of Rights
• NMSA 1978, § 7-1B-8(E) (2019) — hearing timeliness; suspension of interest
• Regulation 3.1.6.10 NMAC — self-assessment
• Regulation 3.1.6.12(A) NMAC — burden shifts to the Department once the presumption of correctness is overcome

Cases:

• Corr. Corp. of Am. v. State, 2007-NMCA-148 (assessments presumed correct)
• TPL, Inc. v. N.M. Taxation & Revenue Dep't, 2003-NMSC-007 (presumption of correctness)
• Gemini Las Colinas, LLC v. N.M. Taxation & Revenue Dep't, 2023-NMCA-039 (burden of production/persuasion)
• Kilmer v. Goodwin, 2004-NMCA-122 (Tax Administration Act limitation periods are mandatory and favor finality)
• Rainbo Baking Co. of El Paso v. Comm'r of Revenue, 1972-NMCA-139 (a regulation cannot impose a time limit that abridges a legislatively authorized deduction)
• Marbob Energy Corp. v. N.M. Oil Conservation Comm'n, 2009-NMSC-013 ("shall" makes interest mandatory)
• AA Oilfield Servs., Inc. v. N.M. State Corp. Comm'n, 1994-NMSC-085 (the tribunal lacks equitable authority to reopen closed years)
• Pinghua Zhao v. Montoya, 2014-NMSC-025 (Legislature has broad discretion over tax policy)
• Phoenix Coal Co. v. Commissioner, 231 F.2d 420 (2d Cir. 1956); ABKCO Indus., Inc. v. Commissioner, 56 T.C. 1083 (1971) (federal recomputation of closed loss years — cited for contrast)
• Hillenga v. Dep't of Revenue, 358 Or. 178, 361 P.3d 598 (2015) (other-state recomputation under different statutory language — cited for contrast)

Source

• Listing: New Mexico Decisions & Orders
• Decision post: Columbia Associates, Inc
• Decision PDF: D&O 26-02

Original ruling text

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

4 COLUMBIA ASSOCIATES, INC.

5 v. Case No. 25.02-003O, D&O No. 26-002

6 NEW MEXICO TAXATION AND REVENUE DEPARTMENT

7 DECISION AND ORDER

8 On October 20, 2025, Hearing Officer Chris Romero, Esq., of the Administrative

9 Hearings Office, conducted an administrative hearing on the merits of the tax protest of

10 Columbia Associates, Inc. (“Taxpayer”) pursuant to the Tax Administration Act and the

11 Administrative Hearings Office Act. The hearing occurred by video conference with all

12 witnesses, parties, and representatives appearing from their respective locations. Taxpayer was

13 represented by its director and shareholder, Peter Frohlich. The Taxation and Revenue

14 Department (“Department”) was represented by attorney Timothy Williams, Esq.

15 The Administrative Hearings Office is an independent adjudicatory agency charged with

16 providing a fair and impartial forum for the resolution of tax protests under the Tax

17 Administration Act. See Regulation 22.600.1.20(C) NMAC (the Hearing Officer is not

18 “responsible to or subject to the direction of any officer, employee or agent of the taxation and

19 revenue department”).

20 Mr. Frohlich testified for Taxpayer. Mary Griego testified for the Department. Amanda

21 Thomas testified under subpoena at the request of Taxpayer. Taxpayer Exhibits 1 through 13

22 were offered. Taxpayer Exhibits 1 through 11 and 13 were admitted into evidence. The

In the Matter of the Protest of Columbia Associates, Inc.
Page 1 of 24
1 Department’s objection to Taxpayer Exhibit 12 was sustained, 1 and although excluded from the

2 evidentiary record, it is retained in the administrative file for appellate review. The Department

3 did not offer any evidentiary exhibits but did refer to a demonstrative exhibit during the hearing,

4 which is also maintained in the administrative file.

5 This protest concerns whether the Department must recognize the revised net operating

6 loss (“NOL”) carryforward amounts reported on Taxpayer’s amended 2021 New Mexico

7 corporate income tax return, which are based on corrected apportionment factors for the 2016–

8 2018 and 2020 loss years. Although the amended 2021 return was timely as to tax year 2021,

9 those earlier loss years were already closed to amendment under the statutory limitation periods

10 in NMSA 1978, Sections 7-1-18, 7-1-13, and 7-1-26. The 2019 tax year is not in dispute. Thus,

11 the central legal question is whether a taxpayer may revise closed loss years by incorporating

12 updated loss-year computations into a timely amended return for 2021. A secondary issue

13 concerns statutory interest.

14 For the reasons explained below, the Hearing Officer concludes that the Department is

15 not required, and indeed lacks statutory authority, to accept revised NOL information that

16 conflicts with the amounts reported for loss years now closed under law. The assessed interest

17 must likewise be upheld, except as limited by Taxpayer’s mid-protest payment. Accordingly, the

18 protest is denied.

19 IT IS DECIDED AND ORDERED AS FOLLOWS:

20 FINDINGS OF FACT

21 The Taxpayer and Its Real Estate Investments

1
Although the New Mexico Rules of Evidence do not apply under NMSA 1978, Section 7-1B-6(D) (2019), the
Hearing Officer sustained the Department’s objection relying on guidance from Rule 11-408 which provides that
offers to compromise are generally inadmissible.

In the Matter of the Protest of Columbia Associates, Inc.
Page 2 of 24
1 1. Mr. Peter Frohlich is the director and shareholder of Taxpayer. He resides in and

2 appeared by video conference from Australia. [Direct Examination of P. Frohlich]

3 2. Since 2006, Taxpayer has invested in real estate in the United States as a passive

4 investor and one of two members of Sarex Setai, LLC. [Direct Examination of P. Frohlich;

5 Taxpayer Ex. 1]

6 3. In 2016, Taxpayer and the other member of Sarex Setai, LLC executed a Second

7 Amended and Restated Operating Agreement that initiated the gradual dissolution of Sarex Setai,

8 LLC. [Direct Examination of P. Frohlich; Taxpayer Ex. 1]

9 4. Before 2016, Taxpayer had no New Mexico tax obligations. Its New Mexico

10 reporting obligations began when Sarex Setai, LLC, and Taxpayer as a member of that company,

11 acquired real property situated in Albuquerque, New Mexico. [Direct Examination of P.

12 Frohlich; Taxpayer Ex. 1]

13 5. Sarex Setai, LLC thereafter filed New Mexico returns and supporting schedules

14 relevant to the years it held the Albuquerque property, from which Taxpayer’s individual New

15 Mexico reporting obligations similarly arose. [Direct Examination of P. Frohlich; Taxpayer Exs.

16 1; 2; 3; 4; 5; 6; and 7]

17 6. The ownership and allocation structure set forth in the operating agreement

18 required allocation of New Mexico property and income between members, which complicated

19 apportionment calculations and tax reporting. [Direct Examination of P. Frohlich; Taxpayer Ex.

20 1]

21 7. Sarex Setai, LLC held the Albuquerque property until the end of 2018, at which

22 time Taxpayer’s membership interest in Sarex Setai, LLC was terminated, and Taxpayer

23 received the property outright, effective January 1, 2019. [Direct Examination of P. Frohlich;

In the Matter of the Protest of Columbia Associates, Inc.
Page 3 of 24
1 Taxpayer Exs. 1; 8]

2 Loss-Year Apportionment and Original Return Preparation

3 8. For 2016–2018, determining Taxpayer’s New Mexico income required

4 calculation of Sarex Setai, LLC’s New Mexico income and Taxpayer’s proportional share.

5 [Direct Examination of P. Frohlich; Taxpayer Exs. 1; 2; 3; 4; 5; 6; 7; and 8]

6 9. Taxpayer described the apportionment computations for 2016–2020 as difficult,

7 particularly given the absence of taxable income in those years. [Direct Examination of P.

8 Frohlich; Taxpayer Exs. 1; 2; 3; 4; 5; 6; 7; and 8]

9 10. Taxpayer explained the discrepancies between the apportionment factors reported

10 on the original New Mexico returns and the corrected computations reflected in Taxpayer

11 Exhibit 8. For example, the 2016 return reported a New Mexico apportionment factor of zero

12 percent, which Taxpayer contends should have been approximately 27 percent. The 2017 return

13 reported 19 percent, which Taxpayer contends should have been approximately 60 percent. The

14 2018 return reported zero percent, which Taxpayer contends should have been approximately 61

15 percent. [Direct Examination of P. Frohlich; Taxpayer Exs. 2; 3; 4; and 8]

16 11. With respect to 2020, “Property factor calculation included in form CIT-A was

17 based off market values of properties held rather than historical cost. Sales factor was calculated

18 correctly.” [Direct Examination of P. Frohlich; Taxpayer Exs. 6 and 8]

19 12. The effect of the reported apportionment factors became apparent after the sale of

20 the New Mexico property in 2021, when the NOL carryforward directly affected the reported

21 gain. [Direct Examination of P. Frohlich; Taxpayer Ex. 8]

22 13. Taxpayer later concluded that its preparers did not exercise adequate attention to

23 detail in the apportionment and NOL-related computations. [Direct Examination of P. Frohlich;

In the Matter of the Protest of Columbia Associates, Inc.
Page 4 of 24
1 Taxpayer Ex. 8]

2 14. Despite Taxpayer’s reliance on its tax professionals, those professionals likewise

3 relied on Taxpayer and Sarex Setai, LLC to provide complete and accurate information.

4 [Taxpayer Ex. 2.27 (“We prepared the returns from information you furnished us without

5 verification.”)]

6 Statutory Limitations and Closed Tax Years

7 15. Taxpayer did not file amended New Mexico returns for tax years 2016, 2017, or

8 2018. [Direct Examination of P. Frohlich; Direct Examination of M. Griego; Taxpayer Ex. 8.1 –

9 8.2]

10 16. By the time Taxpayer filed the amended 2021 return on April 15, 2025, the 2016,

11 2017, 2018, and 2020 tax years were closed to amendment under the applicable limitations

12 period. [Direct Examination of M. Griego]

13 17. The amended 2021 return was submitted and intended to correct historical errors

14 in the apportionment and NOL computations for 2016–2018 and 2020, including adjustments to

15 apportionment percentages and property factor methodology. [Taxpayer Ex. 8]

16 18. On February 6, 2024, the Department issued a Return Adjustment Notice

17 reducing Taxpayer’s claimed 2021 NOL deduction, asserting that the original filing contained

18 errors in the NOL-related computations. [Administrative File (Department’s Answer referring to

19 Letter ID L0866375280)]

20 19. On March 14, 2024, Taxpayer submitted a formal written protest through the

21 Taxpayer Access Point system. [Administrative File (Request for Hearing; Screenshot for

22 “Protest 1675284”)]

23 20. On April 18, 2024, the Department issued a Notice of Assessment of Taxes and

In the Matter of the Protest of Columbia Associates, Inc.
Page 5 of 24
1 Demand for Payment relating to tax year 2021. [Administrative File (Department’s Answer

2 referring to Letter ID No. L1686158960)]

3 21. The Department’s adjustment to Taxpayer’s 2021 return reduced the available net

4 operating loss (“NOL”) carryforward to $23,976, resulting in an assessed tax liability of

5 $1,398.52 and the assessment of statutory interest. [Administrative File; Direct Examination of

6 M. Griego]

7 22. Taxpayer’s amended 2021 return, incorporating revised apportionment factors for

8 the 2016–2018 and 2020 loss years, calculated an available NOL carryforward of approximately

9 $117,087, which would have eliminated the 2021 tax liability in full. [Taxpayer Exs. 8; 9]

10 23. The difference between the parties’ respective NOL carryforward computations is

11 approximately $93,111 and is attributable to the 2016–2018 and 2020 tax years.

12 24. The mathematical accuracy of the parties’ respective calculations was not

13 disputed at hearing. The sole dispute concerns whether revised loss-year apportionment factors

14 may be used after the loss years themselves have closed to amendment. [Direct Examination of

15 P. Frohlich; Direct Examination of M. Griego]

16 Department Staff Roles and Representations

17 25. Amanda Thomas is a senior tax coordinator with the Department, a position

18 formerly known as tax examiner (advanced), and has held that or similar positions for

19 approximately two years. [Direct Examination of A. Thomas]

20 26. Taxpayer testified it believed amended returns could be submitted at any time

21 based on conversations with Ms. Thomas. [Direct Examination of P. Frohlich; Taxpayer Ex. 9]

22 27. Ms. Thomas clarified that amended returns may be submitted at any time, but

23 submission does not determine timeliness for statute-of-limitations purposes. [Direct

In the Matter of the Protest of Columbia Associates, Inc.
Page 6 of 24
1 Examination of A. Thomas]

2 28. Ms. Thomas did not process any returns or amended returns for the years at issue.

3 Her role was limited to assisting Taxpayer with electronically filing its amended 2021 return

4 through the Taxpayer Access Point (TAP) system. [Direct Examination of A. Thomas]

5 29. Department personnel lack discretion to override statutory deadlines. [Direct

6 Examination of A. Thomas]

7 30. Taxpayer does not assert estoppel based on statements attributed to Ms. Thomas.

8 [Direct Examination of P. Frohlich]

9 Filing of the Amended 2021 Return

10 31. On or about April 15, 2025, Taxpayer electronically filed an amended 2021 CIT-1

11 return while the protest was pending, including written explanations and revised NOL

12 carryforward amounts based on recalculated apportionment factors for 2016–2018 and 2020.

13 [Direct Examination of P. Frohlich; Taxpayer Exs. 8 – 9]

14 Department’s Calculation of the 2021 NOL Deduction

15 32. The Department calculated the 2021 NOL deduction using the apportionment

16 percentages reported on the originally filed New Mexico returns, applying 0 percent for 2016

17 and 2018, approximately 19 percent for 2017, and approximately 55 percent for 2020. Using

18 these percentages, the Department determined $23,976 of NOL was available for 2021. [Direct

19 Examination of M. Griego; Taxpayer Ex. 8]

20 33. Taxpayer’s revised computations used higher apportionment percentages for each

21 loss year, resulting in a calculated NOL carryforward of approximately $117,087. [Direct

22 Examination of M. Griego; Taxpayer Exs. 2 – 4; 8; 9]

23 34. Taxpayer asserted that the corrected NOL information more accurately reflected

In the Matter of the Protest of Columbia Associates, Inc.
Page 7 of 24
1 its actual New Mexico losses for 2016–2018 and 2020. [Direct Examination of P. Frohlich]

2 Protest Auditor’s Review and Department Correspondence

3 35. Mary Griego is a protest auditor with approximately 17 years of Department

4 experience, including about 13 years in the protest division. [Direct Examination of M. Griego]

5 36. Ms. Griego reviewed Taxpayer’s original and amended 2021 returns and

6 supporting schedules and noted that the amended 2021 return used loss-year apportionment

7 percentages that differed from those reported in the originally filed returns. [Direct Examination

8 of M. Griego]

9 37. For purposes of this protest, the parties proceeded on the premise that the

10 apportionment factor applicable to an NOL is the apportionment factor for the tax year in which

11 the loss was incurred. [Testimony of M. Griego]

12 38. In January 2025, Ms. Griego advised Taxpayer that its RPD-41379 NOL

13 schedules were “completed incorrectly” and recalculated the available 2021 NOL as $23,976

14 using apportionment factors from the originally filed returns. [Taxpayer Ex. 13]

15 39. Throughout 2024 and 2025, the Department issued multiple conflicting liability

16 notices. Department staff later instructed Taxpayer to disregard at least one of those notices on

17 grounds that it had been reversed. [Taxpayer Ex. 13]

18 40. The record includes evidence of periods of limited staff availability, short-

19 staffing, and a system upgrade during which the case was not actively reviewed. [Taxpayer Ex.

20 13; Taxpayer Ex. 9]

21 41. Because a protest hold was not placed on the account when the protest was first

22 received, the Department issued a collection notice in error. Ms. Griego later acknowledged the

23 Department’s oversight and instructed Taxpayer to disregard the notice, confirming that the

In the Matter of the Protest of Columbia Associates, Inc.
Page 8 of 24
1 protest hold had since been applied. [Taxpayer Ex. 13.5]

2 The 2019 Tax Year

3 42. Taxpayer filed an amended 2019 New Mexico return correcting federal income,

4 and on April 16, 2025, Department employee Amanda Thomas confirmed that the amended 2019

5 return had been processed over the original and was now the official Department record.

6 [Taxpayer Ex. 9]

7 43. Neither party disputes any 2019 figures, including income, apportionment, or loss

8 amounts, because the Department accepted the amended 2019 return. [Taxpayer Ex. 9; Taxpayer

9 Ex. 11]

10 Procedural History, Payment, and Interest

11 44. On September 4, 2024, the Department acknowledged Taxpayer’s protest.

12 [Administrative File (Letter ID No. L2010290544)]

13 45. On January 28, 2025, the Department issued a Notice of Abatement of Tax

14 Assessment in the total amount of $1,362.68. [Administrative File (Letter ID: L1906404720)]

15 46. On January 29, 2025, the Department issued a Notice of Abatement of Tax

16 Assessment in the total amount of $35.84. [Administrative File (Letter ID L1910828400)]

17 47. On February 7, 2025, Taxpayer made a payment through TAP that satisfied all

18 outstanding tax principal. As of that date, statutory interest had accrued through February 7,

19 2025; Taxpayer’s payment satisfied that accrued interest except $390.97, which remained

20 outstanding. Taxpayer denied any admission of liability, explaining that the payment was

21 intended to halt further accrual of interest by paying the tax principal. [Administrative File

22 (Department’s Answer)]

23 48. In an associated email the Taxpayer indicated it was making the payment to stop

In the Matter of the Protest of Columbia Associates, Inc.
Page 9 of 24
1 the further accrual of interest but was not admitting any liability or agreeing to the Department’s

2 calculations. [Administrative File (Department’s Answer); Taxpayer Exs. 9; 13]

3 49. On February 21, 2025, the Department filed a Request for Hearing and its

4 Original Answer to the Protest. [Administrative File]

5 50. On February 24, 2025, the Administrative Hearings Office entered a Notice of

6 Telephonic Scheduling Hearing which set an initial hearing in the protest for March 21, 2025.

7 [Administrative File]

8 51. On March 20, 2025, Taxpayer filed a summary of relevant facts and its legal

9 position. The summary was entitled Submission. [Administrative File]

10 52. A telephonic scheduling hearing was held on March 21, 2025, at which time the

11 parties agreed that additional time might assist them in narrowing or resolving issues. Neither

12 party objected that the hearing satisfied the deadline to conduct a hearing under Section 7-1B-8

13 of the Administrative Hearings Office Act. [Administrative File]

14 53. A second telephonic scheduling hearing occurred on June 13, 2025, at which time

15 the parties concurred that a hearing on the merits of the protest should be set. A Scheduling

16 Order and Notice of Administrative Hearing was entered which set a merits hearing for October

17 20, 2025, in addition to all other attendant deadlines. [Administrative File]

18 54. On September 19, 2025, the Administrative Hearings Office issued a subpoena

19 upon Taxpayer’s request to compel the appearance of Amanda Thomas. [Administrative File]

20 55. On September 19, 2025, Taxpayer filed a request for production of documents.

21 [Administrative File]

22 56. On October 6, 2025, both parties to the protest filed their prehearing statements.

23 [Administrative File]

In the Matter of the Protest of Columbia Associates, Inc.
Page 10 of 24
1 57. On October 20, 2025, the Department submitted a demonstrative exhibit for

2 reference during the hearing. [Administrative File]

3 58. On October 26, 2025, Taxpayer filed Taxpayer’s Final Submission.

4 [Administrative File]

5 59. The record includes correspondence during the protest addressing the parties’

6 respective NOL carryforward computations and the resulting liability notices. [Direct

7 Examination of P. Frohlich; Direct Examination of M. Griego; Taxpayer Exs. 8, 9, 11, 13]

8 60. Taxpayer acknowledged that statutory interest applies to underpayments but

9 argued that Department delays should limit the interest imposed. [Direct Examination of P.

10 Frohlich; Taxpayer Exs. 11; 13]

11 DISCUSSION

12 This protest presents a question of statutory interpretation. Taxpayer seeks recognition of

13 revised net operating loss (“NOL”) carryforward amounts reported on its amended 2021 New

14 Mexico corporate income tax return. The revised NOL figures depend on recalculated

15 apportionment factors for the 2016, 2017, 2018, and 2020 loss years. Although the amended 2021

16 return was filed within the period allowed for that year, the earlier loss years were closed to

17 amendment under the limitation periods set forth in NMSA 1978, Sections 7-1-13, 7-1-18, and 7-1-

18 26 at the time the amended 2021 return was submitted. The 2019 tax year is not at issue because the

19 Department accepted Taxpayer’s amended return for that year. The dispositive question is whether a

20 taxpayer may, through a timely amended return for an open year, effectively revise loss-year

21 apportionment factors and NOL attributes for years that are otherwise closed by statute.

22 The financial consequences of the parties’ disagreement are straightforward. Using the

23 apportionment factors reported on the originally filed New Mexico returns, the Department

In the Matter of the Protest of Columbia Associates, Inc.
Page 11 of 24
1 determined that $23,976 of NOL remained available to offset Taxpayer’s 2021 income, resulting in

2 an assessed tax liability of $1,398.52 and the assessment of statutory interest, of which $390.97

3 remained outstanding after Taxpayer’s February 7, 2025 payment. By contrast, Taxpayer’s

4 amended 2021 return, using revised loss-year apportionment percentages, calculated an available

5 NOL carryforward of approximately $117,087, which would eliminate the 2021 liability in full. The

6 dispute therefore concerns recognition of approximately $93,111 in additional NOL carryforward

7 amounts and the resulting tax and interest consequences.

8 Taxpayer’s Position

9 Taxpayer contends that the Department overstated its 2021 New Mexico corporate income

10 tax liability by refusing to consider the corrected NOL carryforward amounts included with its

11 amended 2021 return. Taxpayer argues that the NOLs generated in tax years 2016, 2017, and 2018

12 were legitimate losses that should properly offset 2021 income, and that its originally filed New

13 Mexico returns for those years understated the New Mexico portion of those losses due solely to

14 preparer error. Taxpayer testified that its outside certified public accountants failed to include

15 accurate apportionment factors or complete accurate NOL schedules, despite the presence of federal

16 losses and New Mexico business activity.

17 Taxpayer maintains that because the amended 2021 return was filed within the period

18 permitted for amending that year, the Department should accept the corrected apportionment factors

19 and NOL computations supplied with that filing. Taxpayer argues that the revised figures more

20 accurately reflect the economic reality of its operations and that reliance on the inaccurate historical

21 filings results in an artificially inflated 2021 liability. In Taxpayer’s view, the Department’s refusal

22 to incorporate the corrected loss-year information elevates procedural finality over substantive

23 accuracy.

In the Matter of the Protest of Columbia Associates, Inc.
Page 12 of 24
1 Taxpayer further asserts that the State’s self-assessment framework, including 3.1.6.10

2 NMAC, supports its ability to correct prior-year errors through a later amended return, reasoning

3 that no statute expressly requires consistency between amended and previously filed returns.

4 Taxpayer also emphasizes that periods of Department delay contributed to the posture of the case.

5 Taxpayer paid the disputed assessment during the protest to halt further accrual of interest and

6 argues that any remaining interest should be reduced or abated on fairness grounds and under the

7 Taxpayer Bill of Rights, NMSA 1978, Section 7-1-4.2.

8 Department’s Position

9 The Department maintains that it correctly calculated Taxpayer’s 2021 NOL deduction by

10 relying on the apportionment factors and NOL amounts reported on the originally filed 2016, 2017,

11 and 2018 New Mexico corporate income tax returns. The Department asserts that accepting

12 Taxpayer’s revised loss-year computation for those years through an amended 2021 return would be

13 tantamount to permitting untimely amended returns for previous loss years, in violation of Sections

14 7-1-13 and 7-1-18. Because those years were closed to amendment, the Department argues that it is

15 legally prohibited from considering revised apportionment factors or NOL amounts for those years.

16 The Department further asserts that its re-computation of the 2021 NOL deduction follows

17 Form RPD-41379 and long-standing administrative practice, both of which require the

18 apportionment factor from the loss year, not the year of application, to determine the New Mexico

19 portion of an NOL. Applying this methodology to the loss-year data on file, the Department

20 determined that only a small amount of NOL remained available to offset Taxpayer’s 2021 income.

21 With respect to interest, the Department maintains that interest is mandatory unless

22 Department error or delay caused the underlying deficiency. Because the deficiency resulted from

23 incorrect information supplied by Taxpayer in the original filings, the Department asserts that the

In the Matter of the Protest of Columbia Associates, Inc.
Page 13 of 24
1 statutory interest must be upheld. No penalty was assessed in connection with the Department’s

2 adjustment, and neither party raised any issue relating to penalty. Accordingly, penalty is not before

3 the Administrative Hearings Office in this protest.

4 Burdens of Production and Persuasion

5 Assessments issued by the Department are presumed correct. See Corr. Corp. of Am. v.

6 State of N.M., 2007-NMCA-148, ¶ 17; TPL, Inc. v. N.M. Taxation & Revenue Dep’t, 2003-NMSC-

7 007, ¶ 10. This presumption applies equally where the Department recalculates or adjusts a

8 taxpayer’s return. A taxpayer may overcome this presumption by producing some countervailing

9 evidence. The evidence need not be persuasive at that stage, and whether the presumption has been

10 overcome is a question of law.

11 Once the presumption is overcome, the burden shifts to the Department to produce evidence

12 supporting its assessment, while the taxpayer bears the ultimate burden of persuasion to show that

13 the Department’s determination is incorrect. See Gemini Las Colinas, LLC v. N.M. Taxation &

14 Revenue Dep’t, 2023-NMCA-039, ¶¶ 23–26; 3.1.6.12(A) NMAC.

15 Here, Taxpayer presented sufficient testimony and documentation to overcome the

16 presumption. The Department met its burden of production by demonstrating that the 2016–2018

17 and 2020 tax years were closed under Sections 7-1-13 and 7-1-18, as reinforced by Section 7-1-26,

18 and that Taxpayer’s revised NOL computations were therefore untimely attempts to alter closed

19 years. The question that remains is whether Taxpayer has met its ultimate burden of persuasion to

20 show that the corrected loss-year computations may nevertheless be recognized.

21 Statute of Limitations and NOL Computations

22 The threshold question is whether a timely amendment of the 2021 return may incorporate

23 revised loss-year information from years that cannot be reopened under the statutory limitations

In the Matter of the Protest of Columbia Associates, Inc.
Page 14 of 24
1 framework. Resolution of that issue turns on the statutory definition of a net operating loss

2 carryover under New Mexico law.

3 The phrase “properly reported” must be read within New Mexico’s statutory framework

4 governing the filing and amendment of returns. A tax attribute is “reported” only through a legally

5 effective return, and the Legislature has prescribed the exclusive time periods within which such

6 reporting may be revised. See NMSA 1978, Sections 7-1-13, 7-1-18, 7-1-26. New Mexico courts

7 have recognized that these limitation provisions reflect a legislative policy choice favoring finality

8 and administrability in tax matters. In Kilmer v. Goodwin, 2004-NMCA-122, ¶ 16, 136 N.M. 440,

9 the Court of Appeals explained that the statutory time limits in the Tax Administration Act serve to

10 avoid stale claims and to permit the Department to “stabilize and predict, with some degree of

11 certainty, the funds it collects and manages,” and that the statutory framework places the burden on

12 the taxpayer to act within the prescribed deadlines. Consistent with that legislative design, an

13 amended return filed outside the statutory period is not legally effective to revise that year’s tax

14 attributes for purposes of Section 7-2A-2(N)’s “properly reported” definition when determining

15 liability for a later year.

16 The statute therefore does not define the carryover as the “correct” net loss or as a loss later

17 shown to be mathematically different; instead, by incorporating “properly reported” into the

18 definition itself, the Legislature made compliance with the return and amendment framework part of

19 the substantive attribute. Accordingly, the NOL carryover in New Mexico is a return-based tax

20 attribute fixed by what was legally reported within the time permitted by statute. The word

21 “properly,” read in context with “reported” and within the statutory amendment framework, denotes

22 reporting accomplished in conformity with the procedures and time limitations established by law.

23 The term “properly reported” is not defined in Section 7-2A-2. The analysis begins with the

In the Matter of the Protest of Columbia Associates, Inc.
Page 15 of 24
1 plain language of the statute, giving the words their ordinary meaning. See Jaramillo v. N.M.

2 Taxation & Revenue Dep’t & Risk Mgmt., 2024-NMCA-028, ¶ 4. When construing statutes,

3 however, the guiding principle is to determine and give effect to legislative intent. See Baker v.

4 Hedstrom, 2013-NMSC-043, ¶ 11. The phrase must therefore be interpreted in harmony with the

5 Tax Administration Act as a whole. Statutes are construed so that all provisions are read together

6 and no part is rendered surplusage or internally inconsistent. See Regents of Univ. of N.M. v. N.M.

7 Fed’n of Teachers, 1998-NMSC-020, ¶ 28.

8 Interpreting “properly reported” to mean “accurately reported regardless of statutory

9 timeliness” would sever the definitional section from the Legislature’s carefully constructed

10 amendment and limitation provisions. Nothing in Section 7-2A-2 creates an exception to, or

11 displacement of, the statutory deadlines governing revision of the reported attributes of a loss year.

12 Taxpayer also relies on the Department’s self-assessment regulation, 3.1.6.10 NMAC, to argue that

13 it may correct prior-year errors through a timely amended return for 2021 without filing amended

14 returns for the loss years themselves. That regulation does not alter the statutory limitation and

15 amendment framework established in the Tax Administration Act. Sections 7-1-13 and 7-1-18

16 prescribe the exclusive periods for amending returns and revising the reported tax attributes of a

17 taxable year. New Mexico courts, as seen in Kilmer, have consistently treated the limitation periods

18 in the Tax Administration Act as mandatory and controlling. Allowing a taxpayer to revise closed-

19 year attributes indirectly through an amended return for a different year would undermine the

20 Legislature’s chosen limitation framework. An administrative regulation cannot expand those

21 legislatively imposed limitation periods or authorize revision of closed-year attributes indirectly

22 through an amended return for a different year. See Rainbo Baking Co. of El Paso, Tex. v. Comm’r

23 of Revenue, 1972-NMCA-139, ¶ 12 (holding an agency’s regulatory authority “did not extend to

In the Matter of the Protest of Columbia Associates, Inc.
Page 16 of 24
1 imposing a time requirement which would abridge or modify the deduction authorized by the

2 Legislature”).

3 Accordingly, 3.1.6.10 NMAC does not provide a legal basis to recognize revised loss-year

4 apportionment factors or NOL carryforward amounts for years closed by statute. The Legislature’s

5 decision to define the carryover in return-based terms reflects a policy judgment within its broad

6 authority over taxation, and that legislative choice governs here. See Pinghua Zhao v. Montoya,

7 2014-NMSC-025, ¶ 29 (“[T]ax laws are complex creations with inherently political aspects and,

8 therefore, the Legislature enjoys broad discretion in formulating tax policies[.]”).

9 This approach differs from the federal scheme. Under 26 U.S.C. Section 172 and related

10 provisions, federal courts have long permitted taxpayers and the Commissioner to recompute a

11 closed loss year as a computational step when necessary to determine the correct tax liability for an

12 open year, treating statutes of limitation as restricting assessment or refund, but not the accuracy of

13 calculations relevant to the open year. See Phoenix Coal Co. v. Commissioner, 231 F.2d 420, 421–

14 22 (2d Cir. 1956); ABKCO Indus., Inc. v. Commissioner, 56 T.C. 1083, 1088–89 (1971). New

15 Mexico’s Legislature adopted materially different language. Unlike 26 U.S.C. Section 172, which

16 defines the carryover mechanically and independently of return reporting, Section 7-2A-2(N)

17 conditions the carryover on what was “properly reported” on a legally effective return. By defining

18 the carryover as the loss “properly reported” on a return, the statute links the existence and amount

19 of the carryover to legally effective reporting within the statutory framework. The federal approach

20 is cited only for contrast; New Mexico’s statutory definition and limitation framework control this

21 protest.

22 Other jurisdictions have permitted recomputation of a closed loss year when a carryover is

23 claimed in an open year. See, e.g., Hillenga v. Dep’t of Revenue, 358 Or. 178, 361 P.3d 598 (2015).

In the Matter of the Protest of Columbia Associates, Inc.
Page 17 of 24
1 Those decisions arise under materially different statutory language. Section 7-2A-2(N) reflects a

2 different legislative choice, one that ties the existence and amount of a carryover to the return

3 reporting process rather than to a free-standing computational recalculation of prior-year income.

4 This does not mean the statute elevates procedural form over substantive accuracy. Rather, it

5 reflects a legislative judgment that tax attributes are established through the return process and are

6 subject to revision only within the periods expressly authorized by statute. Sections 7-1-13 and 7-1-

7 18 define the time within which a return may be amended or a refund may be claimed. Once that

8 period expires, the reported attributes of that year cannot be revised through a later amended return

9 for a different year.

10 Here, Taxpayer did not file amended returns for 2016, 2017, 2018, or 2020 within the

11 statutory period. The amended 2021 return therefore seeks, in substance, to revise the apportioned

12 net losses reported for those closed years. In other words, Taxpayer is not merely asking the

13 Department to recompute a closed year as an evidentiary step in determining the open year; it is

14 asking the Department to substitute revised loss-year apportionment factors and loss amounts as the

15 operative New Mexico attributes for those closed years. Unlike the federal cases, this protest does

16 not involve recomputation of a closed year solely as a computational step in determining a carryover

17 whose amount is defined independently of return reporting. It involves substitution of revised loss-

18 year attributes in place of the amounts legally reported for those years. Because the statutory

19 framework permits revision of loss-year attributes only through timely amended returns for those

20 years, the amended 2021 filing cannot operate to alter them indirectly.

21 New Mexico courts have cautioned against statutory constructions that effectively nullify

22 legislatively imposed deadlines. In Kilmer, 2004-NMCA-122, ¶ 20, the Court of Appeals rejected

23 an interpretation that would read the statutory time limit out of the statute and emphasized that the

In the Matter of the Protest of Columbia Associates, Inc.
Page 18 of 24
1 Legislature intended a clear and definite limit on the authority conferred by the Tax Administration

2 Act. Permitting revision of closed loss-year attributes through a timely amendment of a later year

3 would undermine that limitation framework by allowing, in substance, an extension of the deadlines

4 governing the loss years themselves.

5 To hold otherwise would permit a taxpayer to accomplish indirectly, through an amended

6 return for an open year, what the Legislature has expressly prohibited directly once the amendment

7 period for the loss year has expired.

8 Accordingly, the Department properly calculated the 2021 net operating loss deduction

9 using the apportioned net losses reported on the original returns for the closed loss years.

10 Department Delay and Administrative Process

11 The record reflects periods of limited Department availability and processing backlogs that

12 understandably contributed to Taxpayer’s frustration. The Department acknowledged Taxpayer’s

13 diligence and cooperation during the protest.

14 However, the kinds of administrative slowdowns Taxpayer experienced do not permit

15 recognition of revised NOL information derived from years that are closed by statute. The

16 limitations period established under Section 7-1-18 remains controlling regardless of the pace of

17 administrative review or communication.

18 Although Taxpayer cites the Taxpayer Bill of Rights, Section 7-1-4.2, that provision does

19 not expand this tribunal’s jurisdiction or create a separate remedy for administrative delay. Any

20 question regarding the application of statutory interest is addressed in the following section.

21 Interest

22 Under New Mexico law, “[i]f a tax imposed is not paid on or before the day on which it

23 becomes due, interest shall be paid to the state on that amount from the first day following the day

In the Matter of the Protest of Columbia Associates, Inc.
Page 19 of 24
1 on which the tax becomes due.” See NMSA 1978, Section 7-1-67. Interest is compensatory and

2 reimburses the state for the time value of money. Because Section 7-1-67 uses the word “shall,” the

3 imposition of interest is mandatory. See Marbob Energy Corp. v. N.M. Oil Conservation Comm'n,

4 2009-NMSC-013, ¶ 22, 146 N.M. 24. Interest follows from an unpaid tax, and absent a specific

5 statutory abatement mechanism tied to Department-caused delay or error, this tribunal must apply

6 Section 7-1-67 as written. Interest begins to run from the original due date of the tax until the tax

7 principal is paid in full. Once the tax principal is paid, no further interest accrues on that principal,

8 although any interest that accrued before payment remains due until paid.

9 Here, the underpayment resulted from information reflected in the original 2016–2018 and

10 2020 filings. Although the protest process involved periods of delay, the deficiency arose from the

11 tax attributes reported in the original loss-year filings. Administrative delay in resolving a dispute

12 does not alter the statutory accrual of interest under Section 7-1-67. Although the protest process

13 extended over several months, the governing statutes do not authorize abatement of interest based

14 on the pace of administrative review. Taxpayer’s payment during the protest properly halted the

15 accrual of additional interest, but the statutes do not allow retroactive abatement for periods before

16 payment.

17 The Hearing Officer also considered whether Taxpayer could be entitled to a partial

18 abatement of interest under NMSA 1978, Section 7-1B-8(E), but a review of the record did not

19 reveal a basis for halting the accrual of interest under that statute or its implementing regulations.

20 See 22.600.3.8(A), 22.600.3.18(E) NMAC. Under 22.600.3.8(A) NMAC, the Department was

21 required to request a hearing no less than sixty days and no more than one hundred eighty days after

22 acknowledging Taxpayer’s valid protest. The Department acknowledged the protest on September

23 4, 2024, and requested a hearing on February 21, 2025, well within the regulatory timeframe.

In the Matter of the Protest of Columbia Associates, Inc.
Page 20 of 24
1 Accordingly, Section 7-1B-8(E) and 22.600.3.18(E) NMAC do not provide a basis to suspend

2 further accrual of interest.

3 CONCLUSIONS OF LAW

4 A. Taxpayer timely protested the Department’s action, and the Department timely

5 requested a hearing on the protest. The Administrative Hearings Office conducted a telephonic

6 scheduling hearing on March 21, 2025, within the period required by NMSA 1978, Section 7-1B-8

7 (2019). A subsequent merits hearing was conducted on October 20, 2025.

8 B. The Administrative Hearings Office has jurisdiction over the parties and the subject

9 matter of this protest pursuant to NMSA 1978, Sections 7-1-24 and 7-1B-8, and 22.600.3 NMAC.

10 C. The Department’s assessments are presumed correct. See Corr. Corp. of Am. v.

11 State, 2007-NMCA-148, ¶ 17; TPL, Inc. v. N.M. Taxation & Revenue Dep’t, 2003-NMSC-007, ¶

12 10.

13 D. A taxpayer may overcome the presumption of correctness by producing some

14 countervailing evidence; the evidence need not be ultimately persuasive at that stage, and whether

15 the presumption has been overcome is a question of law. See Gemini Las Colinas, LLC v. N.M.

16 Taxation & Revenue Dep’t, 2023-NMCA-039, ¶ 25, 531 P.3d 622; Regulation 3.1.6.12(A) NMAC.

17 E. Once the presumption is overcome, the Department bears a burden of production to

18 support its assessment, while the taxpayer retains the ultimate burden of persuasion. See Gemini Las

19 Colinas, LLC v. N.M. Taxation & Revenue Dep’t, 2023-NMCA-039, ¶¶ 23–24, 26, 29, 531 P.3d

20 622.

21 F. Under NMSA 1978, Sections 7-1-13, 7-1-18, and 7-1-26, a taxpayer may amend a

22 return or seek revision of a tax year only within the period provided by statute. Once that period

23 expires, the year is closed for purposes of establishing or revising that year’s tax attributes,

In the Matter of the Protest of Columbia Associates, Inc.
Page 21 of 24
1 including the New Mexico portion of any net operating loss. Because the 2016, 2017, 2018, and

2 2020 tax years were not timely amended, their reported apportionment factors and NOL attributes

3 are final and may not be altered through an amended return for 2021.

4 G. “Net operating loss carryover” is defined as the apportioned net loss properly

5 reported on an original or amended tax return for taxable years. See NMSA 1978, Section 7-2A-

6 2(N).

7 H. Taxpayer did not file amended New Mexico corporate income tax returns for the

8 2016, 2017, 2018 and 2020 loss years within the period allowed by Sections 7-1-13 and 7-1-18.

9 I. The Administrative Hearings Office lacks equitable authority and may not reopen or

10 revise closed tax years, whether directly or indirectly. See NMSA 1978, Section 7-1B-8; AA Oilfield

11 Servs., Inc. v. N.M. State Corp. Comm’n, 1994-NMSC-085, ¶ 18, 118 N.M. 273, 279, 881 P.2d 18,

12 24.

13 J. Interest on underpayments of tax is mandatory absent statutory authorization for

14 abatement. See NMSA 1978, Section 7-1-67.

15 K. Taxpayer’s February 7, 2025 payment satisfied the tax principal; interest accrued

16 under Section 7-1-67 through that date remains due until paid. No statutory provision authorizes

17 abatement of interest that accrued before payment of the principal. See NMSA 1978, Section 7-1-

18 67.

19 L. As a matter of law, the Department correctly calculated the net operating loss

20 deduction available for tax year 2021 using the loss amounts properly reported for the closed loss

21 years.

22 Taxpayer has not met its ultimate burden of persuasion to demonstrate that the Department

23 erred in calculating the net operating loss deduction available for 2021 or that the revised loss-year

In the Matter of the Protest of Columbia Associates, Inc.
Page 22 of 24
1 computations submitted with the amended 2021 return may be recognized as a matter of law.

2 For the reasons stated, Taxpayer’s protest is DENIED.

3 DATED: February 27, 2026

4
5 Chris Romero
6 Hearing Officer
7 Administrative Hearings Office
8 P.O. Box 6400
9 Santa Fe, NM 87502

10 NOTICE OF RIGHT TO APPEAL

11 Pursuant to NMSA 1978, Section 7-1-25 (2015), the parties have the right to appeal this

12 decision by filing a notice of appeal with the New Mexico Court of Appeals within 30 days of the

13 date shown above. If an appeal is not timely filed with the Court of Appeals within 30 days, this

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

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

16 Either party filing an appeal shall file a courtesy copy of the appeal with the Administrative

17 Hearings Office contemporaneous with the Court of Appeals filing so that the Administrative

18 Hearings Office may begin preparing the record proper. The parties will each be provided with a

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

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

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

22

In the Matter of the Protest of Columbia Associates, Inc.
Page 23 of 24
1 CERTIFICATE OF SERVICE
2 I hereby certify that I served the foregoing to the parties listed below this 27th day of

3 February 2026 in the following manner:

4 First Class Mail and Email First Class Mail and Email
5
INTENTIONALLY BLANK
6

In the Matter of the Protest of Columbia Associates, Inc.
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