The state seized money from my bank account and later admitted the levy it named was invalid. Do I get the money back?

Subject

John F. Gilliam Jr. & Martha L. Gilliam (D&O 98-35)

Plain-English summary

The Department was trying to collect two different debts from John and Martha Gilliam, so it served two warrants of levy on their bank, Sunwest Bank, at the same time in August 1997:

• Levy no. 8819 — for personal income tax the couple owed for 1994 and 1995. But the Gilliams had timely protested those assessments, which means they were not "delinquent." New Mexico can only levy on a delinquent taxpayer, so this levy was invalid.
• Levy no. 8818 — for gross receipts tax owed by their business, USA Printing. Those assessments were old, unprotested, and genuinely delinquent, so this levy was valid.

The bank handed over $13,966.74. Unfortunately, the Secretary's follow-up letter told the Gilliams the money had been seized under levy 8819 — the invalid one. When Mr. Gilliam objected, the Department acknowledged 8819 was no good but explained it was applying the money to the delinquent gross receipts tax assessments referenced in levy 8818, and sent corrected paperwork showing exactly that.

Hearing Officer Gerald B. Richardson denied the protest. Yes, levy 8819 was invalid — but the bank had been served both levies simultaneously, and levy 8818 was valid because it targeted delinquent, presumptively correct tax the Secretary had a duty to collect (Sections 9-11-6(A) and 7-1-17). The money was in fact applied only to those delinquent assessments. The Secretary's mistake in naming the wrong levy in his letter did not make the seizure illegal, and the Gilliams identified no actual defect in levy 8818, so they failed to carry their burden of proving it invalid. The Order noted a leftover $232.47 credit the couple could reclaim by filing a refund claim under Section 7-1-26.

What this means for you

• A valid levy can support a seizure even if the agency cites the wrong paperwork. When two levies are served together and one is valid, money collected is treated as collected under the valid one. Pointing out the agency's labeling error is not enough to get the money back.
• Protesting an assessment on time protects it from levy. The personal income tax couldn't be levied because the Gilliams had filed a timely protest — that made them "not delinquent" on that debt. Filing a protest within the deadline is what stops collection.
• Old, unprotested assessments are fair game for collection. The gross receipts tax assessments (some dating to 1994) were never protested, so they were delinquent and collectible by levy, subject only to the ten-year collection limit.
• To attack a levy, prove a defect in the levy itself. The taxpayer's burden is to show the specific warrant was invalid or improper. Arguing about a different levy, or about the agency's explanation, doesn't meet that burden.
• Recover an over-collection with a refund claim. When a levy sweeps in more than the debt, the excess isn't automatically returned in the protest — the taxpayer files a refund claim under Section 7-1-26.

Key questions answered

If the levy the Department named was invalid, why didn't the Gilliams win?
Because a second levy — no. 8818 — was served on the bank at the same time and was valid. It targeted delinquent, unprotested gross receipts tax, and the seized money was applied only to those debts. The Secretary's error in naming levy 8819 did not invalidate the collection.

Why was the personal income tax levy (8819) invalid but the gross receipts tax levy (8818) valid?
A levy is only authorized against a "delinquent" taxpayer. The Gilliams had timely protested the personal income tax assessments, so they were not delinquent on those. They had never protested the gross receipts tax assessments, so those were delinquent and collectible.

Did the Secretary's incorrect letter make the seizure illegal?
No. The Hearing Officer held the Secretary's misstatement about which levy applied did not undo the valid levy 8818. The taxpayer showed no actual infirmity in levy 8818 itself.

What happens to the $232.47 that wasn't applied to any assessment?
The Order treated it as a separate matter. The Gilliams did not ask for it in this protest, but they could recover it by filing a claim for refund under Section 7-1-26.

Verbatim citations

Why the seizure stood despite the invalid levy:

Although Secretary Chavez erroneously informed the Taxpayer that the Department had seized the Taxpayer's bank account proceeds pursuant to an invalid levy, the Department served two levies upon Sunwest Bank at the same time, and the Taxpayer has not established any infirmities or improprieties with respect to levy no. 8818.

The holding on the two levies (Conclusions of Law):

Because Sunwest Bank was served with levy no. 8818 as well as levy 8819, any amounts received by the Department from Sunwest Bank were properly collected pursuant to levy 8818.

The route to recover the unapplied credit (footnote):

Should the Taxpayer wish to obtain a refund of this credit, a claim for refund may be filed with the Department pursuant to Section 7-1-26 NMSA 1978.

Source

• Listing: New Mexico Decisions & Orders
• Decision post: John F. Gilliam Jr. & Martha L. Gilliam
• Decision PDF: D&O 98-35

Original ruling text

BEFORE THE HEARING OFFICER
OF THE TAXATION AND REVENUE DEPARTMENT
OF THE STATE OF NEW MEXICO

IN THE MATTER OF THE PROTEST OF
JOHN F. GILLIAM JR. AND MARTHA L. GILLIAM No. 98-35
PROTEST TO WARRANT OF LEVY

DECISION AND ORDER

This matter came on for formal hearing before Gerald B. Richardson, Hearing Officer, on

May 20, 1998. Mr. and Mrs. Gilliam, hereinafter, “Taxpayer”, were represented by Mr. John F.

Gilliam. The Taxation and Revenue Department, hereinafter, “Department”, was represented by

Frank D. Katz, Chief Counsel. Based upon the evidence and the arguments presented, IT IS

DECIDED AND ORDERED AS FOLLOWS:

FINDINGS OF FACT

1. On August 21, 1998 the Department served two warrants of levy, numbers 8818 and

8819, upon Sunwest Bank in Albuquerque New Mexico.

2. Warrant of Levy no.8818 lists John F. Gilliam and Martha L. Gilliam doing business

as USA Printing as the Taxpayer owing the Department unpaid taxes. The Warrant of Levy was

for the total amount of $47,924.49 and contains an attached schedule of assessments which list the

assessment number, the dates of the assessment, the period for which the tax is due and the total

amount of tax, penalty and interest assessed. The assessments were for gross receipts tax, penalty

and interest assessed against the Taxpayer’s business, USA Printing.

3. Warrant of Levy no. 8819 lists John F. Gilliam and Martha L. Gilliam as the Taxpayer

owing the Department taxes. It lists two assessments, nos. 718277 and 718278 for personal
income taxes for tax years 1994 and 1995, and claims a total amount due of $15,105.72 in tax,

penalty and interest.

4. Both Warrants of Levy, (hereinafter, levy or levies) order the person upon whom the

levy is served to reveal the property in their possession belonging to the listed taxpayer and to

surrender the property in their possession to the Department.

5. Pursuant to the levies served upon it, on August 21, 1997 Sunwest Bank paid to the

Department $13,966.74 which it had held in accounts owned by the Taxpayer.

6. On August 22, 1997, John J. Chavez, III, the Secretary of the Department, wrote the

Taxpayer a letter advising them that on August 21, 1997 the Department had secured $13,966.74

from Sunwest Bank in Albuquerque pursuant to service of levy no. 8819.

7. Both Assessment nos. 718277 and 718278 show an assessment date of July 23, 1997

on the Department’s information system. Copies of the assessments which were mailed to the

Taxpayer, however, reflect a hand-stamp which states that the assessments were not actually

mailed to the Taxpayer until August 15, 1997.

8. Section 7-1-31 NMSA 1978 of the Tax Administration Act authorizes the Secretary of

the Department to collect tax from a delinquent taxpayer by levy upon all property of delinquent

taxpayers.

9. Section 7-1-16 NMSA 1978 of the Tax Administration Act defines a delinquent

taxpayer to be a taxpayer to whom taxes have been assessed who does not, within thirty days after

the date of assessment make payment or protest the assessment as provided by Section 7-1-24

NMSA 1978.

10. Section 7-1-24(B) NMSA 1978 allows a taxpayer to whom an assessment has been

issued thirty days from the date of mailing of the assessment to file a protest to the assessment.

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11. On September 11, 1997, the Taxpayer filed a timely, written protest, pursuant to

Section 7-1-24 NMSA 1978 to Assessment nos. 718277 and 718278.

12. The Taxpayer was not a delinquent taxpayer with respect to Assessment nos. 718277

and 718278.

13. Upon learning of the Department’s levy upon his bank account, Mr. Gilliam called

Secretary Chavez to object to the seizure of his bank account for assessments which he had only

just received. On August 28, 1997, Anita Williams of the Department’s Office of Inspector

General and Secretary Chavez spoke with Mr. Gilliam. They admitted that the Department was

not authorized to levy upon his bank account for the personal income tax assessments which were

not delinquent, but informed Mr. Gilliam that the monies seized would be applied to other

assessments which were delinquent and which were referenced in the Department’s levy number

8818. They further informed Mr. Gilliam that they would send him new paperwork to reflect how

the proceeds of the levy would be applied.

14. On August 28, 1997, the Department mailed Mr. Gilliam a letter advising him that the

proceeds of levy no. 8818 were applied as follows;

Assessment no. 1742648 $3,647.00
Assessment no. 1742649 $3,575.49
Assessment no. 1742650 $3,324.82
Assessment no. 1742651 $3,175.43
Assessment no. 2118321 $ 11.53.

The letter further reflected a credit to the Taxpayer in the amount of $232.47, reflecting excess

monies seized pursuant to the levy which were not applied to any assessments.

15. The schedule of assessments attached to levy no. 8818 reflects an assessment date of

January 6, 1994 for Assessment nos. 1742648, 1742649, 1742650 and 1742651. It reflects an

assessment date of March 7, 1997 for Assessment no. 2118321.

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16. The assessments to which the proceeds of levy no. 8818 were applied were not

protested by the Taxpayer.

17. On September 11, 1997 the Taxpayer filed a timely, written protest to the

Department’s seizure of money from his bank account at Sunwest Bank pursuant to the

Department’s levies.

DISCUSSION

The sole issue to be determined herein is whether the Department properly levied upon the

Taxpayer’s bank account with Sunwest Bank. The Taxpayer argues that since he was informed by

the Department Secretary that the account proceeds were levied upon pursuant to levy 8819 and

since the assessments secured by levy 8819 were not delinquent, that the levy was unauthorized

and illegal and that the proceeds of the levy should be returned to him with interest.

The Department acknowledges that Section 7-1-31 NMSA 1978 only authorizes levies for

delinquent taxes and that the Taxpayer was not delinquent with respect to the taxes assessed by

the personal income tax assessments referenced in levy no. 8819. It thus acknowledges that levy

no. 8819 was invalid. It argues, however, that levy no. 8818 was a valid levy since the levy

references assessments of tax which were delinquent. It further argues that because the proceeds

of the levy were only applied to delinquent assessments of tax, the Department could validly levy

upon the Taxpayer’s bank account pursuant to levy no. 8818.

The Department is correct. Although Secretary Chavez erroneously informed the

Taxpayer that the Department had seized the Taxpayer’s bank account proceeds pursuant to an

invalid levy, the Department served two levies upon Sunwest Bank at the same time, and the

Taxpayer has not established any infirmities or improprieties with respect to levy no. 8818. The

Secretary has the duty to administer and enforce the laws with which the Department is charged.

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Section 9-11-6(A) NMSA 1978. Thus, the Secretary is charged with the collection of delinquent

tax assessments. Assessments of tax are also presumptively correct. Section 7-1-17(C) NMSA

1978. Thus, the assessments referenced in levy no. 8818 were presumptively correct. Section 7-

1-17(D) NMSA 1978 authorizes the Secretary to demand payment of any taxes which have been

assessed, except for assessments which are more than ten years old, the collection of which is

barred by Section 7-1-19 NMSA 1978. Reading these statutes together, the Secretary is under the

duty to enforce the collection of delinquent taxes. The tax assessments to which the levy proceeds

were applied were delinquent assessments which had not been protested by the Taxpayer.1 Thus,

regardless of the fact that levy no. 8819 was invalid, levy no. 8818 was valid, the Secretary had

the obligation to enforce the assessments referenced in that levy, and the Department acted

properly when they applied the proceeds of levy no. 8818 to the delinquent assessments

referenced in the levy.

CONCLUSIONS OF LAW

1. The Taxpayer filed a timely, written protest to the Department’s seiziure of his

property pursuant to its Warrants of Levy and jurisdiction lies over both the parties and the subject

matter of this protest.

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There remains a credit in the amount of $232.47 reflecting amounts the Department collected pursuant to levy no.
8818 which have not been applied to any of the other assessments referenced in the levy. The Taxpayer’s protest did
not reference this credit or ask for its return, but focused solely upon the fact that the assessments referenced by levy
8819 were not delinquent. Thus, whether the Taxpayer is entitled to a return of the amount of the credit was not an
issue herein. Should the Taxpayer wish to obtain a refund of this credit, a claim for refund may be filed with the
Department pursuant to Section 7-1-26 NMSA 1978.

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2. The Department’s Warrant of Levy no. 8818 is invalid because it was employed to

collect assessments of tax which were not subject to collection because the Taxpayer was not a

delinquent taxpayer with respect to the assessments referenced in the levy.

3. The assessments referenced by levy no. 8818 are presumptively correct pursuant to

Section 7-1-17 NMSA 1978.

4. The Taxpayer was a delinquent taxpayer, pursuant to Section 7-1-16 NMSA 1978 with

respect to the assessments to which the proceeds of levy no. 8818 were applied.

5. The Taxpayer failed to meet its burden of proving that levy no. 8818 was invalid or

improper in any manner.

6. Because Sunwest Bank was served with levy no. 8818 as well as levy 8819, any

amounts received by the Department from Sunwest Bank were properly collected pursuant to levy

8818.

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

DONE, this 18th day of June, 1998.

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