New Mexico: Amended Return Not Required for Valid Refund Claim

A New Mexico appeals court recently held that a taxpayer was not required to file an amended corporate income tax return as a prerequisite to requesting a refund. The issue was whether the taxpayer’s correspondence with the Department regarding its overpayment of taxes satisfied the legal elements necessary to establish a claim for refund. Under New Mexico law in effect for the tax year at issue, the statutory requirements for filing a refund claim “included” certain items, such as the taxpayer’s name and address, the tax type and amount of the refund, the period for which an overpayment was made, and taxpayer’s basis for the refund. For the tax year at issue, the statute did not specifically require a taxpayer to file an amended tax return. However, the Department’s regulation mandated that a taxpayer claiming a refund provide “information sufficient to allow processing of the claim.” This included providing a copy of the appropriate fully amended return for the period in which the refund was claimed.  In 2017, the statute was amended to also require an amended return as a prerequisite for filing a refund claim. It was agreed by all parties that the taxpayer communicated with the Department on two occasions within the statute of limitations. Those communications, although over three years apart, specified the amount of the refund being claimed and other relevant information. Neither communication included an amended return. After the statute of limitations had expired, the Department requested that the taxpayer file an amended return. It did so ten days later, and the Department subsequently denied the taxpayer’s refund claim as untimely. Subsequently, a Hearing Officer concluded that the regulation was a proper implementation of the law, as it did not impose unreasonable or irrelevant requirements on taxpayers.

On appeal, the court observed that the Hearing Officer had noted that the Department's authority to regulate was limited only to the degree that (1) a regulation cannot add a requirement or impose a limitation that would abridge or modify a statute, and (2) the Department may not enact a requirement that is "unreasonable or irrelevant.” In reaching his conclusion, the Hearing Officer had focused exclusively on the second limitation and determined that the requirement to file an amended return was reasonable and relevant. The court noted that both the statute and regulation addressed the same issue— what is required to submit a timely claim for refund. However, they provided for different results when one authority was followed over the other. The court concluded that because the regulation effectively abridged the taxpayer's right to pursue a claim for refund, the language of the statute must prevail. Therefore, the court ruled that the taxpayer’s refund claim was timely. Please contact Nick Palmos at 214-840-4076 with questions on CIBL, Inc. & Subsidiaries v. New Mexico Taxation and Revenue Department.