United States

New Mexico: No Reduction of Interest Despite Significant Delay in Administrative Hearing

Jan 11, 2016
From KPMG TaxWatch

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A New Mexico Hearings Officer recently addressed whether interest could be abated due to a delay in scheduling a hearing. In 2006, the New Mexico Taxation and Revenue Department assessed a taxpayer for unpaid gross receipts tax and interest for the period from January 2002 through June 2005. A month later, the taxpayer filed a formal protest letter. Almost nine years later―in 2015―the Department requested that the taxpayer’s protest be scheduled for a hearing. At the time of the protest was filed, there was no statutory requirement that a hearing be set within any particular time frame. However, by 2015, the law had been revised to require a hearing to be held within 90 days of receipt of a protest.  In the course of the hearing, in late 2015, the Department agreed to reduce the assessment by about two-thirds for various reasons. The Department calculated interest on the remaining assessment from the original due date of the taxes (i.e., before 2006). This resulted in the taxpayer owing almost as much in interest as it owed in tax under the reduced assessment. The taxpayer argued it should be entitled to a reduction in interest due to the significant delay in scheduling the hearing.

The presiding hearing officer disagreed, noting that it is the taxpayer’s burden to show that it was entitled to a reduction in interest. Because no statutory or regulatory violation occurred, there was no administrative remedy―reduction in interest or otherwise―for a delay in scheduling a hearing. The hearing officer further noted that the assessment of interest is mandatory, not discretionary, and therefore cannot be abated. In her view, the assessment of interest is not meant to punish taxpayers, but to compensate the state for the time-value of unpaid revenues. In this situation, the taxes were not paid when due. For more information regarding In the Matter of the Protest of Precision Eye Center, please contact Josh Fritzsche at 214-840-2198.

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The following information is not intended to be "written advice concerning one or more federal tax matters" subject to the requirements of section 10.37(a)(2) of Treasury Department Circular 230.

The information contained herein is of a general nature and based on authorities that are subject to change. Applicability of the information to specific situations should be determined through consultation with your tax adviser.