United States

New Mexico: Amended Return Required for Valid Refund Claim

Feb 26, 2018
From KPMG TaxWatch

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A New Mexico Hearing Officer recently addressed whether a taxpayer’s corporate income tax refund was barred by the statute of limitations. Specifically, 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 at issue 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, although it varied in each communication, 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. The Hearing Officer first determined that the statute, by using the word “include” to list out the requirements for filing a refund claim, signified a non-exhaustive list and therefore the Department was not precluded from requiring additional criteria by regulation. Furthermore, in the Hearing Officer’s view, the regulation was a proper implementation of the law and did not impose unreasonable or irrelevant requirements on taxpayers. Rather, the filing of an amended return helped the Department process refunds and gave it something to rely on for truth and accuracy. The taxpayer’s argument that the subsequent statute change to require an amended return meant that an amended return was not required for the tax year at issue, was rejected. The Hearing Officer, noting that three years had passed since the first communication with the Department, also implied that the taxpayer should have been more diligent in pursuing its refund claim. Please contact Nick Palmos at 214-840-4076 with questions.

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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.