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F I S C A L I M P A C T R E P O R T

SPONSOR Smith

ORIGINAL DATE

LAST UPDATED

1-30-2006

HB

SHORT TITLE Mailing of Tax Dept. Assessments and Notices

SB 321

ANALYST Dearing

APPROPRIATION (dollars in thousands)

Appropriation

Recurring

or Non-Rec

Fund

Affected

FY06

FY07

NFI*

Please See Narrative*

(Parenthesis ( ) Indicate Expenditure Decreases)

SOURCES OF INFORMATION

LFC Files

Responses Received From

Taxation and Revenue Department (TRD)

SUMMARY

Synopsis of Bill

Senate Bill 321 creates a new section of the Tax Administration Act which requires the Taxation

and Revenue Department to mail assessments of taxes, interest, penalties and other payments to

the last known address of the person owing those liabilities.

Similarly, the act amends Section 7-1-26 § a.) NMSA 1978 such that the department is required

to respond to taxpayer refund claims of gross receipts tax, compensation tax, personal income tax

or corporate income tax, via mail, establishing both that the refund claim was received and the

completeness of the claim, as well as providing the ability for the taxpayer or Taxation and

Revenue Department to designate the claim as “protective.”

In general, these changes are proposed to tax administration statutes:

1. A new section of statute would require the Taxation and Revenue Department to mail as-

sessments of taxes to the last known mailing address of the person owing the taxes.

2. The Department would be required to notify taxpayers when it has received a claim for

refund of certain taxes. The notification would inform the taxpayer whether the Department

Senate Bill 321 – Page

2

considers the claim to be complete. The Department and the taxpayer could agree to designate

the claim as a “protective claim.” A protective claim asserts that the entitlement to a refund will

be established by a pending court decision.

3. Rules governing refund claims would be modified. Under present law, TRD may not act

on a refund claim after 210 days unless the taxpayer has filed a protest. Under the proposal,

TRD could still act on the claim after 210 days, but no interest would be paid. TRD could not

act on a claim after one year. In the case of a protective claim, if the Department has not acted

within 120 days from the final decision on the case on which the claim is contingent, the remain-

ing claim is denied.

The effective date of the provisions of this act is July 1, 2006

FISCAL IMPLICATIONS

*The proposals would have no significant impacts on state and local revenues. Several of the

provisions are already being implemented as a matter of Department policy.

SIGNIFICANT ISSUES

Several other technical changes are made to sections 7-1-26 and 7-1-68 governing interest on

under- and over-payments of tax.

Within Section 7-1-26 § b.) (1) NMSA 1978, the enactment removes language which currently

specifies the pursuit of only one of the available remedies within Section 7-1-26 § c.) NMSA.

Within Section 7-1-26 § b.) (3) NMSA 1978, the enactment amends and creates language to

change the treatment of time-lines surrounding timeliness of taxpayer claims, and subsequent

Department activities such that the Taxation and Revenue Department may act on claims through

and including any time within the calendar year following that year of the date of the refund

claim, but not past Dec. 31

st

in the calendar year following the year in which the refund claim

was received.

Within Section 7-1-26 § b.) (4) NMSA 1978, the enactment establishes for protective claims a

120 day maximum, from either the date of the final decision in the lead case, from which appeal

may not be taken; or the last day on which appeal may be taken yet is not, whereby at this time,

those claims denied will remain so.

Subsections 7-1-26 § k. (1) & (2) NMSA 1978 are created to define “lead-case” and “protective

claim,” and subsection 7-1-26 § l.) (1) NMSA 1978 is created to stipulate that disposition of a

protective claim shall be postponed until a final decision is reached in the lead case.

7-1-68 § e.) (9) & (10) NMSA 1978 are created to stipulate that no interest shall be allowed or

paid with respect to an amount credited or refunded if; in section (9), the credit or refund is in

settlement of a protective claim, as defined in Section 7-1-26 § k. (1) & (2) NMSA 1978, pro-

vided that the interest paid with respect to the period from the date of the final unappealable de-

cision in the lead case until a date preceding by not more than thirty days the date the credit or

refund is paid on the protective claim; or section (10), the Taxation and Revenue Department

acts to grant the credit or refund pursuant to Section 7-1-26 § b. (3) NMSA 1978

Senate Bill 321 – Page

3

Additionally, there are several linguistic changes proposed throughout the aforementioned stat-

utes.

The effective date of the provisions of this act is July 1, 2006

CONFLICT, DUPLICATION, COMPANIONSHIP, RELATIONSHIP

Duplicates HB 383

TECHNICAL ISSUES

Section 3 of the bill contains amendments to Section 7-1-68 NMSA 1978. As the bill is cur-

rently drafted, it makes those amendments to a version of Section 7-1-68 that does not reflect

amendments to that section approved in 2003. To avoid confusion, this section should be re-

written to amend the current language in that section. No substantive changes in the proposal are

needed to achieve this.

Section 1, page 1, lines 22 through 24 should read: “The department shall mail notices of as-

sessment of taxes, interest and penalties and notices of other payments due to the department to

the last known mailing.”

WHAT WILL BE THE CONSEQUENCES OF NOT ENACTING THIS BILL

Applicable sections of the New Mexico Statutes Annotated would remain intact, as currently

written.

PD/nt