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AN ACT

RELATING TO TAXATION; ALLOWING TAXPAYERS TO REQUEST EARLY

COMPLETION OF AUDITS; EXTENDING THE TIME PERIOD DURING WHICH

MANAGED AUDIT PARTICIPANTS MAY MAKE INTEREST-FREE PAYMENTS ON

DELINQUENT TAXES; STATING EXCEPTIONS TO DELINQUENT TAXPAYER

STATUS; AMENDING SECTIONS OF THE NMSA 1978; RECONCILING

MULTIPLE AMENDMENTS TO THE SAME SECTION OF LAW IN LAWS 2001.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF NEW MEXICO:

Section 1. Section 7-1-11 NMSA 1978 (being Laws 1965,

Chapter 248, Section 16, as amended by Laws 2001, Chapter 16,

Section 4 and also by Laws 2001, Chapter 56, Section 4) is

amended to read:

"7-1-11. INSPECTION OF BOOKS OF TAXPAYERS--

CREDENTIALS.--

A. The department shall cause the records and

books of account of taxpayers to be inspected or audited at

such times as the department deems necessary for the

effective execution of the department's responsibilities.

B. Auditors and other officials of the department

designated by the secretary are authorized to request and

require the production for examination of the records and

books of account of a taxpayer. Auditors and officials of

the department designated by the secretary shall be furnished

with credentials identifying them as such, which they shall

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display to any taxpayer whose books are sought to be

examined.

C. Taxpayers shall upon request make their records

and books of account available for inspection at reasonable

hours to the secretary or the secretary's delegate who

presents proper identification to the taxpayer.

D. If the taxpayer's records and books of account

do not exist or are insufficient to determine the taxpayer's

tax liability, if any, the department may use any reasonable

method of estimating the tax liability, including but not

limited to using information about similar persons,

businesses or industries to estimate the taxpayer's

liability.

E. The secretary or the secretary's delegate shall

develop and maintain written audit policies and procedures

for all audit programs in which the department routinely

conducts field audits of taxpayers, including policies and

procedures concerning audit notification, scheduling, records

that may be examined, analysis that may be done, sampling

procedures, gathering information or evidence from third

parties, policies concerning the rights of taxpayers under

audit and related matters. Department audit policies and

procedures shall be made available to a person who requests

them, at a reasonable charge to defray the cost of preparing

and distributing those policies and procedures. Nothing in

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this section shall be construed to require the department to

provide information that is confidential pursuant to Section

7-1-8 NMSA 1978, nor shall the department be required to

provide information concerning how taxpayers are selected for

audit."

Section 2. Section 7-1-11.2 NMSA 1978 (being Laws 2003,

Chapter 398, Section 7) is amended to read:

"7-1-11.2. REQUIRED AUDIT NOTICES.--

A. Except as provided in Subsection G of this

section, prior to or coincident with requesting records and

books of account from a taxpayer pursuant to Section 7-1-11

NMSA 1978, as part of an office or field audit, the

department shall provide the taxpayer with written dated

notice of the commencement of an audit. The notice shall, at

a minimum, state the tax programs and reporting periods to be

covered and the date on which the audit is commenced.

B. To any taxpayer to whom the department is

required to provide a written notice of the commencement of

an audit, the department shall also provide a written notice

of the outstanding records or books of account that have been

requested but not received. If the taxpayer has provided all

records and books of account requested, the notice shall so

state. The notice of outstanding records or books of account

shall be given no sooner than sixty days, unless the taxpayer

provides a written request for early completion of the audit,

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and no later than one hundred eighty days after the date of

the commencement of the audit. The notice of outstanding

records or books of account shall be dated and shall provide

reasonable descriptions of any records or books of account

needed or the information expected to be contained in them

and shall give the taxpayer ninety days to comply with

Section 7-1-11 NMSA 1978. The notice shall state that if the

taxpayer does not properly comply within ninety days of the

date of the notice, the department will proceed to issue any

assessment of tax due on the basis of information available.

C. A taxpayer may request additional time to

comply with the notice of outstanding records and books of

account. Such request shall be in writing and shall state

the amount of time needed.

D. If the department does not issue an assessment

within one hundred eighty days after giving a notice of

outstanding records or books of account or within ninety days

after the expiration of the additional time requested by the

taxpayer to comply, if such request was granted, interest

shall be computed in accordance with Paragraph (6) of

Subsection A of Section 7-1-67 NMSA 1978.

E. Any taxpayer who was not provided a proper

notice of outstanding records or books of account is entitled

to computation of interest in accordance with Paragraph (7)

of Subsection A of Section 7-1-67 NMSA 1978.

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F. Nothing in this section shall prevent the

department from requesting from the taxpayer a waiver of the

statute of limitations for assessment of tax owed. Nothing

in this section shall prevent the department from issuing an

assessment of tax owed on the basis of the information

available.

G. This section does not apply to investigations

of fraud."

Section 3. Section 7-1-16 NMSA 1978 (being Laws 1965,

Chapter 248, Section 19, as amended) is amended to read:

"7-1-16. DELINQUENT TAXPAYER.--

A. Except as provided in Subsection D of this

section, any taxpayer to whom taxes have been assessed as

provided in Section 7-1-17 NMSA 1978 or upon whom demand for

payment has been made as provided in Section 7-1-63 NMSA 1978

who does not within thirty days after the date of assessment

or demand for payment make payment, protest the assessment or

demand for payment as provided by Section 7-1-24 NMSA 1978 or

furnish security for payment as provided by Section 7-1-54

NMSA 1978 becomes a delinquent taxpayer and remains such

until:

(1) payment of the total amount of all such

taxes is made;

(2) a retroactive extension of time to file

a protest is granted pursuant to Section 7-1-24 NMSA 1978;

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provided, however, that the taxpayer again becomes a

delinquent taxpayer if the assessment is not abated and the

taxpayer does not pay, protest or furnish security within the

time allowed by the retroactive extension of time;

(3) security is furnished for payment; or

(4) no part of the assessment remains

unabated.

B. Any taxpayer who fails to provide security as

required by Subsection D of Section 7-1-54 NMSA 1978 shall be

deemed to be a delinquent taxpayer.

C. If a taxpayer files a protest as provided in

Section 7-1-24 NMSA 1978, the taxpayer nevertheless becomes a

delinquent taxpayer upon failure of the taxpayer to appear,

in person or by authorized representative, at the hearing set

or upon failure to perfect an appeal from any decision or

part thereof adverse to the taxpayer to the next higher

appellate level, as provided in that section, unless the

taxpayer makes payment of the total amount of all taxes

assessed and remaining unabated or furnishes security for

payment.

D. A taxpayer does not become a delinquent

taxpayer if the taxpayer:

(1) files for an extension of time to file a

protest as provided in Section 7-1-24 NMSA 1978 within thirty

days after the date of the assessment or demand for payment,

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unless the assessment is not abated and the taxpayer does not

pay, protest or furnish security within the time allowed by

the extension of time; or

(2) has been issued an assessment as a

result of a managed audit but is still within the allowed

time period to pay the tax due as specified in Paragraph (4)

of Subsection A of Section 7-1-67 NMSA 1978."

Section 4. Section 7-1-67 NMSA 1978 (being Laws 1965,

Chapter 248, Section 68, as amended) is amended to read:

"7-1-67. INTEREST ON DEFICIENCIES.--

A. If a tax imposed is not paid on or before the

day on which it becomes due, interest shall be paid to the

state on that amount from the first day following the day on

which the tax becomes due, without regard to any extension of

time or installment agreement, until it is paid, except that:

(1) for income tax imposed on a member of

the armed services of the United States serving in a combat

zone under orders of the president of the United States,

interest shall accrue only for the period beginning the day

after any applicable extended due date if the tax is not

paid;

(2) if the amount of interest due at the

time payment is made is less than one dollar ($1.00), then no

interest shall be due;

(3) if demand is made for payment of a tax,

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including accrued interest, and if the tax is paid within ten

days after the date of the demand, no interest on the amount

paid shall be imposed for the period after the date of the

demand;

(4) if a managed audit is completed by the

taxpayer on or before the date required, as provided in the

agreement for the managed audit, and payment of any tax found

to be due is made in full within one hundred eighty days of

the date the secretary has mailed or delivered an assessment

for the tax to the taxpayer, no interest shall be due on the

assessed tax;

(5) when, as the result of an audit or a

managed audit, an overpayment of a tax is credited against an

underpayment of tax pursuant to Section 7-1-29 NMSA 1978,

interest shall accrue from the date the tax was due until the

tax is deemed paid;

(6) if the department does not issue an

assessment for the tax program and period within the time

provided in Subsection D of Section 7-1-11.2 NMSA 1978,

interest shall be paid from the first day following the day

on which the tax becomes due until the tax is paid, excluding

the period between either:

(a) the one hundred eightieth day after

giving a notice of outstanding records or books of account

and the date of the assessment of the tax; or

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(b) the ninetieth day after the

expiration of the additional time requested by the taxpayer

to comply, if such request was granted, and the date of the

assessment of the tax; and

(7) if the taxpayer was not provided with

proper notices as required in Section 7-1-11.2 NMSA 1978,

interest shall be paid from the first day following the day

on which the tax becomes due until the tax is paid, excluding

the period between one hundred eighty days prior to the date

of assessment and the date of assessment.

B. Interest due to the state under Subsection A or

D of this section shall be at the rate of fifteen percent a

year, computed on a daily basis; provided that if a different

rate is specified by a compact or other interstate agreement

to which New Mexico is a party, that rate shall be applied to

amounts due under the compact or other agreement.

C. Nothing in this section shall be construed to

impose interest on interest or interest on the amount of any

penalty.

D. If any tax required to be paid in accordance

with Section 7-1-13.1 NMSA 1978 is not paid in the manner

required by that section, interest shall be paid to the state

on the amount required to be paid in accordance with Section

7-1-13.1 NMSA 1978. If interest is due under this subsection

and is also due under Subsection A of this section, interest

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shall be due and collected only pursuant to Subsection A of

this section."

Section 5. REPEAL.--Laws 2001, Chapter 16, Section 4 is

repealed.

Section 6. EFFECTIVE DATE.--The effective date of the

provisions of this act is July 1, 2007.