Mary Ann Mendonca



The taxpayer filed a timely 1999 New Mexico personal income tax return showing $61.00 in tax due, and included a check in that amount.  In reviewing the return, the Department incorrectly concluded that the taxpayer was entitled to an additional exemption.  Instead of contacting the taxpayer, the Department recalculated the return and issued her an unsolicited refund check.  At that time, the Department was not authorized to make unsolicited refunds.  Subsequently, the Department discovered its error and assessed the taxpayer for $165.00 of 1999 personal income tax, which was the deficiency created by the refund, plus interest and penalty.  The taxpayer paid the principal but protested the assessed penalty and interest. The Department then abated the penalty.  The hearing officer found that based on the context clause found in the definition of “tax” in Section 7-1-3 NMSA 1978, the taxpayer was not liable for interest on the Department’s unauthorized refund.