Timothy and Teresa Martin

12/09/2013

13-38

As Texas residents, the Taxpayers did not originally file New Mexico personal income tax returns for the relevant tax years: 2007, 2008, 2009 and 2010.  The Department received information that Mrs. Martin had earned income as a teacher in New Mexico during the relevant years, and sent the Taxpayers a notice of limited scope audit on August 10, 2011, for 2007 and 2008 taxes. In response to the notice, the Taxpayers filed their 2007 and 2008 New Mexico personal income tax returns in October 2011.  The Taxpayers did not make a claim for the Special Needs Adopted Child Tax Credit at that time.  In February or March of 2013, after Mr. Martin returned from a 12-month deployment, he prepared and submitted the Taxpayers’ 2009 and 2010 New Mexico personal income tax returns, and claimed the Special Needs Adopted Child Tax Credit for all eight of the Taxpayers’ children. After being told that his 2007 and 2008 returns had never been processed, the Taxpayers also resubmitted their 2007 and 2008 returns, including a claim for the Special Needs Adopted Child Tax Credit for all eight of the Taxpayers’ children.  The Department partially granted the 2009 and 2010 credits, but applied the Taxpayers’ allocation of income to New Mexico percentage to determine the percentage of the credit to which the Taxpayers were entitled.  On August 20, 2013, the Taxpayers protested the Department’s allocation off the credit for tax years 2009 and 2010, and the denial of the credit for tax years 2007 and 2008.  After the hearing, in response to a request for briefing on the applicability of the Servicemembers Civil Relief Act, the Department allowed the Taxpayers claim for the credit for tax year 2008.  Section 7-2-11 (C) NMSA 1978, provides that credits be apportioned in accordance with the apportionment of income.  The Department properly relied on this statute to apportion the claimed credit. Sections 7-2-12.1 and 7-1-26 NMSA 1978, set statutory limits to when a credit may be claimed or granted.  The Taxpayers were beyond the statute of limitations allowed to claim the credit for tax year 2007.  The Taxpayers’ protest was denied.