The Taxpayer filed an official protest to the notices of claim of tax lien which was received timely by the Department on September 22, 2016. The formal protest disputed that the Taxpayer’s are not liable for the amounts due in a personal capacity and that the liability was incurred by a limited liability corporation (LLC). The Taxpayer’s formal protest is based on an assessments sent June 18, 2013.The assessments were the result of an audit on two sole proprietor businesses owned by the Taxpayer for the periods beginning January 1, 2006 and ending September 30, 2011. The Department argued that the taxpayer filed a protest of the original assessments on July 13, 2013 and in June of 2014 the protests were withdrawn by counsel with the Taxpayer’s authorization. On September 18, 2014, the Taxpayer then executed a payment installment agreement with the Department. The instalment agreement explicitly states as a condition that the Taxpayer admits conclusive liability for the entire amount of taxes due consistent with Section 7-1-21 NMSA 1978. The Taxpayers counsel contacted the Department in September of 2014 and a change was made in the system to add the “LLC” designation per the phone call by a revenue agent. The Department does not show any indication that the Department’s procedures were followed by the revenue agent that took the phone call as there is no record of a registration update form with the Department and a new CRS number was not issued. The Department’s process requires that when a business is converted from one form of business entity to another that the business must close its existing account and open a new account as the converted entity. At that time, the business would receive a new CRS number for reporting purposes. The Taxpayer was unable to confirm that any such documentation was sent to the Department and the Department was unable to locate a business registration update form from the Taxpayer. In September of 2014, the Taxpayer failed to make payments per the payments installment agreement with the Department. As the payments were not made before or on the dates specified in the agreement and the liability was not paid per Section 7-1-21 NMSA 1978, “the secretary may proceed to enforce collection of the tax as if the agreement had not been made or proceed as otherwise permitted by law.” The notices for claim of tax liens were sent by the Department to the Taxpayers in a final attempt to collect the unpaid amount due. The Hearing officer determined that the Department provided approximately two years for the Taxpayer to comply with the terms of the installment agreement and then sought to collect the tax owed pursuant to its authority under the Tax Administration Act. It was determined by the Hearing Officer that the Taxpayer was unable to present sufficient evidence to establish that the limited liability companies exist to accept or receive the liability at issue. The Hearing Officer noted that immunity from personal liability for members of a limited liability company extends only to the liability incurred by the limited liability company. The Hearing Officer was still not persuaded that the limited liability companies incurred the Taxpayer’s liability at issue. For the reasons above the Taxpayer’s protest is denied.
Richard Casias & Cheri L. Olivas