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Edward J. Clah & Melvina Murphy



The Taxpayer is an enrolled tribal member of the Navajo Nation.  He is a member of the Iyanbito Chapter, about 20 miles east of Gallup, NM.  The Taxpayer’s wife is also an enrolled member of the Navajo Nation, Iyanbito Chapter.  Although she is listed in the assessments, both parties agreed that her tax obligations were not at issue.  The Taxpayer and his wife own a homesite lease with a home on Navajo Nation tribal trust land, and a home in Gallup.  The Taxpayer’s wife worked as an on-call nurse at the hospital in Gallup during the period in question, so she resided at the home in Gallup and paid New Mexico personal income taxes for the relevant period.  The Taxpayer was employed with Chevron Mining Inc.  at the McKinley Mine on the Navajo Nation from February 1992 until July 2005, and then again from 2007 through 2011.  From July 2005 through 2006, the Taxpayer worked off the Navajo Nation. The Taxpayer claimed that he lived at the Iyanbito home for tax years 2004 through 2010. During that period, the Taxpayer used the Gallup address as his mailing address, the address used for his voter registration, the address on his driver’s license, and the address to which he registered two vehicles. On his New Mexico personal income tax returns, the Taxpayer claimed an exemption for all income earned at the McKinley mine on the Navajo Nation land pursuant to Section 7-2-5.5 NMSA 1978, for New Mexico personal income tax in years 2004, 2005, 2007, 2008, 2009 and 2010.  The Taxpayer did not claim the exemption for 2006 and paid personal income tax that year. On November 28, 2011, the Department assessed the Taxpayer for personal income tax, penalty and interest for tax years 2004, 2005, 2007, 2008, 2009, 2010 and 2011. Upon receiving the assessments, the Taxpayer contacted an investigator with the Department’s Tax Fraud Division. During that conversation, the Taxpayer told the investigator that he, his wife, son and daughter lived at the Iyanbito home and had never rented it out. The Taxpayer filed a protest to the assessments. In February of 2012, the tax fraud investigator visited both of the Taxpayer’s homes and found a woman living at the Iyanbito home who said that she had been renting there for about two years. Upon doing a property record search, the investigator found a listing for another woman, who stated that she, her husband and two kids rented the Iyanbito home in 2003 through 2008, while the Taxpayer and his entire family lived in Gallup. Considering many factors, the Taxpayer failed to demonstrate that he lived within the boundaries of the Navajo Nation during the relevant period, and all evidence seemed to point his having lived in Gallup during that time. The hearing officer found that the exemption under Section 7-2-5.5 NMSA 1978 did not apply and the Taxpayer is liable for the assessed personal income tax principal, penalty and interest. The Taxpayer’s protest was denied.