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  3. 19-01 Silver Oak Drilling LLC.

19-01 Silver Oak Drilling LLC.



On October 6, 2016, the Department denied the Taxpayer’s application for the High Wage Jobs Tax Credit in the amount of $1,144,314.98 for the periods between January of 2010 through December 2014. On January 4, 2017, the Taxpayer executed a protest of the denial of its application. The decision hinged on essentially two points, the first being whether the Taxpayer was an eligible employer and, secondly, the determination of the actual number of new jobs being created in the specified period. The Department argued that the Taxpayer had failed to establish that it made more than fifty percent of its sales of goods or services produced in New Mexico to persons outside the state and therefore was not an eligible employer. The Taxpayer is an oil drilling firm that provided services for two customers that made up 76 percent of their total sales. The Department had determined that each of these had received the services provided inside the state and therefore the Taxpayer could not be seen as having sold to persons outside New Mexico. But the Hearing Officer disagreed. The Department did not consider the location of the headquarters of these customers or where the companies primarily received their capital. He also concluded that it was mistaken when it interpreted that the statute meant the services provided must be received outside the state. A plain language reading of the statute would show that the Taxpayer was an eligible employer as the legislature described. The next point to be determined was whether the number of employees in new jobs calculated by the Taxpayer was correct. Here the Hearing Officer determined the Taxpayer was not precisely following the instructions provided in the statute which state the number is calculated by examining the difference between the total number of employees with high-wage economic-based jobs and the number that there were on the day prior to the date the new job was created. This is what the Department did. This having been established, the Hearing Officer ordered that the protest be granted in part and denied in part, allowing the credit for twelve positions that were disallowed by the Department because of the ineligibility of the employer and disallowing the others because of the incorrect calculation.