Working Boy Productions

20-08

On May 4, 2018, the Department issued a denial of the Taxpayer’s application for a film production credit for the tax years 2015 and 2016. On August 1, 2018, the Taxpayer filed a formal protest of the denial of its applications. The issue to be decided in the case was whether the applications were denied properly by the Department. The Taxpayer is a film production company that had production and postproduction expenditures because of a film or commercial audiovisual project in New Mexico in 2015 and 2016. The Taxpayer argued that the hearing was unfair because of the delays that had occurred in having the hearing. Though at the time statute required the Department conduct a hearing within 90 days of the protest, the remedy allowed was only for liabilities, such as giving the Hearing Officer the authority to stop more interest being assessed, and not for credits. Regarding the merits of the protest, the film production tax credit requires that an application for the credit be made within one year of the date of the last direct production expenditure in New Mexico. The last qualified expenditure for 2015 by the Taxpayer was made on December 7, 2015, but the application was filed well over a year later on October 9, 2017. The Taxpayer argued that the application had been first filed with the Film Office in 2015 but there was no evidence of application and the Taxpayer could provide no support for this claim. The 2016 application had been denied by the Department because the Taxpayer had failed to provide canceled checks that matched the invoice amounts on the qualified expenditures. The Taxpayer explained that it paid several invoices or parts of invoices on one check. The Taxpayer provided invoices that were paid-stamped and a letter from its vendor that stated it had paid all the invoices in full at one time. The Hearing Officer found this evidence, as well as the testimony of the Taxpayer, to be consistent and creditable and so concluded that the 2016 claim for the credit should be allowed. This having been decided, the Hearing Officer ordered that the tax credit for 2016 to be allowed and the application for 2015 denied.