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Wells Fargo Equipment Finance



On September 1, 2015, the Department sent a return adjustment notice for the tax year ending December 31, 2011 to the Taxpayer and on September 8, 2015 an assessment for the tax year ending December 31, 2011 including penalty and interest was sent to the Taxpayer. A timely formal protest was filed by the Taxpayer. The issue to be decided in the hearing is when the Taxpayer is eligible to claim the renewable energy tax credit. The Departments argument is that a taxpayer is eligible to claim the energy credit only after the certificate of eligibility is issued by the Energy, Minerals, and Natural Resources Department (EMNRD) and based on the certificate of eligibility issued to the Taxpayer eligibility to claim the started in 2012. The Department also argued that the initial application package with EMNRD secures the Taxpayer priority in line to claim the credit upon approval. The Taxpayer argued that it could claim the credit at any time after the facilities began producing qualified energy once the application package was approved by EMNRD. In this particular case the Taxpayer was approved in 2011 and they began producing electricity in 2011. The Department and the Taxpayer agreed during the hearing that there were no disputes in the material facts presented. The hearing officer determined that based on the language in Section 7-2A-19 NMSA 1978 that the Taxpayer first applies for the ability to claim the credit with EMNRD, the first level of approval can be received before construction of the facility, after the application package is approved and the facility is producing electricity the credit can be claimed by submitting the certificate of eligibility and other documents to the Department. It was decided that as credits are matters of legislative grace that the credit can be granted only after the requirements in the statute are met. The hearing officer referenced the statutes use of “may” claim the credit and based on the certain qualifications determined that this is intent to limit the credit. This means that the credit is not open-ended, unrestricted, or unconditional. The statute only indicates that the initial approval from EMNRD is used to determine a taxpayer’s priority over others in claiming the energy credit. However, in order to continue claiming the credit in subsequent years the qualifications have to continue to be met. The statute also does not explicitly allow for a taxpayer to reach back to the initial approval date to claim the credit.

The Taxpayer argued that by limiting the availability of the energy credit to the ten years after the facility initially produced qualified energy that the legislature must have intended that a taxpayer be eligible to claim the energy credit in the first year it produced energy as the taxpayer applied in the same year it applied for the credit the Taxpayer believes that it may not receive the full benefit of the credit for the full ten years. The Department argues that the statute does not guarantee that all taxpayers will be able to claim the credit for the full ten years. There are limits to the cumulative amount of credit that can be issued, certain priorities that are granted based on the certificate, and a limit on how long the credit may be claimed after production began per statute. The hearing officer determined that the Taxpayer could not claim the credit until the tax year in which the certification was issued and that the application approval was only a guarantee for a taxpayers priority in claiming the credit. The Taxpayer failed to overcome the presumption and the Department’s assessment and return adjustment were appropriate. For the reasons above the Taxpayer’s protest is denied.