The city of Roswell has joined with many other local governments in New Mexico in a lawsuit alleging that the state has not properly distributed gross receipts taxes for many years, but Chaves County has opted not to become a plaintiff.
“We declined to participate, as our loss of funds was minimal and we were concerned that the costs of the case would outweigh our damages,” County Manager Stanton Riggs wrote in an email.
The city joined the lawsuit in November 2019 when a second amended petition was filed.
The case is in the 2nd Judicial District Court of New Mexico and alleges that the New Mexico Taxation and Revenue Department and the department secretaries, since about 2010, have not properly followed statutes in terms of how requests for refunds are handled, how reductions of local taxes are handled when dealing with refunds, and how tax payments are handled when the state isn’t sure about which local governments should receive the funds.
According to one of the documents filed in the case by the petitioners’ law firm, Gallagher and Kennedy, “Petitioners have good reason to believe that TRD shorted municipalities and counties from receiving tens of millions of dollars” in gross receipts taxes.
The Taxation and Revenue Department, through state attorneys, has denied that statutes have been applied incorrectly and also argue that some of the plaintiffs have “unclean hands” because they did not perform timely reconciliation of accounts.
Its defenses also include that the New Mexico Department of Finance and Administration should be a party to the case and that some of the allegations are barred by statutes of limitations.
A Taxation and Revenue spokesperson added that the department agrees with the need for accurate tax distributions and accounting.
“The Taxation and Revenue Department is committed to ensuring that cities and counties receive timely and accurate gross receipts tax distributions that they are due under the law,” said Communications Director Charlie Moore. “We agree with local governments on the importance of determining the accuracy of distributions from past years. In the meantime, the department’s local government liaison will continue to work with local governments on any questions or concerns they may have about distributions.”
The state collects gross receipts taxes and distributes some of the money back to cities and counties.
In joining 43 other cities, villages, towns and counties in New Mexico, the city of Roswell considers the suit to be in part about the fairness of the tax collection and distribution system, according to City Attorney Aaron Holloman.
“The city believes that it is important to ensure that systems in place should be fairly administered and hope this process will ensure that fairness,” Holloman wrote in an email.
He added that the amount of taxes the city alleges it has lost cannot be specified publicly.
“We have some information about what we might expect, but can only say at this time that it is a significant enough amount to be worth our time in pursuing the claims through the lawsuit,” he stated.
While the lawsuit was originally filed in November 2018 with four cities as plaintiffs, the efforts of municipalities and counties actually began years earlier and included the involvement of people with the New Mexico Municipal League.
Executive Director William F. Fulginiti said that the association began researching the situation on behalf of local governments about three years ago, filing Inspection of Public Records Act requests to obtain information about the situation. The association turned over its work to the law firm once a lawsuit was filed, he said.
“It is way past time to get this resolved,” Fulginiti said. “It has been going on for many years, and it is way past time to get this settled.”
The case is now assigned to Judge Nancy Franchini’s court in Albuquerque, and various motions and discovery actions are under consideration.
Senior Writer Lisa Dunlap can be reached at 575-622-7710, ext. 351, or at email@example.com.