City of Eunice v. State of New Mexico Taxation & Revenue Department, 6 N.M. 476

A taxpayer reported and paid state, county, and City of Eunice (City) gross receipts taxes for years, later amending returns to show its business was in unincorporated Lea County, not the City.
The Department refunded the taxpayer municipal (City) taxes back to January 2009 but did not refund any state gross receipts tax to the taxpayer.
The Department concluded prior transfers/distributions to the City were erroneous and sought recovery of about $2.3 million by withholding future transfers.
The City sued for declaratory and injunctive relief, arguing recovery for distributions older than one year would cause severe fiscal harm (would equal ~40% of its general fund budget).
The district court found the Department could recover only amounts from 2012 (about $120,552.72) under § 7-1-6.15 and permanently enjoined recovery of older amounts.
The Department appealed; the Court of Appeals affirmed, interpreting § 7-1-6.15 and applying the one-year limitation.

Issue	Plaintiff's Argument (City)	Defendant's Argument (Department)	Held
Whether § 7-1-6.15’s term “erroneous” covers taxpayer-caused misallocations as well as Department errors	“Erroneous” includes any mistaken transfer/distribution (including taxpayer reporting errors); Dept. may correct those errors but is limited by statutory timing	§ 7-1-6.15 should be read to apply only to Department errors; distributions were correct when made based on net receipts, so the one-year bar does not apply to taxpayer errors	Court held “erroneous” covers mistakes that result in incorrect transfers/distributions (including taxpayer error); Department may correct but is subject to § 7-1-6.15 timing limits
Whether the Department may recover transfers/distributions made more than one year before its determination (§ 7-1-6.15(C))	Recovery beyond one year would be barred by the statute; municipalities must have revenue stability	Department argues no time limit for recovering amounts that were correctly distributed at the time based on then-reported net receipts	Court held § 7-1-6.15(C) bars decreases to current/future distributions for excess transfers made more than one year prior to the calendar year of the Secretary’s determination; recovery limited to post-2012 transfers here

Hovey v. Allstate Ins. Co., 135 N.M. 397, 89 P.3d 69 (N.M. 2004) (standard of review for statutory interpretation: de novo)
Amoco Prod. Co. v. N.M. Taxation & Revenue Dep’t, 118 N.M. 72, 878 P.2d 1021 (N.M. Ct. App. 1994) (statutes must be interpreted to effect legislative intent and avoid absurd results)
Marbob Energy Corp. v. N.M. Oil Conservation Comm’n, 146 N.M. 24, 206 P.3d 135 (N.M. 2009) (use plain language and ordinary meaning in statutory construction)
Ramirez v. IBP Prepared Foods, 130 N.M. 559, 28 P.3d 1100 (N.M. Ct. App. 2001) (interpret statute as a whole to achieve internal consistency)