{1} Tаxpayer, Quantum Corporation, and certain non-profit organizations are parties to “bingo lease” agreements under which the non-profit organizations use space in buildings leased and renovated by Taxpayer for bingo games. Taxpayer appeals a decision and order of the hearing officer of the New Mexico Taxаtion and Revenue Department (Department) assessing gross receipts taxes and interest on Taxpayer’s proceeds under these agreements. The hearing officer found that the agreements were licenses, not leases, and that the income was subject to gross receipts taxes under NMSA 1978, § 7-9-53(A) (1991). Taxpayer raises two issues on appeаl: (1) whether the hearing officer was incorrect in concluding that these arrangements were licenses and not leases; and (2) if the agreements are leases, whether rent Taxpayer received for leasing equipment within the buildings is deductible under Section 7-9-53(C). We reverse on the first issue and remand for the hearing officer to decide the second issue consistent with this opinion.
Facts
{2} Taxpayer is a New Mexico corporation and engages in the business of leasing three buildings which it has remodeled and customized for purposes of conducting bingo games. The remodeled interiors include large open spaces for bingo patrons, a sales counter, a public address system and speakers, storage closets, a manager’s office with floor safes, and snack bar areas. Taxpayer has placed bingo game equipment such as a
{3} Taxpayer entered into agreements with several non-profit organizations for each building. The term of each agreement is one year. The agreements specify the sessions when the organizations' use the premises, typically four or five per week, rаnging from one and one-half hours to three and one-half hours in length. The non-profit organizations rent the facility for $100 per session, regardless of the length of the session. Taxpayer charges $50 per session for equipment rental.
{4} The organizations must make reasonable requests to Taxpayer for access at times other than the sessions designated in the agreements. They have a building key and know the building alarm code. Each organization has a floor safe for its exclusive use, as well as secure storage closets in which they store their bingo supplies. The organizations pay a pro rata portion of utility and cleaning fees. Taxpayer has access to the premises at any time.
{5} Under the agreements, the organizations must adhere to strict use of the premises. They may use the building only for bingo sessions and related services. The agreements require the organizations to carry public liability insurance and provide security guards. They may not permit anyone to bring food, drinks, or bicycles into the building. Children under the age of 14 are allowed only in the tеlevision room, and no solicitation is allowed in the building.
{6} The organizations pay rent for each session whether or not they hold the session. Taxpayer can maximize rental revenues by having seven organizations per building, with four sessions per week per organization. With this arrangement, Taxpayer could earn an annual income from the agreemеnts of approximately $145,000 from session fees and $72,000 from equipment rental per facility. Taxpayer pays approximately $100,000 per year to lease each building.
{7} The agreements establish a management committee, consisting of representatives of each non-profit organization, as well as Taxpayer’s representative. Thе management committee may set policies for the building; however, in its sole discretion, Taxpayer can adopt policies which will control in the event of a conflict or inconsistency.
Discussion
{8} Generally, this Court reviews a hearing officer’s decision regarding a protestant’s tax liability for the limited purpose of determining whether it is: “(1) arbitrary, capriсious or an abuse of discretion; (2) not supported by substantial evidence in the record; or (3) otherwise not in accordance with the law.” NMSA 1978, § 7-1-25 (1989): In this case, we are asked to determine whether the hearing officer’s decision accords with the statutory .definition of “lease” or “leasing” found in Section 7-9-53(A) and NMSA 1978, § 7-9-3(J) (1994). As such, we are called upon, in part, to answеr a question of statutory interpretation, see Security Escrow Corp. v. Taxation & Revenue Dep’t,
{10} Our legislature has not defined “license” in any of our statutes. When not defined, we will use a word according to its ordinary meaning unless a different intent is clearly indicated. See New Mexico Sheriffs & Police Ass’n v. Bureau of Revenue,
{11} Taxpаyer argues that the intent of the parties controls and that the face of the document entitled “bingo lease,” as well as the contents of the document, demonstrate that the parties intended a lease. The Department argues that the agreements are licenses because they do not convey an interest in real property, they do not provide for exclusive possession, and the organizations have insufficient control over the property to constitute a lease.
{12} Under general law, the character of the instrument is not controlled by its form, “but from the intention of the parties as shown by the contents of the instrument.” Transamerica Leasing Corp.,
{13} The agreemеnts are called “bingo leases” and have a stipulation for rent in exchange for transfer of possession. The agreements are for a one-year term, consisting of four or five sessions per week. The organizations pay $100 per session whether the facility is used or not. Taxpayer is giving up possession and use of its property during the periods of use by the non-profit organizations. While each agreement is for a definite term of one year, the duration of the sessions is atypical. Each session consists of a period of time of less than four hours. A typical lease arrangement would grant exclusive possession and use to one party for a period of time comprised of days, not hours.
{14} The Bingo Act provides an explanation for this atypical time arrangement. It restricts non-profit organizations to 260 sessions a year, five sessions a week, of no more than four hours each, and no more than two sessions a day. Section 60-2B-8(G), (K). The New Mexico Regulation and Licensing Department, which administers the Bingo Act, limits the amount of rent paid per session to $100. With such restrictions, it is reasonable to expect that a non-profit organization would not enter into a lease arrangement which would give it exclusive possession of a facility twenty-four hours, seven days a week. Such a lease arrangement would not be profitable for the organization. Additionally, a non-profit organization is nоt
{15} Significantly, Taxpayer does not have a right to revoke use of the premises at any timе. The right to revoke is consistent with a license, not a lease. See City of Watertown v. Dakota, Minn. & E. R.R. Co.,
{16} The Bingo Act requires organizations to list the facility in which they will conduct bingo games in their requests for licenses. Section 60-2B-6(A)(5). Therefore, a non-profit orgаnization would undoubtedly want the protection of a regular, reliable location afforded by a lease, not a license, since switching locations would require additional interaction with, and perhaps new approval of, the Regulation and Licensing Department. Also, non-profit organizations conduct bingo games to raise funds. Patrons who wish to support a particular non-profit organization want to know a regular schedule of where and when the organization conducts its bingo games. A lease arrangement affords such consistency, while a license without more does not.
{17} The Department argues that the organizations have insufficient control over the premises to constitute а lease. The hearing officer found that limitations upon the use of the building are indicative of lack of control. However, some of these restrictions appear to exist to facilitate compliance with the Bingo Act. See §§ 60-2B-4 (licensing authority), -6 (application for license), - 14 (penalties). The lease limitations also include restricting children to certain portions of the building and limiting the use of the facility for bingo and services. Cf. NMSA 1978, § 60-2E-26(F) (1997) (persons under age of twenty-one shall not enter gaming areas).
{18} Additionally, both Taxpayer and non-profit organizations must comply with the Bingo Act or face possible sanctions or penalties. The Regulation and Licensing Department can suspend or revokе organizations’ licenses, fine them, or declare them ineligible for a license for violating the Bingo Act or rules and regulations of the Regulation and Licensing Department. Section 60-2B-4(E), (G). Taxpayer faces similar sanctions. Section 60-2B-4(G) (“The declaration of ineligibility may be extended to include ... an organization otherwise affiliated with the violator when in the opinion of the licensing authority the circumstances of the violation warrant that action.”). Taxpayer can also incur criminal penalties including fine or imprisonment. Section 60-2B-14 (“[E]very other person or corporation who willfully violates or who procures, aids or abets in the willful violation of the Bingo and Raffle Act ... is guilty of a misdemeanor.”).
{19} Taxрayer’s corporate purpose is to customize and rent buildings for bingo games. Taxpayer must take precautions to ensure compliance with the Bingo Act for if it were to be sanctioned by the Regulation and Licensing Department, Taxpayer’s corporate purpose would be frustrated. Even a onetime fine or sanction could have longer term financial repercussions for Taxpayer. As part of the licensing process, if a non-profit organization rents or leases a facility to conduct bingo games, it must attach a signed statement from the facility owner or operator stating the location and rent to be paid and “that the person, or its officers and directоrs if a corporation, is of good moral character and has not been convicted of any crime involving moral turpitude.” Section 60-2B-6(C). Hence, with potential criminal punishment and monetary penalties, and loss of long-term business, Taxpayer has understandably placed tighter restrictions on the use of its premises. See Schloss v. Sachs,
{21} Finally, we note that despite its extensive regulation of bingo operators and facilities, the Bingo Act contemplates that a lease is a vehicle for non-profit organizations to use premises for conducting bingo games. See §§ 60-2B-6(C), -8(U). But if we were to accept the Department’s arguments, a lease arrаngement under the Bingo Act would be impossible. Indeed, the Bingo Act restricts Taxpayer’s actions and so its actions must be seen through the Act. While the arrangement between Taxpayer and various non-profit organizations might not resemble a “typical” lease, restrictions in the Bingo Act account for the type of arrangement created, which the intent and surrounding circumstances support as a lease. The payment of rent, possession for definite periods of time, exclusive possession of the floor safes and secure storage closets, and the inability of Taxpayer to revoke at will favor a lease. See Town of Kearny,
Conclusion
{22} Because we determine that the agreements which are the subject of this appeal are “leases” within the meaning of Section 7-9-53(A), we reverse the hearing officer’s determination that Taxpayer’s receipts for rental of bingo hall space are not deductible under that section. However, because it appears that the hearing officer’s conclusion regarding the deductibility of Taxpayer’s receipts from the rental of bingo equipment was based on its erroneous determination that the agreements were not leases, we remand for further proceedings on that issue consistent with this opinion.
{23} IT IS SO ORDERED.