TUCSON ELECTRIC POWER CO. v. TAXATION AND REVENUE DEPARTMENT OF THE STATE OF NEW MEXICO
No. A-1-CA-35781
IN THE COURT OF APPEALS OF THE STATE OF NEW MEXICO
November 4, 2019
2020-NMCA-011
Released for Publication February 11, 2020. APPEAL FROM THE ADMINISTRATIVE HEARINGS OFFICE, Monica Ontiveros, Hearings Officer
Suzanne W. Bruckner
Christopher A. Holland
Albuquerque, NM
for Appellant
Peifer, Hanson & Mullins, P.A.
Matthew E. Jackson
Mark T. Baker
Albuquerque, NM
New Mexico Taxation & Revenue Department
Marek Grabowski, Staff Attorney
Santa Fe, NM
for Appellee
OPINION
HANISEE, Chief Judge.
BACKGROUND
{2} Taxpayer co-owns Luna Energy Facility, a power plant located near Deming, New Mexico. Taxpayer purchases natural gas from various third parties, including out-of-state vendors, for use in producing electricity at the plant. In December 2014 Taxpayer applied to the Department for a refund of $434,860.92 for the tax period July 1, 2011, through December 31, 2011, based on its belief that its purchases of natural gas qualified for a deduction under the Gross Receipts and Compensating Tax Act (the Act),
{3} In its protest, Taxpayer argued that it was entitled to a refund “for compensating taxes paid in error . . . for purchases that are not subject to compensating tax” under the Act.1 Taxpayer argued that its purchases of natural gas fell within
{4} Following a hearing, the AHO found that Taxpayer had “paid compensating tax on the purchase of natural gas during the tax period” from various companies, all of which the AHO found “have no nexus with New Mexico and are out-of-state companies.” The AHO‘s analysis began with a discussion of the relationship between New Mexico‘s compensating tax and gross receipts tax and included a threshold determination that “[d]eductions that are applicable to the gross receipts tax may be used to determine whether compensating tax is due on a transaction.” The AHO cited Western Electric Co. v. New Mexico Bureau of Revenue, 1976-NMCA-047, ¶¶ 14, 90 N.M. 164, 561 P.2d 26, for the proposition that “the [L]egislature intended to make our gross receipts tax and our compensating tax correlate[]: a [deduction] from the gross
receipts tax must also be treated as a [deduction] from the compensating tax.”3
DISCUSSION
{5} On appeal, Taxpayer argues that the AHO made two errors of law: first, determining that “natural gas delivered by pipe to a power plant is not sold or delivered by ‘lots’ because gas is a ‘good‘” and “‘goods’ and ‘lots’ are mutually-exclusive“; and second, that “the statute mandates that gas must be both sold and delivered in lots greater than [eighteen] tons to qualify for the deduction.” Taxpayer contends that the AHO‘s ruling “flies in the face of the statute‘s plain language.” The Department argues that the AHO‘s “decision should be affirmed because the Legislature did not intend
Standard of Review
{6} This Court will only set aside an AHO‘s decision if the decision is: “(1) arbitrary, capricious or an abuse of discretion; (2) not supported by substantial evidence in the record; or (3) otherwise not in accordance with the law.”
for any reason, so long as the circumstances do not make it unfair to the appellant to affirm.“).
{7} In reviewing the AHO‘s decision, we presume that the “assessment of taxes or demand for payment made by the [D]epartment is . . . correct.”
Applicable Rules of Statutory Construction
{8} “The guiding principle in statutory construction requires that we look to the wording of the statute and attempt to apply the plain meaning rule, recognizing that when a statute contains language which is clear and unambiguous, we must give effect to that language and refrain from further statutory interpretation.” City of Santa Fe ex rel. Santa Fe Police Dep‘t v. One (1) Black 2006 Jeep, 2012-NMCA-027, ¶ 7, 286 P.3d 1223 (internal quotation marks and citation omitted). “In interpreting statutes, we seek to give effect to the Legislature‘s intent, and in determining intent we look to the language used and consider the statute‘s history and background.” Valenzuela v. Snyder, 2014-NMCA-061, ¶ 16, 326 P.3d 1120 (internal quotation marks and citation omitted). “[W]here the language of the legislative act is doubtful or an adherence to the literal use of words would lead to injustice, absurdity or contradiction, the statute will be construed according to its obvious spirit or reason, even though this requires the rejection of words or the substitution of others.” N.M. Real Estate Comm‘n v. Barger, 2012-NMCA-081, ¶ 7, 284 P.3d 1112 (internal quotation marks and citation omitted). Moreover, “[w]e consider all parts of the statute together, reading the statute in its entirety and construing each part in connection with every other part to produce a harmonious whole.” Dep‘t of Game & Fish v. Rawlings, 2019-NMCA-018, ¶ 6, 436 P.3d 741 (alterations, internal quotation marks, and citation omitted).
Taxpayer‘s Purchases of Natural Gas Do Not Qualify for Section 7-9-65‘s Deduction
{9} In full, the previous version of
Receipts from selling chemicals or reagents to any mining, milling or oil company for use in processing ores or oil in a mill, smelter or refinery or in acidizing oil wells, and receipts from selling chemicals or reagents in lots in excess of eighteen tons may be deducted from gross receipts. Receipts from selling explosives, blasting powder or dynamite may not be deducted from gross receipts.
{10} We apply the principles of statutory construction to determine whether Taxpayer‘s receipts for the purchase of natural gas falls under “chemicals or reagents” in the statute.
{11} First, because Taxpayer is claiming a tax deduction under
{12} Second, we recently addressed, in a memorandum opinion, a markedly similar question regarding the applicability of
applied in Peabody Coalsales Co. here, we similarly determine
{13} Third, as further support for our conclusion we note that the Legislature has enacted other provisions that pertain to natural gas, such as the Oil and Gas Emergency School Tax Act (the Oil & Gas Tax),
{14} To reiterate: tax exemptions and deductions “are a matter of legislative grace and a way of achieving policy objectives” and are to be “construed against the taxpayer.” Sutin, Thayer & Browne v. N.M. Taxation & Revenue Dep‘t, 1985-NMCA-047, ¶¶ 17, 104 N.M. 633, 725 P.2d 833; Murphy v. N.M. Taxation & Revenue Dep‘t, 1979-NMCA-065, ¶ 20, 94 N.M. 90, 607 P.2d 628. It is the taxpayer‘s burden to establish that it is entitled to the deduction. TPL, Inc., 2003-NMSC-007, ¶ 31. Taxpayer has not met its burden to establish its entitlement here, and we will not construe the word “chemical” in dicta to encompass natural gas. Since Taxpayer failed to satisfy the threshold question of whether natural gas is covered by the statute, and we conclude it is not, we decline to address the parties’ remaining arguments on appeal.
{16} Because the right to claim a deduction for receipts from the sale and use of natural gas is not clearly and unambiguously expressed in, or even addressed by,
CONCLUSION
{17} For the foregoing reasons, we affirm the AHO‘s denial of Taxpayer‘s protest.
{18} IT IS SO ORDERED.
J. MILES HANISEE, Chief Judge
WE CONCUR:
BRIANA H. ZAMORA, Judge
RICHARD C. BOSSON, Pro Tempore Judge