1. A. Except as otherwise provided in this section, no assessment of tax may be made by the department after three years from the end of the calendar year in which payment of the tax was due, and no proceeding in court for the collection of such tax without the prior assessment thereof shall be begun after the expiration of such period.
2. B. In case of a false or fraudulent return made by a taxpayer with intent to evade tax, the amount thereof may be assessed at any time within ten years from the end of the calendar year in which the tax was due, and no proceeding in court for the collection of such tax without the prior assessment thereof shall be begun after the expiration of such period.
3. C. In case of the failure by a taxpayer to complete and file any required return, the tax relating to the period for which the return was required may be assessed at any time within seven years from the end of the calendar year in which the tax was due, and no proceeding in court for the collection of such tax without the prior assessment thereof shall be begun after the expiration of such period.
4. D. If a taxpayer in a return understates by more than twenty-five percent the amount of liability for any tax for the period to which the return relates, appropriate assessments may be made by the department at any time within six years from the end of the calendar year in which payment of the tax was due.
5. E. If any adjustment in the basis for computation of any federal tax is made as a result of an audit by the internal revenue service or the filing of an amended federal return or administrative adjustment request changing a prior election or making any other change for which federal approval is required by the Internal Revenue Code that results in liability for any tax, the amount thereof may be assessed at any time, but not after three years from the end of the calendar year in which filing of a federal adjustments report is required by Subsections E through J of Section 7-1-13 NMSA 1978.
6. F. If the taxpayer has signed a waiver of the limitations on assessment imposed by this section, an assessment of tax may be made or a proceeding in court begun without regard to the time at which payment of the tax was due.

7. G. As used in this section:

   1. (1) "administrative adjustment request" means "administrative adjustment request" as used in Section 7-1-13 NMSA 1978; and
   2. (2) "federal adjustments report" means "federal adjustments report" as used in Section 7-1-13 NMSA 1978.

History: 1953 Comp., § 72-13-33, enacted by Laws 1965, ch. 248, § 21; 1970, ch. 18, § 1; 1979, ch. 144, § 17; 1983, ch. 211, § 26; 1993, ch. 5, § 7; 1994, ch. 51, § 4; 2013, ch. 27, § 3; 2021, ch. 83, § 2.

ANNOTATIONS

The 2021 amendment, effective June 18, 2021, amended sections of the tax administration act to address federal partnership audit or adjustment requests resulting in underpayment or overpayment of state taxes, and defined terms as used in this section; in Subsection E, after "an amended federal return", added "or administrative adjustment request", after "filing of", deleted "an amended return" and added "a federal adjustment report", and after "required by", changed "Subsection C" to "Subsection E through J"; and added Subsection G.

The 2013 amendment, effective July 1, 2013, permitted an assessment if an Internal Revenue Service audit or change in a return that required Internal Revenue Service approval results in tax liability; in Subsection E, added the language between "computation of any federal tax is made" and "that results in liability for any tax".

The 1994 amendment, effective July 1, 1994, substituted the language at the end of Subsection E, beginning with "three years", for "one year after the date of the receipt of the amended return or not after the end of the period limited by Subsection A of this section, whichever is later".

The 1993 amendment, effective July 1, 1993, substituted "department" for "director" in the catchline and in Subsection D and for "director or his delegate" in Subsection A, and made a minor stylistic change in Subsection E.

Extension of limitations period. — The taxation and revenue department is required to extend the general three-year limitation on assessments to six years when making an assessment if a taxpayer underreported taxes in excess of 25 percent, and the principles of estoppel do not affect the department's application of the longer period. Taxation & Revenue Dep't v. Bien Mur Indian Mkt. Ctr., Inc., 1989-NMSC-015, 108 N.M. 228, 770 P.2d 873.

Seven-year statute of limitation applied where taxpayers failed to file returns. — Where taxpayers appealed a 2018 assessment of taxes for tax years 2008 through 2011, arising from the operation of an automotive technician business, and where defendant argued that the administrative hearing officer incorrectly applied a ten-year, rather than a seven-year statute of limitations to their failure to file gross receipts tax returns for 2008, 2009, and 2010, the hearing officer erred in finding that taxpayers filed fraudulent returns and applying the ten-year statute of limitation to the assessments, because although taxpayers filed federal and pass-through entities (PTE) returns for the years 2008, 2009, and 2010, the evidence did not demonstrate that the filed federal and PTE returns were false or fraudulent, and the hearing officer explicitly found that taxpayers did not file state gross receipts tax returns for the years 2008, 2009, and 2010. The seven-year limitation period found in § 7-1-18(C) NMSA 1978, relating to the failure to file a return, applied to the facts of this case and barred the taxation and revenue department from assessing taxpayers personally for the years 2008, 2009, and 2010. Vigil v. N.M. Tax'n and Revenue Dep't, 2022-NMCA-032.

Assessment of severance taxes was not barred. — Where taxpayer was party to a settlement agreement that was approved by a federal district court in a class action involving the underpayment of royalties on the production of carbon dioxide gas; the settlement agreement constituted an order that increased the value of the carbon dioxide gas previously reported by taxpayer and constituted a taxable event under Section 7-29-4.3 NMSA 1978; taxpayer did not prepare or file any tax returns that reported any of the settlement proceeds paid by taxpayer to royalty interest owners as additional amounts subject to severance tax liability; the settlement agreement was approved in 1998; and a severance tax assessment was issued in 2004, the assessment was not barred by the statute of limitations. Hess Corp. v. N.M. Taxation & Revenue Dep't, 2011-NMCA-043, 149 N.M. 527, 252 P.3d 751 cert. denied, 2011-NMCERT-003, 150 N.M. 619, 264 P.3d 520.

Proof of effective date of notice of assessment. — The department failed to make out a prima facie case of entitlement to summary judgment on the issue of the backward reach of an assessment where, on the basis of an erroneous assumption that the date of the written notice of assessment was immaterial because the taxpayer was under an independent duty of self-assessment, it did not offer any evidence establishing the effective date of the notice of assessment. Sonic Indus., Inc. v. State, 2000-NMCA-087, 129 N.M. 657, 11 P.3d 1219, rev’d on other grounds, 2006-NMSC-038, 140 N.M. 212, 141 P.3d 1266.

Am. Jur. 2d, A.L.R. and C.J.S. references. — 72 Am. Jur. 2d State and Local Taxation §§ 719, 788.

Civil liability of tax assessor to taxpayer for excessive or improper assessment of real property, 82 A.L.R.2d 1148.

Suspension of running of period of limitation, under 26 U.S.C.A. § 6503, for federal tax assessment or collection, 160 A.L.R. Fed. 1

85 C.J.S. Taxation §§ 1514 to 1524.