2023 New Mexico Statutes › Chapter 7 - Taxation › Article 4 - Division of Income for Tax Purposes › Section 7-4-19 - Equitable adjustment of standard allocation or apportionment.

If the allocation and apportionment provisions of the Uniform Division of Income for Tax Purposes Act do not fairly represent the extent of the taxpayer's business activity in this state, the taxpayer may petition for, or the department may require, in respect to all or any part of the taxpayer's business activity, if reasonable:
A. separate accounting;
B. the exclusion of any one or more of the factors;
C. the inclusion of one or more additional factors which will fairly represent the taxpayer's business activity in this state; or
D. the employment of any other method to effectuate an equitable allocation and apportionment of the taxpayer's income.
History:
1953 Comp., § 72-15A-34, enacted by Laws 1965, ch. 203, § 19; 1977, ch. 249, § 46; 1986, ch. 20, § 57.
ANNOTATIONS
Taxpayer's burden to show when modification of formula necessary.
— Since there was nothing arbitrary or unreasonable about the department's conclusion that dividend income is apportionable without modification of the allocation and apportionment formula, the taxpayer bears the burden of showing by clear and cogent evidence that modification of the formula is necessary.
Taxation & Revenue Dep't v. F.W. Woolworth Co
., 1981-NMSC-008, 95 N.M. 519, 624 P.2d 28,
rev'd on other grounds
, 458 U.S. 354, 102 S. Ct. 3128, 73 L. Ed. 2d 819,
reh'g denied
, 459 U.S. 961, 103 S. Ct. 274, 74 L. Ed. 2d 213 (1982).
Hearing officer's admission of closing agreement into evidence was not error.
— Where taxpayer challenged the use of the department of taxation and revenue's (department) special multistate trucking apportionment regulation to calculate the portion of taxpayer's multistate sales revenue attributable to taxpayer's New Mexico business operations, and where the administrative hearing officer (AHO) found that taxpayer established by clear and cogent evidence that the department's use of the special mileage formula to determine New Mexico's share of taxpayer's multistate revenue for income tax purposes resulted in a gross distortion of taxpayer's actual business activities in New Mexico, contrary to the fair apportionment requirement of the United States constitution's commerce clause and New Mexico's Uniform Division of Income for Tax Purposes Act (UDIPTA), NMSA 1978, §§ 7-4-1 to 7-4-21, and that taxpayer was entitled to equitable apportionment and that the state-to-state volume method proposed by taxpayer was reasonable, and where the department appealed, claiming that the AHO's admission of a closing agreement for prior tax years was reversible error, there was no error where the AHO specifically explained that the closing agreement was admitted into evidence as relevant to show the origins of the state-to-state volume method proposed by taxpayer and relevant to rebut the department's argument that taxpayer made up the state-to-state volume method without any foundation.
United Parcel Serv. v. N.M. Tax'n & Revenue Dep't
, 2023-NMCA-064.
Taxpayer entitled to equitable apportionment.
— Where taxpayer challenged the use of the department of taxation and revenue's (department) special multistate trucking apportionment regulation to calculate the portion of taxpayer's multistate sales revenue attributable to taxpayer's New Mexico business operations, and where the administrative hearing officer (AHO) found that taxpayer established by clear and cogent evidence that the department's use of the special mileage formula to determine New Mexico's share of taxpayer's multistate revenue for income tax purposes resulted in a gross distortion of taxpayer's actual business activities in New Mexico, contrary to the fair apportionment requirement of the United States constitution's commerce clause and New Mexico's Uniform Division of Income for Tax Purposes Act (UDIPTA), NMSA 1978, §§ 7-4-1 to 7-4-21, and that taxpayer was entitled to equitable apportionment and that the state-to-state volume method proposed by taxpayer was reasonable, and where the department appealed, claiming that the AHO erred as a matter of law in refusing to apply the department formula to taxpayer because its special mileage formula for apportioning the income of taxpayer for state corporate tax purposes has been found to be a constitutional method of apportioning the revenue of interstate carriers, the AHO did not err in departing from the department's method of apportionment, because NMSA 1978, § 7-4-19(D), provides that if the taxpayer carries its burden, the taxpayer may demand, or the department may require, the employment of any other method to effectuate an equitable allocation and apportionment of the taxpayer's income, so long as the alternative method is reasonable, and the AHO's finding that taxpayer's state-to-state volume method was a reasonable method of allocating taxpayer's revenue was supported by substantial evidence in the record.
United Parcel Serv. v. N.M. Tax'n & Revenue Dep't
, 2023-NMCA-064.