March 25, 2019- Richard Casias v. New Mexico Taxation and Revenue Department, No. A-1-CA-36316

1 	IN THE COURT OF APPEALS OF THE STATE OF NEW MEXICO
2 RICHARD CASIAS and CHERI L.
3 OLIVAS,
4 	Protestants-Appellants,
5 v. 	No. A-1-CA-36316
6 NEW MEXICO TAXATION AND
7 REVENUE DEPARTMENT,
8 	Respondent-Appellee.
9 IN THE MATTER OF THE PROTEST
10 OF RICHARD CASIAS and CHERI L.
11 	OLIVAS.
12 APPEAL FROM NEW MEXICO TAXATION AND REVENUE
13 	DEPARTMENT
14 Chris Romero, Hearing Officer
15 	Wayne G. Chew, P.C.
16 Wayne G. Chew
17 Albuquerque, NM
18 	for Appellants
19 Hector H. Balderas, Attorney General
20 Santa Fe, NM
21 	NM Taxation and Revenue Department
22 David E. Mittle, Special Assistant Attorney General
23 	Santa Fe, NM
24 for Appellee
Court of Appeals of New Mexico
Filed 3/25/2019 11:33 AM
Mark Reynolds

I 	MEMORANDUM OPINION
2 B. ZAMORA, Judge.
3 	{t} 	Richard Casias and his spouse, Cheri L. Olivas1 appeal from a decision and
4 order (order) of the Administrative Hearings Office upholding an audit assessment
5 and tax lien imposed by the New Mexico Taxation and Revenue Department (the
6 Department). For reasons that follow, we affirm the hearing officer's order as to Mr.
7 Casias.
8 BACKGROUND
9 {2} 	In 	1996 Mr. 	Casias registered his business, Casias Trucking, 2 with the
10 Department as a sole proprietorship and obtained a Combined Reporting System
11 	(CRS) number associated with his social security number. The record is silent as to
12 what involvement, if any, Ms. Olivas had with Casias Trucking.
1Ms. Olivas was and is a nominal party to the administrative proceeding and
this appeal. However, she did not, so far as shown, appear at or participate in the
protest hearing below and was not the subject of any dispositive findings made by
the hearing officer, or even mentioned in his decision and order. Moreover, Ms.
Olivas is not separately identified as a "Protestant-Appellant" in the brief in chief
submitted on appeal, nor does she now advance any arguments distinct to her. We
therefore decline to address her claims in this opinion.
2A separate business entity operated by Mr. Casias, Stars & Stripes Paving,
was referenced in the hearing officer's decision and order, but is not discussed by
Taxpayers on appeal.
2

1 {3} 	In 2003, upon the advice of his certified public accountant (CPA), Mr. Casias
2 reorganized Casias Trucking 	from 	a sole proprietorship to 	a 	limited liability
3 company (LLC). According to Mr. Casias, his CPA prepared articles of organization
4 to effectuate that change, and Mr. Casias relied on his CPA to file all tax-related and
5 other documents necessary to create the LLC.
6 {4} 	Mr. Casias testified that, following the 2003 reorganization, he has held out
7 Casias Trucking as an LLC to the general public, customers, employees, vendors,
8 and contractors and identified it as an LLC on checks, business cards, invoices and
9 W-2s, as well as on certain tax returns and reports submitted to the Department.
10 Although Mr. Casias testified that he considered Casias Trucking to be a single
11 	member LLC, he also testified, and the hearing officer found, that he elected to be
12 taxed as a sole proprietor for federal income tax purposes for tax years 2006 through
13 	2010.
14 {5} 	The record shows, and it is not seriously disputed, that the Department has a
15 	system for assigning new CRS numbers when a taxpayer converts a business from
16 one form to another, which requires the taxpayer business to submit an updated
17 registration form, close its existing account, and open a new account as a new entity.
18 Only then will the Department assign the business a new CRS number. Casias
19 Trucking, however, failed to update its registration form on file with the Department
20 and never obtained a new CRS number for the purported LLC.
3

1 {6} 	In 2013 the Department initiated an audit of Casias Trucking for gross receipts
2 taxes covering tax years 2006 through 2011, pursuant to the Gross Receipts and
3 Compensating Tax Act, NMSA 1978, §§ 7-9-1 to -116 (1966, as amended through
4 2018). The audit resulted in an assessment for gross receipts tax, interest, and
5 penalties in the aggregate amount of $206,292.02. The audit and the notice of audit
6 assessment identified Casias Trucking as a sole proprietorship.
7 {7} 	Casias 	Trucking, 	through 	counsel, 	initially 	protested 	the 	2013 	audit
8 assessment without identifying its supposed status as an LLC and by using the same
9 CRS num~er assigned when Mr. Casias originally registered the business as a sole
10 proprietorship. In approximately June 2014 Casias Trucking again without any
11 	mention that the business was operating as an LLC, filed a withdrawal of the protest
12 in which it "agree[ d] that this withdrawal is conclusive as to the liability for the taxes
13 	... [and that it could not] file another protest on the years cove[red] by the
14 assessments."
15 	{8} 	On September 18, 2014, Mr. Casias entered into an installment agreement
16 with the Department in which he agreed to pay the taxes due on the audit assessment,
17 admitted "[ c]onclusive [l]iability[,]" and "expressly waive[d] any and all rights to
18 	d~spute, challenge or protest the liabilities included within this agreement." The
19 installment agreement identifies Mr. Casias individually by name, address, and
20 social security number and does not identify Casias Trucking as an LLC.
4

1 {9} 	After 	Mr. 	Casias 	entered 	into 	the 	installment 	agreement, 	his 	attorney
2 contacted the Department to add the designation "LLC" to the name of Casias
3 Trucking in "GenTax," the Department's database. The Department changed the
4 name of Casias Trucking to Casias Trucking, LLC, in the GenTax database, but it
5 never received an applicati<;m to update the registration and never issued Casias
6 Trucking a new CRS number. According to the Department, any attempt made on
7 behalf of Casias Trucking to modify or update its tax registration status did not
8 comply with departmental requirements and procedures.
9 	{to} 	In August 2016, after Mr. Casias made only one or two payments on the
10 	installment agreement over the preceding two-year period, the Department issued a
11 	notice of claim of tax lien upon the property of Mr. Casias and his spouse, Ms.
12 Olivas.
13 	{11} 	After Mr. Casias's counsel submitted correspondence protesting the 2013
14 audit assessment and the lien, the Department scheduled a hearing to resolve the
15 	protest. At the hearing, Mr. Casias introduced a printout, purportedly from the
16 	Secretary of State's website, identifying Casias Trucking as an LLC organized on
17 April 23, 2003. The hearing officer did not give the document "any significant
18 weight" because it was not dated and there was "nothing on the face of the exhibit
19 to establish the source of the information contained therein." Mr. Casias did not offer
20 the articles of organization for Casias Trucking, LLC into evidence.
5

(
1 {12} 	The hearing officer denied the protest, concluding that Mr. 	Casias was
2 precluded from protesting the 2013 audit assessment that formed the basis for the
3 tax liens and was personally liable for the amounts due on the liens. Central to the
4 hearing officer's determination were his findings that _Mr. Casias assumed personal
5 liability for the tax indebtedness when he registered his trucking business as a sole
6 proprietorship, did not follow the proper process to register the business as an LLC,
7 and admitted conclusive tax liability under the installment agreement. This appeal
8 followed.
9 DISCUSSION
10 {13} 	Mr. Casias's sole argument on appeal is that tax liability rests not with him,
11 	but solely with Casias Trucking LLC. He contends that a Department registration
12 regulation, 3.l.l.15(A)(l) NMAC (requiring secretary to develop "multiple systems
13 	for the registration and identification of taxpayers who are subject to taxes ... and
t
14 taxpayers shall comply therewith"), is invalid because it conflicts with the Limited
15 	Liability Company Act, NMSA 1978, § 53-19-13 (1993); see also NMSA 1978 § 7-
16 	1-12(A) (2000) (stating that "[t]he secretary by regulation shall establish a system
17 for the registration and identification of taxpayers and shall require taxpayers to
18 comply therewith"). In response, the Department contends that Mr. Casias failed to
19 establish that Casias Trucking was in fact an LLC, and even if it was an LLC that
6

1 Mr. Casias is nevertheless personally liable because he voluntarily entered into the
2 installment agreement in his individual capacity.
3 	{14} 	We begin with the presumption that the Department's tax assessment was
4 correct. See NMSA 1978, § 7-1-17(C) (2007) ("Any assessment of taxes or demand
5 for payment made by the department is presumed to be correct."). The hearing
6 officer's decision may be set aside only if: "( 1) it is arbitrary, capricious or an abuse
7 of discretion; (2) not supported by substantial evidence in the record; or (3) otherwise
8 not in accordance with law." NMSA 1978, § 7-1-25(C) (2015). We review the whole
9 record in the light most favorable to the hearing officer's decision. See ITT Educ.
10 Servs., Inc. v. Taxation & Revenue Dep 't, 1998-NMCA-078, ~ 4, 125 N.M. 244, 959
11 	P.2d 969. To the extent we are required to interpret statutes, we apply a de novo
12 standard of review, but "we consider the issues through the lens of a presumption
13 	that the Department's assessment is correct." Corr. Corp. of Am. v. State 2007-
14 NMCA-148, ~ 17, 142 N.M. 779, 170 P.3d 1017.
15 	I. 	Limited Liability Company
16 {15} 	The hearing officer concluded that (1) Mr. Casias failed to prove that Casias
17 Trucking is an LLC for tax purposes, and (2) Mr. Casias was precluded from
18 protesting the tax lien because he withdrew his protest and subsequently entered into
19 an installment agreement. We agree.
7

1 {16} 	Mr. Casias relies on Section 53-19-13 of the Limited Liability Company Act,
2 which provides:
3 	Except as otherwise provided in the Limited Liability Company
4 	Act, the debts, obligations and liabilities of a limited liability company,
5 	whether arising in contract, tort or otherwise, shall be solely the debts,
6 	obligations and liabilities of the limited liability company .... A person
7 	may be liable for any act or omission performed in his capacity as a
8 	manager of a limited liability company if there is a basis for liability.
9 	Nothing in this section shall be construed to immunize any person from
10 	liability for the consequences of his own acts or omissions for which he
11 	otherwise may be liable.
12 {17} 	An LLC is formed when the articles of organization are filed with the
13 	Secretary of State or any later date specified in the articles of organization. NMSA
14 	1978, § 53-19-lO(A) (1993); see NMSA, § 53-19-2(1) (An LLC is "an organization
15 	formed pursuant to the provisions of the Limited Liability Company Act[.]"). Mr.
16 Casias testified that Casias Trucking held itself out as an LLC to the general public,
17 its employees, vendors and contractors, and that it changed its name to include the
18 LLC designation in the Department's GenTax database. Mr. Casias also proffered
19 copies of some tax returns, reports, and a printout purportedly from the Secretary of
20 State's website that identify Casias Trucking as an LLC. Mr. Casias, however, failed
21 	to offer a "copy of the articles of organization stamped 'filed' and marked with the
22 filing date[,]" which would have been_ "conclusive evidence ... that [the LLC] ...
23 	ha[ d] been legally organized and formed pursuant to the Limited Liability Company
24 Act." NMSA 1978, § 53-19-lO(B). We hold that the hearing officer's conclusion
8

1 that Mr. Casias.failed to prove that Casias Trucking was an LLC was not arbitrary,
2 capricious, or an abuse of discretion and was supported by substantial evidence in
3 accordance with law. See§ 7-1-25(C); N.M Taxation & Revenue Dep't v. Casias
4 	Trucking, 2014-NMCA-099, , 	20, 336 P.3d 436 ("When more than one inference
5 can be drawn from the evidence, the determination made by the hearing officer is
6 conclusive. We will not reweigh the evidence nor substitute our judgment for that of
7 the fact[-]finder" (alteration, internal quotation marks and citation omitted)).
8 	{18} 	Because Mr. Casias failed to prove that Casias Trucking was a limited liability
9 company, we need not address -his claim that the Limited Liability Company Act
10 precludes the imposition of personal tax liability on him.
11 	II. 	The Installment Agreement Precludes Mr. Casias's Protest
12 {19} 	Mr. Casias disputed the Department's lien by filing a written protest. See
13 	NMSA 1978, § 7-1-24 (A)(l), (B), (D) (2017). As the protestant, the evidentiary
14 burden was on Mr. Casias to overcome the presumption of correctness by, for
15 	example, showing that the Department failed to follow relevant statutory provisions
16 or presenting evidence tending to dispute the factual correctness of the assessments.
17 See § 7-1-1 7(C) (stating that [a]ny assessment of taxes or demand for payment made
18 	by the department is presumed to be correct); N.M Taxation & Revenue Dep't v.
19 	Casias 	Trucking, 	2014-NMCA-099, 	, 	8, 	336 	P.3d 	436 	("The 	effect 	of the
20 presumption of correctness is that the taxpayer has the burden of coming forward
9

1 with some countervailing evidence tending to dispute the factual correctness of the
2 assessment made by the secretary." (internal quotation marks and citation omitted)).
3 {20} 	After withdrawing his initial protest in September 2014, Mr. Casias entered
4 into an installment agreement with the Department. He entered into the agreement
5 individually, rather than as an LLC, and he admitted "conclusive liability for the
6 entire amount of taxes due." See NMSA 1978, § 7-l-21(A), (B) (2017). Under the
7 plain terms of the agreement, Mr. Casias expressly waived "any and all rights to
8 dispute, 	challenge 	or 	protest 	the 	liabilities 	included 	within 	the 	agreement."
9 Additionally, by entering into the agreement, Mr. Casias further waived his statutory
10 rights under Section 7-1-24 to dispute, challenge or protest the liabilities. See Hittson
11 	v. Chicago R. L & P. Ry. Co., 1939-NMSC-004 ,I 10, 43 N.M. 122, 86 P.2d 1037
12 ("It is a general rule that any right or privilege to which a person is legally entitled,
13 	whether secured by contract [ or] conferred by statute ... may be· waived by him;
14 provided it is intended for his sole benefit, and does not infringe upon the rights of
15 	others, and such waiver is not against public policy.").
16 	{21} 	Because Mr. Casias failed to pay the taxes determined to be due pursuant to
17 the 2013 audit assessment, despite having admitted to conclusive liability under the
18 	installment agreement, "the amount of the tax [became] a lien in favor of the state
19 upon all property and rights to property of the [taxpayer]." NMSA 1978, § 7-1-37(A)
20 (1993); see§ 7-1-21(C) (stating that "if the taxpayer does not provide security, the
10

1 secretary shall cause a notice of lien to be filed ... and when so filed it shall.)
2 constitute a \lien upon all the property or rights to property of the taxpayer in that
3 county"); see also § 7-1-38 ("The notice of lien shall identify the taxpayer whose
4 liability for taxes is sought to be enforced."); § 53-19-13 ("Nothing in [the Limited
5 Liability Act] shall be construed to immunize any person from liability for the
6 consequences of his.own acts or omissions for which he otherwise may be liable.").
7 {22} 	The 	hearing 	officer's 	conclusion 	that 	Mr. 	Casias 	was 	precluded 	from
8 protesting the tax liens because he entered into an installment agreement admitting
9 conclusive tax liability was not arbitrary, capricious, or an abuse of discretion or
10 contrary to the law. See§ 7-1-25 (C).
11 	CONCLUSION
12 {23} 	We affirm the hearing officer's order denying Mr. Casias's protest of the tax
13 	lien.
14 {24} 	IT IS SO ORDERED
15
16
WE CONCUR:
11