Golden Servs. Home Health & Hospice v. Taxation & Revenue Dep't of State (In re Protest to Assessment Issued under Letter Id No. L1636159024)

GOLDEN SERVICES HOME HEALTH AND HOSPICE andUNNAMED NURSING AND REHABILITATION CENTER, Protestants-Appellees, v. TAXATION AND REVENUE DEPARTMENT OF THE STATE OF NEW MEXICO, Respondent-Appellant,

IN THE MATTER OF THE PROTEST TO ASSESSMENT ISSUED UNDER LETTER ID NO. L1636159024,

and

IN THE MATTER OF THE PROTEST TO DENIAL OF REFUND ISSUED UNDER LETTER ID NO. L0609102128.

No. A-1-CA-36987

COURT OF APPEALS OF THE STATE OF NEW MEXICO

April 20, 2020

This decision of the New Mexico Court of Appeals was not selected for publication in the New Mexico Appellate Reports. Refer to Rule 12-405 NMRA for restrictions on the citation of unpublished decisions. Electronic decisions may contain computer-generated errors or other deviations from the official version filed by the Court of Appeals.

APPEAL FROM THE ADMINISTRATIVE HEARINGS OFFICE

Dee Dee Hoxie and Chris Romero, Hearing Officers

Martin, Dugan & Martin

W.T. Martin, Jr.

Kenneth D. Dugan

Carlsbad, NM

for Appellee Golden Services Home Health and Hospice Sutin, Thayer & Browne, P.C.

Suzanne W. Bruckner

Andrew J. Simons

Albuquerque, NM

for Appellee Unnamed Nursing and Rehabilitation Center

Hector H. Balderas, Attorney General

David E. Mittle, Special Assistant Attorney General

Santa Fe, NM

for Appellant

MEMORANDUM OPINION

HANISEE, Chief Judge.

{1} The New Mexico Taxation and Revenue Department (the Department) appeals from two orders by administrative hearing officers (AHO), each finding that Taxpayers Golden Services Home Health and Hospice and Unnamed Nursing and Rehabilitation Center (collectively, Taxpayers), respectively, were entitled to a deduction under NMSA 1978, Section 7-9-93 (2007, amended 2016). In the Matter of the Protest of Golden Services, No 17-50, 2017 WL 6729674, *7, (Dec. 20, 2017) (dec. & order). This consolidated appeal presents a question of first impression: whether certain health care facilities¹ like Taxpayers—facilities that provide hospice, rehabilitative, or other such services—are entitled to a deduction from the gross receipts tax for qualifying payments under Section 7-9-93.² Concluding they are not, we reverse the AHOs' decisions in both protests.

BACKGROUND

{2} The underlying protests at issue in this appeal were initiated by Taxpayers in separate administrative proceedings. We set forth the relevant backgrounds of each case and relevant history of the statute's interpretation.

Golden Services Home Health and Hospice

{3} Golden Services is a health care facility that provides hospice services performed by health care practitioners. In November 2016, Golden Services filed a protest in the administrative hearings office after the Department denied their claims for a deduction for the tax periods from January 2009 to December 2014. Nine months later, Golden Services filed a motion for summary judgment, and the parties agreed that there were no disputed issues of material fact, and that the dispositive legal question was whether Golden Services was entitled to a deduction under Section 7-9-93.

{4} On December 20, 2017, the AHO granted summary judgment in favor of Golden Services, finding that the statute was "not ambiguous" and that "any taxpayer who had receipts of qualifying payments [could] take the deduction." The AHO therefore concluded that Golden Services was entitled to claim the deductions, pursuant to Section 7-9-93. Although the Department had enacted regulations 3.2.241.13 NMAC³ and 3.2.241.17 NMAC⁴ in 2006, which expressly disallowed health care facilities from claiming the deduction, the AHO reasoned that the regulations "were void as they attempted to abridge or modify the statute as it was written." The AHO's decision and order also determined that Golden Services "would not be entitled to [a] deduction" under the current version of Section 7-9-93 (2016). Specifically, the AHO found that the "subsequent [2016] amendment of the statue was a substantive change in the law, and the change does not apply retroactively." The Department appealed the AHO's decision and order (the summary judgment order).

Unnamed Nursing and Rehabilitation Center

{5} Unnamed Nursing is a nursing and rehabilitation facility that also protested the Department's denial of its claim for a deduction under Section 7-9-93 for the tax periods from January 2015 to May 2016. The Department filed a motion for partial judgment on Unnamed Nursing's protest in May 2017. In its order denying the Department's motion, a different AHO determined that Section 7-9-93 is "clear and unambiguous" and that the Legislature did not intend to exclude Unnamed Nursing or other health care facilities from claiming the deduction.⁵ Moreover, after evaluating the legislative history of thestatute, the AHO concluded that the 2016 amendment to Section 7-9-93 did not warrant retroactive application. The Department appeals the AHO's order denying the Department's motion for partial judgment (the partial judgment order).

Evolution of Section 7-9-93

{6} Section 7-9-93 was originally enacted in 2004, at which time, the Department permitted health care facilities to apply for the deduction. See FYI-202 Gross Receipts Tax & Health Care Services NEW (8/04), page 5 (providing general examples where a health maintenance organization (HMO) and hospital were permitted to deduct payments from services provided by a health care practitioner), available at https://www.nmchiro.org/articles/FYI-202HealthServicesDeduction083104.pdf. Following the statute's amendment in 2006, the Department enacted regulations prohibiting health care facilities from claiming the deduction. See § 7-9-93(B)(3)(o), (p) (2006); 3.2.241.13 NMAC and 3.2.241.17 NMAC. The Legislature again slightly amended the statute in 2007, but it was a minor addition to Section 7-9-93(B)'s definition of a health care practitioner. In 2016, the AHO in HealthSouth Rehabilitation, interpreted Section 7-9-93 to permit health care facilities to take the deduction, concluding that the Department's 2006 change in regulations was in error. No 16-16, 2016 WL 2958471, **5, 7 (May 11, 2016) (dec. & order). Taxpayers claim that they are eligible for the deduction in reliance on the administrative decision in HealthSouth Rehabilitation. Id.

DISCUSSION

{7} On appeal, the Department makes several arguments in support of its contention that health care facilities are not entitled to the deduction in Section 7-9-93: (1) the AHOs in both protests, failed to properly apply the plain meaning rule given the statute's ambiguity, and the Taxpayers' right to a deduction is not clearly set out in the statute; (2) the legislative intent of the statute, as ascertained through canons of statutory construction, indicates that health care facilities are not entitled to the deduction; and (3) the 2016 amendment to the statute clarified the legislative intent as originally enacted to reflect that the deduction is limited to individual health care practitioners, and therefore should be applied retroactively.

Standard of Review

{8} Since the issue presented is one of statutory interpretation regarding the meaning of the version of Section 7-9-93 in effect at the time, we review the AHOs' decisions de novo. A&W Restaurants, Inc. v. Taxation & Revenue Dep't, 2018-NMCA-069, ¶ 6, 429 P.3d 976 ("The meaning of language used in a statute is a question of law that we review de novo." (internal quotation marks and citation omitted)), cert. denied, 2018-NMCERT-___ (No. S-1-SC-37272, Oct. 26, 2018). While we are not bound by either AHO's interpretation of the statue, 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."

NMSA 1978, § 7-1-25(C) (1989); Stockton v. N.M. Taxation & Revenue Dep't, 2007-NMCA-071, ¶ 8, 141 N.M. 860, 161 P.3d 905; see N.M. Mining Assn. v. N.M. Water Quality Control Comm., 2007-NMCA-010, ¶ 11, 141 N.M. 41, 150 P.3d 991 ("We are not bound by an agency's interpretation of a statute, since it is a matter of law that is reviewed de novo.").

Applicable Rules of Statutory Construction

{9} "Our primary goal [in statutory interpretation] is to give effect to the intent of the Legislature." Sacred Garden, Inc. v. N.M Taxation & Revenue Dep't, 2020-NMCA-___, ¶ 5, ___ P.3d ___ (No. A-1-CA-37142, Jan. 28, 2020) (alteration, internal quotation marks, and citation omitted). "We discern legislative intent by first looking at the plain meaning of the language of the statute, reading the provisions together to produce a harmonious whole." Id. (omission, internal quotation marks, and citation omitted). Additionally, we may "consider the statute's history and background." Valenzuela v. Snyder, 2014-NMCA-061, ¶ 16, 326 P.3d 1120 (internal quotation marks and citation omitted). "But where 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." State ex rel. Helman v. Gallegos, 1994-NMSC-023, ¶ 3, 117 N.M. 346, 871 P.2d 1352 (internal quotation marks and citation omitted).

Applicable Presumptions

{10} "There is a presumption that all persons engaging in business in New Mexico are subject to the gross receipts tax." TPL, Inc. v. N.M. Taxation & Revenue Dep't, 2003-NMSC-007, ¶ 9, 133 N.M. 447, 64 P.3d 474; see also NMSA 1978, § 7-9-5(A) (2002) ("To prevent evasion of the gross receipts tax and to aid in its administration, it is presumed that all receipts of a person engaging in business are subject to the gross receipts tax."). As such, "deductions are construed strictly against the taxpayer" and "[t]he right to a deduction must be clearly and unambiguously expressed in the statute." TPL, Inc., 2003-NMSC-007, ¶ 9. The taxpayer bears the burden of proving its eligibility for the deduction. Id. ¶ 31. Nevertheles...