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County loses $2M; taxes paid in error

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It’s clear that Bernalillo County is losing about $2 million in tax revenue.

What isn’t so clear are details about the why.

Deputy County Manager Teresa Byrd says the county received about $1 million less than expected in gross receipts taxes last month, and she’s been told to prepare for another $1 million reduction this month.

That’s apparently because one or more companies made claims with the state that they had overpaid their gross receipts taxes, Byrd said. The state Department of Taxation and Revenue told Byrd’s office recently that it would work with its attorneys to see whether any more information could be shared, but nothing more has been so far, she said.

The state distributes revenue from gross receipts taxes – similar to a sales tax – to cities, counties and other agencies each month.

Bernalillo County isn’t the only local government that’s faced large, unexpected adjustments.

William Fulginiti, executive director of the New Mexico Municipal League, said about 10 cities and counties have faced large “take backs” of revenue recently, including Guadalupe County, Santa Rosa and Eunice. It can cause financial challenges, especially for smaller governments, he said.

“Frankly, we don’t have the kind of budget reserves or tax reserves the state has,” Fulginiti said.

Maggie Hart Stebbins, chairwoman of the Bernalillo County Commission, said she’s surprised at the secrecy surrounding the sometimes-unexpected changes in revenue, which happen with little warning to local governments.

“We try to budget responsibly,” Hart Stebbins said Monday in an interview, “but it’s hard when we’re unaware that these cases are pending and have no way to anticipate what the result will be.”

Bernalillo County expected to receive about $94 million in gross receipts taxes this fiscal year, Byrd said, but it looks like the revenue will come in about 3 percent short.

However, the loss of $2 million isn’t expected to cause any immediate, dramatic spending cuts, she said.

Demesia Padilla, New Mexico’s secretary of Taxation and Revenue, said she couldn’t share details about what occurred because of state and federal rules centered on the rights of taxpayers.

Generally, she said, adjustments in tax distributions can occur when a company makes a refund claim or an audit shows someone paid too much in taxes or paid them to the wrong jurisdiction.

“That happens every month,” she said of the refund claims, which range from $10 to $10 million.

In many cases, the financial impact on the state government itself is heftier than what local governments face.

One recent adjustment totaled $8 million to $9 million for the state, Padilla said.

“The state’s not losing any money,” she said. “These are legitimate refunds that are due to taxpayers.”

The counties can also end up receiving more money if an audit shows someone didn’t pay enough in taxes.

As for any frustration over secrecy, Padilla said state attorneys are examining whether they can legally provide more information to the public in the interest of open government and transparency.

“Trust me, I’d love to be able to give the counties more information,” she said.

Some officials say the adjustments may be happening more often now because of the tight economy.

“As times get tough, taxpayers are challenging their tax payments even more,” Byrd said.

Fulginiti said many adjustments are the result of errors by the taxpayer.

“I know it may not be the fault of the (Taxation and Revenue) Department,” he said. “It certainly is not the fault of the city or the county. It’s generally a taxpayer issue. They either mis-code their report or didn’t claim a deduction or credit, or the department itself does an audit.”

Fulginiti said the Municipal League and others have worked, without success, to pass legislation making more information available when changes occur.

In any case, Byrd said she’s pleased the state is trying to provide more notice to local governments.

In April, the county didn’t know there would be any change until its tax distribution for the month came in less than expected, she said. For this month, however, the county got about three weeks’ notice.

She hasn’t been told to expect any changes in upcoming months.

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