New Mexico State University wants a tax refund for its out-of-state road games and is willing to go to court to get it.
NMSU filed a lawsuit last week against the State of New Mexico and its secretary of taxation and revenue, Demesia Padilla, seeking $282,747.61 plus interest for “overpayment of governmental gross receipts taxes.” The tax payments at issue were paid on amounts New Mexico State received for competing in out-of-state athletic events from December 2011 through 2014.
The lawsuit says out-of-state games amount to interstate commerce and as such can be deducted from governmental gross receipts according to state statutes. NMSU claims it “erroneously” paid governmental gross receipts tax on payments for out-of-state games during the 2011-14 time span and filed for a refund in June.
The State Taxation and Revenue Department informed NMSU in November that its refund had been rejected. The school responded by filing a lawsuit seeking the requested refund amount plus interest and litigation costs. The suit was filed in Santa Fe County’s First Judicial District Court on Dec. 29.
Whether NMSU can recover its tax money may hinge on whether or not out-of-state games meet established parameters for interstate commerce. The lawsuit includes a Nov. 16 email from the state taxation and revenue department that informed NMSU its refund had been rejected. The email said state statutes “do not appear to exempt out of state events.”
The email refers to a state bill (SB 271) that spells out tax exemptions for athletic or entertainment services that occur out of state and says the proposed amendment to a state statute was “never signed by the governor and therefore not enacted.”
Attorney Zachary McCormick, who is representing NMSU in the lawsuit along with Marjorie Rogers, does not believe SB 271 is significant to his client’s claim.
“The state statute already has an exclusion for out-of-state commerce,” McCormick said, “and includes the right to deduct it from governmental gross receipts tax.”
New Mexico State athletic director Mario Moccia declined to comment on the pending litigation. However, Moccia said payouts for road games, especially big-money football games, are necessary to help
balance NMSU’s athletic budget. The school took in $1.85 million for football games at Florida and Ole Miss in 2015 and is slated to make $2.8 million for games at Kentucky and Texas A&M next fall.
Moccia referred to such guarantee games as “necessary evils,” from a financial perspective.
“We actually have line items in our budget for money games,” Moccia . “That money not only goes for funding operational budget but paying off our existing deficit. Those are the realties we face.”
Football does not account for all the money NMSU takes in for out-of-state athletic events. The lawsuit included a breakdown of 19 monthly periods from December 2011 through 2014 during which the school also received compensation for out-of-state men’s and women’s basketball, volleyball and baseball games. More than 100 pages of individual game contracts were included.
Some out-of-state game payments provided little more than travel costs for Aggie teams, but others contributed significant income to the athletic department. For example, the Aggies received $900,000 and $950,000 for respective football games at Auburn and Texas and $93,000 for a 2013 men’s basketball game at Gonzaga.
Payouts for road games can help NMSU’s athletic department compensate for poor home attendance, but Moccia hopes greater on-field and on-court success will allow the Aggies to play fewer money games in coming years. In the interim, NMSU will seek to get some of the money from previous road games back through its lawsuit.
As of Wednesday the state had not responded to NMSU’s lawsuit, McCormick said.