Weatherford Artificial Lift Sys., LLC v. Clarke

• Citation: 499 P.3d 679
• Decision Date: 14 September 2021
• Docket Number: No. A-1-CA-37773,A-1-CA-37773
• Parties: WEATHERFORD ARTIFICIAL LIFT SYSTEMS, LLC, a Delaware corporation, Plaintiff-Appellant, and Weatherford U.S., L.P., a Delaware corporation, Plaintiff-Appellant, v. Stephanie Schardin CLARKE, Secretary of Taxation & Revenue, and New Mexico Taxation & Revenue Department, Defendants-Appellees.
• Court: Court of Appeals of New Mexico

499 P.3d 679

WEATHERFORD ARTIFICIAL LIFT SYSTEMS, LLC, a Delaware corporation, Plaintiff-Appellant,

and

Weatherford U.S., L.P., a Delaware corporation, Plaintiff-Appellant,

v.Stephanie Schardin CLARKE, Secretary of Taxation & Revenue, and New Mexico Taxation & Revenue Department, Defendants-Appellees.

No. A-1-CA-37773

Court of Appeals of New Mexico.

Filing Date: September 14, 2021

Joe Lennihan, Santa Fe, NM, for Appellants

Hector H. Balderas, Attorney General, David Mittle, Special Assistant Attorney General, Santa Fe, NM, for Appellees

ATTREP, Judge.

{1} In this consolidated appeal, Plaintiffs Weatherford Artificial Lift Systems, LLC and Weatherford U.S., L.P. (collectively, Taxpayers) appeal the district court's grant of summary judgment in favor of Defendants John Monforte¹ and the New Mexico Taxation and Revenue Department (collectively, the Department) based on the doctrines of exhaustion of administrative remedies and primary jurisdiction. We reverse.

{2} This case involves the exhaustion requirements for a taxpayer who seeks to challenge the Department's denial of successive applications for tax credits. Generally speaking, a taxpayer who is dissatisfied with the Department's denial of a tax credit may pursue one of two remedies under the Tax Administration Act—an administrative protest or a claim for refund—and must exhaust the chosen remedy. See NMSA 1978, §§ 7-1-22 (2015), -24 (2015, amended 2019), -26(C) (2015, amended 2021). An administrative protest is decided by the Administrative Hearings Office, the outcome of which then may be appealed to this Court. See §§ 7-1-22, - 24 (2015). A claim for refund is decided by the Department, the denial of which then may be contested before the district court in a civil action. See §§ 7-1-22, -26(C)(2) (2015). In this appeal, the Department takes the position that when a taxpayer pursues successive denials of tax credits raising a common issue, the taxpayer must have the issue resolved in the forum where it was initially raised or is otherwise bound by their choice of remedy for the original denial. We find no support in the Tax Administration Act for the Department's position, and we conclude the Act requires only that a taxpayer denied a given credit exhaust their remedy for that denied credit before seeking relief from the courts.

{3} In light of this, we hold that, based on the undisputed facts in this case, Taxpayers exhausted their administrative remedies. We further hold that the doctrine of primary jurisdiction, which was raised for the first time at the hearing on the Department's motions for summary judgment, does not apply in this case. For these reasons, we reverse the district court's grant of summary judgment in favor of the Department.

BACKGROUND²

{4} This case involves Taxpayers' attempt to obtain high-wage jobs tax credits under NMSA 1978, Section 7-9G-1 (2013, amended 2021).³ The Legislature enacted Section 7-9G-1 "to provide an incentive for urban and rural businesses to create and fill new high-wage jobs in New Mexico." Section 7-9G-1(B). The statute permits an "eligible employer" to claim a credit for each "new high-wage economic-based job" filled by an "eligible employee." Section 7-9G-1(A), (C). As relevant to this case, an "eligible employer" is defined as an employer who "made more than fifty percent of its sales of goods or services produced in New Mexico to persons outside New Mexico during the applicable qualifying period[.]" Section 7-9G-1(M)(3)(a). A "qualifying period" is "the period of twelve months beginning on the day an eligible employee begins working in a new high-wage economic-based job or the period of twelve months beginning on the anniversary of the day an eligible employee began working in [such] job[.]" Section 7-9G-1(M)(6).

{5} In December 2015 Taxpayers applied to the Department for high-wage jobs tax credits for twenty-one employees whom Taxpayers had hired between 2010 and 2015 (the 2015 Credits). See § 7-9G-1(J) (providing that an eligible employer must apply to the Department in order to receive a high-wage jobs tax credit). After the Department denied the 2015 Credits, on grounds not of record, Taxpayers filed written protests to be heard by the Administrative Hearing Office (AHO). See § 7-1-24(A)(3)(a), (B) (2015) (providing that a taxpayer may dispute the denial of a credit by filing a written protest); § 7-1-26(C)(1) (2015) (same); see also § 7-1B-8 (2015) (providing the procedures for the AHO to follow upon the filing of a protest). The protests were consolidated and, as of the completion of briefing in this appeal, have yet to be resolved.⁴ Although the protests of the 2015 Credits are not before this Court in this appeal, the Department, as we explain, relied on Taxpayers' election to protest the denial of these credits to support its motions for summary judgment.

{6} In December 2016 Taxpayers applied to the Department for high-wage jobs tax credits for 101 employees whom Taxpayers had hired between 2011 and 2016 (the 2016 Credits). The employees for whom Taxpayers sought credits in the 2016 Credits were not those included in their application for the 2015 Credits. The Department denied the 2016 Credits for a variety of reasons, including on the ground that Taxpayers were not "eligible employers." Instead of filing administrative protests, as Taxpayers had done with the denials of the 2015 Credits, Taxpayers claimed refunds for the denied 2016 Credits, and, upon the Department's denials of the claims, pursued those claims through two civil actions in the First Judicial District Court, in Santa Fe County.⁵ See § 7-1-26(C)(2) (2015) (allowing a taxpayer who has been denied a claim for refund to seek a remedy by filing a complaint in the district court for Santa Fe County alleging that the Department is indebted to the taxpayer).

{7} In Taxpayers' cases before the district court, the Department filed identical motions for summary judgment, contending the district court lacked jurisdiction because Taxpayers had failed to exhaust their administrative remedies.⁶ The Department argued that the 2015 and 2016 Credits "involved some of the same timeframe" and clarified in reply that this meant Taxpayers' status as eligible employers was the same for both the 2015 and 2016 Credits.⁷ From this, the Department argued that Taxpayers were precluded from seeking relief in district court as to the 2016 Credits because they elected to pursue their 2015 Credits via administrative protests before the AHO. As legal support, the Department cited Section 7-1-22, which makes the exhaustion of administrative remedies a prerequisite to a court's jurisdiction over a matter, and Section 7-1-26(C) (2015), which provides that a taxpayer may pursue only one remedy upon the denial of a credit—i.e., a written protest to be heard by the AHO, or a claim for refund, the denial of which is heard in the district court. As factual support, the Department attached a copy of a joint motion in the consolidated administrative protest of the 2015 Credits, in which the parties agreed that "[t]he timeframes involving the [p]rotest and the [c]omplaint overlap." Taxpayers responded that they had exhausted their administrative remedies as to the 2016 Credits and it was irrelevant that they had elected to protest their 2015 Credits, given that those credits were different from the 2016 Credits.

{8} At the motions hearing, in addition to advancing its exhaustion argument, the Department argued for the first time that, under the doctrine of "primary jurisdiction," the AHO, given its expertise, should first be allowed to decide whether Taxpayers were eligible employers. The district court granted the Department's motions for summary judgment, invoking the doctrines of exhaustion of administrative remedies and primary jurisdiction. Afterward, Taxpayers attempted to append the 2016 Credits to their administrative protests of the 2015 Credits, but the AHO denied the request.

{9} Taxpayers appealed, and we consolidated their appeals prior to briefing.

STANDARD OF REVIEW

{10} We generally review the district court's grant of summary judgment de novo. Freeman v. Fairchild , 2018-NMSC-023, ¶ 14, 416 P.3d 264. Summary judgment is only appropriate where "there is no genuine issue as to any material fact and ... the moving party is entitled to a judgment as a matter of law." Rule 1-056(C) NMRA. When, however, a district court is called upon to determine subject matter jurisdiction, as is the case with exhaustion of administrative remedies, the court is free to resolve factual disputes. See Gzaskow v. Pub. Emps. Ret. Bd. , 2017-NMCA-064, ¶¶ 18, 22-23, 403 P.3d 694 ; South v. Lujan , 2014-NMCA-109, ¶¶ 8-9, 336 P.3d 1000. In this case, the relevant facts appear undisputed, and the district court made no factual findings as part of its exhaustion of administrative remedies ruling. Consequently, our review is de novo. See City of Albuquerque v. BPLW Architects & Eng'rs, Inc. , 2009-NMCA-081, ¶ 7, 146 N.M. 717, 213 P.3d 1146 ("[I]f no material issues of fact are in dispute and an appeal presents only a question of law, we apply de novo review[.]").

{11} In undertaking our de novo review of the grant of summary judgment, we bear in mind that the party moving for summary judgment has the burden of making a prima facie showing that there is "an absence of a genuine issue of fact, and that it [is] entitled as a matter of law to judgment in its favor." Brown v. Taylor , 1995-NMSC-050, ¶ 8, 120 N.M. 302, 901 P.2d 720. If the moving party fails in this regard, the non-moving party need not make any factual showing because summary judgment is not proper as a matter of law. See id.

DISCUSSION

{12} The district court invoked the doctrines of exhaustion of administrative remedies and primary jurisdiction to grant summary judgment for the Department. How and why the district court applied these doctrines in this case, however, is less than clear. After asserting that the doctrines applied, ...