Judge asked to enjoin tax department from refusing to collect tax

By Steve Hansen
QCS Managing Editor

Quay County has asked a Santa Fe District judge to order the New Mexico Taxation and Revenue Department to get out of the way of the county’s collection of a tax that county voters imposed on themselves since 1987 to support the Dr. Dan C. Trigg Memorial Hospital

County Attorney Warren Frost has filed a complaint before First Judicial District Judge Sarah Singleton to enjoin the tax department from refusing to collect the tax for the county. A hearing is scheduled Dec. 27 in Santa Fe, Frost said.

Quay County voters approved continuation of the tax, equal to one-eighth of one percent of gross receipts, in an election on Sept. 17. Voters have renewed the tax every five years since its inception in 1987. The state has attempted to block the tax, however, because the language of the referendum question before the voters did not include a clause that is in the state’s model ordinance for special hospital taxes.

That clause reads: “This ordinance hereby adopts by reference all definitions, exemptions and deductions contained in the Gross Receipts and Compensating Tax Act as it now exists or as it may be amended.”

In motions for permanent and temporary injunctions, Frost argues that the omitted clause does not affect the meaning of the tax ordinance, nor would the presence of that clause have affected the outcome of the election.

Since the tax and revenue department brought the matter to the county’s attention on Sept. 25, the Quay County Commission has re-adopted and published the ordinance with the “definitions, exemptions and deductions” clause added in an attempt to correct the apparent error, but to no avail, according to the county’s complaint.

Demesia Padilla, the secretary of the tax and revenue department, said that amending the ordinance would be adequate to restore validity, but the department declared the ordinance and continuation of the tax invalid, anyway, the county’s complaint said.

In that letter, which is attached to the complaint as an exhibit, Padilla writes,

“Upon receipt of an ordinance that complies with the provisions of (the statute), that conforms substantially to the sample ordinance of the department and that fulfills any other statutory requirements,” the tax department will implement the tax.

In a responding motion, the tax department said Padilla meant the ordinance must be rewritten and again submitted to voters in order to be valid.

The tax department’s motion argues that the word “shall” in the statute requiring counties to adopt the state’s model ordinance word-for-word means there is a mandate that is not open to debate. The clause left out of the tax ordinance presented to voters,therefore, violates the word-for-word requirement, which means the tax department must nullify the tax.

The tax department’s motion also asserts that the County Commission’s attempt to correct the ordinance by approving a corrected version on a retroactive basis is an inadequate response. The corrected ordinance must again be presented to voters, the motion argues.

“How can a voter approve an ordinance that is not even adopted at the time they are asked to approve of the tax?” the tax department’s motion asks. “There is no reason to believe that the voters would not have approved the tax” as proposed in the ordinance the county approved after the vote, “but the issue is whether the voters were given the opportunity to approve or reject that tax to be imposed.”

The corrected ordinance cannot go into effect until after it is approved by the voters of the county, the tax department’s motion said.

Since the county cannot hold a new election before the end of the year, the county’s complaint says, “the County will lose its ability from this point forward” to adopt the tax. Since the county no longer meets the criteria to qualify for the tax and since there will be a gap in its application, the county may be ineligible to pass the tax again, the county’s complaint says.

The county’s complaint emphasizes that the Trigg Hospital and clinic ”employs 112 individuals and generates more than $6,500,000 in salaries, wages and benefits to Quay County employees.”

The hospital is the only hospital in Quay County. The closest hospital is the Guadalupe County Hospital 60 miles away.

Further, the county’s complaint states, “as a result of budget cuts associated with the Affordable Care Act, the hospital has struggled to maintain viability.”

The hospital gross receipts tax, which has been in effect since 1987, generates approximately $200,000 per year and is “critical to the maintenance of a hospital in Quay County,” according to the complaint.

Lance Labine, the hospital administrator, said the money is used to match funds for grants. Losing the tax could lead to a loss of $800,000 in grant funds, he said.

The tax department’s refusal to accept the gross receipts tax ordinance as passed is “jeopardizing the continuing existence of adequate health care for Quay County citizens,” the complaint concludes.

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