EUNICE — Email bantering over the weekend left Eunice’s gross receipts tax revenue still in question, with possible legal action in the works.
The $158,617.96 withheld from the small Lea County city’s April distribution remains unexplained, with state officials claiming no legal reason to explain it.
Eunice’s budget is based on a pandemic-reduced monthly estimated revenue of $300,000 after a previous fiscal year average of more than $420,000 per month. Actual GRT revenue from July through March, the current fiscal year, has averaged a little less than $270,000 per month.
Municipalities in New Mexico depend on GRT revenue for operating expenses, revenue that comes from consumers through retailers who pay the tax to the state. It takes two months after a taxable sale for revenue to reach city coffers.
The New Mexico Taxation and Revenue Department’s governmental liaison David Monteith responded in an email to a letter from the city’s attorney, Tommy Parker, citing the state statute that was revised by the New Mexico Legislature after a previous legal battle between Eunice and the TRD.
“In this matter, the Department is not recovering a ‘recoverable amount’ and there was no requirement to allow for any inspection,” Monteith said. “That is, refund claims and lack of a taxpayer payment gave rise to the withholding of revenues, but they did not trigger the statutory provision for notification because the withholding was not a ‘recoverable amount.’”
Parker countered by email with a reminder to Monteith that he indicated to City Manager Jordan Yutzy in a telephone call on April 21 that the recovered amount was the result of an amended return.
“You recognized at that time that there was a requirement to give notice to the City of Eunice,” Parker told Monteith in his email. “Furthermore, when you spoke to Jordan Yutzy, you told him that you had looked up the matter and that an anonymous taxpayer had filed an Amended Return on March 16, 2021, which caused the adjustment. This is the reason the City of Eunice is demanding the right to inspect the Amended Return. Contrary to your statement, this is clearly a ‘recoverable amount’ under Section 7-1.6.15 (the disputed section of law).”
Yutzy told the News-Sun on Monday a court document has been written and he expects Parker to file it as a request for injunction in Fifth Judicial District Court in Lovington on Wednesday if the issue remains unresolved.
“So far, we don’t have our money. We’re moving forward,” Yutzy said, noting he also has spoken with the New Mexico Municipal League and learned other small cities, especially in southwestern New Mexico, have had the same problems.
Eunice’s previous legal battle with the TRD began in early 2013 when the state agency announced an intention to recoup $2 million in overpaid GRT distributions.
After several court appearances culminating with the state Supreme Court siding with the City of Eunice in 2016, the state Legislature changed the law, requiring TRD to allow 90 days after notifying a city or county of the need for an adjustment, allowing the city or county the opportunity to review the amended return causing the adjustment and only withholding the funds over a six-month period.
“We’re still trying to come to a peaceful solution with the state, but their response is basically saying, ‘We don’t have to tell you why we took the money out because it’s not a recoverable amount. Therefore, we don’t have to follow state law,’” Yutzy said Monday.
For comparison, while the $158,000-plus withheld from the city constitutes more than half of Eunice’s budget for a month, it’s only 4 percent of Santa Fe’s April distribution of $7,978,284.32 and less than half a percent of Albuquerque’s $36,777,917.03, according to data posted on the TRD’s website.
Parker specifically demanded the TRD allow the city to review the amended return and, if found valid, the TRD follow the provisions of the law in repayment.
“Hopefully we can reach a resolution before the City of Eunice has to start laying off city employees because of this tremendous financial shortfall. For your information, the City of Eunice has now dropped $750,000 below its projected budget for this year,” Parker wrote to Monteith. “Prior to this last adjustment, the City of Eunice was only down $441,000.”
The attorney’s email again threatens legal action but allows for resolution.
“If we cannot resolve this matter this coming week, then we will be forced to proceed with legal action in order to address concerns the City of Eunice has with how all of this has been handled by the Taxation & Revenue Department,” Parker wrote. “We hope that the Taxation & Revenue Department will work with the City of Eunice on this matter without need for litigation.”
Curtis Wynne may be contacted at reporter3@ hobbsnews.com.
