New Mexico cities sue state over withheld gross receipts taxes

New Mexico

Cities around New Mexico are suing the state, saying they are illegally siphoning their money — tens of millions of dollars that go toward things like police, fire and citizen services.

“Those fragile municipal budgets that depend heavily on gross receipt tax have to have some protection,” said Municipal League Executive Director Bill Fulginiti.

Whether it’s funding public libraries, fixing streets or paying police officers, every town in New Mexico depends on gross receipt tax money from the state. But Fulginiti said the state’s Tax and Revenue Department is holding back.

“We decided we really need to solve this so we’re in court,” said Fulginiti.

According to this lawsuit, Taxation and Revenue withheld money in gross receipts taxes over many years, totaling somewhere between $10 million and $12 million. The department collects taxes from businesses and shares that money with local governments. That money is mainly used for the city’s budget. When tax revenues are down, cities have to cut their budgets and funding for programs.

“It’s important and vital to the city and to it’s constituents to fund operations, new streets, new projects, and other important services provided to the citizens of Farmington,” said Farmington City Attorney Jennifer Breakell. “So therefore we felt it was important and vital to join in on the lawsuit.”

Farmington believes the state owes them close to $3.6 million dollars.

“Any sort of money that isn’t turned over to the city that the city is rightfully entitled to hurts the city and their operational budget and more importantly hurts the constituents,” said Breakell.

Albuquerque, Artesia, Moriarty and Farmington are currently listed on the lawsuit. Santa Fe, Bloomfield and Raton are looking to joining the lawsuit as well.

“I can tell you that from our research there’s a problem in every municipality from the last fiscal, from the last 11 fiscal years and every county,” said Fulginiti. “So the magnitude of that — I’m not sure what the number would be but I’m probably guessing it could be tens of millions of dollars minimum.” 

This isn’t a new issue for Tax and Rev. The city of Eunice sued them in 2013 after the state notified them they owed $2.3 million in back taxes because they were accidentally overpaid. The city won the suit when a judge found the state at fault. The cities now filing suit say the problem should have been fixed back then.

When KRQE News 13 asked for a response, Tax and Revenue sent a statement saying:

“The Taxation and Revenue Department is committed to responsible stewardship of taxpayer dollars and proper distribution of tax dollars. TRD has not been served with a complaint and cannot speculate about potential litigation.”

Copyright 2019 Nexstar Broadcasting, Inc. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.

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