A-1-CA-37347 | Omnilex

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Corrections to this opinion/decision not affecting the outcome, at the Court's discretion, can occur up to the time of publication
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in Odyssey.

IN THE COURT OF APPEALS OF THE STATE OF NEW MEXICO
Is Mexi
DEL CORAZON HOSPICE, LLC, ee eed 4/10/2000 8:42 An
f
Protestant-Appellant, wba
Mark Reynolds
v. No. A-1-CA-37347
NEW MEXICO TAXATION & REVENUE

DEPARTMENT,
Respondent-Appellee,

IN THE MATTER OF THE PROTEST
TO ASSESSMENTS ISSUED UNDER
LETTER ID NOS. L1216767280 AND
0849274160.

APPEAL FROM THE ADMNISTRATIVE HEARINGS OFFICE
Chris Romero, Hearing Officer

Sutin, Thayer & Browne
Suzanne W. Bruckner
Wade L. Jackson
Albuquerque, NM

for Appellant

Hector H. Balderas, Attorney General

David Mittle, Special Assistant Attorney General
Santa Fe, NM

for Appellee

MEMORANDUM OPINION

| BOGARDUS, Judge.

3 Del Corazon Hospice, LLC (Taxpayer) appeals from the administrative

hearing officer’s (the AHO) decision and order affirming the New Mexico Taxation

and Revenue Department’s (the Department) assessment of unpaid gross receipts tax

pursuant to New Mexico Gross Receipts and Compensating Tax Act, NMSA 1978,

§§ 7-9-1 to -117 (1966, as amended through 2020), against Taxpayer in the amount

of $290,967.68, including penalty and interest through March 29, 2018. For the

reasons that follow, we affirm.

BACKGROUND

3 Taxpayer is a licensed provider of hospice care services authorized by federal

authorities to provide services to Medicaid patients. Taxpayer does not provide room

and board for the hospice patients it serves nor does it operate nursing home

facilities. Instead, Taxpayer provides hospice services in the location where its

patients reside, including nursing homes located in Santa Fe and Espanola, New

Mexico.

{33 New Mexico is a pass-through state, which means that the nursing home

facilities are prohibited from billing Medicaid directly for the room and board

services provided to hospice patients. Accordingly, Taxpayer bills Medicaid for all

services performed on behalf of its patients, including room and board services

provided by the nursing home facilities in which the patients reside. The complete

billing process was described _at the protest hearin

{4 First, the nursing home facility bills Taxpayer for the patient’s room and

board. The nursing home facility’s bill contains the patient’s identifying information,

insurance information, the dates of service, the number of days within the dates of

service, the nursing home’s daily rate, the total amount due, and the patient’s share

of the total amount due. Taxpayer is contractually obligated to pay the total amount

due, less the patient’s share, to the nursing home facility within thirty days. Second,

Taxpayer relies on the nursing home facility’s bill to prepare a detailed invoice for

submission to the appropriate medical care organization that operates as a fiscal

intermediary for Medicaid. This invoice consists of detailed room and board

information for each day of the billing period for which payment is due for the

patient’s room and board. Taxpayer then electronically transmits the invoice to the

managed care organization. Third, the managed care organization pays Taxpayer

ninety-five percent of the charges billed by the nursing home facilities for a patient’s

room and board because the managed care organization is entitled to a five-percent

discount under the applicable regulations.

{5} | During the relevant audit period, Taxpayer had two contracts with each of the

nursing home facilities it served. The initial contracts between Taxpayer and the

nursing home facilities expressly disclaimed any agency relationship between them.

The subsequent contracts allowed Taxpayer to serve as the nursing home facility’s
3

agent for billing Medicaid for room and board services provided by the nursing home

differences, Taxpayer maintained the same billing and payment protocols under both

versions of the contracts. Taxpayer did not have the authority to bind any of the

nursing home facilities ina contract with a third party, including the medical care

organization that paid for room and board services. There was no requirement to

submit the contracts between Taxpayer and the nursing home facilities to Medicaid,

and the contracts were not submitted to Medicaid.

{6 | Following an audit of the period from June 30, 2011 to February 29, 2016, the

Department assessed a total of $282,743.91 for unpaid gross receipts tax, penalty,

and interest through April 2017. This assessment related only to Taxpayer’s receipts

from Medicaid for room and board. In July 2017, Taxpayer protested the

Department’s assessment, arguing that the receipts it received for room and board

were not subject to tax. In March 2018, the parties participated in an administrative

hearing before the AHO.

tn In May 2018, the AHO issued his decision and order denying Taxpayer’s

appeal. The AHO found, in relevant part, that “[i]f any of the relevant contracts

actually created a genuine agency relationship, the relationship ha[d] not actually

been disclosed to the medical care organizations.” The AHO then concluded, in

relevant part, that (1) “[t]he contracts between the nursing home facilities and

Taxpayer failed to established a disclosed agency relationship in which Taxpayer
4

had actual authority to bind the nursing home facilities in contracts with third parties,

ayer was therefore not a disclosed agent under... Section 7-9-3.5(A)(3)(

and... 3.2.1.19(C)(1) NMAC”; (2) “[s]ince Taxpayer was not a disclosed agent

under [that statute and regulation], Taxpayer’s receipts from Medicaid for room and

board services were taxable gross receipts”; and (3) Taxpayer was responsible for

interest and penalty in regard to the assessment.

DISCUSSION

{8} Taxpayer advances three arguments in this appeal: The AHO erred by (1)

applying 3.2.1.19(C) NMAC because it is inapplicable to the facts of this case or, to

the extent that that regulation does apply, its requirement that an agent be able to

bind a principal impermissibly limits Section 7-9-3.5(A)(3)(f); (2) not finding that

Taxpayer was acting as an agent of the nursing home facilities; and (3) finding that

Taxpayer’s agency relationship with the nursing home facilities had not been

disclosed to the medical organizations that administer Medicaid.

(93 “Onappeal from an agency determination, we determine whether, viewing the

evidence in a light most favorable to the agency’s decision, the findings have

substantial support in the record as a whole.” Wing Pawn Shop v. N.M. Taxation &

Revenue Dep't, 1991-NMCA-024, 4 8, 111 N.M. 735, 809 P.2d 649. “Under this

standard, we review whatever evidence fairly detracts from the administrative

findings as well.” /d. (internal quotation marks and citation omitted). To the extent

that Taxpayer’s arguments require us to engage in statutory interpretation, our
5

review is de novo. A&W Rests., Inc. v. N.M. Taxation & Revenue Dep’t, 2018-

ENV E NS bh th El NAVE ONS ea

NMCA-069, 46, 429 P.3d 976, cert. denied, 2018-NMCERT- (No. S-1-SC-

37272, Oct. 26, 2018). We further recognize that this Court can only set aside the

AHO’s decision and order on appeal if we conclude that it is “(1) arbitrary,

capricious or an abuse of discretion; (2) not supported by substantial evidence in the

record; or (3) otherwise not in accordance with the law.” NMSA 1978, § 7-1-25(C)

(2015); Tucson Elec. Power Co. v. N.M. Taxation & Revenue Dep ’t, 2020-NMCA-

011, 4.6, 456 P.3d 1085.

{10} Before addressing Taxpayer’s arguments, we identify presumptions that are

relevant to this appeal. “There is a presumption that all persons engaging in business

in New Mexico are subject to the gross receipts tax.” 7PL, Inc. v. N.M. Taxation &

Revenue Dep’t, 2003-NMSC-007, 4 9, 133 N.M. 447, 64 P.3d 474; see § 7-9-5(A)

(“To prevent evasion of the gross receipts tax and to aid in its administration, it is

presumed that all receipts of a person engaging in business are subject to the gross

receipts tax.”’). Further, “[a]ny assessment of taxes or demand for payment made by

the department is presumed to be correct.” NMSA 1978, § 7-1-17(C) (2007). “The

effect of the presumption of correctness is that the taxpayer has the burden of coming

forward with some countervailing evidence tending to dispute the factual correctness

of the assessment made by the secretary.” 3.1.6.12(A) NMAC; see MPC Lid. v. N.M.

Taxation & Revenue Dep’t, 2003-NMCA-021, § 12, 133 N.M. 217, 62 P.3d 308

(“The taxpayer claiming that receipts are not taxable bears the burden of proving the
6

assertion.”); Wing Pawn Shop, 1991-NMCA-024, 4 16 (“Where an exemption or

deduction from tax is claimed, the statute must be construed strictly in

* = > te COE SEO OE

taxing authority, the mght to the exemption or deduction must be clearly and

unambiguously expressed in the statute, and the right must be clearly established by

the taxpayer.” (internal quotation marks and citation _omitted)). “Unsubstantiated

statements that the assessment is incorrect cannot overcome the presumption of

correctness.” 3.1.6.12(A) NMAC.

gy Against this background, we turn to Taxpayer’s challenges to the AHO’s

decision and order. Taxpayer argues generally that the AHO erred by concluding

that it was not entitled to the tax exemption found at Section 7-9-3.5(A)(3)(f), which

provides that “amounts received solely on behalf of another in a disclosed agency

capacity” are excluded from gross receipts. As we analyze that challenge, we accept,

without deciding, the merits of Taxpayer’s first two arguments: (1) 3.2.1.19(C)

NMAC is inapplicable to the facts of this case; and (2) Taxpayer was an agent of the

nursing home facilities. Further, we assume, without deciding, that the amounts

Taxpayer received from Medicaid were received solely on behalf of another—the

nursing homes. Accordingly, we are only concerned with whether the AHO erred by

finding that Taxpayer’s assumed agency relationship with the nursing home facilities

was not disclosed to Medicaid.

4123 New Mexico’s appellate courts have analyzed whether there is a “disclosed

agency capacity” only when it was undisputed that 3.2.1.19(C) NMAC applied. See
7

MPC Lid., 2003-NMCA-021, {4 14, 37. Accordingly, that authority is unhelpful

rere because we_are proceeding under the asst

Gt = oe

not apply to these facts. We therefore must use the principles of statutory

interpretation to guide us as we interpret the plain language of Section 7-9-

3.5(A)(3)\(f). See Dell Catalog Sales L.P. v. N.M. Taxation & Revenue Dep’t, 2009-

NMCA-001, 9 19, 145 N.M. 419, 199 P.3d 863.

413} “Our main goal in statutory construction is to give effect to the intent of the

[L]egislature.” /d. (internal quotation marks and citation omitted). “|T]he plain

language of a statute is the primary indicator of legislative intent.” High Ridge

Hinkle Joint Venture v. City of Albuquerque, 1998-NMSC-050, 4 5, 126 N.M. 413,

970 P.2d 599 (internal quotation marks and citation omitted). “Courts are to give the

words used in the statute their ordinary meaning unless the [L]egislature indicates a

different intent.” /d. (internal quotation marks and citation omitted). We often use

the dictionary for guidance when determining “the plain meaning of the words at

issue[.|” Griego v. Oliver, 2014-NMSC-003, § 21, 316 P.3d 865 (internal quotation

marks and citation omitted).

414} Merriam-Webster defines, in relevant part, the verb “disclose” to mean “to

make [(something)] known or public.” https://www.merriam-

webster.com/dictionary/disclose (last visited July 15, 2020). Similarly, Black’s Law

Dictionary defines “disclose” to mean “[t]o make (something) known or public; to

show (something) after a period of .. . being unknown; to reveal.” Disclose, Black’s
8

Law Dictionary (11th ed. 2019). These definitions make it clear that our Legislature

415} In this case, Taxpayer has failed to direct this Court to any evidence indicating

that Taxpayer undertook any affirmative act to disclose to Medicaid its alleged

agency capacity with the nursing home facilities. Further, our independent review of

the record did not identify any such evidence. Seemingly acknowledging this

evidentiary limitation, Taxpayer argues that, based upon the billing it submitted to

the managed care organization, Medicaid knew to pay Taxpayer “at the nursing

home daily rate|.|’ From this, we are asked to accept “the plainly obvious inference”

that Medicaid knew “that the patient resides in a nursing home.” We understand

Taxpayer to argue that it could satisfy the requirement that its agency capacity be

disclosed to Medicaid through possible inferences and that to conclude otherwise is

to “ignore the facts and suspend common sense.” Stated differently, we understand

Taxpayer to be arguing that an affirmative act demonstrating disclosure is

unnecessary. We are not persuaded.

{16 As we have stated, by requiring “disclosure” of an agency capacity, our

Legislature intended some affirmative act that would make the agency capacity

known or public. Accordingly, we cannot say that the information relayed in

Taxpayer's billing that potentially supported an inference of an agency capacity

satisfied Taxpayer’s responsibility to affirmatively disclose its agency capacity such

that it was entitled to the tax exemption found at Section 7-9-3.5(A)(3)(f). Because
9

Taxpayer has failed to direct this Court to contrary evidence, we cannot conclude

2 that the AHO’s finding that Taxpayer had not disclosed any agency relationship it
3] had with the nursing home facilities to Medicaid was erroneous. Accordingly, on
A} this basis, we hold that the AHO’s decision and order denying Taxpayer’s protest
5| was not arbitrary, capricious, an abuse of discretion, or otherwise not in accordance
6] with the law and was supported by substantial evidence. See § 7-1-25(C),.
7| CONCLUSION
8] 473 We affirm.
9] as} ~=IT ISSO ORDERED.

10 ffattow Bede vod

u KRISTINA BO@ARDUS, Judge

12| WE CONCUR:

13]__ 2 Wh Uw

14] J. MILES HANISEE, Chief Judge

15 AD 7 |

16] FACE R. MEDINA, Judge

August 10, 2020- Del Corazon Hospice, LLC v. New Mexico Taxation & Revenue Department, No. A-1-CA-37347

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