AI Generated Opinion Summaries

This summary was computer-generated without any editorial revision. It is not official, has not been checked for accuracy, and is NOT citable.

Facts

• The Hess Corporation (Hess) was involved in a class action lawsuit by royalty interest owners alleging underpayment for carbon dioxide produced from the Bravo Dome Unit in New Mexico. The lawsuit was settled, with Hess agreeing to compensate the owners. Subsequently, the New Mexico Taxation and Revenue Department (the Department) issued a severance tax assessment to Hess, citing the settlement as a taxable event. Hess contested this assessment, arguing the Department lacked statutory authority for the tax imposition (paras 1, 3-5).

Procedural History

• District Court of Santa Fe County: The court rejected Hess's argument against the Department's statutory basis for the assessment but granted a partial refund on other grounds (para 1).

Parties' Submissions

• Hess Corporation: Argued that the Department lacked statutory authority for the severance tax assessment following the class action settlement and contested the factual assumption that the settlement proceeds related to price claims (paras 5, 7).
• New Mexico Taxation and Revenue Department: Asserted that the settlement constituted a taxable event under NMSA 1978, Section 7-29-4.3, due to the litigation's claims that Hess suppressed the value of carbon dioxide, thereby establishing an increased taxable value (paras 5, 7).

Legal Issues

• Whether the settlement agreement from a class action lawsuit constitutes a taxable event under NMSA 1978, Section 7-29-4.3, thereby obligating Hess to severance tax reporting and payment (para 10).
• Whether the assessment was barred by the statute of limitations (para 22).

Disposition

• The court affirmed the district court's judgment partially refunding Hess but rejected Hess's arguments against the Department's authority to issue the severance tax assessment and the applicability of the statute of limitations (paras 39-40).

Reasons

• Per CELIA FOY CASTILLO, Judge (MICHAEL D. BUSTAMANTE, Judge, LINDA M. VANZI, Judge concurring):
  The court held that a settlement of a royalty class action may constitute an adjudicatory event resulting in an increased taxable value of products, thus falling within the scope of Section 7-29-4.3. The FSA was determined to have settled both price and non-price claims, with the Department's allocation of settlement proceeds to price versus non-price claims not supported by evidence. The court found a proper allocation was half to price and half to non-price claims (paras 16-18).
  The court rejected Hess's argument that the assessment was barred by the statute of limitations, noting that Hess failed to file any tax forms identifying or allocating settlement payments as subject to severance tax, thus extending the statute of limitations to seven years under Section 7-1-18(C) (paras 22-28).
  The court addressed and dismissed Hess's additional arguments regarding the lack of substantial evidence for the Department's assessment methodology, the allocation of settlement proceeds, and the imposition of a negligence penalty, finding substantial evidence supported the district court's findings and conclusions (paras 29-38).