Legal action threatened over delayed refunds for immigrants

Lawyers for Taxation and Revenue Department say sides never agreed on deadline for payments

Two civil rights groups on Wednesday said they will take Gov. Susana Martinez’s administration back to court because it has yet to pay income tax refunds to immigrants who are entitled to the money but have been discriminated against by a government that wrongly profiled them as cheats.

The state settled the initial complaint by agreeing that it would not automatically deny tax refunds to state residents who do not have a Social Security number. But a lawyer for the Mexican American Legal Defense and Education Fund said Martinez’s Taxation and Revenue Department still has not sent refund checks to potentially thousands of New Mexico immigrants.

State officials said the practice of withholding tax refunds from foreign nationals without a Social Security

number was intended to prevent fraud. But civil rights groups counter that the Martinez administration’s policy was arbitrary and punished immigrants who had paid the state more in taxes than was required.

“The department had no basis — not even a single instance of fraud — to support their policy,” Marisa Bono, Southwest general counsel for MALDEF, told reporters after a court hearing in Santa Fe.

A spokesman for the Taxation and Revenue Department did not respond to questions about the case.

Lawyers representing the department said state officials never agreed to a deadline for processing the old returns. They said the agreement settling the lawsuit came in the middle of tax season, when the agency is usually swamped with new filings, and shortly after the department’s Cabinet secretary, Demesia Padilla, suddenly resigned amid a criminal investigation.

“It’s just not happening as fast as the plaintiffs would like,” lawyer Mark Baker told Thomson.

Beginning around 2012, the state began rejecting personal income tax filings submitted with what are known as individual tax identification numbers. These numbers are provided by the federal government to workers who do not have a Social Security card. Instead of processing the tax returns, the state instead demanded that taxpayers submit additional documents.

The federal government accepts tax filings using individual tax identification numbers and sends tax refunds to foreign nationals who qualify for them. But the state government took a different, hard-line stand, flagging some 14,500 returns by 2014 and, according to MALDEF, withholding more than $4 million in refunds due to foreign nationals.

MALDEF and Somos Un Pueblo Unido, an advocacy organization for immigrants, sued the state in 2015. They challenged the state policy of denying tax refunds on behalf of four individual taxpayers, calling the practice part of “a disturbing pattern by Governor Martinez’s administration to single out and punish hard-working immigrant families.”

The dispute came during an unsuccessful five-year push by Martinez, a Republican, to repeal a law allowing New Mexico residents without proof of immigration status to obtain a state driver’s license.

The lawsuit over the state withholding tax refunds was scheduled to go to trial last summer. Instead, Martinez’s administration agreed to a settlement in which it would abandon the policy, automatically reprocess the tax returns and issue refunds to those who should have received them.

Civil rights groups say state officials have not lived up to that agreement.

Bono said the state has provided tax refunds from 2015 to the handful taxpayers at the center of the case. They are still waiting for refunds from 2012-14, she said. And the department has not reprocessed filings from those years, leaving potentially thousands of taxpayers without their refunds.

State District Judge David Thomson granted the state’s request on Wednesday to dismiss the case, as agreed in the settlement. But the civil rights groups will ask him to require the state to immediately process those tax returns or set a deadline.

“If we had known it would take over eight months … we would not have agreed to forgo our clients’ rights to trial in this case and sit around for some indefinite period,” Bono told the judge. She said the state only settled the case to avoid a trial but had not acted in good faith to send taxpayers refund checks.