This summary was computer-generated without any editorial revision. It is not official, has not been checked for accuracy, and is NOT citable.
Facts
Corrections Corporation of America (CCA), a private prison operator, entered into agreements with the New Mexico Corrections Department (NMCD) and the federal Bureau of Prisons (BOP) to provide prison facilities and correctional services in New Mexico. CCA claimed that these agreements constituted leases of real property, making the receipts from these agreements deductible under the Gross Receipts and Compensating Tax Act. The agreements involved per diem payments based on the number of inmates housed, with CCA retaining control over the facilities and the ability to house inmates from other jurisdictions if capacity was not met by NMCD or BOP (paras 2-12, 27).
Procedural History
- District Court, Carol J. Vigil, J.: Denied CCA's claim for a refund of gross receipts tax, holding that the agreements between CCA and the governmental entities were not leases of real property (para 1).
Parties' Submissions
- Appellants (CCA): Argued that the agreements with NMCD and BOP constituted leases under New Mexico law because the governmental entities had sufficient dominion and control over the prison facilities. CCA also contended that inconsistencies in the district court's findings justified reversal and that difficulties in calculating the refund amount should not preclude a refund (paras 16, 22).
- Appellees (State of New Mexico and Secretary of Taxation and Revenue): Asserted that the agreements were not leases because CCA retained ultimate control over the facilities, including possession of the keys and the provision of correctional services. They argued that the per diem payment structure and CCA's ability to house inmates from other jurisdictions further demonstrated that the agreements were not leases (paras 23-24).
Legal Issues
- Whether the agreements between CCA and the governmental entities constituted leases of real property under the Gross Receipts and Compensating Tax Act (para 16).
Disposition
- The Court of Appeals affirmed the district court's decision, holding that the agreements were not leases of real property and denying CCA's claim for a tax refund (para 31).
Reasons
Per Bustamante J. (Fry and Robinson JJ. concurring):
The Court held that the agreements between CCA and the governmental entities did not constitute leases of real property under the Gross Receipts and Compensating Tax Act. The Court emphasized that a lease requires the transfer of possession and control of the property to the lessee. In this case, CCA retained significant control over the facilities, including possession of the keys and the ability to house inmates from other jurisdictions if capacity was not met by NMCD or BOP (paras 23-28).
The Court distinguished this case from prior decisions, such as Quantum Corp. v. State Taxation & Revenue Dep't and Chavez v. Commissioner of Revenue, where fixed payments and exclusive possession were key factors in finding a lease. Here, the per diem payment structure and CCA's ability to fill unused capacity with inmates from other jurisdictions indicated that the agreements were more akin to arrangements for hotels or motels rather than leases of real property (paras 27-28).
The Court also noted the legislative policy favoring taxation and the presumption that the Department's assessment is correct. It concluded that the agreements did not meet the statutory definition of a lease and that deductions under the Gross Receipts Act must be narrowly construed (paras 29-30).