A new tax court? Also, state legislators discuss outsourcing, disclosure.

• Author: Allen, Bruce C.
• Position: Government Relations

AB 2472 (Wolk) and SB 1424 (Burton) would establish an administrative California tax court to decide sales and use, insurance and income tax appeals.

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According to the authors, the tax court would increase public confidence in the tax systems' fairness, ensure fair and equal treatment for taxpayers and provide a legal forum for tax dispute resolution similar to the U.S. Tax Court.

California tax court decisions would be published and could provide guidance to similarly situated taxpayers.

The bills would not eliminate the Board of Equalization, which would continue to adopt regulations, establish policy issues, administer other taxes and hear some property tax disputes.

All major tax appeals would go to this proposed tax court consisting of five judges appointed by the governor and confirmed by the Senate. Proponents believe that these appointed judges would not be subject to the political pressures that elected Board of Equalization members may experience.

The proposed tax court, while an administrative body, would function much like a court. CPAs and other non-attorneys must be authorized to practice before it, which requires passing an exam, or complying with qualifying procedures that would be developed.

Appeals from the tax court would go to the Court of Appeal rather than Superior Court. The Franchise Tax Board also would be able to appeal to the Court of Appeal, which it cannot do now.

Opponents say the current system is open and less formal, and CPAs, enrolled agents, taxpayers and attorneys resolve tax disputes in a relatively uncomplicated administrative procedure and hearing process that would become a captive, specialty practice for a select few members of the state bar.

The California Judicial Council is concerned that the Legislature may not have the constitutional authority to create a new court that bypasses the Superior Court appeal process.

CalCPA has expressed concerns that the hurdles set for practice by the proposed court may deny CPAs the opportunity to represent clients. CPAs routinely represent clients in IRS appeals, but very few represent clients in U.S. Tax Court.

If the bills pass in their current form, clients would be deprived of a cost-effective method of resolving tax disputes.

AB 2472 proponents have advised CalCPA that they will provide for CPAs to continue to represent their clients. Without such a provision, CalCPA will oppose the legislation.

Labor groups and the California Society...