TEI issues five state and local tax policy statements.

• Position: Tax Executives Institute

In November 2015, TEI's State and Local Tax Committee issued five policy statements: (1) Reporting Federal Income Tax Changes, (2) Audit Procedures, (3) Corporate Tax Return Due Dates, (4) State and Local-Imposed Audit Fees, and (5) Interest Rates. TEI's policy statements reflect TEI's position on important state and local administrative and procedural issues. They are intended to enable TEI to respond quickly to issues as they arise across the country and to facilitate advocacy by providing formal position papers TEI's members can use when communicating with taxing agencies.

TEI's policy statements were prepared under the aegis of TEI's State and Local Tax Committee, whose chair is Jamie Fenwick. Pilar Mata, TEI Tax Counsel, coordinated the preparation of the policy statements.

Reporting Federal Income Tax Changes

Nearly all states require taxpayers to report changes resulting from federal income tax examinations to state tax authorities. Similarly, states require taxpayers to file amended state income tax returns reflecting changes reported on amended federal income tax returns. The purpose of these requirements is to assure states collect the revenues to which they are entitled. States diverge, however, regarding (1) the time to report the changes, (2) the specific events or actions triggering the reporting requirement, and (3) the form or format required to report the federal adjustments.

Tax Executives Institute, Inc. (TEI) supports states' adoption of uniform procedures to report federal income tax changes. Multiple and diverse reporting requirements create endless confusion and complexity for multistate taxpayers. The burden of complying with these different rules to report the same information in different formats to different states is inefficient, costly, and wasteful. TEI recommends states adopt these guidelines and procedures to provide taxpayers with certainty and consistency:

* Taxpayers should be provided 180 days to report federal income tax changes to state tax authorities (and to report state changes to municipal tax authorities).

* This 180-day period should commence upon the latter of:

** The taxpayer's execution of Federal Form 870, or its equivalent, agreeing to the final and complete disposition of all deficiencies or over-assessments. If the agreement is subject to final approval by the Internal Revenue Service (or Joint Committee on Taxation or U.S. Department of Justice, as appropriate), the agreement should be deemed final when the taxpayer receives a copy of the agreement executed by the government. If the Form 870 does not resolve all issues raised during the examination, the Form 870 should be considered a "partial 870" that does not trigger the 180-day period.

** The expiration of the statutory time to petition the U.S. Tax Court for a redetermination of the Notice of Deficiency.

** The execution of a signed closing agreement between the taxpayer and the Internal Revenue Service pursuant to I.R.C. [section] 7121, which results in a final...