TEI-MTC liaison meeting report.

• Position: Tax Executives Institute, Multistate Tax Commission

The following report has been adapted from the minutes of a meeting of the Multistate Tax Commission's Executive Committee on November 11, 2004.

On Veterans' Day 2004, a delegation from Tax Executives Institute met with the Executive Committee of the Multistate Tax Commission (MTC). Janet M. Wilson, Chair of the Institute's State & Local Tax Committee, led the Institute's delegation. R. Bruce Johnson, Chair of the MTC Executive Committee and Utah State Tax Commissioner, presided.

MTC Audits

Ms. Wilson thanked the MTC for the opportunity for the meeting, noting that it was the first formal liaison meeting between the two organizations in several years. Dan Bucks, MTC's Executive Director, thanked TEI for coming and expressed high regard for TEI. Particularly, he expressed appreciation to the Institute for inviting Les Koenig, Director of MTC's Joint Audit Program, to speak at the Institute's 2004 Midyear Conference about Hewlett-Packard Company's MTC audit. (An article on this audit, Unprecedented Taxpayer-Initiated MTC Joint Audit Program Yields Benefits to All Parties, appeared in the January-February 2004 issue of The Tax Executive.)

Ms. Wilson contrasted the positive experience of the HP audit with the negative feedback received regarding MTC audits in general. A recurring issue is the lack of initial planning or communicated expectations on how- the audit will proceed. Mr. Koenig responded that, in the HP audit, the MTC sat down with the taxpayer at the beginning and work out a plan. He then described a typical MTC audit process, noting that while a basic time schedule is set for the audit, the auditors frequently are not aware of issues that might come up, and so are unable to present a fully-worked-out plan at the start. He said that they have noticed it is hard for an auditor to devote the requisite attention to three audits at a time with the increased number of states involved in each audit, and is considering limiting auditor workload to two audits at a time.

Ms. Wilson suggested that MTC auditors could profitably sit down with the taxpayer after a week's preliminary work to develop an audit plan. Mr. Koenig noted that an occasional problem is getting the consolidated federal Form 1120 from a taxpayer, which slows auditors' efforts to focus on the issues. Rick Clayburgh, North Dakota State Tax Commissioner, said that North Dakota uses the MTC because it represents an added resource to the state's own auditors, and his presumption...