TEI policy statement on independent state tax tribunals.

• Position: Tax Executives Institute

February 1, 2012

On February 1, 2012, Tax Executives Institute released the following policy statement setting forth the Institute's position encouraging all states to establish pre-payment, independent tax tribunals presided over by individuals possessing a strong knowledge of the tax law. The policy statement was prepared under the aegis of TEI's State and Local Tax Committee, whose chair is Linda H. Dickens of Texas Instruments Incorporated. Contributing substantially to the development of TEI's comments was Howard Grindle of XO Communications. Daniel B. De Jong, TEI Tax Counsel, serves as legal staff liaison to the State and Local Tax Committee and coordinated the preparation of TEI's policy statement.

Summary

Tax Executives Institute encourages all states to establish independent tax tribunals presided over by individuals possessing a strong knowledge of the tax law. Decisions of these tribunals should be made public to assist taxpayers in their efforts to comply with the tax laws. There should be no "pay to play" requirement; i.e., access to these tribunals should not require prepayment of the amount in dispute.

Despite their best efforts, taxpayers and state tax auditors do not always resolve every issue that arises during a tax audit. In the majority of states, taxpayers can appeal these issues to an independent forum without prepaying the disputed liability. Other states, however, provide no independent review other than by appeal to a court of general jurisdiction--and sometimes only after posting a bond or paying the full amount of the disputed assessment.

Allowing the same state authority that seeks to impose or collect a tax to also adjudicate a taxpayer's appeal is inherently unfair, and creates a conflict of interest that cannot help but foster the perception that the deck is stacked against taxpayers. That perception is exacerbated since departments of revenue are in the position of judging the regulations and rules they have promulgated. Further, audit assessments are generally presumed to be correct placing the burden on taxpayers to prove the assessments are in error. This burden shifting magnifies the importance of creating an impartial forum for adjudicating tax disputes.

The most important attribute of a tax tribunal is its independence. An impartial process for resolving tax disputes is a hallmark of both equitable tax administration and a competitive business environment. This perception of fairness also contributes...