The Georgia Tax Tribunal Act of 2012
| Citation | Vol. 18 No. 4 Pg. 0010 |
| Pages | 0010 |
| Publication year | 2012 |
A Look at the Law
The Georgia Tax Tribunal Act of 2012
by Richard C. Litwin and John Masters
On April 19, 2012, Georgia Gov. Nathan Deal signed into law House Bill 100 (HB 100 [2011-12 Reg. Session]), cited as the Georgia Tax Tribunal Act of 2012 (the Act). The Act established a specialized tribunal in the executive branch of government to hear state tax disputes.
Starting Jan. 1, 2013, taxpayers seeking to contest a state tax liability can petition to the Georgia Tax Tribunal. This article examines the methods by which a taxpayer can challenge a state tax liability under current tax procedure and highlights the advantages of using the new Georgia Tax Tribunal instead. This article also addresses key provisions of the Act.
Background—Limits Under Current System Accentuates Need for a Tax Tribunal
Under the Commissioner of Revenue's authority set out in Georgia tax procedure,[1] the Georgia Department of Revenue (the Department) issues an Official Assessment and Demand for Payment (Official Assessment) to notify a taxpayer of the Department's final assessment of tax, penalty and interest. If a taxpayer wants to challenge the Official Assessment, then the taxpayer has four options for doing so, but limitations and conditions tied to these options restrict their utility. First, the taxpayer can file a tax appeal in superior court within 30 days of the date of the Official Assessment. With a few exceptions, the appeal is filed in the county of the taxpayer's residence, but to use this option, the taxpayer must "pay-to-play."[2] Specifically, the taxpayer must post a surety bond (not a bail bond) to cover the entire tax, penalty and interest. Although, the taxpayer can avoid the bond requirement if the taxpayer has an interest in real estate sufficient to cover the liability,[3] the "bond requirement" discourages many taxpayers from putting their tax case before a superior court judge.[4]
Second, the taxpayer can challenge the Official Assessment by filing with the Commissioner of Revenue a demand for hearing under the Georgia Administrative Procedures Act.[5] The taxpayer's case is heard by an administrative law judge at the Office of State Administrative Hearings (OSAH). This remedy is a pre-deprivation remedy, to wit: the taxpayer is not forced to make a financial sacrifice as a condition to using the remedy. Nonetheless, after the administrative law judge issues his initial decision, the Commissioner of Revenue can overturn the administrative law judge's initial decision.[6]
Georgia law requires that the taxpayer act within 30 days of the date of the Official Assessment to file a tax appeal (first option) or a demand for hearing (second option). If the taxpayer fails to act within this 30-day period, then the Commissioner of Revenue can issue a State Tax Execution and begin collection proceedings.[7]
Third, the taxpayer can contest the Official Assessment by paying the amount assessed and filing a refund claim with the Department.[8] If the refund claim is denied, then the taxpayer can file a complaint for refund in superior court,[9] but the taxpayer must pay the liability before the taxpayer can file his complaint for refund in superior court.
Fourth, a taxpayer who fails to challenge the Official Assessment within the 30-day period can wait for the Department to issue the state tax execution. After the state tax execution is issued, the taxpayer can file an affidavit of illegality of tax execution.[10] The "surety bond" barrier exists here as well. As a condition to bringing the action, the taxpayer must post a surety bond (not a bail bond) to ensure payment of the tax, penalty and interest, in the event that the taxpayer loses the case.[11]
The limitations on the various options for challenging an Official Assessment have left many practitioners and their clients frustrated by the system. To compound taxpayer angst tied to the system for contesting a state tax liability, substantive case law on Georgia state taxation is scarce. Decisions issued by superior courts are often unpublished and as result are difficult to access. Further, decisions issued by OSAH are confidential, and therefore they cannot be leveraged effectively as precedent. Moreover, appellate review by the Court of Appeals of Georgia of both OSAH decisions and superior court decisions is obtainable only by application and is subject to discretionary review procedures.[12]
Recognizing the growth of tax courts and tax tribunals in other states, practitioners gathered, caucused and shared ideas for several years to develop a solution. Their efforts led to the Georgia Tax Tribunal Act of 2012.
The Act creates a specialized Tax Tribunal to replace the demand-for-hearing option provided under the Administrative Procedure Act (the APA). Indeed, the demand for hearing prescribed in the APA (at O.C.G.A. § 50-13-12) is repealed.[13] The Act also provides that a taxpayer can file a petition in the Tax Tribunal as an alternative to filing a tax appeal in superior court. The Act contains various provisions aimed at ensuring efficient and fair resolutions to state tax disputes. Key provisions of the Act are examined below.
Independence and Location of the Tax Tribunal
The Georgia Tax Tribunal's main location will be in Fulton County in offices separate from the Commissioner of Revenue (and, presumably, the Department of Revenue).[14] The Tax Tribunal will be part of OSAH but will be an independent and autonomous division of OSAH. The Tax Tribunal will operate under the sole direction of the chief tribunal judge.[15]The Tax Tribunal can hear cases in Fulton County at its main location or at any other place in Georgia.[16]
Types of Cases Heard by the Tax Tribunal
Under the Act, the Tax Tribunal functions to resolve taxpayer disputes with the Georgia Department of Revenue.[17] To that end, it has jurisdiction to hear cases between a taxpayer and the Department of Revenue. The Tax Tribunal also has jurisdiction to hear a taxpayer refund action following the Commissioner of Revenue's denial of a taxpayer's claim for refund of sales taxes, income taxes, real estate transfer taxes and intangible recording taxes.[18] The Tax Tribunal can also hear the traditional tax appeal, to wit: an appeal from "any order, ruling, or finding of the Commissioner of Revenue."[19]This type of tax appeal arises typically following the issuance of an Official Assessment.[20]
In addition, the Tax Tribunal has jurisdiction to hear the Commissioner of Revenue's denial of corporation's petition for alternative apportionment under Georgia income tax laws.[21] The Tax Tribunal can hear appeals of special taxpayers (such as public utilities and railroads) whose property, for ad valorem property tax purposes, is centrally assessed by the Commissioner of Revenue.[22] The Tax Tribunal can also hear a declaratory judgment action challenging the Commissioner of Revenue's adoption of a Department of Revenue regulation.[23]
Finally, the Tax Tribunal can hear a petition filed to challenge a state tax execution.[24] As noted above, under current law, only a superior court has jurisdiction over an affidavit of illegality and cannot hear the case, unless that taxpayer posts a surety bond to cover an adverse judgment. But the Act explicitly dispenses with the bond (or other security) requirement as a condition to bringing the appeal before the Tax Tribunal.[25] Thus, in contrast to current law, a taxpayer that fails to appeal an Official Assessment within 30 days of the date of the Official Assessment is not barred from bringing an action in the Tax Tribunal to challenge the liability asserted in the State Tax Execution.
Notably, however, the Tax Tribunal cannot hear every tax-related challenge. It cannot hear challenges tied to the Department's administration of the state alcoholic beverages laws, under Title 3, or motor vehicle laws, such as the issuance of car titles, under Title 40.[26]Further, the Tax Tribunal cannot hear ad valorem property tax cases. In addition, a taxpayer seeking to challenge an assessment of value
on real or personal property must follow the procedures set out in O.C.G.A. § 48-5-311(e).[27] Finally, the Tax Tribunal does not have jurisdiction to rule on constitutional issues.[28]
Concurrent Jurisdiction with Superior Courts
Under the Act, superior courts retain jurisdiction to hear all matters over which superior courts have jurisdiction currently, but the taxpayer now has a choice.[29] He can file the action in superior court (in which case, the same conditions for jurisdiction, such as the bond requirement, apply), or he can file a petition in the Tax Tribunal. The Act does not allow the taxpayer to move the case from superior court to the Tax Tribunal or vice-versa.
Tax Tribunal Judges— Qualifications and Term of Office
A chief objective of the Act is to resolve a dispute through a specialized tribunal. Consistent with this objective, the Act imposes guidelines for qualified candidates for the position of Tax Tribunal judge. First, the candidate must be a U.S. citizen and a Georgia resident during his term in office. Second, the candidate must be an attorney licensed to practice in Georgia. Finally, as a condition to the appointment, the candidate must have practiced primarily in tax law for eight years prior to serving as judge.[30]
The Tax Tribunal's initial judge(s) shall be appointed by the governor.[31] Term of office for the judges depends upon the number of judges appointed initially. If the tribunal has only one judge initially, then the judge shall serve a term of four years and shall be chief tribunal judge. If the tribunal has more than one judge initially, then the chief tribunal judge is appointed for an initial term of six years and the other judge (or judges) is appointed...
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