A Success in Protecting Taxpayer Rights

Protecting and maintaining the rights of taxpayers (as they comply with procedural requirements or seek a determination regarding a tax dispute) became a chief cause of the Indiana Chamber in several cases this session.

First, there was a bill (SB 546) introduced to substantially reorganize the Tax Court. Why? This was our question. It seems that some feel that the governmental entities should win many more cases (meaning that taxpayers should be losing many more cases.) Yes, taxpayers do win more frequently than the officials in charge of assessing taxes. Why? Because the assessment determinations that are disputed are those where the taxpayer feels they are being charged more than the law requires them to pay – nobody needs to appeal when the government has gotten it right.

The Chamber strongly believes in the value of a specialized court with tax knowledge and expertise that allows for cases to be resolved in a consistent and uniform manner. That was the original purpose, and is the ongoing function of the Tax Court. The transition to a new judge a few years ago has been a little bumpy, but it is all smoothing out and restructuring the Court was exactly the wrong thing to do.Fortunately, we were able to convince others of this and, consequently, the bill did not receive a hearing.

Then there was the Department of Revenue (DOR) bill (SB 515); generally speaking, it’s a good bill, except that in connection with federal law changes it resulted in making corporate returns due on the same day as federal returns. Existing law gave preparers a 30-day breathing period before the state return came due. Meaning no harm, DOR and administration officials agreed to alter the provision to maintain the more favored status quo.

Another problem bill (SB 501) sought to revamp the property tax appeals procedures; it was later merged into SB 386 in the House. The objectives of the bill were admirable, and it included some real improvements to the process; most notably, it established a uniform June 15 appeal deadline statewide. Previously, the deadline was tied to the assessment notices and varied from county to county. However, the provisions of SB 501/386 extended a bit too far in attempting to streamline the process as it impacted a taxpayer’s ability to correct what are typically clerical type mistakes made by the assessor or other county officials.

These type errors have historically always been correctable for up to three years, but the bill restricted many of them to a period of just 45 days. This over encompassing contraction of rights – restricting the remedy for taxpayers to correct errors – was unnecessary and unacceptable.

The Chamber concentrated its focus late in the session on reinstating the full complement of existing rights back into this procedural recodification. Here again, with the help of several stakeholders, including the Indiana Manufacturers Association and Indiana Farm Bureau, we were successful at protecting the legislation from impinging on taxpayer rights. The Chamber wishes to recognize the efforts of Rep. Mike Karickhoff (R-Kokomo) in working with the interested parties in the waning hours of the session to successfully resolve these concerns.

Separately, an issue that didn’t make the headlines but you could have felt in your wallet centers on school bonds. The rating entities had concerns about the state’s potential role in ensuring these payments are made by the individual schools. Legislators took care of this with SB 196 and Indiana avoided a rating downgrade. Otherwise, this would have triggered increased interest rates on these bonds and cost taxpayers millions in additional property taxes.

Tax Court Under Scrutiny

10044552In April 2015, the Indiana Supreme Court ordered the creation of the Ad Hoc Tax Court Advisory Task Force to review the Indiana Tax Court’s resources, caseload, performance and operations. In May of 2015, the General Assembly passed legislation calling for the Indiana Judicial Center to conduct a like review and submit a report to the Legislative Council by December 1, 2016. The Supreme Court subsequently amended its order to have the task force submit its report to the Judicial Center and the Legislative Council by May 1, 2016.

In April 2016, the task force issued its findings and recommendations along with a report compiled by the National Center for State Courts (NCSC), which was contracted to assist the task force. These materials are now getting some attention and are definitely worthy of examination. The nine-member task force was chaired by Court of Appeals Judge James S. Kirsch. The members include a variety of experienced tax practitioners as well as the general counsel for the Department of Revenue and chief deputy for the Office of Attorney General. Tax Court Judge Martha B. Wentworth also participated as an “ex officio” liaison and attended meetings by invitation from the chair.

The NCSC researched the Court’s caseload, staffing and timeliness. It also interviewed stakeholders and conducted a survey seeking opinions on these subjects and on the perceived timeliness, fairness and demeanor of the Court. And it looked into case management, internal procedures and administrative practices. The statistical results, observations and recommendations are all set out in the report. The survey results evidence a contrast in opinions between the government responses and taxpayer responses regarding the quality of service provided by the Tax Court.

In short, it seems that the government representatives are significantly less satisfied with the Court. Not unrelated to their disgruntlement, it was noted in the preface to the findings that the Department of Revenue and attorney general members of the task force sought recommendations to review the very structure of the Court, recommending review of the de novo hearing process and the lack of automatic appeal rights. However, the majority of the group and the chair found these matters “outside the purview of the task force’s directive.”

Several things were apparently deliberated and no specific findings or recommendations were made. Ultimately, the task force’s primary finding was that after 30 years, the existence of the Tax Court still serves its initial purposes of providing tax expertise, tax law consistency and renders fair and thoughtful opinions.

The findings do focus on the need for continued progress in timely addressing pending cases and the utilization of resources and staff. The report recommends an ongoing review and suggests the Tax Court explore several reforms to its case management practices, including ruling on some matters without oral arguments, limiting discovery, requiring the Department of Revenue to certify a complete audit file (to avoid it having to be reconstructed) and referring some cases to mediation.

The findings and recommendations, NCSC report and other materials are available online.