State Tax Tribunals 

    Published July 20, 2012

    Quick LinksIssue | Background | Importance to CPAs | AICPA Position | Existing Language | Proposed Language | AICPA Staff Contacts | AICPA State Tax Tribunal Matrix | Summary | No State Tax Tribunal | State Tax Tribunal | 2013 Pending Legislation | CPA Representation | State Specific Documents | Other Links | Article

    An evolving issue in many states is the creation of state tax tribunals, which provide a means to resolve state tax appeal controversies prior to litigation, but in a forum outside the dominion and control of the state tax authority.  In 2014, Alabama (H105) enacted legislation on March 4, 2014, and 3 states have introduced legislation to create a state tax tribunal (Oklahoma (SB 392), Tennessee (SB0734, HB0961), and Washington (SB6176)), and Kansas (HB 2413) would make administrative changes.  In 2013, 8 states considered proposed legislation to create a state tax tribunal (Alabama (H264, S223), Colorado (HB 13-1140), Iowa (HSB 228, HB 1446), Kansas (HB 2413) Louisiana (HB 585, HB 515), Oklahoma (SB 392), Tennessee (SB0734, HB0961), and Texas (HB 2488)).  The AICPA generally supports the creation of state tax tribunals and is working with the state CPA societies on this issue.  The AICPA State and Local Tax Technical Resource Panel has developed a summary matrix chart of the current status of state tax tribunals.  As detailed in the chart, 17 states do not have a tribunal, while 27 have a tribunal contained in the executive branch and 6 have a tax tribunal located in the judicial branch.  Further noted in the AICPA Chart are the 5 states (AL, DC, MS, TX and WY) that allow CPAs (in-state and out-of-state) full rights to represent taxpayers in all tax matters before an independent tax forum with no additional steps required. There are 10 states (AK, AZ, DE, GA, IA, MI, NY, SC, WA and WV) that allow CPAs (but with limitations or additional steps required) to represent taxpayers in some fashion in a truly independent tax forum (non-court) in some tax matters.

    Issue

    As a means to resolve state tax appeal controversies prior to litigation, but in a forum outside the dominion
    and control of the state tax authority, many states are considering the adoption of state tax tribunals.

    Background

    More than half the states have adopted independent state tax tribunals (either in the judicial or executive
    branch). In the 2014 legislative session, Alabama enacted a state tax tribunal bill, and in the 2012 legislative session, Georgia and Illinois enacted bills to establish independent state tax tribunals. In 2012, the issue was also considered in Alabama, Louisiana, Oklahoma, and Pennsylvania.  In 2014, 3 states (Oklahoma, Tennessee, and Washington), and in 2013, 8 states (Alabama, Colorado, Iowa, Kansas, Louisiana, Oklahoma, Tennessee, and Texas) considered proposed legislation to create a state tax tribunal.

    The 2006 American Bar Association (ABA) Model State Administrative Tax Tribunal Act (Model Act) provides legislative language that often serves as a base for legislation on this issue in various states. As more states consider establishing new independent tax appeal forums or revising existing tax appeal systems, it is important to review the proposals to ensure CPAs authorized to practice in the state are able to represent taxpayers before the tribunal; this includes those licensed in another state but who have a practice privilege which makes them eligible to practice in this state under the state’s CPA mobility laws). The AICPA continues to consider this issue and is available as a resource to state CPA societies. (See AICPA Position below).

    In addition to the rights of CPAs to represent clients before proposed tax tribunals, it is also important to
    consider whether tax laws promote fairness and efficiency in regard to tax administration and policy, such as:
    independence (from the State Revenue Commissioner/ Department of Revenue), avoiding “pay-to-play” (the
    ability to challenge an assessment without first paying the tax (and interest and penalties), limited
    jurisdiction/specialized tax expertise, experienced tax judges, and published precedential decisions. The
    specific details of the forums vary among the states, so as states consider this issue, it is important for CPAs to advocate for fairness and mobility in representation rights before the tribunals. This issue is expected to
    continue to be debated around the country over the next several years.

    Importance to CPAs

    There are several reasons why state tax tribunals are a good idea for taxpayers and CPAs, as well as for the
    broader goal of good tax administration.

    1. Tax tribunals ensure a fair and effective tax administration system for taxpayers. All taxpayers would have a state tax appeal forum for state tax disputes that functions independently from the state tax authority.
    2. Tax tribunals, when structured in line with the Model Act, provide CPAs with greater taxpayer representation rights and service opportunities.
    AICPA Position

    While the AICPA does not lobby directly at the state level, it supports efforts by state CPA societies who may advocate for the creation of state tax tribunals structured in line with the provisions of the Model Act.

    The AICPA believes that if a state is considering possible legislation on this issue, “Section 16. Representation” of the Model Act should be slightly revised to take into account state CPA mobility laws.

    Existing Language

    (a) Appearances in proceedings conducted by the Tax Tribunal may be by the taxpayer, by an attorney
    admitted to practice in this State (including an attorney who is a partner or member of, or is employed by, an
    accounting or other professional services firm), by an accountant licensed in this State, or by an enrolled agent authorized to practice before the Internal Revenue Service. The Tax Tribunal may allow any attorney or accountant authorized to practice or licensed in any other jurisdiction of the United States to appear and
    represent a taxpayer in proceedings before the Tax Tribunal for a particular matter. In addition, the Tax
    Tribunal may promulgate rules and regulations permitting a taxpayer to be represented by an officer,
    employee, partner or member.

    (b) The [department of revenue] shall be represented by an authorized representative in all proceedings
    before the Tax Tribunal.

    Proposed language (italicized new language)

    (a) Appearances in proceedings conducted by the Tax Tribunal may be by the taxpayer, by an attorney
    admitted to practice in this State (including an attorney who is a partner or member of, or is employed by, an
    accounting or other professional services firm), by a certified public accountant licensed or authorized to
    practice in this State under the State’s accountancy laws, or by an enrolled agent authorized to practice before the Internal Revenue Service. The Tax Tribunal may allow any attorney (deleted “or accountant”) authorized to practice or licensed in any other jurisdiction of the United States to appear and represent a taxpayer in proceedings before the Tax Tribunal for a particular matter. In addition, the Tax Tribunal may promulgate rules and regulations permitting a taxpayer to be represented by an officer, employee, partner or member.

    (b) The [department of revenue] shall be represented by an authorized representative in all proceedings
    before the Tax Tribunal.

    Such a revision to Section 16 acknowledges the extensive efforts the CPA profession has undertaken to allow individual CPAs to practice across state lines without having to obtain a reciprocal license or meet other barriers to practice (e.g. special notices or fees). These “mobility” laws have already passed in 48 states and the District of Columbia and are an important priority of the profession as it seeks to adapt to clients’ needs and help CPAs thrive in the ever-changing marketplace. As long as a CPA meets the requirements to obtain a practice privilege in the state under the state’s accountancy law, the CPA should be allowed to represent a client before a tax tribunal. For example, a CPA in Kansas City, Missouri should be able to represent a client in Kansas City, Kansas even though she lives across the state border. In addition to the mobility laws reflecting the modern practice of accountancy, the public is also protected under mobility laws because any CPA practicing in a state, even if licensed elsewhere, falls under the jurisdiction of the state’s board of accountancy.

    The enhanced language also puts CPAs on a level playing field with enrolled agents, who, under the Model Act, do not have a state-specific requirement to represent a client in a state. They must simply be registered with the Internal Revenue Service. This change reflects the ways in which CPAs and enrolled agents are regulated and may operate across state lines.

    For more specific information about the CPA profession’s position on a specific pending legislative proposal in a state, interested parties should contact the state CPA society in that state.

    AICPA Staff Contacts

    • Mat Young, Vice President, State Regulatory and Legislative Affairs, 202/434-9273, myoung@aicpa.org
    • Eileen Sherr, Senior Technical Manager – Taxation, AICPA State and Local Taxation Technical Resource Panel, 202/434-9256, esherr@aicpa.org 

    Download a PDF of the above information on this page (AICPA Position Paper).

    AICPA State Tax Tribunals Matrix

    Summary:

    No State Tax Tribunal - 17 states do not have tribunals

    (No)  – AR, CA, CO, FL, ME, NE, NV, NM, ND, OK, PA, RI, SD, TN, UT, VT, VA

    State Tax Tribunal - 33 states (including DC) have some form of tax tribunal/ court (27 executive branch (EB) + 6 judicial branch (JB) = 33)

    (Yes) - 

    27 EB AL, AK, DE, DC, GA, ID, IL, IA, KS, KY, LA, MD, MA, MI, MN, MS, MO, MT, NH, NY, NC, OH, SC, TX, WA, WV, WI, WY

    6 JB – AZ, CT, HI, IN, NJ, OR

    2014 Enacted Legislation - 1 state has enacted legislation relating to state tax tribunals -

    AL (H105) – created an independent tax tribunal Alabama Tax Appeals Commission (EB) – CPAs (in state and out of state) could represent taxpayers if have written authority or power of attorney. House passed, referred to the Senate 1/16/14, enacted 3/4/14.

    2014 Proposed Legislation
    - 4 states have introduced legislation relating to state tax tribunals -  

    KA (HB 2413) - would change court to board - CPAs would not be allowed to represent to the board.

    OK (SB 392) – would create the State Office of Administrative Tax Hearings (EB), CPAs (in and out of state) would be allowed to represent taxpayers.

    TN (SB0734, H961) – would create an independent tax tribunal within the executive branch (EB), CPAs (in state can represent taxpayers (and out of state on particular matters)).

    WA (SB 6176) – would create a new state tax tribunal (EB) as an agency of state government (and eliminate the BOTA).  Accountants licensed in the state and accountants authorized to practice and licensed in another state may appear before the tribunal.  Introduced 1/16/14.

     

    2013 Proposed Legislation - 11 bills in 8 states considered legislation relating to state tax tribunals –

    AL (H264, S223) – would create independent tax tribunal Alabama Tax Appeals Commission (EB) – CPAs (in state and out of state) could represent taxpayers if have written authority or power of attorney.  Alabama's 2013 legislative session ended without passing this legislation.


    CO (
    HOUSE BILL 13-1140) – would create the Colorado independent tax appeal court - (JB), CPAs (in state can represent taxpayers (and out of state on particular matters)).  Colorado's 2013 legislative session ended without passing this legislation.

    IA (HB 1446) - provides for a study of the effectiveness of the state's current administrative processes for tax matters and the feasibility of consolidating these processes under a tax appeals court.  (HSB 228) – would require a study by Jan. 8, 2014 of the current administrative appeals processes for tax matters and make recommendations for changes if necessary and study the possibility of creating a new consolidated tax appeal board.

    KA (HB 2413) - would change court to board - CPAs would not be allowed to represent to the board.

    LA – (HB 585, HB 515) – would create a Tax Court (JB), CPAs (in and out of state) would be allowed to represent taxpayers if the CPA passes a test.  HB 515 does not have language referencing the ability of CPAs to represent their clients.

     

    OK (SB 392) – would create the State Office of Administrative Tax Hearings (EB), CPAs (in and out of state) would be allowed to represent taxpayers.

    TN (SB0734, H961) – would create an independent tax tribunal within the executive branch (EB), CPAs (in state can represent taxpayers (and out of state on particular matters)).

    TX (HB 2488) – would create a tax tribunal (EB) – with authorized representatives including an accountant licensed in this State or any other jurisdiction of the United States.


    CPA Representation

    Five  states, AL, DC, MS, TX and WY, allow CPAs (in-state and out-of-state) full rights to represent taxpayers in all tax matters before an independent tax forum with no additional steps required.  There are 10 states AK, AZ, DE, GA, IA, MI, NY, SC, WA, and WV) that allow CPAs (but with limitations or additional steps required) to represent taxpayers in some fashion in a truly independent tax forum (non-court) in some tax matters.  Some of the limitations include:  AL, AK (CPAs need to submit power of attorney), AZ (limited cases), DE (out of state CPAs need permission) (though note that Tax Appeals Board and Division of Revenue are both located in Department of Finance),
    DC, GA (enacted 4/19/12 – CPAs can represent only in small claims division), IA (CPAs authorized to practice in the state), LA (with some limitations on CPAs), MI (CPAs can represent in the tax tribunal, not in the claims court), MS, NY (NY CPAs allowed, out of state CPAs and out of state attorneys need special permission), SC (tax matters, no unauthorized practice of law), TX, WA (WA CPAs allowed, out of state CPAs with permission of the Board), WV (in-state and out of state CPAs, but there are strong limitations (i.e., questioning a witness) against unauthorized practice of law) and WY.

    For more detailed information on any or all of the states, see the AICPA State Tax Tribunals Matrix.

    State Specific Documents

    Alabama -
    AICPA Letter, One Pager

    Other Links/Resources

    State tax tribunal information:

    Georgia tribunal FAQs  and info.

    Michigan tribunal info. and Q&A

    New York State Tax Appeals Tribunal info.
     
    New York City Tax Appeals Tribunal info.

    City of Detroit, Michigan Tax Tribunal info.

    ABA Model Act - 2006

    Other Organizations:

    Council on State Taxation (COST) statement on independent state tax tribunals and 2012 and 2013 letters on Alabama proposed legislation and The Best and Worst of State Administration: COST Scorecard on Tax Appeals and Procedural Requirements, Dec. 2013

    Tax Executives Institute (TEI) statement on independent tax tribunals

    Illinois Chamber of Commerce supports tribunal

    Georgia Chamber of Commerce supports tribunal

    National Taxpayers Union (NTU) letter on ABA Model Tax Tribunal Act

    American Legislative Exchange Council (ALEC) letter on ABA Model Tax Tribunal Act

    Gar Allen letter on California and state tax tribunals - May 27, 2009

    Articles

    The Tax Adviser article on State Independent Tax Tribunals:  A Popular Alternative to Resolving Disputes - September 1, 2013 

    AICPA e-alert  update on state tax tribunals - June 7, 2013

    Accounting Today article on the Rise of State Tax Tribunals - June 5, 2013

    State Tax Notes article on Alabama Should Take This Chance at Improving its Tax System - May 14, 2013

    State Tax Notes article on Alabama May Pass State Tax Tribunal Bill this year - Feb. 19, 2013

    Morrison and Foerster LLP article on To Each Its Own: Procedural and Jurisdictional Considerations for Recently Enacted State Tax Tribunals - Jan. 22, 2013

    Article on Illinois's New Independent Tax Tribunal - Tax Analysts - Oct. 1, 2012

    Article on Illinois Establishes Independent Tax Tribunal - Dykema - Sept. 2012

    Jones Day newsletter article on Georgia Introduces an Independent Tax Tribunal - June 2012 

    Article on Heard in More States - See You in Tax Court! - Chicago Tribune - May 25, 2012

    Sutherland article on Courting Independence:  The Rise of Effective State Tax Courts and Tribunals - Tax Analysts, Feb. 6, 2012

    Blog on State Tax Tribunals - Feb. 2012

    Article on THE MODEL STATE ADMINISTRATIVE TAX TRIBUNAL ACT: FAIRNESS FOR ALL TAXPAYERS by Garland Allen and Craig B. Fields in The State and Local Tax Lawyer, Vol. 10, 2005, p. 83 - 2005.




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