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State Taxpayer Rights Protections – Some Highlights & a Free Online Workshop Series

Posted on Oct. 12, 2022

Today’s post is from Anna Gooch, the ABA Tax Section Public Service Fellow at the Center for Taxpayer Rights. Over the last year, in conjunction with the ABA Tax Section State and Local Tax Committee and the support of the Rockefeller Foundation, Anna and the Center have been conducting a survey of state and local tax procedures, in order to identify strengths and weaknesses in taxpayer rights protections. Although the survey is an ongoing process and will be updated periodically, the Center has gathered enough data to convene a free online workshop series, Reimagining Tax Administration: State Tax Practices & Taxpayer Rights. The workshop series consists of four 2-hour online workshops, between October 25 and November 22, 2022. The series will cover tax return filing issues; audits, appeals, and adjudications; collection enforcement and collection alternatives; and state funding of LITCs and establishment of state taxpayer advocate/ombuds offices. You can see the full agenda and register for the free conference here. Meanwhile, read on to learn about some interesting highlights from the survey. – Nina Olson

Taxpayers in the United States routinely interact with any number of tax systems – the federal income tax; state (including district and territory) income tax; state sales, gross receipts, or franchise tax; and locality (county, city, and school district) property tax. This is not an exhaustive list. Broadly speaking, there are 52-plus unique state, district, and territory tax agencies that taxpayers must engage with in addition to the Internal Revenue Service. Each of these agencies has the ability to strengthen, protect, undermine, and impair taxpayer rights through its choices in tax and benefits administration. With the preliminary results of a survey conducted by the Center for Taxpayer Rights (more on the survey here), we can not only view the combined data for each jurisdiction in one place, but we can also begin to identify practices that work well and areas that would benefit from advocacy. These findings can then be shared among the state tax agencies and state tax practitioners with the hope that learning from each other will inspire positive change.

With this background in mind, I’d like to share examples of best practices, areas that would benefit from intervention, encouraging statistics, and concerning trends that have emerged as outliers as the Center continues to receive completed surveys from our volunteers.

Best Practices: Oregon’s Office of the Taxpayer Advocate

Oregon is not the only state with a taxpayer advocate’s office; however, Oregon’s office is a standout. The legislation that created the office in 2021 is impressive, and it can serve as a model for other jurisdictions to adopt when creating their own state taxpayer advocate or ombuds offices. Specifically, the legislation sets out in detail the responsibilities and duties of the office. These duties are broad, and they include not only the requirement of assistance to taxpayers who are unable to solve their tax problems through normal channels, but also a requirement that the taxpayer advocate help educate taxpayers and provide easily understandable information about various Department of Revenue procedures. From this extensive list of functions in the legislation, it is clear that the Oregon legislature had taxpayer rights in mind when creating this office.

Needs Improvement: Louisiana’s Driver’s License Suspension

Many state agencies and licensing boards are authorized to suspend or block the renewal of professional (teaching, nursing, attorney, etc.) and recreational (hunting, fishing, etc.) licenses when a licensee owes state taxes. Few states take the suspension of licenses a step further by allowing the department of motor vehicles (or equivalent) to suspend or block the renewal of driver’s licenses for licensees who owe state taxes. In Louisiana, the threshold amount for the recommendation of a suspension is $1,000, and the decision is final and cannot be appealed. For comparison, the state of California may only recommend license suspension when the taxpayer owes more than $100,000 in state taxes and appears on the state’s list of top 500 tax delinquents. Louisiana’s practice is concerning because it not only perpetuates the taxpayer’s inability to pay the tax due by jeopardizing their ability to maintain their income, but it also threatens the taxpayer’s ability to obtain food, medical care, and other necessities. Although intended to scare taxpayers into paying past due tax debt, this practice may only exacerbate harm when the taxpayer cannot afford to pay the tax in the first place without incurring economic hardship.

Concerning Trends: Locating Procedural Information, Specifically in the Audit Context, Is Nearly Impossible

Some questions in the survey can be answered with a quick Google search. Does New York regulate commercial tax return preparers? (Yes). Does Pennsylvania offer innocent spouse relief? (Yes). How often must municipalities in Alaska assess property tax? (Yearly). Some questions, however, seem impossible to answer, especially those concerning audit and appeals procedures. A search asking how to know if a taxpayer is under audit yields no relevant results. States generally do not have a search function for notices or letters like the IRS does. With the exception of New Mexico, publications and other guidance on audits and appeals are rare. Without this information, taxpayers must blindly enter the audit and appeals processes. There are few, if any, resources with easy to digest information, let alone those in languages other than English. This lack of information significantly impairs taxpayer rights, and states should consider improvements both to their audit and appeals procedures and to their communications about these processes.

Encouraging Statistics: Nearly Every State Has a Taxpayer Bill of Rights

As volunteers return completed surveys, one (near) constant has been the answer to Question 111: Does your state have a taxpayer bill of rights?Yes. When I look further into the content of these state taxpayer bills of rights (TBORs), I feel hopeful that state taxpayer rights will be better protected in the future. Some state TBORs are nearly identical to the federal version, but some include protections that are not guaranteed on the federal level. For example, North Dakota’s TBOR includes the right to record conversations between the taxpayer and the Office of the Tax Commissioner. It also includes the right to a waiver of penalties and interest for “good cause.” These two rights are not common, but they show that the state is considering its taxpayers’ unique needs and wants when developing its TBOR. Of course, there is a difference between what a state includes in its TBOR and what is does in practice, but seeing the intent on paper is promising.

These are just a few examples of key takeaways from the Center’s survey, and more will be discussed in more detail during the Center’s Reimagining Tax Administration series later this fall. During those workshops, panelists will discuss their experiences with issues involving state tax return filing, appeals and audit procedures, state tax collections, and state taxpayer rights generally. We hope that in providing a space where practitioners and government officials and policymakers can discuss these issues, we will facilitate the sharing of procedures and strategies designed to protect and enhance taxpayer rights at the state level.

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