On March 11, 2014, Alabama formally created an independent tax tribunal and implemented additional procedural changes through the enactment of the Alabama Taxpayer Fairness Act (“Act”), which becomes effective October 1, 2014.
The Alabama Senate approved legislation creating the Act on February 27, followed by House approval on March 4 and formal enactment by Governor Robert Bentley on March 11. The Act closely follows the provisions of the American Bar Association’s Model State Administrative Tax Tribunal Act and replaces the Alabama Department of Revenue’s (“Department”) Administrative Law Division with the Alabama Tax Tribunal (“ATT”), a new independent state agency which will be funded with an annual appropriation previously earmarked for the soon-to-be defunct Administrative Law Division. One departure from the ABA Model Act, however, involves requiring taxpayers to appeal to circuit court as opposed to the Alabama Court of Civil Appeals.
Alabama’s stated goal in creating the ATT is to “[i]ncrease public confidence in the fairness of the state tax system” by permitting taxpayers the opportunity to resolve disputes with the Alabama Department of Revenue before an independent body without having to first pay the assessment or post a bond. Under the general provisions of the Act, taxpayers will incur no filing fee for appealing assessments to the Tribunal. Alabama’s Governor has the power to appoint up to three judges to the Tribunal for six year terms, although appointed judges are subject to removal by the Governor for “neglect, inability to perform duties, or malfeasance in office,” and are further subject to the same disciplinary and removal standards applied by Alabama’s Judicial Inquiry Commission to state circuit judges. At present, the Governor has appointed Alabama Department of Revenue Chief Administrative Law Judge Bill Thompson to serve as the first Chief Judge for the Tribunal.
With regard to self-administered counties and cities (“self-administered jurisdiction”), the Act provides that assessments of sales, use, rental and lodgings taxes issued by or on behalf of such jurisdictions may be appealed to the Tribunal, unless a self-administered jurisdiction formally opts out. Permitting appeals to the ATT of final assessments issued by self-administered jurisdictions should help provide a higher level of uniformity and simplicity for taxpayers who have previously faced a myriad of appeals procedures imposed by self-administered jurisdictions and will further compliment Alabama’s Optional Network Election for Single Point Online Transaction e-filing program utilized for local sales, use, and rental taxes. In addition, under the Act, self-administered jurisdictions wishing to enter preliminary assessments of additional sales, use, rental or lodgings against taxpayers audited and issued final assessments by the Department must now do so by the earlier of six (6) months from the date the Department enters the final assessment or sixty (60) days from the date the Department mails or e-mails the self-administered jurisdiction a copy of such assessment. Self-administered jurisdictions may only impose such assessments for the same tax periods as that assessed by the Department, and the assessments are limited to the same adjustments contained within the Department’s assessment. The Act also clarifies that self-administered jurisdictions may enter into installment agreements with taxpayers.
In addition to creating the ATT, the Act also modifies several taxpayer procedural protections, including:
Requiring that taxpayers appeal preliminary or final assessments within thirty (30) days from the date such assessment is mailed or personally served by the Department (whichever occurs first) as opposed to the current requirement that appeals occur within thirty (30) days from the date the assessment is entered. The Act also now permits taxpayers to appeal preliminary assessments to either the ATT or circuit court after five (5) years from when the assessment was entered if such assessment is not made final or otherwise withdrawn by the Department;
Expressly permitting taxpayers to appeal proposed net operating loss (“NOL”) adjustments regardless whether such adjustment will result in an increased tax liability;
Expanding the scope of innocent spouse relief within Alabama;
Expanding the power of the Taxpayer Advocate to correct final ATT orders where new evidence establishes that the underlying assessment is incorrect;
Exempting taxpayers with a net worth of less than $250,000 (as opposed to the previous $100,000 threshold) from posting bond or paying the disputed tax prior to appealing an assessment to circuit court; and
Requiring Department attorneys to consult with a taxpayer or his or her representative prior to issuing requested rulings.
For more information, please contact Chris Wilson, Leigh Griffith, or any member of the Tax team.
The opinions expressed in this bulletin are intended for general guidance only. They are not intended as recommendations for specific situations. As always, readers should consult a qualified attorney for specific legal guidance.
WE ARE REQUIRED BY IRS CIRCULAR 230 TO INFORM YOU THAT ANY STATEMENTS CONTAINED HEREIN ARE NOT INTENDED OR WRITTEN TO BE USED, AND CANNOT BE USED, BY YOU OR ANY OTHER TAXPAYER, FOR THE PURPOSE OF AVOIDING ANY PENALTIES THAT MAY BE IMPOSED BY FEDERAL TAX LAW.