Making modifications to tax deadlines and tax disputes

This bill relates to the administration of the tax by making modifications to tax deadlines and tax disputes. Under the bill, if a due date has not yet passed, the running of the time period leading up to the due date shall be tolled on the date a power of attorney form is filed with the department of revenue (department). The tolling of the time period ceases upon the date the power of attorney is authorized or denied by the department. The bill specifies this provision shall not be construed to toll any time period in a criminal proceeding. 60(2)(b) relating to the furnishing of an explanation for an assessment of tax or denial of a refund claim. The bill requires the department to furnish to the taxpayer an explanation of the reasons for a proposed notice of assessment or refund claim denial no less than 30 days before issuing the notice. The bill allows the taxpayer to request a meeting with specified department personnel before the issuance of the notice of assessment or refund claim denial. The appropriate department personnel relating to the assessment or refund claim denial is required to meet with the taxpayer in a format requested by the taxpayer to discuss the explanation of the proposed assessment or refund claim denial before issuing the notice. Under the bill and in current law, an inadequate explanation shall not invalidate the notice of an assessment or refund claim denial. However, under the bill, if the notice does not present a particular factual or legal basis for the assessment or refund claim denial, the department may not allege a new factual or legal basis for the assessment after the taxpayer has timely filed an appeal. The bill specifies an explanation by the department is sufficient where each factual and legal basis for the assessment or refund claim denial is stated in the notice, and when applicable the amount of tax, interest, and penalty is stated together with an attachment setting forth the computation of the tax by the department.60(2)(i) relating to taxpayer interviews by specifying the taxpayer is permitted to record the interview. The bill changes the costs allowed to be recovered in the collection of tax penalties and interest (dispute). The bill strikes the current $25,000 cap on litigation costs that are recoverable by a taxpayer in a dispute and modifies the various costs to be recoverable by the taxpayer. The costs that may be awarded under the bill include reasonable court costs; reasonable prevailing market rates for expert witnesses, studies, tests, analysis, or special projects; and reasonable attorney or accountant fees including fees related to the recovery of costs allowed under the bill. However, an award shall not be made with respect to any portion of the proceedings during which the prevailing taxpayer has unreasonably protracted the proceedings. The bill caps the hourly rate for attorneys at $250 except under special circumstances. The bill ties the $250 hourly rate cap to consumer price index as calculated by the federal government beginning January 1, 2027. Under the bill, if the taxpayer substantially prevails in the dispute relating to the amount in controversy or issues involved, the burden of proof shifts to the department to prove that the position of the department was substantially justified. If the department proves the position of the department was substantially justified, the bill prohibits the taxpayer from recovering an award in the dispute. Under current law, the taxpayer must prove the position of the department was not substantially justified in addition to the amount in controversy and issues involved.