HB38

ENGROSSED

A BILL TO BE ENTITLED AN ACT

To amend Section 40-2A-3, Code of Alabama 1975, to revise the definitions of Taxpayer Advocate and taxpayer assistance order; to amend Section 40-2A-4, Code of Alabama 1975, relating to the Taxpayer Advocate; to provide for the appointment of the advocate by the Governor; to require the advocate to maintain a public website; to require the advocate to promote the interests of taxpayers involved in disputes where an ambiguity in tax law exists; to remove the assistant commissioner's authority to approve taxpayer assistance orders; to require an annual report to certain legislative committees regarding tax law ambiguities; to provide for additional duties of the advocate; and to add Section 40-2A-4.1 to the Code of Alabama 1975, to create the Taxpayer Advocate Selection Committee and to provide for membership and duties of the committee.

BE IT ENACTED BY THE LEGISLATURE OF ALABAMA:

Section 1. Section 40-2A-3, Code of Alabama 1975, is amended to read as follows:

"§40-2A-3.

"For the purposes of this chapter and Chapter 2B, the following terms shall have the following meanings:

"(1) ASSOCIATE ALABAMA TAX TRIBUNAL JUDGE. An associate judge as defined in Section 40-2B-2.

"(2) AUTHORIZED REPRESENTATIVE. Any individual, including, but not limited to, an attorney or certified public accountant with written authority or power of attorney to represent a taxpayer before the department or the Alabama Tax Tribunal; provided however, that nothing herein shall be construed as entitling any such individual who is not a licensed attorney to engage in the practice of law.

"(3) CHIEF ALABAMA TAX TRIBUNAL JUDGE or CHIEF JUDGE. The chief judge as defined in Section 40-2B-2.

"(4) COMMISSIONER. The commissioner of the department or his or her delegate.

"(5) COMPTROLLER. The Comptroller of the State of Alabama.

"(6) DELEGATE. When used with reference to the commissioner means any officer or employee of the department duly authorized by the commissioner, directly or indirectly, by one or more redelegations of authority, to perform the function described in the context.

"(7) DEPARTMENT or DEPARTMENT OF REVENUE. The Alabama Department of Revenue.

"(8) GROSS RECEIPTS TAX IN THE NATURE OF A SALES TAX. A privilege or license tax, imposed by a municipality or county, measured by gross receipts or gross proceeds of sale and which: (i) was in effect on or before February 25, 1997, or is an amendment to a tax which was in effect on that date; (ii) is levied against those selling tangible personal property at retail, those operating places of amusement or entertainment, those making street deliveries, and those leasing or renting tangible personal property; and (iii) is due and payable to a county or municipality monthly or quarterly.

"(9) FINAL ASSESSMENT. The final notice of value, underpayment, or nonpayment of any tax administered by the department.

"(10) INTEREST. That amount computed under Section 40-1-44, on any overpayment or underpayment of tax or under Section 40-2A-18 on a final assessment.

"(11) INTERNAL REVENUE SERVICE. The agency of the United States principally responsible for the determination, assessment, and collection of taxes established by Title 26 of the United States Code.

"(12) NOTICE OF APPEAL. Any written notice sufficient to identify the name of the taxpayer or other party appealing, the specific matter appealed from, the basis for that appeal, and the relief sought.

"(13) PERSON. Any individual, association, estate, trust, partnership, corporation, or other entity of any kind.

"(14) PETITION FOR REFUND. Any written request for a refund of any tax previously paid, including in the form of an amended return. Unless otherwise provided by law, the request shall include sufficient information to identify the type and amount of tax overpaid, the taxpayer, the period included, and the reasons for the refund.

"(15) PETITION FOR REVIEW. A written document filed with the department in response to a preliminary assessment in which the taxpayer sets forth reasonably specific objections to the preliminary assessment.

"(16) PRELIMINARY ASSESSMENT. The preliminary notice of value or underpayment of any tax administered by the department.

"(17) PRIVATE AUDITING OR COLLECTING FIRM. Any person in the business of collecting, through contract or otherwise, local sales, use, rental, lodgings or other taxes or license fees for any county or municipality, or auditing any taxpayer, through the examination of books and records, for any county or municipality. The term shall not include any of the following:

"a. The Department of Revenue.

"b. A county or municipality that has entered into a contract or other arrangement to collect local sales, use, rental, lodgings, or other taxes or license fees on behalf of another county or municipality, or to audit a taxpayer, through the examination of books and records, on behalf of another county or municipality.

"c. A person or firm whose sole function and purpose on behalf of a municipality or group of municipalities is to collect delinquent insurance premium license fees levied by that municipality or group of municipalities, and who has no authority to determine the amount of license fee, interest, court cost, or penalty owed to the municipality or group of municipalities.

"(18) PUBLICATION 1A. A written pamphlet to be distributed by the department to all taxpayers whose books and records are being examined by the department, at or before the commencement of an examination, explaining in simple and nontechnical terms, the role of the department and the rights of the taxpayer whose books and records are being examined by the department during the examination and which shall be promptly revised from time to time to reflect any changes in the applicable law or rules.

"(19) RETURN. Any report, document, or other statement required to be filed with the department for the purpose of paying, reporting, or determining the proper amount of value or tax due.

"(20) SECRETARY. The secretary of the department.

"(21) SELF-ADMINISTERED COUNTY OR MUNICIPALITY. A county or municipality that administers its own sales and use taxes or other local municipal or county taxes levied or authorized to be levied by a general or local act, or contracts out all or part of that function to a private auditing or collecting firm. The term does not include any of the following:

"a. A county or municipality that allows the department to administer a sales, use, rental, or lodgings tax which is levied by or on behalf of that county or municipality.

"b. A municipality or county that levies a gross receipts tax in the nature of a sales tax, as defined in subdivision (8). A county or municipality that both self-administers a sales, use, rental, or lodgings tax and allows the department to administer a sales, use, rental, or lodgings tax that is levied by or on behalf of the county or municipality is only a self-administered county or municipality with respect to those sales, use, rental, or lodgings taxes that the county or municipality administers itself or for those taxes that it contracts for the collection.

"(22) TAX. Any amount, including applicable penalty and interest, levied or assessed against a taxpayer and which the department or any county, municipality, or their designees are required or authorized to administer under the provisions of Alabama law.

"(23) ALABAMA TAX TRIBUNAL. The Alabama Tax Tribunal as described in Chapter 2B.

"(24) TAXPAYER. Any person subject to or liable for any state or local tax; any person required to file a return with respect to, or to pay, or withhold and remit any state or local tax or to report any information or value to the department, a county, municipality, or its designee; or any person required to obtain or holding any interest in any license, permit, or certificate of title issued by the department, a county, municipality, or its designee, or any person that may be affected by any act or refusal to act by the department, a county, municipality, or its designee, or to keep any records required by this chapter.

"(25) TAXPAYER ADVOCATE. The person so designated from time to time by the commissioner appointed by the Governor pursuant to Sections 40-2A-4 and 40-2A-4.1 to assist the taxpayers of the State of Alabama with regard to tax issues resulting from any taxes administered or collected by the department.

"(26) TAXPAYER ASSISTANCE ORDER. A written order issued by the Taxpayer Advocate and approved by either the commissioner or assistant commissioner which, among other items, states the facts and grants relief to a taxpayer concerning an issue in dispute with the department with regard to tax issues resulting from any taxes administered or collected by the department."

Section 2. Section 40-2A-4, Code of Alabama 1975, is amended to read as follows:

§40-2A-4.

"(a) Rights of the taxpayer.

"(1) For purposes of this subsection and subsections (c) and (d), the term "department" shall include the Department of Revenue, a self-administered county or municipality, or a private examining or collecting firm, depending on whether the Department of Revenue, a self-administered county or municipality, or private examining or collecting firm is conducting the examination of the taxpayer.

"(2) At or before the commencement of an examination of the books and records of a taxpayer, the department shall provide to the taxpayer the current version of Publication 1A. Publication 1A shall provide, in simple and non-technical terms, a statement of the taxpayer's rights. Those rights include the right to be represented during an examination, an explanation of their appeal rights, and the right to know the criteria and procedures used to select taxpayers for an examination.

"(3) At or before the issuance of a preliminary assessment, the department shall provide to the taxpayer in simple and non-technical terms:

"a. A written description of the basis for the assessment and any penalty asserted with respect to the assessment.

"b. A written description of the method by which the taxpayer may request an administrative review of the preliminary assessment.

"(4) At or before the issuance of a final assessment, the department shall inform the taxpayer by a written statement of his or her right to appeal to the Alabama Tax Tribunal or to circuit court.

"(5) Except in cases involving suspected criminal violations of the tax law or other criminal activity, the department shall conduct an examination of a taxpayer during regular business hours after providing reasonable notice to the taxpayer. A taxpayer who refuses a proposed time for an examination on the grounds that the proposed examination would cause inconvenience or hardship must offer reasonable alternative times and dates for the examination.

"(6) At all stages of an examination or the administrative review of the examination, and in any appeal to the Alabama Tax Tribunal, a taxpayer is entitled to be assisted or represented, at his or her own expense, by an authorized representative. The department shall prescribe a form by which the taxpayer may designate a person to represent him or her in the conduct of any proceedings, including collection proceedings, resulting from actions of the department. In the absence of this form, the department or the Alabama Tax Tribunal may accept such other evidence that a person is the authorized representative of a taxpayer as it considers appropriate. This provision shall not be construed as authorizing the practice of law before the department, Alabama Tax Tribunal, or any court in this state by a person who is not a licensed attorney.

"(7) A taxpayer shall be allowed to make an audio recording of any in-person interview with any officer or employee of the department relating to any examination or investigation by the department, provided, however, the taxpayer must give reasonable advance notice to the department of his or her intent to record and the recording shall be at the taxpayer's own expense and with the taxpayer's own equipment. The department shall also be allowed to record any interview if the taxpayer is recording the interview, or if the department gives the taxpayer reasonable advance notice of its intent to record the interview. The department shall provide the taxpayer with a copy of the recording, but only if the taxpayer provides reimbursement for the cost of the transcript and reproduction of the copy. The cost shall be reasonable as prescribed by regulations issued by the department.

"(8) This section shall not apply to criminal investigations or investigations relating to the integrity of any officer or employee of the department.

"(b) Department responsibilities generally.

"(1) The commissioner Governor shall appoint a Taxpayer Advocate from among the employees of the department a list of at least two and up to five qualified candidates submitted by the Taxpayer Advocate Selection Committee created in Section 40-2A-4.1. The Taxpayer Advocate shall serve at the pleasure of the Governor. The taxpayer advocate Taxpayer Advocate shall be an employee of the Department of Revenue in the unclassified service. The salary shall be fixed by the Governor in accordance with Section 36-6-6 and shall be paid from the Revenue Department Administrative Fund. For purposes of employment benefits, the Taxpayer Advocate shall be treated as other unclassified employees of the state. This officer shall receive and review inquiries or complaints concerning matters that have been pending before the department for an unreasonable length of time, or matters where the taxpayer has been unable to obtain a reasonable response after several attempts to communicate with the department employee assigned to the taxpayer's case, or his or her immediate superiors. In addition, this officer shall review and have the authority to waive a penalty for reasonable cause as provided in subsection (h) of Section 40-2A-11, shall promptly review inquiries concerning release of property levied upon, the erroneous filing of liens, the failure to release a lien for good cause, or other matters complained of by a taxpayer or other affected party. The Taxpayer Advocate shall have no authority nor issue any ruling with regard to any taxes collected by or on behalf of a self-administered county or municipality.

"a. The Taxpayer Advocate shall, subject to the approval of the commissioner or the assistant commissioner, issue taxpayer assistance orders in the form and manner prescribed herein and by department regulations.

"b. Notwithstanding any statute of limitation or other provision in this title, a taxpayer assistance order may declare that any tax, including a final assessment, was erroneously assessed or reported and is not a liability due the state, or that a petition for refund was erroneously denied by the department.

"c. A taxpayer assistance order shall grant relief as deemed appropriate, including the voiding of any erroneously issued final assessment for a tax which was not a debt due the state, granting of any refund due the taxpayer, or abating an assessment of interest that has accrued because of undue delay by department personnel, or the granting of such other relief that is equitable under the circumstances.

"d. At the request of the Alabama Tax Tribunal, the taxpayer advocate Taxpayer Advocate shall review a final order issued by the Alabama Tax Tribunal that was not appealed pursuant to Section 40-2B-2, if there is newly discovered evidence which by due diligence could not have been discovered in time to file an application for rehearing pursuant to Section 40-2B-2, and may propose relief as the taxpayer advocate Taxpayer Advocate deems appropriate and approved by the commissioner or the assistant commissioner. evidence which by due diligence could not have been discovered in time to file an application for rehearing pursuant to Section 40-2B-2, and may propose relief as the taxpayer advocate deems appropriate and approved by the commissioner or the assistant commissioner relevant to the issue or issues addressed in the final order. The Taxpayer Advocate, with the approval of the commissioner, may thereafter grant such relief based on the evidence that is equitable under the circumstances.

"e. All taxpayer assistance orders shall be dated and signed by the Taxpayer Advocate and approved either by the commissioner or the assistant commissioner, and shall state the underlying facts, the reasons for granting relief, and the relief granted. Any taxpayer assistance order may, for good cause, be modified or rescinded in writing by the Taxpayer Advocate and either the commissioner or the assistant commissioner.

"f. The Taxpayer Advocate shall have full access to department personnel, books, and records subject, however, to the confidentiality restrictions imposed by this chapter. The department shall provide appropriate and adequate office space, equipment, trained and qualified personnel, and other property necessary to support the requirements of the Taxpayer Advocate.

"g. Taxpayer assistance orders shall not be subject to the confidentiality provisions of this title, and shall be maintained by the secretary of the department and shall be open to review upon written request. The Taxpayer Advocate shall have no authority nor issue any ruling with regard to any taxes collected by or on behalf of a self-administered county or municipality.

"h. The commissioner shall make an annual report to the Legislature of all taxpayer assistance orders approved in accordance with the provisions of this section and Sections 40-2A-2 and 40-2A-3. Such report shall contain the total amount of relief granted and the types of taxes for which relief was granted.

"i.1. The Taxpayer Advocate shall promote the interests of taxpayers involved in disputes where an ambiguity in tax law exists and work to resolve those disputes in favor a manner that addresses the interests of the taxpayer.

"2. On or before January 15 of each year, the Taxpayer Advocate shall submit a report identifying ambiguities in tax laws in this state and providing recommendations to resolve the identified ambiguities to the Governor, Lieutenant Governor, Speaker of the House, President Pro Tempore of the Senate, and Chairs of the Senate Finance and Taxation General Fund Committee, the Senate Finance and Taxation Education Committee, the House Ways and Means General Fund Committee, and the House Ways and Means Education Committee. The commissioner shall also be provided the report and may submit his or her comments and additional suggestions in response to the report.

"j. The Taxpayer Advocate shall maintain a public website, paid for from the Revenue Department Administrative Fund, separate from the department department's public website detailing activity of the advocate and containing information and resources for taxpayers. The department shall include contact information of the Taxpayer Advocate on its public website.

"k. In addition to all other duties prescribed in this subsection, the Taxpayer Advocate shall do all of the following:

"1. Identify subject areas where taxpayers have difficulties interacting with the department.

"2. Identify classes of taxpayers or specific business sectors which have common problems related to the department.

"3. Propose solutions, including administrative changes, to practices and procedures of the department.

"4. Recommend legislative action as may be appropriate to resolve problems encountered by taxpayers.

"5. Educate taxpayers concerning their rights and responsibilities under the tax laws of this state.

"6. Educate tax professionals concerning the department's rules and interpretations by issuing bulletins and written materials.

"(2) The department shall maintain a continuing education program to train employees of the department and to provide them with a current knowledge of state and applicable federal tax laws.

"(3) In addition to any other information provided by law, the commissioner shall include in the department's annual report information about the number or kind of audits or assessments conducted in the year covered by the report.

"(4) The department shall not use the amounts of taxes assessed by an employee of the department as:

"a. The basis of a production quota system for employees; or

"b. The basis for evaluating an employee's performance.

"(5) The department shall establish procedures for monitoring the performance of department employees which may include the use of evaluations obtained from taxpayers.

"(6) INSTALLMENT PAYMENTS.

"a. The commissioner is authorized to enter into written agreements to allow any taxpayer to pay any tax in installment payments if the commissioner determines that such agreement will facilitate collection of such tax. Notwithstanding the preceding sentence, such agreements shall be entered into only regarding a tax that has been finally assessed by the department and not appealed, and such agreements shall not extend for a period exceeding 12 months, provided, that any such agreement may be renewed at the discretion of the commissioner for succeeding periods not to exceed 12 months. The commissioner shall only be authorized to enter such an agreement with regard to a tax administered or collected by the department.

"b. The commissioner may terminate, alter, or modify any agreement entered into hereunder if:

"1. Information provided by the taxpayer to the commissioner prior to the date of such agreement was inaccurate or incomplete;

"2. The taxpayer fails to pay any installment at the time such installment payment is due under such agreement;

"3. The taxpayer fails to pay any other tax liability due the department at the time such liability is due, unless the taxpayer has appealed such other liability pursuant to the terms of this chapter;

"4. The financial condition of the taxpayer has significantly changed;

"5. The taxpayer fails to provide a financial condition update as requested by the commissioner; or

"6. The commissioner believes that collection of any tax to which an agreement under this provision relates is in jeopardy.

"c. The commissioner shall have sole authority or discretion to enter into or amend, modify, or terminate any installment payment agreement provided for herein. The commissioner shall promulgate regulations necessary for the implementation of this provision.

"d. Any self-administered county or municipality shall have the same authority as provided to the commissioner by this subdivision relating to installment payments with respect to taxes administered or collected by the self-administered county or municipality.

"(c) Department failure to comply with this section. The failure of the department to comply with any provision of this section shall not prohibit the department from assessing any tax as provided in this chapter, nor excuse the taxpayer from timely complying with any time limitations under this chapter. However, if the department fails to substantially comply with the provisions of this section, the commissioner shall, upon application by the taxpayer or other good cause shown, abate any penalties otherwise arising from the examination or assessment.

"(d) Abatement of penalty. The department shall abate any penalty attributable to erroneous written advice furnished to a taxpayer by an employee of the department. However, this section shall apply only if the department employee provided the written advice in good faith while acting in his or her official capacity, the written advice was reasonably relied on by the taxpayer and was in response to a specific written request of the taxpayer, and the penalty did not result from the taxpayer's failure to provide adequate or accurate information."

Section 3. Section 40-2A-4.1 is added to the Code of Alabama 1975, to read as follows:

§40-2A-4.1.

(a) The Taxpayer Advocate Selection Committee is hereby created for the purpose of submitting nominations to the Governor for the position of Taxpayer Advocate pursuant to Section 40-2A-4. The committee shall consist of the following members:

(1) The Chair of the House Commerce and Small Business Committee.

(2) The Chair of the Senate Fiscal Responsibility and Economic Development Committee.

(3) The Secretary of State.

(4) The Executive Director of the National Federation of Independent Business/Alabama (NFIB-AL).

(5) The Chair of the Alabama Business Associations' Tax Coalition (BATC).

(b) Candidates selected by the committee for nomination shall have experience and be highly knowledgeable in the areas of accounting, business management, finance, tax law, or other applicable backgrounds related to the duties of the Taxpayer Advocate.

(c) Within 60 days of the effective date of this act, the committee shall meet and provide its list of recommendations to the Governor. In the event of a vacancy in the position of Taxpayer Advocate, the Governor shall immediately notify and call a meeting of the committee.

The employee serving as Taxpayer Advocate prior to the effective date of this act may be reassigned duties within the Department of Revenue as determined by the commissioner.

Section 4. This act shall become effective immediately following its passage and approval by the Governor, or its otherwise becoming law.

Taxation

Taxpayer Advocate

Governor

Revenue Department

Internet

Code Amended