Legislature(1995 - 1996)
1996-01-17 Senate Journal
Full Journal pdf1996-01-17 Senate Journal Page 2155 SB 224 SENATE BILL NO. 224 BY THE SENATE RULES COMMITTEE BY REQUEST OF THE GOVERNOR, entitled: An Act establishing the office of tax appeals in the Department of Administration; revising the procedures for formal hearing of certain tax appeals, including appeals regarding seafood marketing assessments; providing for the release of agency records relating to formal administrative tax appeals; relating to litigation disclosure of public records; clarifying administrative subpoena power in certain tax matters; and providing for an effective date. was read the first time and referred to the Resources, Judiciary and Finance Committees. Fiscal notes published today from Department of Revenue, Department of Administration. Zero fiscal note published today from Department of Law. Governors transmittal letter dated January 16: Dear President Pearce: Under the authority of art. III, sec. 18, of the Alaska Constitution, I am transmitting a bill relating to certain tax appeal procedures. This bill addresses the concerns of fairness and improves the efficiency and openness of certain administrative tax appeals presently assigned to the Department of Revenue. 1996-01-17 Senate Journal Page 2156 SB 224 The bill has four main components: transfer of the function of hearing certain tax appeals (including appeals regarding seafood marketing assessments) from the Department of Revenue (DOR) to a newly-created office of tax appeals in the Department of Administration; revision of the tax appeal procedures to encourage earlier exchange of information and resolution of tax disputes; opening administrative tax appeals to public examination and scrutiny; and clarification of the ability of the DOR to obtain information regarding tax matters. Transferring the function of hearing administrative tax appeals to the Department of Administration will address a perception held by certain taxpayers that the current system is unfair because the tax audit and appeal function are both in the DOR. Courts have consistently found that combining the functions of auditing taxes and hearing tax appeals in the same department is fair. Nevertheless, I have decided to recommend the transfer to remedy the perception of unfairness. Transfer from the DOR will have the additional advantage of removing a difficulty the commissioner of revenue often faces. As the ultimate decision maker in an appeal, the commissioner of revenue must distance himself or herself from the auditing division when the matter reaches the formal hearing stage. Transferring these hearing functions from the DOR resolves this issue. Under the proposed bill, the commissioner of revenue may be involved with the auditing division throughout the appeal process. This will foster resolution of tax appeals more quickly and efficiently. The second component of the bill is a revision of the revenue tax procedures to encourage earlier exchange of information and to lessen the burden of discovery during the formal appeal phase. The bill also requires that administrative law judges supervising tax appeals limit discovery to relevant information and permits further limitation of discovery in order to promote efficient, just, and speedy resolution of appeals. The purpose is to prevent revenue tax appeals from becoming wars of attrition with huge volumes of documents being requested and produced. The bill would induce both parties to a tax dispute to focus on the bona fide issues at hand. 1996-01-17 Senate Journal Page 2157 SB 224 A third feature of the bill is that the formal tax appeal proceedings, records, and decisions would be open to the public. Under current law, a tax matter becomes public only when it is appealed to the superior court. Tax appeals often are of great public interest and public scrutiny will help the process. The fourth component of the bill is a clarification of the DORs subpoena power during the audit stage. Under current law, the DOR has the power to compel production of records and testimony necessary to complete an audit, but in practice the DOR has almost always relied upon voluntary release of information by taxpayers and depended upon the discovery process of the formal hearing to obtain information that a taxpayer has refused or failed to release. The current system has no express procedure for judicial enforcement of tax audit subpoenas. Many times in the past, a taxpayers position has been initially rejected due to the taxpayers failure to provide substantiating information. Then, during the appeal, the taxpayer released the relevant information and made the issue moot. This practice has unnecessarily complicated and delayed tax disputes. The bill provides a streamlined process for court enforcement of subpoenas issued during the audit stage and clarifies the current ambiguity in AS 43.55.040 as to whether the DOR is vested with investigatory powers to the full extent of the law in order to perform the audit function. The DOR, in consultation with the Department of Law, has prepared a section-by-section analysis that is available to explain the detailed features of the bill. This bill is designed to help break the chain of antagonistic tax disputes that have characterized our states recent history. Disputes will not end, of course, but if this bill becomes law, they will be resolved more quickly and efficiently to the advantage of taxpayers and the public alike. I urge your support of this bill. Sincerely, /s/ Tony Knowles Governor