Pennsylvania Pulls Proposal on Tax Appeals

Daily Tax Report: State provides authoritative coverage of state and local tax developments across the 50 U.S. states and the District of Columbia, tracking legislative and regulatory updates,...

By Leslie A. Pappas

The Pennsylvania Department of Revenue has pulled a legislative proposal to change the state’s tax appeal process after an uproar from businesses and tax professionals, Bloomberg BNA has learned.

The proposal, first circulated to select law and accounting firms as a bullet-point summary and then later in the form of draft legislation, would have upended the current process of tax appeals by forcing taxpayers to present all evidence and legal arguments at the first stage of the process. The proposed changes would have made it almost impossible for taxpayers to appeal an assessment without getting immediate help from an attorney.

The original proposal would “essentially turn the process on its head and tilt it extremely in favor of government,” Sam Denisco, vice president of government affairs for the Pennsylvania Chamber of Business and Industry, an advocacy group for Pennsylvania businesses, told Bloomberg BNA April 28.

Department spokesman Kevin Hensil confirmed to Bloomberg BNA in an April 27 email that “the draft has been withdrawn and is undergoing review and revision.”

Widespread Concern

Under the existing tax appeal process, a taxpayer who receives an assessment may appeal within 90 days to the Board of Appeals, an informal tribunal under the DOR. If not resolved, the case moves to the Board of Finance and Revenue, an independent board that falls under the Treasury. Decisions of the Board of Finance and Revenue may then be appealed to the Commonwealth Court.

The department’s proposal would have shortened the time to appeal to 30 days and would have required that all legal arguments and factual evidence be presented to the Board of Appeals, regardless of whether the department fully explained the reasons behind the assessment. Taxpayers wouldn’t have a chance to bring up new arguments or evidence after that.

The proposal drew widespread concern from attorneys, accountants, advocacy groups and even the Pennsylvania Treasury.

“Treasury had made its concerns about the prior version known to the Department of Revenue,” Treasury spokesman Mike Connolly told Bloomberg BNA in an emailed statement.

‘Impossible’ to Appeal

“The Core Proposals would make it impossible, in many, if not most cases, for taxpayers to effectively appeal tax assessments,” the tax section of the Philadelphia Bar Association wrote in a letter to legislative leaders April 21.

The “more burdensome requirements” would “make it difficult for taxpayers to represent themselves” in the tax appeal process, “creating a need to seek outside assistance from attorneys” and thus adding costs, Mary Raffaele, an associate in state and local tax with BDO USA LLP, in Philadelphia, told Bloomberg BNA in an email.

The proposal would have been “a major change from current practice, and from the practice on appeals from the Board of Finance and Revenue for over 70 years,” Christine Hanhausen, part of the state tax group for Reed Smith LLP in Philadelphia, told Bloomberg BNA.

Backlash Not Expected?

Apparently, the Department of Revenue didn’t anticipate the pushback it got to the proposed changes, Kenny Levine, also in the state tax group for Reed Smith in Philadelphia, told Bloomberg BNA.

Acting Secretary of Revenue C. Daniel Hassell was at a recent Philadelphia Bar Association tax section meeting “and he seemed genuinely surprised that the tax community was so against these proposals,” Levine said. “His surprise itself was quite surprising.”

The department didn’t comment on when a revision of the proposal would be released.

To contact the reporter on this story: Leslie A. Pappas in Philadelphia at LPappas@bna.com

To contact the editor responsible for this story: Ryan C. Tuck at rtuck@bna.com

For More Information

Text of the proposal summary is at http://src.bna.com/olY.

Text of the draft legislation is at http://src.bna.com/olT.

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