State Tax Snapshot: COST’s Best and Worst of State Tax Administration

Maine and Ohio each earned an “A,” while California and Louisiana each received a “D –” in the Council On State Taxation’s fifth Scorecard on Tax Appeals & Procedural Requirements.The scorecard, which was released Dec. 16, evaluates the fairness of each state’s appellate and procedural systems based on specific criteria.

Top scores are given to appeals systems that are independent from a state’s tax agency. Jurisdictions are also rewarded for even-handed procedural provisions, such as applying the same interest rate to both refunds and assessments.

The most improved state from COST’s last scorecard in 2010 was Pennsylvania, which saw its grade shoot up from a “D” to an “A-” as a result of adopting reforms aimed at providing independence in tax appeals heard by the state’s Board of Finance and Review.

Also, earning additional credit for adopting a more independent tax appeals system was Georgia, which saw its grade rise from a “C-” to a “B,” based on its implementation of the Georgia Tax Tribunal.

 Further down the list was Illinois. The state enacted legislation establishing an independent tribunal, but COST noted that it failed to appoint tribunal judges according to the tribunal’s own statutory requirements.   

Among the worst states was Alabama, which COST said “lamentably failed to establish an Alabama Tax Appeals Commission (‘ATAC’) again this year, missing multiple opportunities to improve its tax administration and business climate.”

In judging the fairness of procedural provisions, COST panned the District of Columbia and Wisconsin’s disparate treatment of interest on refunds and assessments.  In the District of Columbia, interest accrues at the rate of 10 percent on underpayments and 2 percent on overpayments. In Wisconsin, interest is 12 percent on underpayments and 3 percent on overpayments. 

Continue the conversation in the Bloomberg BNA State Tax LinkedIn Group: Do you believe the COST Scorecard is an accurate assessment of the fairness of the appeals and procedural provisions in your state?

By Steven Roll

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