State Tax Snapshot: How Much Weight Should Informal Guidance From Tax Departments Receive?

Each year, Bloomberg BNA sends questions to all of the state revenue departments seeking to shed light on the gray areas of state tax. They are compiled and published in the annual Survey of State Tax Departments, but how do tax professionals know how much weight the responses should get?

At the D.C. Bar’s most recent State and Local Tax Series event, “Meet the SALT Press,” on May 7, Bloomberg BNA’s Steven Roll led an active discussion with practitioners about the survey, including topics such as how much weight practitioners should give it.

The states provide the results knowing they will be published, but at the same time, they are not making laws, the responses are not provided under oath, and it is unclear whether the responses are even binding.

Stephen Kranz, partner with McDermott Will & Emery LLP, said at the meeting that this kind of information is published at the risk of creating law, and he asked whether there is any effort to either publish the names of the people who provide the responses or push responses at the highest level of the revenue departments.

“There are responses in the survey that are not supported by law,” Kranz said, and asked whether a state’s position in the survey should be counted as authority. 

Roll said BBNA tries to balance getting responses with accountability, and said he worried about whether publishing individuals’ names would have a chilling effect. Some of the questions are about nascent areas of state tax law.

“A lot of times they’re really cutting-edge issues that they themselves don’t know the answer to,” Roll said. BBNA asks practitioners to look over the answers that states provide and flag areas for clarification with the states.

 “We speak with one voice, and we review [the responses] at the highest level,” said Alan C. Levine, chief counsel at the District of Columbia’s Office of Tax and Revenue. However, he said people can certainly call the department to clarify the responses.

Ferdinand Hogroian, legislative counsel at the Council On State Taxation (COST), suggested that states indicate the weight of their survey responses for their jurisdictions.  Fred Nicely, tax counsel at COST, likened the survey responses to individually solicited advice.

“I think it’s really no different than calling a department of revenue and asking for advice over the phone,” Nicely said. “It’s something that you can cite to them.”

Other practitioners said that the survey helps provide initial guidance when there might not be other guidance available.

“It certainly has its use for persuasive circumstances, particularly when there’s nothing else out there,” said Jamie Yesnowitz, principal at Grant Thornton in Washington, D.C.

Also presenting at the session was Cara Griffith, editor in chief of State Tax Publications at Tax Analysts. While Roll’s portion of the discussion provided insight on informal guidance, Griffith’s presentation focused on Tax Analyst’s efforts to obtain insight on tax administration through formal guidance. Many times Tax Analysts does this through Freedom of Information Act (FOIA) requests, and focuses on making guidance such as letter rulings and administrative-level tax rulings public, pushing for an open legislative process, and encouraging states to have independent tax tribunals.

Griffith said the idea behind seeking formal guidance is the desire for certainty in what the law is, how to follow it, how it will be enforced and that it will be enforced consistently. For example, Griffith said about 45 states issue letter rulings, but only about 35 states make them publicly available.

Continue the discussion on Bloomberg BNA’s State Tax Group on LinkedIn: Should states provide the weight of authority they give the guidance they provide in state tax surveys?

For more information about this and other state tax issues, sign up for a free trial of the Bloomberg BNA Premier State Tax Library. 

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