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About That Audit: Business, Tax Collectors Talk Ideas For Resolving Appeals Issues

The Association of Washington Business (AWB) has had concerns about the Department of Revenue’s (DOR’s) internal appeal system for years, including basic questions of transparency, said Amber Carter, director of governmental affairs for tax and fiscal policy at the AWB.

One of the biggest concerns is the lack of transparency that permeates the internal process, known as “Rule 100.” The DOR doesn’t publish most of its decisions, even though they can be used as precedence in the cases of other taxpayers. DOR officials explain that not all decisions can be “sanitized” – or redacted to a degree guaranteed to provide anonymity to the taxpayer involved.

“It doesn’t let the tax payers have consistent treatment,” Carter said. “One taxpayer may have a non-published decision and another may have one that is published. And they could be in conflict with each other.”

Gil Brewer, senior director of tax policy at the DOR, rejected that characterization.

“We want the department to be able to speak with one voice,” he said. “We’re trying very hard to get consistent treatment throughout the department. So, similar taxpayers are going to get the same answer from everybody.”

The agency is trying to improve transparency by publishing more decisions. Previously it published as few as five decisions a year, but it’s been increasing that in recent years and it now has the goal of releasing up to 60 published decisions annually.

But Carter says that’s not enough.

“We’re in the age when it ought to be technologically conceivable to publish all of these decisions,” she said.

Another major problem Carter cites is the “Technical Advice Requests,” or TARS. These are documents created when an administrative law judge at DOR has a question about interpreting something related to a specific tax case. The response is not shared with the business making an appeal, so they never have all the information used to make a ruling against them.

“We kind of laugh in the business community about being TARS and feathered,” Carter said, adding that AWB believes the agency is using TARS documents to make internal policy, avoiding a public and formal process. The documents aren’t subject to public records requests because they contain taxpayer information, and according to state code, the agency isn’t required to redact that information to make a document public.

Sen. John Braun, R-20

Sen. John Braun, R-Centralia.

In a hearing in the Senate Trade and Economic Development Committee Friday morning, Chairman John Braun, R-Centralia, discussed setting up an independent tribunal to handle taxpayer appeals, which would be a division within the state’s appellate court system.

Carter spoke in favor of the proposal, saying it would bring a measure of fairness to a process she believes is skewed against taxpayers currently.

Scott Edwards, a tax attorney with Lane Powell, said he struggles with delays in seeing rules published, or no published guidelines at all, which he felt contributes to a lack of transparency on tax issues.

“It will help us have a tax system where the rules are more transparent,” Edwards said.

But Steve Smith, speaking in opposition of the proposal, said he believes the proposal would be too drastic of a fix for a small portion of the workload for administrative law judges who hear the appeals. Excise tax cases only make up about 10 percent of the caseload, and he believes Braun’s proposal would amount to “radical surgery” when he could be focusing on making selective changes to the current system.

Drew Shirk of the Department of Revenue said DOR isn’t opposed to the proposal, but cautioned that it would lead to delays in revenue collection. The current system requires taxpayers to make their payments before they can appeal, and Braun’s proposal would change that, delaying payment until the appeal is resolved, which could take months.

Braun said he wanted his fellow lawmakers to consider the issue in the upcoming legislative session, which will see Republicans pushing for reform measures in exchange for any new revenues the Legislature may pursue.

“We should start the conversation about whether that process is fair to those that have to provide that revenue,” Braun said.

Peter Jensen contributed reporting to this story.


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