Gil Brewer is senior director of tax policy at the Department of Revenue (DOR). He provided an interview to the Washington State Wire for a story about criticisms that the agency’s appeals division was “rubber stamping” decisions against the taxpayer. Brewer explains that the internal – and low-cost – appeals process is not designed to be independent. Instead, it’s a chance for the taxpayer to make his or her case before the agency when they’re facing a tax lien. Read on for his take on the process, and on the agency’s Tax Advice Request System (TARS), an internal method for administrative law judges considering a case to seek guidance on a decision.
Former ALJ Dave Dressel has publicly criticized the agency, describing the internal appeals process as unfair. What’s your take on his claims?
“Dave’s a friend of mine. I like Dave. Dave is entitled to his opinion. In terms of the overall process … roughly one-third of the time we’re finding reason to make some adjustment (to how much a taxpayer owes), or reason to change the prior decision.
Frankly, I’d like to see that lower, because what that would mean is that we’re getting it right the first time. That’s one-third of the time that we have to fix things. But I don’t think it shows a system that is broken or slanted, or weighs against a taxpayer.
This is an internal review of the departments policies and how they are applied to a taxpayer. I would hope that we get it right most of the time.”
On why the internal appeals shouldn’t be independent:
We want the department to be able to speak with one voice. We’re trying very hard to get consistent treatment throughout the department. So, similar taxpayers are going to get the same answer from everybody … I have nothing against an independent review, I just don’t think it should be in the department.”
But the internal non-independent process is the only one that allows the taxpayer avoid paying a lien up front. Taxpayers must pay to get an independent review from the Board of Tax Appeals, or you pursue collections.
“You can either get a bond or other assurance that you’re going to pay, or we will pursue collections in those cases. And most of the time, people voluntarily pay and go through the litigation. That is a legislative decision that they made. We cannot ignore someone that we think owes tax. That’s a bad situation for a Department of Revenue to be in to pick certain people we’re going to pursue and some we won’t. If the Legislature – the phrase is pay to play, you have to pay to get into court – if the legislature chose to change that, we have no position whatsoever. That’s a decision that was made years ago.”
When a taxpayer gets a decision from internal appeal, they can petition for reconsideration, but they would get the same ALJ again?
“Generally.”
On how the system works when the agency has an internal question:
“It goes into the TARS system, an answer is generated, a decision is made; ‘Ok, this is the result we’re going to apply here.’ That information is shared with (taxpayers) every time, because the auditor has to tell them, ‘here’s the decision.’ If a taxpayer wants to see the actual TARS exchange, 99 percent of the time they can get that, because we can’t release confidential taxpayer information to some other person (but) … If it’s yours, no problem.”
Do the TARS and other internal documents set policy that would be more appropriately put into a rule-making process or some kind of public discussion?
“Ideally, you would have everything done in a public process and get input and reach a decision. And we certainly try to do that, but that requires us to anticipate every possible factual variation. We will never do that. We can’t do that.
So we end up finding in a specific application of individual taxpayers, ‘gee we didn’t think of this angle. Maybe that changes how we think this policy should apply?’
And, we have to answer that taxpayer, we have to have a decision for them. It’s not fair for them to hold everything up and say, ‘we think you’re right, but we need to talk to stakeholders and do a rule making, and it’s going to take us two years, and we’ll get back to you.’
To some extent yes, we make some policy and individual decisions like that. But what we do then is take that back to the rule writers and … say, ‘Ok, do we need to change something? Do we need to add some nuance? Do we need to change our policy outright?’ So it’s an iterative process back and forth, and I don’t think there’s anyway around that because we simply can’t anticipate every possibility.”
If another taxpayer’s TARS was used in deciding my case, would I be allowed to use it?
“We would not be able to share that because it would a different taxpayer.”
Why couldn’t you redact it and make it available? Some taxpayers feel there’s a decision being made and they don’t have all the information that is being used to reach that decision.
“I understand why you may have heard (that), because it’s become apparent to me that people think there’s something in TARS that I really don’t think there is. But part of that is because they can’t see it because it’s confidential taxpayer information. An audit writeup should explain to the taxpayer, ‘here’s the result, this is why.’ That’s the same information that is included in a TARS.”
The agency has been increasing the number of appeals division decisions it publishes each year, doubling the number released each of the past two years. The latest goal is to reach 60 decisions published, but there’s frustration that they aren’t all shared. Why not make them all available?
“Recognize the tension that for every taxpayer who wants to know how their competitor was treated, there’s a taxpayer who doesn’t want their competitor to know and we’re stuck in a position of, we’re trying to maintain the confidentiality of taxpayer information, while providing guidance so other taxpayers understand their obligations and our staff are treating people consistently.”
About half (roughly 500) of the annual appeals decisions are large claims cases – those worth $25,000 or more. Brewer explains why the agency doesn’t make all of those available:
“Of those 500, some of them are still very routine and repetitive … Publishing those types of decisions doesn’t really add anything for people. We have the information out, it’s clear what our policy is. Just saying, ‘and we mean it, and we mean it and we mean it,’ over and over, doesn’t help.
What it does is provide a bunch of determinations that people have to wade through to find the ones they really want.
So what we’ve done in the past is try to pick which ones make sense, (the ones) that have applications to other taxpayers that would be worthwhile and useful for people to see as publications of department policy.”
On the demand to see more decisions:
“Because people can’t see it, there’s always a suspicion, ‘you’re just cherry picking, you’re publishing the ones you want and you’re hiding the ones you don’t want.’ My answer is, one, we don’t do that, two, how in the world is it to our benefit to hide a statement where somebody owes tax? We want them to pay tax. We want to get that out and let them know.”
On why the agency must be precise in its decisions under its own internal, ALJ process:
“We don’t have the ability to appeal an ALJ determination. If you had an independent decision and that one individual decided they knew something better than the group of people who made that decision on behalf of the department, and ruled against us, we can’t go anywhere. We can’t appeal it to the (Board of Tax Appeals, or BTA), we can’t go to court. That (would be) a broken system if you did it that way. That is not how ours is set up. It’s a departmental review. It’s us looking at ourselves. It’s not independent. If somebody wanted to establish an independent role within a department – ours or any others – I think that’s just asking for problems because you’re setting up a department against itself.
If they wanted to provide an independent administrative review, that is essentially what the BTA is designed to do. That is fine.”
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