SB 0021 Puts burden of proof on taxing authority; grants various taxpayer protections during audits and collections
LR Number:S0558.01I Fiscal Note:0558-01
Committee:Ways and Means
Last Action:03/02/99 - SCS Voted Do Pass S Ways & Means Committee Journal page:
Effective Date:August 28, 1999
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Current Bill Summary

SCS/SB 21 - This act requires that all state tax laws are to be strictly construed against the taxing authority, which bears the ultimate burden of proof. The bill also contains the following provisions:

1) Allows the taxpayer to choose the method and time frame for reconstructing income for an audit by the Department of Revenue, unless the Department can show that the taxpayer's method would result in material misstatement of income (less than 50% of income derived by an accepted alternative method). The Department of Revenue is required to promulgate by rule the reasonable and customary methods of audit procedures and the criteria used in selecting a business or taxpayer for audit;

2) Requires audit findings of the Department of Revenue to be accompanied, if requested in writing by the taxpayer, by a statement of legal principles relied upon by the Auditor. Collection of any amount based on an invalid rule or regulation is required to be refunded to the taxpayer with interest, along with attorney's fees;

3) Requires auditors assigned to an audit to commit no less than 75% of their work time to completion of that audit;

4) Allows a taxpayer for whom a tax has been collected to receive a refund even if the collecting party does not file for one;

5) Requires refunds to be paid in a lump sum regardless of the filing status of the taxpayer, or a lesser amount at the option of the taxpayer;

6) Requires all tax refund requests to be processed, and a written confirmation or denial mailed, within thirty days of receipt of the request;

7) Applies the same innocent spouse protections for state income tax returns as apply to federal income tax returns;

8) Subjects all agents and employees of the Department of Revenue to the same provisions of the Fair Debt Collection Practices Act as apply to the Internal Revenue Service due to the Restructuring and Reform Act of 1998. Taxpayers are given standing to bring a civil action for damages for any collection practice which violates those provisions.

The act also makes changes in allowing income tax and sales tax refunds or credits and for the payment of interest on certain overpayment or underpayment of taxes. Balances resulting from the offset of any income or withholding tax overpayment to satisfy other debts owed the state may be credited to the taxpayer's account rather than being refunded.

The act also clarifies the tax liability of entities which have issued improper sales tax exemption certificates. Similar provisions of this act are contained in CCS/SS/SCS/HS/HB 516.