Lawmakers are floating legislation they argue could lead to better results for Pennsylvania residents and businesses that challenge their state tax bills.
- The legislation would allow taxpayers in certain situations to file appeals past a statutory deadline.
- And in an effort to settle disputes more quickly, the legislation would create a new, independent mediation process.
- “This legislation is a taxpayer protection proposal, pure and simple,” said state Sen. Scott Hutchinson, a Republican from northwestern Pennsylvania who is drumming up support for the idea.
- A House version is being advanced by state Rep. Tim Briggs, a Montgomery County Democrat
- A department spokesperson said the agency is still reviewing the proposals, which began circulating last week.
Why is this happening: The mediation provisions address what observers say is a glut of cases filed in Commonwealth Court by taxpayers who don’t get results they can live with from the administrative appeals process.
- Under current law, that process starts with an administrative Board of Appeals, which has the power to review initial decisions by the Department of Revenue in areas such as tax assessments and refund requests.
- The board is expected to hear 35,000 appeals this year, up from 29,400 in 2022, according to the department.
- If the board rules against them, taxpayers can turn to the Board of Finance & Revenue, a three-person panel housed in the state Treasury Department
- The board includes two members appointed by the governor and a chair designated by the state treasurer.
- The set-up is designed to ensure the board is independent from the revenue department.
- If taxpayers don’t like the board’s decision, they can appeal to Commonwealth Court.
- At both stages, taxpayers can try to negotiate compromises directly with officials from the revenue department, an option encouraged by the state.
Why mediate: To provide an independent voice in negotiations between taxpayers and the revenue department.
- Mediation could lead to quicker decisions, according to accountants and attorneys interviewed by biznewsPA.
- They note a lack of personnel occasionally holds up the current compromise process.
- “I just think it’s going to expedite the process,” said Jason Skrinak, founder of Pivot Strategic Consulting, a tax consulting servicein Harrisburg.
- He noted that the legislation offers mediation as an addition to the existing options.
Will it work: One tax attorney is skeptical.
- “What they’re trying to do with this proposal makes sense,” said the attorney, Richard Botwright, co-chair of the state and local tax group at Reading-based law firm Stevens & Lee.
- But, he said, parties may not accept the outcome of the mediation, and it’s not clear what an independent mediator will add.
- “People are usually pretty good about arguing their case and telling the department why they’re wrong,” said Botwright, a former tax attorney in the Office of Chief Counsel for Pennsylvania. “I don’t really see a mediator providing a better argument than the taxpayer.”
What about the deadlines: The legislative proposal would allow taxpayers in extenuating circumstances to file appeals with the Board of Finance & Revenue after a 60-day deadline.
- The provision would provide some relief to taxpayers whose appeals are delayed by health issues, disasters or other unexpected events, said Michael Carr, a senior tax manager at Lancaster-based Trout CPA.
- Under the current law, the board can’t accept late appeals, Carr said, “You hit a date and the doors shut. You can’t go through.”
What’s next: Briggs said he expects to introduce legislation by the end of this year for consideration in 2024.
- The bipartisan support suggests the idea could see some action in a divided state legislature where Republicans control the Senate and Democrats control the House.
- “Hopefully, both Sen. Hutchinson and I will be able to go to our leadership and express our interest in advancing this,” Briggs said. “We just have to do everything we can to get creative and figure out how to pass good policy.”
