Effective April 1, 2014, Pennsylvania’s Board of Finance and Revenue will be reconstituted with independent voting members and other improved procedures. (HB 465) This is a change we and many other practitioners, as well as the business community at-large, have sought for many years.
Independent Board Members
The primary objection to the current make-up of the Board has been the participation by the Secretary of Revenue or his designee as a member of the Board. Together with participation by the Auditor General (or designee), whose office also participates in the pre-assessment review of many tax returns, this has given many the impression that the decisions of the Board have not been truly independent. This impression has not been cured by the participation of the State Treasurer, Attorney General, Governor’s General Counsel and Secretary of the Commonwealth (or their designees) as members of the Board.
Effective April 1st, there will be three members of the Board. Two will be appointed by the Governor and confirmed by the Pennsylvania Senate - one initially serving a Four-year term and one serving a six-year term, with all subsequent terms being six years. The State Treasurer or the Treasurer’s designee will fill the third seat. The two gubernatorial appointees and the Treasurer’s designee will be required to meet the following requirements:
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Citizen of US and Pennsylvania Resident
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Attorney or CPA qualified in Pennsylvania
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At least ten years experience in a position requiring substantial knowledge of Pennsylvania tax law
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Devote full time to Board duties
Appointed members will serve until their successor is qualified; they may be renominated.
Representation Before the Board
Taxpayers may be represented before the Board by themselves, by an attorney, by an accountant, or by another representative so long as the representation does not constitute the unauthorized practice of law. Both the taxpayer and the Department of Revenue will have the right to be represented before the Board.
Ex parte communications with Board members or staff on the merits of a case will no longer be permitted. A party submitting information or documentation to the Board will also be required to serve the other party.
Public Hearings and Published Decisions
Hearings of the Board, as at present, will be open to the public unless an executive session is necessary to protect a lawful privilege or confidentiality. Decisions of the Board, including dissenting opinions, will be published (after deletion of certain confidential information) on a publicly accessible Internet website.
Appeals to Court
As at present, appeals from decisions of the Board will be taken to the Commonwealth Court and will be heard de novo (i.e., no formal record will be made before the Board and new evidence may be presented on appeal to court).
New Compromise Authority
HB 465 instructs the Board to establish procedures to facilitate compromise of cases before the Board. The statute does not detail how this process is to work.
Our View
We view the establishment of a truly independent Board as a very significant and positive development. We will withhold judgment on the compromise process at this level until we see how the process is implemented - this could be a very useful, cost-saving tool for all, or it could end up just being window dressing to satisfy a check-box on a survey of best appeal practices. The publication of decisions will be useful, but publishing all decisions in an online database risks the evolution of a bloated database filled with many marginally useful records. And, as attorneys, we wonder how a non-attorney CPA member of the Board can be expected to appropriately adjudicate cases turning on complicated and often close legal issues. On the whole, however, this is the most positive development in the Pennsylvania tax appeals process the author of this article has witnessed in more than 30 years of experience with the Department of Revenue’s Board of Appeals and in private practice. We look forward to helping to make this work for the benefit of Pennsylvania taxpayers!
