Pennsylvania altered its tax appeal process at its two administrative boards — the Board of Appeals (BOA) and the Board of Finance and Revenue (BF&R) — to make changes favorable to taxpayers. Act No. 123, S.B. 1051, Oct. 29, 2024 (Act 123). The bill was signed into law on October 29 and becomes effective on January 27, 2025 (90 days after enactment). The following changes will be made:
90-day Appeal Period
Taxpayers appealing a Pennsylvania Personal Income Tax assessment will have 90 days (instead of 60 days) from the date of the Department of Revenue’s (Department) Notice of Assessment to file an appeal to the BOA, and 90 days (instead of 60 days) to appeal the Department’s decision and order to the B&R.
Extension for Cause
An extension of the time for filing an appeal to the BOA or the BF&R may be allowed for cause but not more than an additional 30 days from the original filing deadline.
New BF&R Settlement Process
Upon filing an appeal to the BF&R, either party may request, or the BF&R may direct, a settlement conference within 30 days of the date the appeal is filed with the BF&R. The BF&R may permit settlement conferences upon a late-filed application for cause. Once a settlement conference is requested, the BF&R will defer review of the appeal for an additional six months while the parties attempt to reach a settlement. The settlement conference is not mandatory and may be declined by either party. The settlement conference will be held no later than 60 days from the date the BF&R defers the case for settlement. Any settlement reached must be presented to and approved by the BF&R. Once approved, the settlement will not be considered precedential and is not appealable.
The appointed settlement officers must be attorneys or certified public accountants, who are independent from the Department and Pennsylvania Treasury other than their role as settlement officers, and who have relevant experience with tax matters. The settlement officers may not impose a settlement on the parties, but they may recommend a settlement and may make ex parte communications with each party in furtherance of settlement.
This process will replace the BF&R’s current compromise process.
Looking forward, the additional 30 days permitted to PIT taxpayers to appeal to the BOA and BF&R is beneficial for individual taxpayers, who typically make up the majority of the petitioners to the BOA and the BF&R. All taxpayers used to have 90 days to appeal an assessment to the BOA and to the BF&R until the General Assembly changed the law in 2017. The renewal of the 90-day appeal period is a step in the right direction to give taxpayers more time to timely appeal. It is too soon to tell whether the other new process will be helpful to taxpayers. The effectiveness of the settlement program will likely turn on the skill of the settlement officers appointed by the BF&R to oversee the process and mediate a settlement. It is unclear how much impact the 30-day grace period for cause will have on taxpayers. Generally, Pennsylvania courts view the term good cause as a flexible term and therefore not amenable to general rules or rigid formulas, Trexler v. Unemployment Compensation Bd. Of Review, 365 A.2d 1342, 1344 (Pa. Cmmw. Ct. 1976), and this term has been construed narrowly against taxpayers in other Pennsylvania statutes. It is not clear how the BF&R will interpret the term for cause, as the term is undefined in the legislation; however, it is likely intended to apply in instances of non-negligent happenstance that result in late-filed appeals.
