Protest Procedure: A Primer Marjorie Welch Interim General Counsel Oklahoma Tax Commission
Agency s Mission Statement: To serve the people of Oklahoma by promoting tax compliance through quality service and fair administration.
APPLICABLE LAW Title 68 Uniform Tax Procedure Code: 201 263 OAPA Hearing Procedures do not apply OKLA. ADMIN. CODE 710 Rules of Practice & Procedure: 710:1-5-1 through 710:1-5-200 Commission Orders: www.tax.ok.gov or Westlaw
CONFIDENTIALITY 68 O.S. 205 OTC employees cannot discuss any aspect of a taxpayer s account without a power of attorney Form BT-129. Available at www.tax.ok.gov OTC attorneys cannot discuss any aspect of a taxpayer s account without a power of attorney or entry of appearance filed with the Office of Administrative Law Judge Generally any person authorized by a taxpayer may represent that taxpayer before the agency s administrative tribunal (OKLA. ADMIN. CODE 710:1-5-27)
NOTICE OF ADJUSTMENTS & ASSESSMENTS 221(A): OTC may audit and issue proposed tax assessments in case of failure to report and where the tax disclosed by report is less than tax disclosed by OTC examination. Results of examination are sent to the taxpayer s last-known address.
Last-Known Address 208: the last address given for such person as it appears on the records of the division of the Tax Commission giving such notice, or if no address appears on the records of that division, the last address given as appears on the records of any other division of the Tax Commission. If no such address appears, the notice shall be mailed to such address as may reasonably be obtained. If the Tax Commission receives an address from USPS as a result of a change of address submitted to USPS, last-known address shall mean the address provided to USPS. ACTUAL NOTICE IS NOT REQUIRED. Mailing to the last-known address is presumptive evidence of the taxpayer s receipt of the notice
PROTESTS
Goal of the Administrative Process: Resolve controversies at the lowest level and at the lowest cost, in terms of resources and time, to the taxpayer while ensuring that the taxpayer is provided an independent review of the proposed agency action.
PROTEST PERIODS Assessments: 60 days from date the assessment was mailed (date on the notice of proposed assessment) 221(C) Prior to expiration of 60 day protest period, taxpayer may request extension of time to file protest. The extension shall not exceed an additional 90 days. 221(F) Denial of claim for refund (other than income tax refund): 60 days from date assessment was mailed (date on notice of denial) 227 Denial of income tax refund: 207; OTC Order No. 2008-09-11-02 Filing of tax return constitutes the claim for refund ( 2385.10) Taxpayer must file claim for refund of income tax within 3 years from due date of original return or refund is barred. 2373; OKLA. ADMIN. CODE 710:50-9-2; Neer v. OTC, 1999 OK 41 An extension to file the return does not extend this 3 year SOL. Matlock v. OTC, 2001 OK CIV APP 104
Note OKLAHOMA TAX COMMISSION COMPONENTS Signed & filed by taxpayer or taxpayer representative Amount in controversy Errors states each error alleged to have been made by OTC division Authority & legal argument Statement of relief Verification by taxpayer or taxpayer representative No filing fees, court costs, or administrative fees Mail to address provided on notice A protest will not be rejected simply because it was not sent to the address on the notice
COMPONENTS (CONT.) The OTC will accept any written indication of disagreement as a protest so long as the protest is timely. TIP TIP TIP Enclose a copy of the notice Enclose documentation supporting the taxpayer s position Proof of filing: copy of post-marked enveloped, tracking number, certified mail
TIMELINESS Mailbox Rule 221.1; OKLA. ADMIN. CODE 710:1-5-44 The protest is timely so long as the postmark on the envelope is within the required number of days from the date on the notice.
DOCKETING Taxpayer receives acknowledgment letter Process is aimed at resolving the dispute at the lowest level, and without need for formal hearing if possible (OKLA. ADMIN. CODE 710:1-5-20(a)) If can t be resolved at division level, division forwards the protest to the ALJ ALJ assigns case number and sends taxpayer docketing letter with administrative rules booklet Protest file is transmitted to Office of the General Counsel where it is assigned to an attorney as counsel for the division that issued the notice The assigned attorney will file an Entry of Appearance and send the taxpayer or the taxpayer s representative a letter of introduction
EX PARTE COMMUNICATIONS Rules of ex parte communications apply to all parties to the protest (OKLA. ADMIN. CODE 710:1-5-27(e) & 710:1-5-36(b)) Attorneys in the Office of the General Counsel will not communicate with the ALJ without taxpayer or taxpayer representative being afforded an opportunity to be present, or, if in written form, without providing a copy of the document filed with the ALJ to taxpayer or taxpayer representative The Office of the General Counsel expects taxpayers and their representatives to likewise refrain from engaging in any ex parte communications and to provide the OGC with copies of all documents submitted to the ALJ Parties are free to contact the ALJs clerks regarding procedural and scheduling matters
PRE-TRIAL PROCEDURE ALJ sets prehearing teleconference (PHC). Unless protest is to denial of claim for refund under 227. Instead of a prehearing teleconference, the ALJ sets the protest for hearing within 60 days of receipt of the protest in the ALJ s Office. Parties can agree to strike that hearing and reset at a later date. 227(e) PHC can be continued or rescheduled upon request If parties have discussed issues and agree additional time is advisable to resolve preliminary issues or attempt resolution, parties may file a status report in lieu of the PHC ALJ will issue PHC Order or other notice directing the parties as to the next action required by the ALJ
PRE-TRIAL RESOLUTION Protests may be resolved without need for ALJ intervention. Division may withdraw the assessment or adjustment Taxpayer may withdraw the protest Division may issue revision to which taxpayer is agreeable In such cases, ALJ will issue a notice that the file is closed. OKLA. ADMIN. CODE 710:1-5- 46. No Findings of Fact, Conclusions of Law, and Recommendations will be issued.
BURDEN Taxpayer bears the burden of proof (OKLA. ADMIN. CODE 710:1-5-47; Enterprise Mgmt. Consultants, Inc. v. OTC, 1988 OK 91) Standard is preponderance of the evidence. Each element must be supported by reliable, probative, and substantive evidence of sufficient quality and quantity as to show the existence of the facts supporting the claim are more probable than their nonexistence (2 Am. Jur. 2d Administrative Law 357) Failure to provide evidence sufficient to show an adjustment to the proposed assessment is warranted will result in denial of protest (Continental Oil Co. v. Okla. State Bd. of Equalization, 1976 OK 23) Because taxpayer bears the burden, taxpayer is entitled to the first and last word (OKLA. ADMIN. CODE 710:1-5-32(3))
SUBMISSION OF THE CASE May be submitted by several methods: Verified response if taxpayer fails to appear at PHC and has not requested a hearing (OKLA. ADMIN. CODE 710:1-5-28(c)) Live evidentiary hearing before the ALJ (OKLA. ADMIN. CODE 710:1-5-29) Stipulation of facts with briefing cycle (OKLA. ADMIN. CODE 710:1-5-38) Full or partial summary disposition (OKLA. ADMIN. CODE 710:1-5-38.1) Depending on complexity of the issues, scheduling order may be issued, or the parties may proceed directly to hearing In all cases, a legal brief or position statement must be filed with the ALJ, usually 1 week before the hearing
Verified Response OKLA. ADMIN. CODE 710:1-5-28(c) Taxpayer did not appear for the PHC Taxpayer did not request a hearing in the protest letter or in any other document filed with the ALJ No hearing is held Division submits legal brief with exhibits attached supporting division s factual assertions Verified Response is signed by the attorney representing division, & verified under oath by division representative Taxpayer is provided an opportunity to respond in writing. After opportunity for taxpayer response, ALJ closes record and issues Findings of Fact, Conclusions of Law, and Recommendations (FCRs)
Discovery 68 O.S. 206(b); OKLA. ADMIN. CODE 710:1-5-33 Rules provide for written discovery; deposition; and production of documents Subpoenas (including to 3 rd parties) may be issued by the ALJ on behalf of either party Note Differs from district court: an attorney is not authorized as an officer of the court to issue the subpoena. Instead, the attorney, or taxpayer representative, submits the subpoena to the ALJ to be signed and issued. The attorney/representative will then serve the subpoena. Parties typically agree to abide by the Oklahoma Discovery Code (12 O.S. 3224 3237) Request responses to admissions Require response to requests within 30 days of receipt Request sanctions No protective order is necessary at the administrative stage. All information obtained through discovery is confidential (68 O.S. 205; OKLA. ADMIN. CODE 710:1-5-33(3))
Stipulation/Briefing Cycle OKLA. ADMIN. CODE 710:1-5-38 Issue is purely legal in nature Parties agree on the undisputed, material facts Joint Stipulation of the Issue(s) filed by the parties Note The ALJs typically require the parties to file an Agreed Statement of Issues regardless of whether the parties are stipulating to the facts; this ensures that both sides have the opportunity to fully respond to all issues raised in the protest. Joint Stipulation of Facts filed with attached evidentiary material Briefing cycle 30 days after Joint Stipulation of Facts filed, taxpayer files brief-in-chief 20 days after taxpayer s brief-in-chief filed, division files response 10 days after division response filed, taxpayer files reply At conclusion of briefing cycle, record is closed and ALJ will issue FCRs
Partial Stipulations Even if the parties are unable to fully stipulate to the facts, parties are encouraged to stipulate to any undisputed material facts. This reduces the amount of time needed at any hearing and allows the parties to focus on the actual issue to be determined. Parties to a protest can typically agree to most of the following facts: Date the return/report examined was filed Date the return/report was assessed/adjusted Date the assessment/adjustment was protested Certain documents, such as Return/report Notice of assessment/adjustment Protest Authenticity of certain other documents
Summary Disposition OKLA. ADMIN. CODE 710:1-5-38.1 Moving party believes there are no material facts in dispute Evidentiary materials must be attached affidavits, documents, etc. Must be verified Moving party believes it is entitled to a judgment in its favor Motion may be for full summary disposition or partial summary disposition Respondent may file response to motion within 15 days after service of motion Note The Rule does not provide for a counter-motion by the respondent, nor does it provide for the movant to file a reply to the response Timing If protest has been set for hearing, must be filed at least twenty (20) days before the scheduled hearing By date set by court order
Summary Disposition (cont.) OKLA. ADMIN. CODE 710:1-5-38.1 Disposition of the Motion Denied: ALJ determines that material facts are in dispute. Matter proceeds to full evidentiary hearing Accepted: ALJ determines that there is no substantial controversy as to the material facts and that one of the parties is entitled to a decision in its favor as a matter of law If hearing has been set or requested, ALJ sets motion for oral argument If no hearing has been requested, ALJ may rule on the motion based on parties submission Partial: accepted on the submitted issue; remainder of issues proceed to hearing. Decision on submitted issue is incorporated into the FCRs for the protest
Hearings OKLA. ADMIN. CODE 710:1-5-31, 710:1-5-32 Notice of hearing and date for legal briefs/position statements ALJ controls hearing Confidentiality is invoked unless specifically waived Recorded by ALJ s clerk Party can provide court reporter but must provide ALJ and opposing party with transcript Witnesses testify under oath Record may be held open or closed at conclusion of hearing Once record is closed, ALJ will issue FCRs
Hearings (cont.) OKLA. ADMIN. CODE 710:1-5-31, 710:1-5-32 Evidentiary rulings Oklahoma Evidence Code (12 O.S. 2101 et seq. generally applies, OKLA. ADMIN. CODE 710:1-5-34(a)) ALJ may officially notice certain facts (OKLA. ADMIN. CODE 710:1-5-36) Matters which could be judicially noticed by judges of district court (12 O.S. 2201, 2202, 2203) Facts within the scope of personal knowledge or within the specialized knowledge of the OTC Sua sponte or upon request of a party Party objecting to any ruling of ALJ may certify the issue to the Commissioners for decision prior to conclusion of proceeding (OKLA. ADMIN. CODE 710:1-5- 36(b)) ALJ, moving party, and opposing party must all sign the request
FINDINGS OF FACT, CONCLUSIONS OF LAW, AND RECOMMENDATIONS OKLA. ADMIN. CODE 710:1-5-39 Regardless of method of submission to the ALJ, once the record has closed, the ALJ will issue FCRs. Absent a motion for rehearing/reconsideration, or a motion for en banc hearing before the Commissioners, the FCRs are presented to the Commissioners for consideration. Commissioners issue order adopting, modifying, or vacating the FCRs. The Commission Order is the final, appealable agency order.
POST-FCR RELIEF OKLA. ADMIN. CODE 710:1-5-40 Within 15 days of issuance of FCRs, either party may file: Before the ALJ: motion for rehearing (new evidence) or reconsideration (unconsidered issue) If granted, FCRs are vacated If denied, FCRs are deemed issued on date motion is denied Before the Commissioners: motion for en banc hearing 15 days from issuance of FCRs or 15 days from the date of denial of motion for rehearing/reconsideration Upon filing of any of these motions, responding party may files its reply within 15 days of the mailing of the motion Note Issues not raised in a motion will not later be considered
APPEALS OF FINAL AGENCY ORDERS 68 O.S. Supp. 2014, 225
EXHAUSTION OF ADMINISTRATIVE REMEDIES Taxpayer must exhaust all administrative remedies before filing an appeal of the Commission Order (OKLA. ADMIN. CODE 710:1-5-43; Cimarron Ind., Inc. v. OTC, 1980 OK 190)
WHAT IS THE AUDIT PERIOD? Before January 1, 2014: taxpayer may appeal directly to the Oklahoma Supreme Court. Before and after January 1, 2014: taxpayer may appeal directly to the Oklahoma Supreme Court or may appeal for trial de novo in (1) Oklahoma County District Court or (2) district court of the county in which the taxpayer resides. After January 1, 2014: taxpayer may appeal directly to the Oklahoma Supreme Court or may appeal for trial de novo in (1) Oklahoma County District Court or (2) district court of the county in which the taxpayer resides.
A taxpayer has 30 days from the date the Commission Order is mailed to appeal.
CONFIDENTIALITY Appeals are generally public records under the Oklahoma Open Records Act and 205 does not apply to any part of the appeal filed by a taxpayer, including the underlying agency record. Taxpayers wishing to preserve confidentiality should petition the appellate court to seal the record (Okla.Sup.Ct.R. 1.6)
DISTRICT COURT APPEALS Trial de novo No jury trial Over $10,000, heard by district or associate judge Under $10,000, may be heard by special judge Appeal from District Court Order Governed by Okla.Sup.Ct.R. 1.20 1.39, not Okla.Sup.Ct.R. 1.125 1.130 Appeal to OSC must be filed within 30 days of the date the district court order was issued
221(E) Abatement Requests OKLA. ADMIN. CODE 710:1-5-70 through 710:1-5-78
WHAT IS AN ABATEMENT? An abatement is basically an untimely protest to an assessment A taxpayer may request an adjustment or abatement of assessed taxes if the request is submitted in writing within 1 year of the date the assessment becomes final Mailbox rule still applies No special language required; if taxpayer submits written disagreement with an assessment within the time period under 221(E), the written disagreement will be construed as a request for a 221(E) abatement
HOW DOES AN ABATEMENT DIFFER FROM A PROTEST? The assessment is a final liability collection activity by the OTC is not prohibited No ALJ or evidentiary hearing Commission Order is not appealable
MECHANICS Request should be sent to the division that issued the assessment As with protests, all documents supporting taxpayer s position should be submitted Taxpayer bears the burden of proof to demonstrate, by a preponderance of the evidence, that the assessment or some portion thereof is clearly erroneous Division agrees with taxpayer Division adjusts final liability and mails copy of adjustment to taxpayer No new right to protest is created Division disagrees with taxpayer Division notifies taxpayer in writing that request is denied Taxpayer may appeal division denial to the Office of the General Counsel within 30 days of the date the notification was mailed
MECHANICS (CONT.) Taxpayer timely files appeal with the Office of the General Counsel Written request for review with any additional information not previously provided attached OGC creates new E file and assigns an attorney to review the request Letter of introduction and request for provision of any additional information not previously provided sent to taxpayer or taxpayer representative OGC attorney reviews all information submitted by taxpayer OGC attorney notifies taxpayer of recommendation Presentation of request to Commissioners Matter set on Commission agenda for Commissioners consideration Taxpayer may appear and present documentary evidence and testimony in affidavit form Non-appealable order issued
MISCELLANEOUS Regularly scheduled Commission meetings September May: Tuesdays & Thursdays at 1:30 p.m. June August: Tuesdays at 1:30 p.m. ALJs accept electronically filed documents Fax: (405) 557-1723 Judge Harrington: Linda Spradlin, lspradlin@oktax.state.ok.us Judge Kasper: Audra Minton, aminton@oktax.state.ok.us Locations Commission meetings: Connors Building, 5 th Floor, Capitol Complex Public entrance is located on the south side of the building Hearings before the ALJ: 3700 N. Classen, Ste. 260 (northeast corner of 36 th & Classen) Office of the General Counsel: 100 N. Broadway Ave., Ste. 1500 (15 th Floor, Chase Tower)
Questions?
Resources Oklahoma Statutes www.oscn.net Attorney General Opinions www.oscn.net Rules & Proposed Rules www.tax.ok.gov Tax Commission Decisions www.tax.ok.gov Letter Rulings www.tax.ok.gov Tax Commission Agendas www.tax.ok.gov Visit www.tax.ok.gov for Forms, Up to the Minute, Quick Clicks, Reports, and other helpful information
Useful Phone Numbers General Counsel s Office 405/522-9460 fax 405/701-6144 General Counsel s Office, Tulsa 918/581-2970 fax 918/581-2087 Administrative Law Judges Judge Harrington 405/319-8508 Judge Kasper 405/319-8500 fax 405/557-1723 Tax Practitioner Hotline 405/521-6827
Useful Phone Numbers (cont.) Permits, Income Tax Refunds, OKTAP, General Information 405/521-3160 Waivers 405/522-5717 219.1 Settlements 405/522-1289 Tax Warrants & Warrant Payoffs 405/522-4193 Audit 405/521-3251 Notice to Show Cause 405/521-3281 Payments/Pay-Out Plans 405/521-3281 Professional Licensing 405/522-6800