SOURCE: Pennsylvania Treasury

Pennsylvania Treasury

July 09, 2013 12:26 ET

Treasurer McCord: New Law Increases Fairness, Openness of Tax Appeals

McCord Proposed Modernization of Board of Finance and Revenue, Which He Chairs

HARRISBURG, PA--(Marketwired - July 09, 2013) -  The appeals system for Pennsylvania taxpayers will become fairer and more transparent under changes contained in legislation that has been sent to the governor affecting the Board of Finance and Revenue (BF&R), State Treasurer Rob McCord said today. With the board becoming more independent of state taxing authorities, the reforms will put the taxpayer on equal footing with the Department of Revenue when the board considers appeals. A requirement that the board publish its opinions will make the public better informed about taxation rules.

McCord, who chairs the board, advocated for modernization and worked with the General Assembly and the governor's office to craft bipartisan legislation, which awaits the signature of Governor Tom Corbett as part of the Tax Code bill (HB 465). Leaders of the business, legal, and tax accounting communities also provided input to the agency overhaul.

"Taxpayers deserve an appeals process that is open and transparent, predictable and fair," McCord said. "For decades, various parties have attempted and failed to revamp the tax appeals system for Pennsylvania citizens, but we are finally taking a major step forward with this pro-taxpayer legislation."

BF&R hears and decides appeals involving business and personal tax matters. It is generally the second level of appeal, following decisions by the Department of Revenue's Board of Appeals. The law relating to the composition of BF&R and the manner in which it hears appeals had not been altered in more than 50 years. The make-up of the board has been criticized for its lack of independence from the authority whose decisions were the subject of the appeal.

Once the law takes effect, composition of the board will change from six to three members -- two appointed by the governor and confirmed by the Senate, plus the state treasurer. The two appointees will be full time and will serve six-year terms. The treasurer will remain chairman, and will oversee administrative operation of the board, including the selection of staff.

An appointed board member must be either a certified public accountant or lawyer and have at least 10 years of experience with state tax law.

Until now, the board included the secretary of revenue along with the auditor general, attorney general, secretary of the commonwealth and the governor's general counsel. The presence of the secretary of revenue was an essential flaw, placing that official in the position of helping to decide appeals of Revenue Department actions while serving alongside two other administration officials.

"It is just common sense, and a matter of fairness, that the taxing authority with a stake in the outcome will no longer be a voting member of the board that decides appeals," McCord said. "The board should be independent and free to weigh the rights and the interests of both parties."

The new law prohibits ex parte communications between the Department of Revenue or a taxpayer and board members. The department and the taxpayer will both be entitled to present oral and documentary evidence. The board will also have the power to settle cases upon mutual agreement of the department and the taxpayer, which it now lacks.

The board will be required to publish all opinions after redacting confidential information, and to provide specific information on how decisions were reached, thus equipping taxpayers with necessary knowledge about the tax consequences of financial and business decisions. The opinions will be available on searchable databases for the public. The board gained legal authority to publicize its decisions three decades ago, but until McCord became treasurer in 2009, it had never made a tax appeal opinion public.

As chairman, McCord implemented some modernizations on his own, such as publicizing decisions, advocating for more transparency, and questioning some of the board's customary practices, but the new reforms are more extensive and have the force of law. Some changes had to be accomplished through statute.

"Coming to elected office after being an entrepreneur, I realized businesses need to understand how tax law will be applied. They also need to believe it will be applied fairly and uniformly, and that judgments will be rendered without bias," McCord said.

The Pennsylvania Chamber of Business and Industry and The Pennsylvania Institute of Certified Public Accountants supported the legislation. 

BF&R is also responsible for selecting depositories for commonwealth funds, and it biannually determines the interest rate for commonwealth deposits. It will continue to perform those duties.

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