HB1468, which was filed today, would establish an independent Arkansas Tax Appeals Commission that would replace the current internal appeals office at the Department of Finance and Administration. The bill is sponsored by Rep. Joe Jett and Sen. Blake Johnson. The Arkansas Tax Appeals Commission would be made up of three commissioners, including a Chief Commissioner coming from the private sector. It promises a streamlined and more balanced system for Arkansas taxpayers.
Currently, Arkansas tax appeals of audit assessments and refund claim denials generally are appealed to the DFA Office of Hearings & Appeals. The Office of Hearings & Appeals is staffed with two administrative law judges who are employees of DFA. The taxpayer gets a hearing, and then the ALJ issues an Administrative Decision. That decision is subject to a secondary internal appeal to the Secretary of DFA — in practice typically the Commissioner of Revenue. This internal appeal process historically has been deferential to positions taken by DFA audit and legal, with taxpayers losing most of their cases (over 90% in a survey of 2019 decisions).
The prior legislative session in 2019 saw Sen. Johnson's SB560 proposal to create an independent tax appeals commission pass the Senate only to be stranded in the House at the end of session. 2021's HB1468 is based on SB560 and also incorporates elements of the American Bar Association model act (which is also endorsed by AICPA and ALEC). Most states already have some sort of independent tax court or tax tribunal — 35 according to AICPA.
The Arkansas Tax Appeals Commission would be made up of three commissioners: an attorney, a CPA, and a double-licensed attorney/CPA who would be the Chief Commissioner. The Chief Commissioner must have worked at least 5 of the past 10 years in the private sector so as to bring a taxpayer perspective. The commissioners would be appointed by the governor based on shortlists of nominees provided by the Arkansas Bar Association, the Arkansas Society of Certified Public Accountants, and the Arkansas Supreme Court. The Commission would also employ a staff accountant and a staff attorney to assist in rendering decisions. Within the executive branch, the Commission would be housed in the Department of the Inspector General.
Taxpayers would go to the Tax Appeals Commission by filing a petition from a proposed assessment or claim denial. DFA would file a response, and the taxpayer would file a reply. The Commission would then hold a hearing and render its decision. Significant or large-dollar cases typically would be heard by the full Commission en banc, smaller cases would be heard by a single commissioner. Either party could appeal to court from a Commission decision.
If enacted, the Arkansas Tax Appeals Commission promises to be a sea-change from the current appeal system. Taxpayers interested in supporting this legislation should contact their legislators. HB1468 is supported by the Arkansas State Chamber of Commerce and the Arkansas Society of Certified Public Accountants.