To address practitioners' transparency concerns over the equal application of Department of Revenue determinations, new Washington proposed legislation (SB 5647) would prohibit the department from publishing only those determinations it deems precedential.
According to its language, the bill aims to "provide transparency, ensure consistent treatment, and assist taxpayers in understanding department rules and interpretations."
Primarily sponsored by Sen. John Braun (R), SB 5647 would require the DOR to publish all written determinations within 90 days after a matter is finalized. The bill would also require the DOR to establish a stakeholder process to review determinations and make recommendations if changes to a law or rule would provide taxpayers with increased technical clarity.
Currently, RCW 82.32.410 permits the revenue director to designate some written determinations as precedent. The director is also to adopt· the criteria that would be used to decide whether a determination is precedential. Determinations.that are precedential "shall be made available for public inspection and shall be published by the department."
The director has not adopted a rule specifying the exact criteria for deciding whether a determination is precedential, but the DOR's website specifies that to be published, determinations must have well reasoned applications of the law to a specific set of facts and must address only the law and facts necessary to resolve that case.
Examples of precedential determinations include those that:
- provide guidance on a previously unaddressed area of the law, and to articulate the DOR's current policy
- apply the law to a significantly different set of facts
- overrule a published determination; or provide a better or more current articulation on how the law should be interpreted.
Because the DOR publishes few determinations-which often address the same issues-each year, practitioners question whether the criteria have been applied evenly. (Prior coverage: State Tax Notes, June 18, 2012, p. 815.
Cosponsored by five Republicans and four Democrats, SB 5647 has solid bipartisan support, according to Amber Carter, government affairs director with the Association of Washington Business.
There will likely be some debate over the bill's cost. Carter said she expects the DOR to attach a cost increase to the bill, given that it will be required to redact and publish all determinations.
But the bill would also simplify the department's process by eliminating the need for a decision on whether a determination is precedential. "The DOR currently has to review everything to determine what is or is not precedential versus just publishing everything with an improved redaction/sanitization process," Carter said.
Senate Panel Considers Bill
The Washington State Senate Trade and Economic Development Committee on February 12 took up the bill.
The first testimony was from committee counsel Jack Brummel, who explained the current state of the law and the specific changes proposed in SB 5647. Brummel said a fiscal note on the provision has been requested for the bill, though none was currently available.
A panel supporting the bill then spoke. Norman Bruns, ofcounsel at Garvey Schubert Barer, Seattle, testified about the need for transparency in tax collection and said that the original purpose of the current law was to require the DOR to publish some determinations and that it was "initially robust" toward that end.
Bruns said the changes in SB 5647 are now needed because the department publishes so few determinations that the statute is "practically meaningless."
Gerald Swanson ofKOM Consulting and Michelle DeLappe, associate at Garvey Schubert Barer, Seattle, echoed Bruns's remarks. Swanson said that the current situation creates a lack of confidence in the system, particularly for out-of-state taxpayers, and DeLappe noted that publication of determinations was a long-standing concern for the bar association.
Carter addressed the DOR's suggestion that SB 5647 would be costly to implement. Carter said that publishing redacted versions of all determinations would likely be less expensive than the current process of reviewing each determination to see if it is precedential.
DOR legislative liaison Drew Shirk expressed several department concerns with SB 5647, especially that the bill could conflict with the statutory requirement for taxpayer confidentiality. Shirk said that because Washington uses a business and occupation tax rather than an income tax, some taxpayers could easily be identified by the facts necessary for the determination.
The legislation lacks protection for taxpayers who do not wish to have their appeal made public, Shirk said. He also said the DOR has a general commitment to transparency and cited several ways in which it makes information available to the public.
Citing a lack of time and a need to consider additional legislation, Trade and Economic Development Chair John Braun (R) asked Shirk to submit the remainder of his testimony in writing.
Authors Cara Griffith and Jennifer Carr