One of my goals as commissioner in writing this blog is to remove the mystery -- or the perceived mystery -- that taxpayers and practitioners may have about various DOR policies, procedures and processes. While I haven't ranked them, I already know from my first few months on the job that there is a great deal of misunderstanding about the settlement process in general and the Office of Appeals in particular, so let me start there.
The Department of Revenue is authorized to resolve tax disputes prior to assessment or litigation. This settlement authority allows the Commissioner to accept less than the full amount of a contested liability based on the best interests of the Commonwealth and the potential hazards of litigation. The Commissioner may also conduct conferences to determine whether proposed tax assessments are proper, and to determine whether assessed taxes should be abated.
The Office of Appeals, an independent office within the Department that reports directly to the Commissioner's Office, settles tax disputes and conducts conferences. The settlement and conference processes are functionally combined at the Office of Appeals to afford a taxpayer a single, integrated forum to resolve disputes and an outstanding opportunity for settlement in an informal arena without time-consuming and expensive proceedings.
While it’s tempting to think that a taxpayer’s opportunities for settlement increase as a case moves into litigation, the fact is that the Office of Appeals settles disputes on the same basis as the Litigation Bureau, assuming the factual and legal development are the same. So, where the parties are as motivated to settle as they may be later in the process, and are as forthcoming with documentation as they might be during a discovery process, the Office of Appeals presents settlement opportunities that are equivalent to those afforded on the litigation track.
Since 1999, when the Legislature authorized the Commissioner to settle disputes prior to litigation, the Office of Appeals has settled over 4,500 cases with roughly $1.5 billion in dispute. Almost 300 of these appeals have involved disputes with more than $1 million at issue.
That said, there is still room for improvement. I am committed to resolving tax disputes as efficiently and as early as possible, and to that end the Department is reviewing some best practices from the IRS and elsewhere to improve the appeals process. In particular, we are considering a “fast track settlement” process, which is a pre-assessment process where a trained appeals officer acts as mediator between the tax auditors and the taxpayer.
As we consider new processes, I am soliciting your input, particularly if you have experience with these processes as they are applied by the IRS. Please send any comments or suggestions to Maryann Merigan, DOR 360 Director, at meriganm@dor.state.ma.us.