The Commissioner of Revenue (the "Commissioner") is authorized to resolve tax disputes, whether at a pre-assessment stage and or post-assessment. In particular, the Commissioner may settle civil tax disputes pursuant to G.L. c. 62C, § 37C. Settlement 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. Settlement may be considered subject to the agreement of both the Commissioner and the taxpayer.
The Commissioner may conduct conferences pursuant to G.L. c. 62C, § 26(b) to determine whether proposed tax assessments are proper, and hearings pursuant to G.L. c. 62C, § 37 to determine whether assessed taxes should be abated. The Commissioner may also conduct hearings involving other types of disputes, such as penalty disputes, manufacturing classification appeals, responsible person determinations, direct payment authority appeals, and appeals relating to applications for certain tax credits, e.g., the Brownfields Credit. The Office of Appeals, an independent office within the Department of Revenue (“Department”) performs all of these functions on behalf of the Commissioner. The settlement and conference/hearing processes are functionally combined at the Office of Appeals to afford a taxpayer a single, integrated forum to resolve disputes. This integration allows the Office of Appeals to operate in an informal and expeditious manner, without time consuming and expensive proceedings.
The appeals process at the Office of Appeals is intended to be flexible and offer a taxpayer several avenues to resolve contested matters. The process may be commenced in different ways depending upon a taxpayer's preferences, and the timing of an appeal. However, generally only one conference/hearing request will be considered with respect to each case.
628.2 Timing and Content of Appeals
628.2.1 Pre-Assessment Appeals
A taxpayer seeking a pre-assessment appeal must submit a request either online or by submitting a paper form. To request an appeal online a taxpayer may use the dispute function on MassTaxConnect (MTC) by choosing "File a Dispute" under "I Want To" in their account for each tax type even if they did not file the original return electronically. Please make sure to select the pre-assessment dispute option. This is the fastest and most efficient way to submit an appeal. A taxpayer may also submit a completed Office of Appeals Form, Form DR-1, that is postmarked within 25 days of the date the Department has issued a Notice of Intent to Assess (NIA) a tax. A pre-assessment conference (Conference), which should also be requested on Form DR-1, must also be postmarked within 25 days of the date of an NIA. See Administrative Procedure 609.5. A completed Form DR-1 must contain a true, correct and complete statement of the facts and issues in dispute and the reasons the taxpayer believes the amount in dispute is excessive or in error. The statement should cite relevant statutes, cases and other authority which support the taxpayer's position. A taxpayer's submission should be forthright and complete, as the appeals process is premised on good faith and full disclosure. Misleading or false statements will result in the termination of settlement discussions.
Taxpayers seeking settlement should also submit a proposal for resolving the matter. A taxpayer must submit a specific dollar or percentage settlement offer with Form DR-1. A taxpayer's initial offer need not be its final offer. Such offer must, nonetheless, be sufficient to evidence a good faith effort to settle.
628.2.2 Post-Assessment Appeals
To initiate a post-assessment appeal and request a hearing, a taxpayer must submit a dispute with the Office of Appeals. The simplest and most direct method to submit a dispute is electronically through MTC. A taxpayer who does not have access to MTC may file an Application for Abatement, Form ABT.
If a taxpayer has not had a Conference relating to a given matter, the taxpayer has the right to a hearing, if requested, pursuant to G.L. c. 62C, § 37 (Hearing) when seeking a full or partial abatement of previously assessed tax. The taxpayer may request a Hearing online through MTC in connection with the request for a post-assessment appeal. See Administrative Procedure 627.10. A Hearing will not be necessary if the Office of Appeals determines to grant the requested abatement in full.
When a taxpayer has initiated the appeals process prior to assessment of a tax and has had a Conference with the Office of Appeals, a Hearing relating to the same matter will only be granted if the taxpayer first establishes to the satisfaction of the Commissioner that a further hearing is necessary, either due to the availability of new factual information or new legal precedent not available to the taxpayer at the time of the Conference.
A request for settlement consideration may be made with the submission of the appeal. To request settlement consideration, a taxpayer should submit a request through MTC or by filing a Form DR-1 with the Form ABT. A request for settlement consideration will be accepted up to the date that the Department acts on the taxpayer's Application for Abatement. As with pre-assessment appeals, an online request and/or a completed Form DR-1 must contain a true, correct and complete statement of the facts and issues in dispute and the reasons the taxpayer believes the amount in dispute is excessive or in error. In addition, the online request and/or Form DR-1 should contain the taxpayer's good faith settlement offer with a specific dollar amount or percentage proposed.
628.3 Statutes of Limitations
The Department must make sure that assessments are made before the applicable statute of limitations expires. Accordingly, when a pre-assessment appeal has been requested, the Office of Appeals will request that the taxpayer sign a Special Consent Extending the Time for Assessment of Taxes, Form B-37, and submit the completed form to the Department. They may submit the form electronically through MTC by uploading the completed Form B-37 as an attachment. If the taxpayer is requesting settlement consideration at the Office of Appeals, a completed Form B-37 is required.
Form B-37 extends the time for assessment of taxes until 90 days after final disposition of the matter by the Office of Appeals. The taxpayer may, in writing, terminate the special consent granted by Form B-37, in which case the Department may assess the tax within 90 days after the date the Department receives notice of such termination. Neither execution nor termination of Form B-37 will reduce the period of time otherwise provided by law for making an assessment.
The taxpayer must make sure that a request for abatement is made before the applicable statute of limitations expires. Form DR-1 is not an Application for Abatement and does not extend the time allowed for submitting a post-assessment appeal. Generally, an Application for Abatement may be filed at any time: (1) within 3 years from the date of filing the return; (2) within 2 years from the date the tax was assessed or deemed to be assessed; or (3) within 1 year from the date the tax was paid, whichever is later. For more information regarding the filing of an Application for Abatement, see G.L. c. 62C, § 37 and 830 CMR 62C.37.1.
628.4 Appeals Process
628.4.1 Initial Evaluation
The Office of Appeals will perform an initial evaluation of each appeal. This evaluation will include a review of Department records that relate to the matter in dispute and of any submissions made by the taxpayer.
628.4.2 Conferences and Hearings
6184.108.40.206 Scheduling a Conference or Hearing
After receiving an appeal request from a taxpayer, the Office of Appeals will schedule a pre-assessment Conference or post-assessment Hearing, as appropriate, and notify the taxpayer of the date and time of such conference or hearing. In some instances, a taxpayer may be asked to provide additional information before the Conference or Hearing is scheduled. Generally, the Office of Appeals schedules a Conference or a Hearing within 30 days from the date of assignment of the case to an appeals officer.
6220.127.116.11 Taxpayer Options for a Conference or Hearing
The Conference or Hearing is conducted either in person at the Office of Appeals, located in Boston, Massachusetts, or by telephone. A taxpayer may also request that a determination be based solely on the information in the case file and the taxpayer's written submissions.
The taxpayer may be represented by another person during the appeals process. To authorize representation by another person, the taxpayer must complete and submit a Form M-2848: Power of Attorney and Declaration of Representative. See infra 628.6.1.
618.104.22.168 Conduct and Disposition of the Conference or Hearing
An appeals officer from the Office of Appeals is responsible for conducting a Conference or Hearing. At any time during the review of an appeal, including during a Conference or Hearing, a taxpayer or the Office of Appeals, in its discretion, may choose to discuss settlement of the disputed issues.
Either the taxpayer or the taxpayer's authorized representative must participate in a Conference or Hearing conducted by telephone or in person. Other representatives of the Department may also attend.
Conferences and Hearings are informal, employing neither the rules of evidence nor testimony given under oath. No transcript or formal record of the proceedings is made. The Office of Appeals may request, however, that matters alleged as fact be submitted under the pains and penalties of perjury.
Typically, the appeals officer will begin the Conference or Hearing by summarizing the contested issues, and then asking the taxpayer to present its case. The appeals officer also may pose questions to the taxpayer. If the appeals officer requests additional information from the taxpayer, a date will be set by which the information must be submitted to the Office of Appeals to be considered in connection with the appeal.
The appeals officer will not make a determination at the Conference or Hearing. Rather, the matter will be taken under advisement, and the appeals officer will draft a determination letter which typically sets forth the Office of Appeals' determination. If the taxpayer or the Office of Appeals has initiated the settlement process, the appeals officer will prepare a settlement recommendation which will include a summary of the information presented at the Conference or Hearing. See infra 622.214.171.124.
628.4.3 Settlement Consideration
6126.96.36.199 Settlement Recommendations
An appeals officer will prepare a settlement recommendation for review either by the Settlement Review Board or by the Director and a Deputy Director of the Office of Appeals depending upon the issues presented and the amount in dispute. The Settlement Review Board consists of the Senior Deputy Commissioner (or his designee, the Taxpayer Advocate), the General Counsel, and the Deputy Commissioner of the Resolution Division.
The review process is designed to confirm whether a matter is appropriate for settlement consideration, and if so, to authorize an appeals officer to pursue settlement on specified terms. The settlement recommendation is a confidential internal process and is discussed without the participation of the taxpayer or the Audit Division (if the appeal includes a pending audit).
6188.8.131.52 Settlement Discussions
After a settlement recommendation has been reviewed and settlement terms approved, the appeals officer will contact the taxpayer or the designated representative to discuss the case and attempt to secure disposition of the controversy consistent with the terms established during the review.
6184.108.40.206 Completion of Settlement and Effect of Settlement Agreement
When the taxpayer and the Office of Appeals have agreed to settlement terms, the taxpayer (or its designated representative) and the Department must sign a written settlement agreement reflecting those terms.
Once a settlement agreement has been signed, the matter in question may not be reopened absent fraud, misrepresentation of a material fact, or mutual mistake relating to a material fact. Additionally, settlements may not be regarded as precedent in any other matter, including other settlements, whether or not involving the same taxpayer.
6220.127.116.11 Settlement Not Reached
If a taxpayer and the Office of Appeals cannot reach mutually acceptable settlement terms, this fact will be confirmed in writing. If a Conference or Hearing relating to the matter was conducted, the letter will also serve as a determination letter. See supra 618.104.22.168. In general, once settlement of a given matter has failed, it will not be reconsidered by the Office of Appeals.
628.5 Other Settlement Options
628.5.1 Limited Information Settlements
In cases where the taxpayer does not have or is otherwise unable to provide any additional information or documentation concerning the matter in dispute, the taxpayer may submit a settlement proposal and request that the Office of Appeals consider that proposal based solely on the information and/or documentation that has been submitted to the Department as of the date of submission of the request. The Office of Appeals retains the discretion to determine that limited information settlement consideration would not be appropriate for specific cases. Further, the limitation on factual development and/or the insufficiency of supporting documentation may be taken into account by the Office of Appeals in the amount of any offer to which it might agree.
A taxpayer may request limited information settlement consideration by checking the appropriate box on Form DR-1.
628.5.2 Expedited Settlements
A taxpayer may request that the Office of Appeals consider reviewing a settlement proposal on an expedited basis. A taxpayer may request expedited settlement consideration when submitting a dispute online or by checking the appropriate box on Form DR-1. The Office of Appeals retains the discretion to determine that expedited settlement consideration would not be appropriate for specific cases. To receive expedited settlement consideration, the following requirements must be met either through an online submission or with the Form DR-1:
- A complete explanation of the facts and issues in dispute;
- A specific proposal for settlement;
- All documentation necessary to support the settlement proposal;
- For pre-assessment appeals, a completed Form B-37; and
- The taxpayer and/or the taxpayer’s representative must be prepared to participate in a conference or hearing on an expedited basis and must have binding authority to settle the dispute at the time of any conference or hearing.
628.5.3 Early Mediation Program
The Department offers an Early Mediation Program for certain qualifying audit cases, generally limited to cases in which the Department is proposing to assess tax of $250,000 or more. The Early Mediation Program is administered jointly by the Audit Division, the Legal Division, and the Office of Appeals. It is a collaborative dispute resolution process for parties seeking resolution through reasonable compromise of all issues in a disputed matter. Early Mediation may be initiated at any time after a matter in dispute has been fully developed, but no later than 30 days after the issuance of a Notice of Intent to Assess. Use of the Early Mediation Program in any particular case is optional for both the Department and the taxpayer.
For additional information concerning the Early Mediation Program, including eligibility requirements, the application process and the mediation process, see Administrative Procedure 635, Early Mediation Program.
628.6 Miscellaneous Policies of the Office of Appeals
628.6.1 Taxpayer Representation
A taxpayer need not be represented in any proceeding before the Office of Appeals. A taxpayer who chooses to be represented must submit a completed Power of Attorney and Declaration of Representative, Form M-2848, designating the individual(s) who may act on the Taxpayer's behalf. A completed M-2848 may be uploaded as an attachment in MTC.
At the request of the taxpayer, designated representatives will generally receive a copy of all correspondence sent to a taxpayer by the Office of Appeals.
628.6.2 New or Additional Information
During the course of an appeal, a taxpayer may submit, on its own initiative or at the request of the Office of Appeals, information not previously possessed by the Department. The Office of Appeals may ask the Audit Division to review the newly submitted information, if an appeal relates to a proposed audit assessment.
628.6.3 Postponement of Departmental Action
Generally, once the Office of Appeals has received an appeal and, if necessary, a waiver extending the statute of limitations on assessment has been secured, any pending Departmental action in relation to that specific matter will be postponed. That is, the Department will not issue an assessment, deny an Application for Abatement, or pursue collection while the Office of Appeals is considering a matter. However, interest and applicable penalties will continue to accrue. For additional information about interest and penalties, see G.L. c. 62C, §§ 32 and 33, and Administrative Procedure 612.
628.6.4 Multiple Submissions
Generally, a taxpayer may only submit one request for settlement consideration in connection with each disputed matter.
628.6.5 Interest Only Cases
The Office of Appeals will not conduct a Conference or Hearing when the only issue in dispute is the imposition of interest. Interest may be reduced only if the amount of the underlying tax or penalty is reduced or abated. See G.L. c. 62C, § 32.
628.6.6 Cases Not Appropriate for Settlement
Certain types of cases are not suitable for settlement. Generally, the Office of Appeals will not consider settlement when:
- fraudulent or criminal behavior is suspected or ascertained;
- the Department is committed to litigate an issue, particularly when the issue involves an overriding or critical concern applicable to other cases;
- the Department's position is legally and factually compelling and the only apparent benefit to the Commonwealth from a settlement would be avoidance of the cost or inconvenience associated with litigation, i.e., the only consideration is "nuisance value";
- taxpayer objections are based upon religious, moral, political, conscientious, or similar grounds, e.g., "tax protester cases"; or
- the only matter at issue is collectability.
The Office of Appeals may also decline to pursue settlement when:
- significant information, documentation, or evidence has been withheld by a taxpayer or its representative; or
- a taxpayer's prior actions indicate to the Department a pattern of disregard of Massachusetts tax laws.
628.7 Additional Types of Appeals
628.7.1 Manufacturing Classification Appeals
If the Department notifies a corporation of its intent to deny a manufacturing classification request, the corporation may request a Hearing with the Office of Appeals to contest the proposed denial. A request for a Hearing must be either received by DOR or postmarked within 30 days of the date set forth in the notice of intent to deny the classification.
The request for a Hearing with the Office of Appeals does not extend the time for filing a petition with the Appellate Tax Board. Such petition must be either received by the Board or postmarked on or before April 30th of the year for which classification is sought or within 30 days of the date the Department provides its list of manufacturing corporations to the local boards of assessors, whichever is later. See 830 CMR 58.2.1(10).
Manufacturing classification appeals generally follow the procedures for the scheduling, conduct and disposition of Conferences and Hearings. However, if warranted, a site inspection may be conducted in lieu of, or in conjunction with, an office Hearing.
The Hearing will not affect the corporation's right to file a petition with the Appellate Tax Board. However, any corporation that confers with the Commissioner at the Office of Appeals and files a petition with the Appellate Tax Board must withdraw that petition if the Commissioner grants manufacturing corporation status. If a corporation confers with the Commissioner but does not file a petition with the Appellate Tax Board, the determination of the Office of Appeals is final.
628.7.2 Sales/Use Tax Direct Payment Authority Appeals
A purchaser that has been denied direct payment authority with respect to sales/use taxes may request a conference at the Office of Appeals to contest the denial. A request for a conference should be either received by DOR or postmarked within 30 days of either the date set forth in the notice of rejection, or if no notice was received, the date the purchaser's request was deemed denied as provided in 830 CMR 64H.3.1(4)(b).
Direct payment appeals generally follow the procedures for the scheduling, conduct and disposition of Conferences and Hearings. The decision of the Office of Appeals shall be the final determination of the taxpayer's administrative appeal. See 830 CMR 64H.3.1.
628.7.3 Massachusetts Brownfields Credit Application Appeals
If the Department’s Brownfields Unit notifies an applicant of its intent to deny, in whole or in part, the applicant’s application for the Massachusetts Brownfields Tax Credit (“MBTC”) as submitted on its Form BCA: Brownfields Credit Application, the applicant may request a Conference with the Office of Appeals (Conference Request). The Conference Request must be made in writing. It must be filed with and received by the Brownfields Unit within 30 days of the date set forth in the proposed denial or proposed partial denial. The Conference Request must include a statement setting forth the reason(s) why a specific amount of credit that is proposed to be denied should be approved. Any supporting documentation should be submitted with the Conference Request.
MBTC appeals generally follow the procedures for the scheduling, conduct and disposition of Conferences and Hearings at the Office of Appeals. The Office of Appeals generally will require that the applicant execute a Form B-37.
If an applicant disagrees, in whole or in part, with the Department’s final determination with respect to the applicant’s application for the MBTC, the applicant may have appeal remedies outside the Department. However, an appeal from the denial or partial denial of such an application by the Department is not specifically enumerated within the statutory jurisdiction granted to the Appellate Tax Board under the provisions of G.L. c. 58A, § 6. Accordingly, the Department recommends that an applicant consult with an attorney to determine the proper venue and procedure for any further appeal.
For additional information about the Massachusetts Brownfields Credit, including the application and appeal process, see G.L. c. 62, § 6(j), G.L. c. 63, § 38Q, and Administrative Procedure 636.
628.7.4 Miscellaneous Appeals
If a taxpayer’s case does not specifically involve a proposed tax assessment, a tax assessment, a request for abatement of penalties, a request for manufacturing classification, a request for direct payment authority, a proposed denial with respect to a Form BCA: Brownfields Credit Application, or a proposed change or denial with respect to another tax credit, then the taxpayer may not be entitled to a Conference or Hearing at the Office of Appeals. Consequently, the case may not be enumerated within the statutory jurisdiction granted to the Appellate Tax Board under the provisions of G.L. c. 58A, § 6. The Department recommends consultation with an attorney to determine appeal rights, venue, and statutory limitations in such cases.