Act 123 of 2024, which will become effective January 27, includes several significant changes designed to make the appeals process easier for the taxpayer to present his or her case and settle the dispute with the Pennsylvania Department of Revenue more efficiently.
As anyone who has had to work through the process of disputing a tax assessment in Pennsylvania can attest, filing an appeal in the state can feel like traversing a maze with many pitfalls. Here are four key changes for you to know about.
1. Deadline to File an Appeal
The timeline to file an appeal of an assessment with the Board of Appeals for Personal Income Tax, Employer Withholding Tax and Pass-Through entities has been extended to 90 days from the date of the assessment (note all other taxes remain at the 60-day timeline). In addition, the Act allows for a 30-day extension of the deadline for good cause, which also applies to appeals of the same tax assessments from the Board of Appeals to the second appeal level at the Board of Finance and Revenue.
This change should allow taxpayers enough time to discuss the assessment with their tax provider and properly determine how best to address any disagreement with the Department of Revenue. Plus, allowing both the Board of Appeal and the Board of Finance and Revenue to grant an additional 30 days for good cause allows taxpayers who may have otherwise been excluded from the appeals process a chance to present their case.
2. Mailing Options
Act 134 allows the Board of Appeals to use the postmarked date as the filed date for mailings sent through means other than the U.S. Postal Service, including mailing services that are defined by the U.S. Treasury Department as acceptable services, like FedEx and UPS.
This change provides taxpayers another option to file an appeal to the Board of Appeals within the prescribed timeline.
3. Board of Finance and Revenue Mediated Settlement
The Act also adds a new option for taxpayers to negotiate a settlement agreement to close the dispute at the Board of Finance and Revenue level. Any of the parties to the appeal, including the Board of Finance and Revenue itself, can request a settlement conference with a settlement officer, whose role will be to conduct an informal conference with the taxpayer and the Department to try and facilitate an agreement. If the settlement is agreed to, the appeal will not be required to proceed to the formal Board of Finance and Revenue hearing and the appeal will be closed.
This new process provides taxpayers with the ability to negotiate an agreed-upon amount to close tax disputes related to both assessment and refunds. The addition of the settlement officer to the negotiation provides an independent third party to assist with reaching an agreement with the Department of Revenue, which can be advantageous for cases where the taxpayer and the Department may have been having discussions for a protracted period, as can occur with field audit review and cases with a large amount of information under review.
This added option gives taxpayers the ability to reach a resolution before the need to file an appeal at the Pennsylvania Commonwealth Court level.
As with any settlement agreement, the taxpayer will be asked to forego any further appeal of the issue, so he or she should consult with a tax advisor and/or counsel before final agreement.
4. Department of Revenue Closing Agreements
The Department of Revenue is now authorized to enter into a closing agreement with a taxpayer related to a specific tax matter. The agreement will be in writing and will be final and conclusive.
As of the date of this article, the Department of Revenue has not released details as to what will constitute a closing agreement or when and how a taxpayer can negotiate the agreement. Since the matter will be final and conclusive, we recommend consulting a tax advisor and/or counsel before entering into the agreement.
Our Thoughts On
While these changes will not completely eliminate the need to proceed with administrative appeal hearings and court filings, they’re a positive step to working with the Department of Revenue, Board of Appeals and Board of Finance and Revenue in a more timely and potentially cost-effective manner.
Schneider Downs State and Local Tax group stands ready to assist you with appeal of Pennsylvania and other states tax notices and assessments.
About Schneider Downs Tax Services
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