For the past several legislative sessions, the Alabama Legislature has considered a bill to establish an independent tax tribunal outside the Alabama Department of Revenue (“ADOR”). Rep. Paul DeMarco (R-Homewood) introduced HB 264 (the Alabama Taxpayers’ Bill of Rights II, or “TBOR II”), and Sen. Bryan Taylor (R-Prattville) introduced the companion Senate bill, during the 2013 regular session. Among other things, TBOR II would have established the Alabama Tax Appeals Commission (“ATAC”)—a new executive branch agency independent from the ADOR—by transferring the ADOR’s Administrative Law Division (“ALD”), including its personnel and budget, to the new ATAC. On August 19, a Birmingham-based think tank, the Alabama Policy Institute (“API”), issued a research paper endorsing the establishment of an independent tax tribunal in Alabama but expressed two concerns about TBOR II. A copy of the API’s report is available at http://www.alabamapolicy.org/wp-content/uploads/2013-Independent-Tax-Tribunals-for-Alabama1.pdf.
Arguably, one of the most important concerns taxpayers have with the current ALD is the perceived ADOR bias. “Alabamians must have confidence that their tax appeals are being heard by a neutral arbiter,” said Cameron Smith, vice president and general counsel of the API. “Under the current system, an Alabamian appealing a tax assessment faces a judge whose pay comes from the government department that assessed the tax in the first place. Regardless of the even-handedness of the [current] judge, this type of perceived conflict is not tolerated elsewhere in our legal system, and we should end its practice in Alabama’s tax appeals.”
The potential for increased state spending associated with moving the ALD to an independent executive agency is one concern for the API, which argues that legislators must assure Alabama taxpayers that the move will not result in increased legislative appropriations. The fiscal note attached to TBOR II points out that spending could increase beyond current levels because of the option to add more than one judge to ATAC. However, it also indicates that the extra cost could be offset by money collected from expedited revenue ruling fees or other sources.
The API’s concerns did not take into account one of the major benefits of ATAC—that is, allowing taxpayers for the first time to appeal local assessments issued by the multitude of self-administered cities and counties or their private auditing firms. The sponsors and authors of TBOR II have encouraged the cities and counties not to opt out of ATAC once it is established. If a majority of those entities allow their assessments to be appealed to ATAC, a second “circuit riding” judge may eventually become necessary because of the volume of appeals and to make it more convenient for both the local government and the appealing taxpayer.
The API also seemed concerned about the method of selecting ATAC judges. Under TBOR II, the Governor would appoint the ATAC judge from a list of five qualified candidates selected by a nonpartisan nominating committee. Each candidate would have to possess state and local tax expertise. However, Senate confirmation of the Governor’s judicial appointee to ATAC is not required, at least not under the 2013 version of TBOR II. The API believes that for ATAC to achieve its stated goal of being an independent tax tribunal, “individual taxpayers and businesses of all sizes must be assured that a judge appointed to the ATAC will be a neutral arbiter without allegiance or obligation to special interest or political pressures.”
The importance and impact that ATAC would have on equality between taxpayers and the ADOR cannot be understated. Katherine Robertson, senior policy counsel for the API and principal author of the report, opined:
As a think tank dedicated to principles of limited government, the Alabama Policy Institute supports creative state-based policies that aim to reduce the wide array of burdens that taxpayers face. Giving the taxpayer an opportunity to appeal his tax assessment is a basic element of due process, and this right is strengthened through the creation of an independent tax tribunal. Establishing an independent tax tribunal in Alabama would allow taxpayers to appear before a judge who is not only independent from the state agency collecting the taxes but . . . also uniquely qualified to rule on these matters.
The API report concluded by recommending that Alabama legislators also consider an independent tax appeals process for ad valorem property taxes. Like income and sales and use taxpayers, property taxpayers “need the assurance of a fair and balanced appeals process.” While property taxes are imposed at the local level, assessments must be appealed to the locality that levied the property tax. An independent tax tribunal like ATAC “would also help ensure equality and proportionality between business and residential property taxpayers.”