Administrative ProceduresAdministrative ProceduresOKLAHOMA TAX OKLAHOMA TAX

COMMISSIONCOMMISSIONKathryn BassKathryn Bass

Chief Deputy General CounselChief Deputy General Counsel

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Oklahoma Tax CommissionOklahoma Tax Commission

ThreeCommissioners

Kemp, Johnson, Irby

Counsel to Commission

AdministrativeLaw Judges

Administrator Internal Audit Group

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OTC DivisionsOTC Divisions

ADMINISTRATOR

ACCOUNT MAINTENANCE DIVISION

AD VALOREM DIVISION

CENTRAL PROCESSING DIVISION

COMPLIANCE DIVISION

LEGAL (GENERAL COUNSEL’S OFFICE)

MOTOR VEHICLE DIVISION

TAX POLICY DIVISION

TAXPAYER ASSISTANCE DIVISION

omitted divisionsHR, IT, MS

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Legal DivisionLegal Division(General Counsel’s Office)(General Counsel’s Office)

Protests (administrative)Protests (administrative) Litigation (state and federal court)Litigation (state and federal court) BankruptcyBankruptcy Foreclosures/Quiet TitleForeclosures/Quiet Title CollectionsCollections Personnel CasesPersonnel Cases Opinions/Letter RulingsOpinions/Letter Rulings Partial Lien ReleasesPartial Lien Releases Innocent SpouseInnocent Spouse

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OKLAHOMA TAX LAWSOKLAHOMA TAX LAWS

Tax Codes: Title 68 of Tax Codes: Title 68 of Oklahoma StatutesOklahoma Statutes

Uniform Tax Uniform Tax

Procedure Code: 68 Procedure Code: 68 O.S. O.S. §§ 201 – 263 §§ 201 – 263 (hearing procedures in (hearing procedures in APA, 75 O.S. § 250 et APA, 75 O.S. § 250 et seq. do not apply to seq. do not apply to OTC)OTC)

Tax Commission rules Tax Commission rules are in Ch. 710 of the are in Ch. 710 of the Okla. Administrative Okla. Administrative Code (OAC)*Code (OAC)*

OTC Rules of Practice OTC Rules of Practice and Procedureand Procedure710:1-5-1 through 710:1-5-1 through 710:1-5-200710:1-5-200

*OTC website *OTC website www.tax.ok.govwww.tax.ok.gov

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ASSESSMENTSASSESSMENTS

§ 221(A)§ 221(A) authorizes OTC to audit and issue authorizes OTC to audit and issue proposed tax assessments in cases of: proposed tax assessments in cases of:

(1) failure to file report and (1) failure to file report and (2) where tax disclosed by report is (2) where tax disclosed by report is

less than tax disclosed by OTC examinationless than tax disclosed by OTC examination§ 224 authorizes jeopardy assessments under § 224 authorizes jeopardy assessments under

certain circumstances; they are issued by certain circumstances; they are issued by OTC order, rather than as a proposed OTC order, rather than as a proposed assessment; order is appealableassessment; order is appealable

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Oklahoma TaxesOklahoma Taxes

SalesSales Income Income WithholdingWithholding Mixed BeverageMixed Beverage FranchiseFranchise EstateEstate Gross Production Gross Production

CigaretteCigarette TobaccoTobacco Motor FuelMotor Fuel Vehicle ExciseVehicle Excise Aircraft ExciseAircraft Excise Documentary StampDocumentary Stamp Ad ValoremAd Valorem Other MiscellaneousOther Miscellaneous

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AdministrativeAdministrative Hearings (most common)Hearings (most common)

1.1. protest to estate tax assessment §815protest to estate tax assessment §8152.2. protest to denial of tax refund claim protest to denial of tax refund claim §227§227

(except income tax)(except income tax)33.. protest to denial of income tax refund claim protest to denial of income tax refund claim

§207§2074.4. protest to tax assessmentprotest to tax assessment §221 §221

(except estate tax)(except estate tax)55.. hearing on interception of income tax hearing on interception of income tax

refund to satisfy outstanding tax liabilityrefund to satisfy outstanding tax liability

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Administrative Hearings Administrative Hearings (miscellaneous)(miscellaneous)

1.1. protest to denial of manufacturer’s protest to denial of manufacturer’s exemption certificate exemption certificate § 207§ 207

2.2. protest to denial of ad valorem exemptionprotest to denial of ad valorem exemption

3.3. title revocation hearingtitle revocation hearing

4.4. boat dealer license hearingboat dealer license hearing

5.5. cancellation of tax permit or license § 212cancellation of tax permit or license § 212

1010

Protest Steps I (prior to pre-hearing)Protest Steps I (prior to pre-hearing)

Taxpayer is audited and issued an assessmentTaxpayer is audited and issued an assessment Taxpayer files protest to assessmentTaxpayer files protest to assessment Auditors review and make any adjustments that Auditors review and make any adjustments that

may be necessarymay be necessary ALJ dockets case, sends taxpayer copy of ALJ dockets case, sends taxpayer copy of

procedural rulesprocedural rules OTC attorney is assigned to represent DivisionOTC attorney is assigned to represent Division

1111

Protest Steps II (before ALJ)Protest Steps II (before ALJ)

Pre-hearing conference; scheduling order issuedPre-hearing conference; scheduling order issued DiscoveryDiscovery HearingHearing ALJ issues Findings, Conclusions, and ALJ issues Findings, Conclusions, and

RecommendationsRecommendations Petition for Rehearing or Reconsideration before Petition for Rehearing or Reconsideration before

ALJALJ

1212

Protest Steps III (before OTC)Protest Steps III (before OTC)

Petition for En Banc before OTC Petition for En Banc before OTC CommissionersCommissioners

Commissioners adopt FindingsCommissioners adopt FindingsRight to appeal OTC Order to Oklahoma Right to appeal OTC Order to Oklahoma

Supreme CourtSupreme Court

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Protest letter componentsProtest letter components

amount of deficiencyamount of deficiencyeach error alleged to have been committed each error alleged to have been committed

by OTCby OTCargument and legal authorityargument and legal authoritystatement of relief soughtstatement of relief soughtverification that statements are trueverification that statements are truesigned by taxpayer or taxpayer’s agentsigned by taxpayer or taxpayer’s agent

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Time limits for protestsTime limits for protests

within 60 days after mailing of the proposed within 60 days after mailing of the proposed assessmentassessment

OTC may extend the time for filing not to OTC may extend the time for filing not to exceed an additional 90 daysexceed an additional 90 days

1515

Time limits for claims for refund Time limits for claims for refund (68 O.S. (68 O.S. §§227)227)

claims must be filed within 3 years from date of claims must be filed within 3 years from date of paymentpayment

if claim is denied, taxpayer may file a demand for if claim is denied, taxpayer may file a demand for hearing within 30 days of the mailing date of the hearing within 30 days of the mailing date of the notice of denialnotice of denial

OTC must set date of hearing which is not later OTC must set date of hearing which is not later than 60 days from the date the demand for hearing than 60 days from the date the demand for hearing was mailedwas mailed

§227 does not apply to income tax or to estate tax §227 does not apply to income tax or to estate tax (income tax claim for refund hearings are held (income tax claim for refund hearings are held under § 207)under § 207)

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§ 226 Procedures§ 226 Procedures

In addition to right to protest under In addition to right to protest under § 221, within § 221, within 30 days of assessment, taxpayer may pay tax and 30 days of assessment, taxpayer may pay tax and give notice of intent to file suit for recovery of such give notice of intent to file suit for recovery of such tax (suit must be filed in district court within 1 year)tax (suit must be filed in district court within 1 year)

only available in cases where taxes are claimed to only available in cases where taxes are claimed to be an unlawful burden on interstate commerce of be an unlawful burden on interstate commerce of violative of any Congressional Act or provisions of violative of any Congressional Act or provisions of the Federal Constitutionthe Federal Constitution

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RepresentationRepresentation

Taxpayer may represent himself or herself or Taxpayer may represent himself or herself or may be represented by:may be represented by:an attorneyan attorneyan accountantan accountantan enrolled agentan enrolled agenta representative who has been approved by the a representative who has been approved by the

Commission to represent the taxpayerCommission to represent the taxpayer

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Proceedings confidentialProceedings confidential

Taxpayer records are confidential under Taxpayer records are confidential under § § 205 (note exceptions, including amounts 205 (note exceptions, including amounts due by any taxpayer where a tax warrant due by any taxpayer where a tax warrant has been filed; annual list containing names has been filed; annual list containing names and address of all income tax payers; and address of all income tax payers; information as to issuance or revocation of information as to issuance or revocation of any tax permit or license)any tax permit or license)

Taxpayer may waive confidentialityTaxpayer may waive confidentiality

1919

Pre-hearing ConferencePre-hearing Conference

710:1-5-28. General provisions710:1-5-28. General provisionsattempt to resolve case attempt to resolve case discuss factsdiscuss factsidentify legal issuesidentify legal issuespresent discovery requestspresent discovery requestspropose procedural schedulepropose procedural schedule

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After Pre-hearing conference After Pre-hearing conference

ALJ issues pre-hearing order with scheduling datesALJ issues pre-hearing order with scheduling dates If taxpayer fails to appear at pre-hearing, but has If taxpayer fails to appear at pre-hearing, but has

requested a hearing in writing, ALJ schedules a hearingrequested a hearing in writing, ALJ schedules a hearing If taxpayer fails to appear, but has not requested a If taxpayer fails to appear, but has not requested a

hearing, Division will file a Verified Response to Protest; hearing, Division will file a Verified Response to Protest; a.a. if taxpayer responds to the Verified Response and if taxpayer responds to the Verified Response and

requests a hearing, ALJ sets for hearingrequests a hearing, ALJ sets for hearingb.b. if taxpayer responds and does not request a if taxpayer responds and does not request a

hearing, ALJ issues Findings based on written hearing, ALJ issues Findings based on written submissionssubmissions

c.c. if taxpayer does not respond, ALJ issues Findings if taxpayer does not respond, ALJ issues Findings based on protest and Verified Responsebased on protest and Verified Response

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PRE-HEARING PROCEDURESPRE-HEARING PROCEDURES

ALJ issues notice of date and time of ALJ issues notice of date and time of hearing and due date of briefs or positions hearing and due date of briefs or positions letters in support of positionletters in support of position

Discovery (interrogatories, requests for Discovery (interrogatories, requests for production of documents, depositions)production of documents, depositions)

Subpoenas issued by Secretary of Tax Subpoenas issued by Secretary of Tax CommissionCommission

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Rules of EvidenceRules of Evidence710:1-5-34710:1-5-34

OTC follows rules of evidence as applied in non-OTC follows rules of evidence as applied in non-jury, civil cases in district court, “except when it is jury, civil cases in district court, “except when it is necessary to ascertain facts not reasonably necessary to ascertain facts not reasonably susceptible of proof under those rules.” susceptible of proof under those rules.”

““In that event, evidence not admissible under the In that event, evidence not admissible under the Rules of Evidence may be admitted, if it is of a Rules of Evidence may be admitted, if it is of a type commonly relied on by reasonably prudent type commonly relied on by reasonably prudent persons in the conduct of their affairs.”persons in the conduct of their affairs.”

2323

Certification of issuesCertification of issues

A party who objects to a ruling of the A party who objects to a ruling of the Administrative Law Judge may request and Administrative Law Judge may request and obtain certification of the issue to the obtain certification of the issue to the Commission for a decision prior to ALJ’s Commission for a decision prior to ALJ’s issuance of Findings, Conclusions, and issuance of Findings, Conclusions, and RecommendationsRecommendations

Certification must contain signatures of Certification must contain signatures of taxpayer’s representative, tax division taxpayer’s representative, tax division attorney, and ALJ attorney, and ALJ

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Administrative Law JudgesAdministrative Law Judges

Two ALJs; Must be licensed attorneyTwo ALJs; Must be licensed attorney

conduct hearingsconduct hearings examine witnessesexamine witnesses rule on motionsrule on motions rule on admissibility of evidencerule on admissibility of evidence continue or recess any hearingcontinue or recess any hearing control the recordcontrol the record make recommendations to Tax Commissionmake recommendations to Tax Commission

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Conduct of hearingConduct of hearing

preliminary motions, if anypreliminary motions, if any opening statementsopening statements call and examine witnesses (ALJ entitled to question any call and examine witnesses (ALJ entitled to question any

party or any witness)party or any witness) offer documentary evidenceoffer documentary evidence cross examine opposing witnesses (in discretion of ALJ, cross examine opposing witnesses (in discretion of ALJ,

cross may cover matters relevant to issue even though not cross may cover matters relevant to issue even though not covered in direct examination)covered in direct examination)

make closing arguments (taxpayer entitled to open and make closing arguments (taxpayer entitled to open and conclude)conclude)

Parties may submit Proposed Findings, Conclusions, and Parties may submit Proposed Findings, Conclusions, and RecommendationsRecommendations

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Burden of ProofBurden of Proof

Taxpayer has burden of proof Taxpayer has burden of proof (preponderance of evidence) to show in (preponderance of evidence) to show in what respect the action of the OTC is what respect the action of the OTC is incorrectincorrect

exception – where OTC brings action to exception – where OTC brings action to revoke a permitrevoke a permit

2727

Submission of Case On BriefsSubmission of Case On Briefs

if taxpayer does not request hearing or if taxpayer does not request hearing or parties agree hearing is not necessary, ALJ parties agree hearing is not necessary, ALJ may base Findings on briefs submitted by may base Findings on briefs submitted by parties (and stipulations)parties (and stipulations)

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DismissalDismissal

Voluntary dismissal (taxpayer may dismiss Voluntary dismissal (taxpayer may dismiss protest or tax division may withdraw protest or tax division may withdraw assessment any time prior to the entry of a assessment any time prior to the entry of a final order by OTC)final order by OTC)

Dismissal for mootness (case presents no Dismissal for mootness (case presents no actual controversy or issues have ceased to actual controversy or issues have ceased to exist)exist)

Dismissal for lack of jurisdiction (not filed Dismissal for lack of jurisdiction (not filed within the time provided by statute)within the time provided by statute)

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Findings, Conclusions, and Findings, Conclusions, and RecommendationsRecommendations

includes statement of facts, issues and includes statement of facts, issues and contentions, conclusions based on findings contentions, conclusions based on findings of fact and applicable law, and of fact and applicable law, and recommendation to the Tax Commissionrecommendation to the Tax Commission

Tax Commission issues final orderTax Commission issues final order

3030

Options after ALJ Findings Options after ALJ Findings issuedissued

motion for rehearing before ALJmotion for rehearing before ALJ applications for en banc hearing before applications for en banc hearing before

Commissioners; application must specify each Commissioners; application must specify each ground upon which the party alleges the Findings ground upon which the party alleges the Findings to be erroneousto be erroneous

if granted, case heard by Commissioners; if granted, case heard by Commissioners; Commissioners set date and time of hearing, Commissioners set date and time of hearing, briefs submitted at least 14 days prior to hearing, briefs submitted at least 14 days prior to hearing, Commission sets time limits for oral argumentsCommission sets time limits for oral arguments

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OTC issues orderOTC issues order

OTC may vacate, modify, or affirm, in part or OTC may vacate, modify, or affirm, in part or whole, the recommendations of the ALJwhole, the recommendations of the ALJ

OTC order appealable to Oklahoma OTC order appealable to Oklahoma Supreme CourtSupreme Court

3232

Actions requiring approval of Actions requiring approval of CommissionersCommissioners**

Findings and Recommendations of ALJFindings and Recommendations of ALJ waivers of penalty and interest waivers of penalty and interest §220**§220** requests for abatement under requests for abatement under §§221(e)221(e) requests for abatement under requests for abatement under §219.1§219.1 requests for settlement under §219requests for settlement under §219 innocent spouse relief under §2361innocent spouse relief under §2361*meet every Tues. & Thurs.*meet every Tues. & Thurs.**over $10,000 requires D.Ct. approval **over $10,000 requires D.Ct. approval

3333

221(e) abatement221(e) abatement

if taxpayer fails to file protest within 60 day period, if taxpayer fails to file protest within 60 day period, assessment becomes finalassessment becomes final

however, within one year of the date the however, within one year of the date the assessment becomes final, taxpayer may request assessment becomes final, taxpayer may request the OTC to adjust or abatement the assessmentthe OTC to adjust or abatement the assessment

taxpayer must demonstrate, by a preponderance taxpayer must demonstrate, by a preponderance of the evidence that the assessment or some of the evidence that the assessment or some portion thereof is clearly erroneousportion thereof is clearly erroneous

order denying a request for abatement is not order denying a request for abatement is not appealable appealable

3434

221(e) procedures221(e) proceduresInitial ReviewInitial Review

Division which issued proposed assessment Division which issued proposed assessment determines whether the request was timely determines whether the request was timely filed and whether the assessment was filed and whether the assessment was clearly erroneousclearly erroneous

If Division agrees assessment erroneous, If Division agrees assessment erroneous, Division director issues abatement letterDivision director issues abatement letter

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221(e) Review of Initial 221(e) Review of Initial DeterminationDetermination

If Division does not agree to abatement the assessment, If Division does not agree to abatement the assessment, Division notifies taxpayer of decisionDivision notifies taxpayer of decision

Taxpayer may make a written request for a review of the Taxpayer may make a written request for a review of the Division’s determination to the OTC General Counsel’s Division’s determination to the OTC General Counsel’s OfficeOffice

Assigned attorney reviews the evidence in support of Assigned attorney reviews the evidence in support of taxpayer’s request and prepares a fact sheet for taxpayer’s request and prepares a fact sheet for presentation to the Commission at a regularly scheduled presentation to the Commission at a regularly scheduled meeting (recommending either approval or denial of meeting (recommending either approval or denial of request)request)

Taxpayer may appear and present arguments at meeting, Taxpayer may appear and present arguments at meeting, but no other hearing is providedbut no other hearing is provided

3636

§219.1 Abatement/Settlement§219.1 Abatement/Settlement

Taxes may be abated if Commission finds by clear Taxes may be abated if Commission finds by clear and convincing evidence:and convincing evidence:

1.1. collection would result in taxpayer filing collection would result in taxpayer filing bankruptcybankruptcy

2.2. taxpayer is insolvent (beyond control of taxpayer is insolvent (beyond control of taxpayer)taxpayer)

3.3. tax liability is attributable to actions of a person tax liability is attributable to actions of a person other than taxpayer (inequitable to hold liable)other than taxpayer (inequitable to hold liable)

4.4. nonpayment of trust fund taxes, taxes were not nonpayment of trust fund taxes, taxes were not collected from customer and taxpayer had good collected from customer and taxpayer had good faith belief collection was not requiredfaith belief collection was not required

3737

§219.1 settlement factors*§219.1 settlement factors*

whether taxpayer made good faith effort to whether taxpayer made good faith effort to comply with tax lawscomply with tax laws

whether taxpayer benefited from whether taxpayer benefited from nonpayment of the taxnonpayment of the tax

involvement of taxpayer in economic involvement of taxpayer in economic activities from which tax liability originatedactivities from which tax liability originated

*Application for Settlement of Tax Liability is *Application for Settlement of Tax Liability is on OTC website www.tax.ok.govon OTC website www.tax.ok.gov

3838

§219.1 abatement agreements§219.1 abatement agreements

must be approved by unanimous vote of must be approved by unanimous vote of OTCOTC

decision to deny abatement not appealabledecision to deny abatement not appealableif taxes abated are greater than $10,000, if taxes abated are greater than $10,000,

agreement must be approved by judge of agreement must be approved by judge of the district court of Oklahoma Countythe district court of Oklahoma County

no appointed or elected official is eligible for no appointed or elected official is eligible for this reliefthis relief

3939

§219 settlements (compromises §219 settlements (compromises where amounts in dispute)where amounts in dispute)

Where amount of tax due is in controversy Where amount of tax due is in controversy and liability has not been finally established, and liability has not been finally established, OTC may enter agreement to compound, OTC may enter agreement to compound, settle, or compromise any controversy settle, or compromise any controversy relating to amount of taxes duerelating to amount of taxes due

agreements to settle controversies do not agreements to settle controversies do not require district court approvalrequire district court approval

4040

Innocent Spouse ReliefInnocent Spouse Relief68 O.S. 68 O.S. § § 23612361

if joint return has been filed by married if joint return has been filed by married taxpayerstaxpayers

liability is attributable to income of non-liability is attributable to income of non-requesting spouse and would be inequitable requesting spouse and would be inequitable to hold the requesting spouse liable to hold the requesting spouse liable

IRS determination binding on OTCIRS determination binding on OTC

4141

Innocent spouse relief – IRS Innocent spouse relief – IRS determination (determination (§ 2361)§ 2361)

The determination made by the Tax The determination made by the Tax Commission shall be the same as the Commission shall be the same as the determination made by the IRS provided tax determination made by the IRS provided tax years and circumstances are the sameyears and circumstances are the same

If IRS has not made a determination, the If IRS has not made a determination, the OTC shall apply the factors that would have OTC shall apply the factors that would have been applied by IRSbeen applied by IRS

4242

§207 Hearings§207 Hearings

generalgeneral power of Commission to conduct power of Commission to conduct hearings, issues subpoenas for witnesses and hearings, issues subpoenas for witnesses and production of recordsproduction of records

person desiring hearing files an application person desiring hearing files an application setting forth: tax, amount, error, argument and setting forth: tax, amount, error, argument and legal authority, relief, witnesses, verificationlegal authority, relief, witnesses, verification

(this section applies to claims for refund of income (this section applies to claims for refund of income tax, tax, Sowders v. OTCSowders v. OTC, 527 P.2d 852; also applies , 527 P.2d 852; also applies to hearings on protest to denial of manufacturer’s to hearings on protest to denial of manufacturer’s exemption certificate)exemption certificate)

4343

Tax liensTax liens

filed in office of the county clerk; evidence of filed in office of the county clerk; evidence of state’s lien on any interest in any real or state’s lien on any interest in any real or personal property of the taxpayerpersonal property of the taxpayer

prior to other claims or encumbrances on prior to other claims or encumbrances on property except those of a mortgagee property except those of a mortgagee whose rights have attached prior to date of whose rights have attached prior to date of filing of tax lienfiling of tax lien

Partial release: OAC 710:1-3-80Partial release: OAC 710:1-3-80