In March 2014, the Alabama Legislature passed the landmark Alabama Taxpayer Fairness Act (Act No. 2014-146), a substitute to the Alabama Taxpayers’ Bill of Rights II legislation, which had been introduced in various forms over the past decade. Although the lengthy legislation provides a number of procedural protections for Alabama taxpayers, its most significant feature is the creation of an independent tax court known as the Alabama Tax Tribunal (ATT), whose purpose is to “increase public confidence in the fairness of the state tax system.”
Beginning October 1, taxpayers no longer have the option of appealing final assessments issued by the Alabama Department of Revenue (ADOR) to its Administrative Law Division; it no longer exists. Instead, taxpayers now have the option of appealing final assessments issued not only by the ADOR but by local taxing jurisdictions (or their contract auditing firms) to the ATT, or they can continue to appeal directly to circuit court. Although local taxing authorities can opt out of the ATT’s jurisdiction, the vast majority of the self-administered cities and counties, including those represented by Revenue Discovery Systems (RDS), intend to remain under the ATT’s jurisdiction. Thankfully, as of October 1, only the Cities of Birmingham, Gulf Shores, Helena, Hoover, Leeds, Mountain Brook, Pelham, Ragland, and Tuscaloosa and the Counties of Bibb, Madison, Morgan, Shelby, and St. Clair have opted out.
The ATT has jurisdiction over:
- Taxpayers’ appeals from final assessments of most tax types (except ad valorem property taxes and municipal business license, liquor, and occupational taxes)
- Challenges to the ADOR's proposed adjustments to a taxpayer’s net operating loss carryovers
- Denied refund claims
- Any preliminary assessment entered by the ADOR or a local jurisdiction that is not made final or withdrawn within five years from the date of entry
All cases pending before the ALD on October 1 were automaticallytransferred to and will be handled by the ATT. This summer, Governor Bentley appointed the ALD’s longstanding Chief Administrative Law Judge, Bill Thompson, as the first Chief Judge of the ATT, thus assuring a smooth transition from the ALD.
Judge Thompson authored a set of proposed regulations, published July 31, that will govern appeals filed with the ATT. In drafting the regulations, the Judge requested input from a variety of interested parties, including representatives from the Alabama State Bar Tax Section, the ADOR’s Legal Division, the Alabama Society of CPAs, and self-administered local jurisdictions and their contract auditing firms. Members of our firm were among the group of interested parties from whom Judge Thompson sought informal comments while drafting the regulations. In our opinion, the regulations are thorough, fill in several gaps in the act, and address a number of key provisions, including filing appeals with ATT, the conduct of hearings before the ATT, protective orders, and appeals from preliminary and final orders issued by the ATT. The regulations make it clear that taxpayers will receive fair and impartial hearings before the ATT in a relatively informal manner, just as they do now before the ALD. The regulations, with some amendments dealing with the transition from ALD to ATT, will become final on October 15, 2014.