As of July 1, 2010, the Mississippi State Tax Commission, the longstanding tax collection agency and administrator of the State’s revenue laws, was totally reorganized and restructured by legislation designed to provide more independence between the tax collection administration and enforcement processes of the state government and the tax assessment appeals process.
Prior to this landmark change, the Mississippi State Tax Commission (the “Commission”) had exclusive jurisdiction not only over administrative, collection, enforcement and processing of returns for state taxes, but also over all levels of administrative review of any tax disputes between a taxpayer and the Commission itself. The now-repealed statutes provided that the Commission consisted of a chairman and two associate commissioners, all of whom were appointed by the Governor. As a result, the appointed chairman held two titles – Chairman of the Commission and Commissioner of Revenue. The individual appointed as Chairman was further described in the statute as the executive officer of the Commission, having the power and authority to perform all duties prescribed by law to be performed by the chairman of the commission, the commissioner of revenue, or the Commission. He was designated by the former law, along with the two associate commissioners, to serve on a three person appeal board for administrative appeals by taxpayers of assessments issued by the Commission. As Commissioner of Revenue, his powers and duties included directing the Commission’s function of administering the state’s tax laws, processing tax returns, collecting taxes determined to be due on those returns, and enforcing the collection of those taxes.
In practice, questions of objectivity and independence in the administrative appeals process arose since the audit function of the Commission was also under the supervision of the Chairman. Additionally, the design of this system for resolving tax disputes with the Commission was somewhat confusing for the taxpayer and continually subjected the appeals process to claims of lack of independence and objectivity. The audit function, which produced the assessment in dispute, was supervised and directed by the same individual (the Chairman) who sat on the Appeal Board (the Commissioner) hearing the disputed decision. Although in practice the Appeal Board could and would overturn the decisions of the audit function and the Board of Review from time to time, questions of independence in the administrative appeals process continued to be raised by aggrieved taxpayers and tax practitioners.
In an attempt to address these issues and provide more independence, clarity and objectivity to the state tax administrative appeals process in Mississippi, the Mississippi Legislature, in its 2009 legislative session, passed Senate Bill 2712, and adopted 2009 Miss. Law Chapter 402, which became effective July 1, 2010. The new statutory scheme, codified at Mississippi Code Ann. § 27-3-1, et seq. and § 27- 4-1, et seq. (together, the “Act”), eliminated the Commission and reorganized and restructured the duties formerly delegated to it and its Chairman and Commissioners. The Act created the Mississippi Department of Revenue, which is supervised by the Commissioner of Revenue as its executive officer, parallel to the structure of most other state departments of revenue or taxation around the country. Ed Morgan, formerly the Chairman of the Commission and Commissioner of Revenue, now serves as the Commissioner of Revenue of the new Mississippi Department of Revenue.
As described in the Act, the Mississippi Department of Revenue has responsibility for most of the administrative, return processing, collection and enforcement functions formerly assigned to the Commission. The Commissioner of Revenue is to exercise all of the powers, duties and functions previously vested in the Chairman/Commissioner and the Commission, except for the duties and powers devolved upon the new Board of Tax Appeals in Mississippi Code Ann. § 27-4-3. All documents, records, property, etc. and all actions taken by the Chairman and/or the Commission (other than those transferred to the Board of Tax Appeals) became those of the Department of Revenue, and the creation of the Department is to be “treated as only a change of name.” Any reference in any rules or regulations of the Commission to “Chairman” now automatically is deemed to be a reference to the Commissioner of Revenue.
The Act also created the Board of Tax Appeals, an entity separate and apart from the Department of Revenue, which “shall not in any way be subject to the supervision or control of the Department of Revenue….” The Board of Tax Appeals is established as a three-member appeal panel and is to conduct the final level of administrative appeal review for any tax disputes with the Department of Revenue. Janet Mann, who previously served as Deputy Director of Audit and Recovery for the Mississippi Division of Medicaid, was appointed by the Governor as the Chair of the Board of Tax Appeals and, along with Associate Members James Wilkinson, a former county tax assessor and collector, and Marcus Martin, a practicing certified public accountant, now serve as the three members of the Board of Tax Appeals. Wilkinson and Martin were the two acting Associate Commissioners of the Commission prior to July 1.
In addition to being the final administrative level of review for assessments and decisions of the Review Board, the Board of Tax Appeals has jurisdiction over administrative appeals involving Department decisions under the alcoholic beverage control laws, certain homestead exemption matters, statewide equalization of property tax rolls of a county, and objections to ad valorem tax assessments issued by the Department of Revenue. The Act also created the position of Executive Director of the Board, with administrative responsibilities for operation of the Board’s functions. Sam Polk, formerly the Secretary of the Commission, was designated as Executive Director of the Board.
There are several other important changes made by the Act. For example, the Department of Revenue was granted the right to appeal to chancery court an adverse decision of the Board of Tax Appeals. Prior to that change, only a taxpayer had the right to appeal an adverse decision on an assessment to the former Appeal Board. Venue for appeals of decisions of the Board of Tax Appeals is similar to the prior venue rules for taxpayer appeals from decisions of the Appeal Board under prior law with the exception that venue for an appeal by the Department does not appear to be appropriate in a county where a taxpayer resides unless the taxpayer also has a place of business in that county or the appeal is being filed in the First Judicial District of Hinds County.
If both the taxpayer and the Department of Revenue appeal a decision issued by the Board of Tax Appeals, the two appeals will be consolidated and the chancery court where the taxpayer filed its appeal will have jurisdiction over the consolidated cases. As was previously the case, the appeal at the chancery court level is a trial de novo and the court is still required to give deference to the Department’s decisions and interpretations in its review. Fortunately, however, the Act reduces the appeal bond requirement. Now, the taxpayer must post an appeal bond in an amount equal to half of the disputed tax assessed, instead of double the disputed amount as under previous law. In addition, this bond requirement can now be reduced or waived by the chancery court if, upon the taxpayer’s motion and following a hearing, the court finds that the interests of the State in collecting the tax ultimately determined to be due are otherwise protected. However, since this reduction or waiver can only be done after motion, notice and hearing, it seems that the Department may argue that the bond must still be required as part of the filing of the appeal petition, but that after the bond and appeal petition are filed, the taxpayer could then make a motion to the court seeking a reduced bond or no bond.
The Act also now provides the taxpayer with 60 days in which to appeal decisions of the Department in each step in the administrative review process as opposed to the prior 30 day requirement and further provides 60 days to appeal an order of the Board of Tax Appeals to the chancery court. This change is consistent with one of the fundamental recommendations of the well-respected Council On State Taxation (COST) published for consideration in order to create a fair appeals process for state taxpayers. See COST Policy Statements under “About COST” at www.cost.org/public for COST’s “Fair, Efficient and Customer-Focused Tax Administration” policy position. As a cautionary note, the change to increase the time in which to appeal to 60 days does not apply to certain ad valorem tax appeals, appeals of alcohol beverage control law permit decisions or appeals of denials or suspensions by the Department of certain other permits and licenses, although the appeals of these matters will be handled by the Board of Tax Appeals under the new statutory scheme.
We are advised that both the Department of Revenue and the Board of Tax Appeals are drafting proposed regulations interpreting certain provisions of the Act and addressing additional issues, as authorized by the Act and the Mississippi Administrative Procedures Law. In the meantime, a helpful new website has been created for the Board of Tax Appeals at www.bta.ms.gov. Several of the pages are under construction as of the writing of this article, but will ultimately have the necessary appeal forms and instructions for filing an appeal along with rules and contact information. The website for the Mississippi State Tax Commission has been converted into the website for the Mississippi Department of Revenue, found at www.dor.ms.gov, and contains all the information previously found on the Commission’s website. We and other tax practitioners have been encouraged by the new system and with the spirit of cooperation being exhibited by MDOR and MBTA officials.