Governor Greg Abbott signed Senate Bill 903 and House Bill 2080, both of which expand a taxpayer’s right of access to Texas courts. SB 903 allows refund claimants to go directly to district court without an administrative hearing, whereas HB 2080 allows taxpayers to file suit without first paying the disputed amounts under protest.
SB 903 – Bypassing the State Office of Administrative Hearings
Effective September 1, 2021, a taxpayer whose claim for refund has been denied by the Comptroller may choose to 1) request a refund hearing and have the claim heard by the State Office of Administrative Hearings (SOAH) before going to district court, or 2) file a notice of bypass and skip SOAH entirely. The process for going to court after a hearing is unchanged. However, the bill provides an entirely new process to bypass SOAH. The new law applies to a claim for refund that is pending or filed on or after September 1, 2021, even if the subject taxes were due before that date.
Notice of Bypass. On or before the 60th day after the date the Comptroller issues a written denial of a refund claim, the taxpayer may file a written notice of bypass. The notice must set forth the material facts and specific legal basis for the claim and state the amount of refund sought. The taxpayer may amend the notice of intent with the Comptroller’s written consent. Only material facts and legal bases raised in the notice of intent may be raised in a subsequent refund suit.
Bypass Conference. The Comptroller may require the taxpayer to participate in a conference to go over the facts and legal issues, as well as documentation. The Comptroller has 30 days to notify the taxpayer of the conference requirement, and the date of the conference cannot be later than 90 days after the filing date of the notice of intent to bypass SOAH.
Waiver of Hearing. The new law includes instructions regarding how and when a taxpayer may withdraw a notice of intent and proceed to hearing. However, generally speaking, filing a notice of intent constitutes a waiver of the taxpayer’s right to a hearing.
When Suit Must Be Filed. If the taxpayer participates in a bypass conference, the refund suit must be filed on or before the 60th day after the conference concludes, unless the Comptroller agrees to a later date. If the Comptroller fails to timely notify the taxpayer of the requirement for a bypass conference, the taxpayer may file suit on or before the 90th day after the date the notice of intent was filed.
HB 2080 – No More “Pay-to-Play” in Protest Suits
Effective September 1, 2021, HB 2080 creates a new process for challenging assessments without paying the disputed amounts under protest, revises the previous law governing protest suits, and repeals the law that allowed taxpayers to enjoin collection of taxes. The Act applies to a suit to dispute an amount of tax, penalty, or interest that became due and payable after September 1, 2021.
Prepayment of Disputed Amounts No Longer Required. After completing the administrative redetermination process at SOAH and filing a motion for rehearing, a taxpayer may challenge the final determination in district court by paying only the undisputed amounts of tax found to be due. If the taxpayer withholds payment of the disputed amounts, they will accrue penalties and interest if ultimately found to be due.
Collection Actions Prohibited. Following service of a lawsuit, both the Comptroller and Attorney General are enjoined from collecting the disputed amounts as long as the suit remains pending. However, they are allowed to file tax liens against the taxpayer. They may also recover damages from the taxpayer if a court finds that the enjoined amounts were disputed solely for delay.
New Procedures. The taxpayer must file the suit before the expiration of 90 days after the date the motion for rehearing is denied. The original petition must set forth both the disputed and undisputed amounts of the redetermination, and the motion for rehearing must be attached to the petition. The grounds of error set forth in the motion for rehearing are the only issues the taxpayer may raise in the suit.
No More Injunctions. The bill repeals Subchapter C of Chapter 112, Tex. Tax Code, which allowed taxpayers to request restraining orders or injunctions to prevent the state from collecting a tax or fee.
Existing Laws Amended. The bill also changes several aspects of existing law relating to taxpayer suits. The bill makes clear that Chapter 403 of the Government Code does not apply to taxpayer suits filed under Chapter 112 of the Tax Code. The bill prohibits recovery of attorney’s fees in most tax cases (while still allowing fees if the state pursues frivolous or bad faith claims). The bill repeals language that allowed submission of protested franchise tax payments with reports filed by the extended due date, raising questions for franchise taxpayers who wish to submit and pay original reports under protest.
TECHNICAL INFORMATION CONTACTS:
Holly Reed
Principal
Ryan
972.934.0022
holly.reed@ryan.com
John Christian
Director
Ryan
512.476.0022
john.christian@ryan.com
The material presented in this communication is intended to provide general information only and should solely be seen as broad guidance and not directed to the particular facts or circumstances of any individual who may read this publication. No liability is accepted for acts or omissions taken in reliance upon the content of this piece. Before taking (or not taking) any action, readers should seek professional advice specific to their situation from Ryan, LLC or other tax professionals. For additional information about this topic, please contact us at info@ryan.com.
- Topics
- Holly Reed