FINANCE AND ADMINISTRATION CABINET

Department of Revenue

(Amendment)

 

      103 KAR 1:010. Protests and appeals.

 

      RELATES TO: KRS 49.220, 49.250, 131.010, 131.030, 131.081, 131.110, 131.180, and 13B[131.340, 131.345, 131.360, 131.370, 139.760, 139.980(4)]

      STATUTORY AUTHORITY: KRS[Chapter 13A,]131.130

      NECESSITY, FUNCTION, AND CONFORMITY: KRS 131.130 authorizes the Kentucky Department of Revenue to promulgate administrative regulations for the administration and enforcement of all tax laws of this state. This administrative regulation provides guidance regarding a taxpayer’s[summarizes significant portions of the statutes dealing with taxpayer] protest and appeal rights and outlines procedures to facilitate the filing, processing and disposition of a protest or[such protests and] appeal.

 

      Section 1. Definitions. As used in this administrative regulation, "Notice" means a letter, memorandum, or other document from the department notifying the taxpayer that tax has been assessed and is due.

 

      Section 2. Protest - Assessments. (1) Taxpayers will be notified of additional tax assessments by mail. Payment including interest from the original due date, in the absence of protest, must be made within forty-five (45) days from the date of the notice informing the taxpayer that tax is owed.

      (2) A written protest may be filed by the taxpayer, or other persons representing the taxpayer, against additional assessments. The department may require the taxpayer to furnish a "Declaration of Representative," Form 20A100 if a representative is serving on behalf of the taxpayer. The protest and supporting statements shall be filed with the Revenue Cabinet within forty-five (45) days from the date of notice.

      (3) A taxpayer or taxpayer representative may submit a written protest and supporting statements to the department by one (1) of the following methods:

      (a) Hand delivery to the department at 501 High Street, Frankfort, Kentucky 40601, or a department Taxpayer Service Center location as listed on the department’s website;

      (b) By the United States postal service or express mail service to the address listed in the notice; or

      (c) Electronically to an email address, if provided, listed in the assessment or notice.

      (4) When determining if the protest was timely filed, the department shall record the submission as:

      (a) The date stamped as received by the department, if hand delivered;

      (b) The postmark date from the United States post office, if the postal service is used, but excluding the date from a postage meter;

      (c) The delivery confirmation date when received by the department, if an express mail service is used; or

      (d) The electronic date and time received, if electronically delivered. If the protest is submitted to the department electronically, the taxpayer shall also mail a copy of the protest and supporting statements to the department at the address listed in the notice.

      (5) The department shall acknowledge receipt of the taxpayer’s protest in writing within ninety (90) calendar days from the date received by the department.

      (6) In the absence of a protest, payment of the tax assessed in the notice, including any fees, shall be due on or before the due date listed in the notice.

      (7) Scheduling options for a conference shall be communicated to the taxpayer by the department within forty-five (45) days of the taxpayer’s written request for a conference. Audio recordings of the conference are permitted in accordance with KRS 131.081.

 

      Section 3. Protest - Refund Denials. (1) The department shall send the taxpayer a notice by mail of any denial or partial denial of any refund applied for, including a refund claimed upon any return.

      (2) The department shall include with each notice of the denial:

      (a) A clear and concise explanation of the reason for the denial by the department;

      (b) References to the statutes and administrative regulations that are the basis for the denial; and

      (c) The date by which the taxpayer must protest the denial.

      (3) A If the taxpayer disagrees with the disallowance of any refund, the taxpayer may file a written protest and supporting statements with the department by the methods set forth in Section 2 of this administrative regulation.

      (4) If the taxpayer or taxpayer representative has submitted all supporting statements and documentation requested by the department but has not received a determination regarding the refund request from the department within 180 calendar days from the date the request was submitted, the taxpayer may file a protest on the claim as if the refund has been denied by the department.

 

      Section 4. Protest – Transfer (1) Unless the assessment results from an audit performed by the Office of Field Operations, the department shall attempt to resolve the protest within the taxing area from which the assessment was issued.

      (2) If the protest cannot be resolved at the assessment level, the taxing area shall transfer the protest to the Division of Protest Resolution.

      (3) A taxpayer may request in writing that a protest be transferred to the Division of Protest Resolution by the methods outlined in Section (2) of this administrative regulation for consideration by the department.

      (4) The department shall complete the transfer within forty-five (45) days of receipt of the taxpayer’s written request to transfer the protest to the Division of Protest Resolution.

      (5) The Division of Protest Resolution shall acknowledge receipt of the protest in writing to the taxpayer within forty-five (45) days of the department transferring the protest. The acknowledgement by the Division of Protest Resolution shall contain:

      (a) The name and contact information of the department employee assigned to the taxpayer’s protest; and

      (b) The name and contact information of the employee’s direct supervisor.

 

      Section 5. Final Ruling. (1) The department shall issue a final ruling on all unresolved protests after transfer to the Division of Protest Resolution.

      (2) The taxpayer may request in writing a final ruling at any time after the filing of a timely protest and supporting statements.

      (3) If requested in writing, the department shall issue a final ruling to the taxpayer within thirty (30) days from the date the request is received by the department by one of the methods described in Section 2 of this administrative regulation.

 

      Section 6. Failure by the department to meet any of the deadlines imposed by this administrative regulation:

      (1) May justify a waiver of penalties; and

      (2) Shall not be interpreted to allow a reduction in any tax, interest, or fees assessed by the department.[(3) A hearing may also be requested. The taxpayer may appear in person or by representative. If a taxpayer is not present in person, or if a corporation is not represented by an authorized officer, the cabinet may require the taxpayer's representative to furnish evidence of his authority to act for the taxpayer. Consideration will be given to additional information presented in the protest and at hearings and the additional assessment may be adjusted accordingly.

      (4) As provided in KRS 131.081, a taxpayer may make an audio recording of any conference with or hearing by the Revenue Cabinet. However, the Revenue Cabinet may make such a recording only if the taxpayer is given prior written notice. If the conference or hearing is recorded by the Revenue Cabinet, the taxpayer may obtain a copy or transcript thereof as provided in KRS 61.874.

 

      Section 2. Protests - Refund or Credit Denials. (1) Taxpayers will also be notified by mail of disallowance or partial disallowance of any refund or credit claim including a refund or credit requested upon any return.

      (2) A taxpayer may protest such disallowance or partial disallowance by written protest filed with the Revenue Cabinet, within forty-five (45) days of the disallowance. Procedures governing protests and hearings for refunds and credits are the same as for assessments.

 

      Section 3. Final Ruling. If the taxpayer's protest of an assessment or refund or credit denial cannot be resolved through correspondence and/or conferences with officials of the Revenue Cabinet and he desires to exercise his rights of further appeal, the taxpayer may request in writing a final ruling at any time after the filing of a timely protest and supporting statements. The final ruling shall be given to the taxpayer within thirty (30) days from the date the request is received by the cabinet.

 

      Section 4. Appeal - Kentucky Board of Tax Appeals. (The following procedure is prescribed by rules and administrative regulations of the board):

      (1) If a taxpayer desires to appeal a final ruling of the cabinet he may, within thirty (30) days from the date of such ruling, apply for a hearing before the Kentucky Board of Tax Appeals. The appeal:

      (a) Must be filed in quintuplicate;

      (b) Must contain a brief statement of the law and facts in issue;

      (c) Must state the petitioner's position regarding the law, facts, or both; and

      (d) Must contain a copy of the final ruling of the cabinet.

      (2) The board will set a date for a formal hearing. The hearing procedure before the board will be in accordance with the board's rules.

      (3) On the basis of the hearing, briefs, and other documents, the board will issue a written order which will affirm, reverse, modify or remand the final ruling, and will forward a copy of the order to the taxpayer and the cabinet. Assessments upheld by the board shall be due and payable thirty (30) days after the date of the board's order. In the absence of appeal, penalties for failure to pay tax when due apply if payment is not made within thirty (30) days after the date of the board's order.

      (4) Interest from the original due date of the return until the tax is paid shall be added to the additional assessments.

      (5) As provided in KRS 131.355, all hearings before the board are required to be officially reported and all records of proceedings shall be public records except in the case of appeals of unmined minerals assessments in which, under specified circumstances, the statute prohibits disclosure of records or any recorded or transcribed testimony concerning such records. In such cases, a protective order is required to be entered and remain in effect during the entire appeals process, including appeals to the courts, and thereafter, preventing the parties, their agents and representatives, except the taxpayer, from disclosing the confidential records or testimony concerning them outside the appeals proceedings.

 

      Section 5. Appeal - Circuit Court. Any party aggrieved by a final order of the Kentucky Board of Tax Appeals may, within thirty (30) days after such order becomes final, file a notice of appeal with the Kentucky Board of Tax Appeals and shall serve a copy of said notice upon all other parties to the appeal. A statement of appeal must then be filed within (30) days after the date on which the notice of appeal was filed with the appropriate circuit court, with a copy of the ruling made before the Kentucky Board of Tax Appeals. The statement of appeal must conform to that required to be filed in the Kentucky Supreme Court. Pursuant to KRS 131.370, if the appeal is from an order sustaining a tax assessment, collection of the tax may be stayed by the filing of a supersedeas bond in the manner directed by the Rules of Civil Procedure, or by payment of the tax as provided in KRS 134.580(1).

 

      Section 6. Appeal - Kentucky Court of Appeals and Kentucky Supreme Court. Any party may appeal to the Kentucky Court of Appeals and to the Kentucky Supreme Court under rules provided by those courts.]

 

DANIEL P. BORK, Commissioner

      APPROVED BY AGENCY: December 12, 2017

      FILED WITH LRC: December 13, 2017 at 4 p.m.

      PUBLIC HEARING AND PUBLIC COMMENT PERIOD: A public hearing on this administrative regulation shall be held on January 24, 2018, at 1:00pm in Room 11A, State Office Building, Frankfort Kentucky 40601. Individuals interested in being heard at this hearing shall notify this agency in writing by five (5) workdays prior to the hearing, of their intent to attend. If no notification of intent to attend the hearing is received by that date, the hearing may be cancelled. This hearing is open to the public. Any person who wishes to be heard will be given an opportunity to comment on the proposed administrative regulation. A transcript of the public hearing will not be made unless a written request for a transcript is made. If you do not wish to be heard at the public hearing, you may submit written comments on the proposed administrative regulation. Written comments shall be accepted through January 31, 2018. Send written notification of intent to be heard at the public hearing or written comments on the proposed administrative regulation to the contact person.

      CONTACT PERSON: Lisa Swiger, Tax Policy Research Consultant II, Finance and Administration Cabinet, Department of Revenue, 501 High Street, Station 1, Frankfort, Kentucky 40602, phone (502) 564-9526, fax (502) 564-3875, email Lisa.Swiger@ky.gov.

 

REGULATORY IMPACT ANALYSIS AND TIERING STATEMENT

 

Contact Person: Lisa Swiger

      (1) Provide a brief summary of:

      (a) What this administrative regulation does: This administrative regulation updates regulatory language to conform to statutory revisions and provide the most accurate and up to date information on filing a protest or appeal with the Department of Revenue.

      (b) The necessity of this administrative regulation: In March of 2017 the Kentucky General Assembly passed HB 453 creating the Kentucky Claims Commission, and combining the functions of the Kentucky Board of Claims, Kentucky Board of Tax Appeals and the Crime Victims Compensation Board. This administrative regulation is necessary to remove outdated information and references to the Kentucky Board of Tax Appeals in 103 KAR 1:010, and make other changes needed to conform to the provisions of Kentucky Acts Chapter 74 (HB 453).

      (c) How this administrative regulation conforms to the content of the authorizing statutes: It updates outdated references and language the Kentucky Board of Tax Appeals to conform.

      (d) How this administrative regulation currently assists or will assist in the effective administration of the statutes: It will provide the most up-to-date guidance for all parties who wish to file a protest with the Department of Revenue against tax assessed by the department, or a refund reduction issued by the department.

      (2) If this is an amendment to an existing administrative regulation, provide a brief summary of:

      (a) How the amendment will change this existing administrative regulation: This amendment describes multiple methods for filing a timely protest with the department, sets forth new time frames and deadlines for notifications by the department, and removes all references to the Kentucky Board of Tax Appeals.

      (b) The necessity of the amendment to this administrative regulation: To conform to recent statutory revisions made in HB 453 during the 2017 Regular Session.

      (c) How the amendment conforms to the content of the authorizing statutes: Updates regulatory language to comply with statutory guidance.

      (d) How the amendment will assist in the effective administration of the statutes: The amendment will provide up-to-date information to taxpayers for the most efficient and effective administration of the law.

      (3) List the type and number of individuals, businesses, organizations, or state and local governments affected by this administrative regulation: This administrative regulation will impact any individual, business or organization wishing to file a protest or appeal against tax owed to the Commonwealth of Kentucky, or a refund reduction issued by the Department of Revenue.

      (4) Provide an analysis of how the entities identified in question (3) will be impacted by either the implementation of this administrative regulation, if new, or by the change, if it is an amendment, including:

      (a) List the actions that each of the regulated entities identified in question (3) will have to take to comply with this administrative regulation or amendment: None, unless they wish to file a protest or appeal, in which case they will follow the parameters set forth herein.

      (b) In complying with this administrative regulation or amendment, how much will it cost each of the entities identified in question (3): No additional costs to impacted entities.

      (c) As a result of compliance, what benefits will accrue to the entities identified in question (3): Taxpayers will be able to file a protest of tax assessed by the Department of Revenue in a timely fashion, including electronically, and will be afforded additional administrative processes to ensure that their protests are handled fairly and efficiently by department personnel.

      (5) Provide an estimate of how much it will cost the administrative body to implement this administrative regulation:

      (a) Initially: No additional costs are anticipated. Current staff and department resources will be utilized to implement the provisions of this amendment.

      (b) On a continuing basis: None.

      (6) What is the source of the funding to be used for the implementation and enforcement of this administrative regulation: The implementation and enforcement of this administrative regulation will be done using existing department funding and personnel.

      (7) Provide an assessment of whether an increase in fees or funding will be necessary to implement this administrative regulation, if new, or by the change if it is an amendment: No. Only current department budgeted funding will be used to implement this amendment.

      (8) State whether or not this administrative regulation established any fees or directly or indirectly increased any fees: No fees were created or increased by this amendment.

      (9) TIERING: Is tiering applied? Tiering is not applied as the provisions of this administrative regulation will apply equally to all applicants for a protest or appeal with the Department of Revenue.

 

FISCAL NOTE ON STATE OR LOCAL GOVERNMENT

 

      1. What units, parts or divisions of state or local government (including cities, counties, fire departments, or school districts) will be impacted by this administrative regulation? The Finance and Administration Cabinet, Department of Revenue.

      2. Identify each state or federal statute or federal regulation that requires or authorizes the action taken by the administrative regulation. KRS Chapter 131.130.

      3. Estimate the effect of this administrative regulation on the expenditures and revenues of a state or local government agency (including cities, counties, fire departments, or school districts) for the first full year the administrative regulation is to be in effect. There is no expected increase or decrease in revenues or expenditures for any state or local government agency as a result of this administrative regulation.

      (a) How much revenue will this administrative regulation generate for the state or local government (including cities, counties, fire departments, or school districts) for the first year? None. This amendment only addresses the procedures to be taken for a taxpayer to file a protest of taxes, penalties, interest or fees assessed by the department.

      (b) How much revenue will this administrative regulation generate for the state or local government (including cities, counties, fire departments, or school districts) for subsequent years? None.

      (c) How much will it cost to administer this program for the first year? No additional costs will be incurred in the first year of this regulation being in effect. Current processes are already in place to administer protests and the resolution of protests.

      (d) How much will it cost to administer this program for subsequent years? No additional costs will be incurred in subsequent years.

      Note: If specific dollar estimates cannot be determined, provide a brief narrative to explain the fiscal impact of the administrative regulation.

      Revenues (+/-):

      Expenditures (+/-):

      Other Explanation: