Key Takeaways
- Starting January 27, 2025, taxpayers have 90 days to appeal personal income tax assessments or BOA decisions to the BFR, with possible 30-day extensions for cause.
- The new settlement conference process at the BFR provides an optional, informal way to resolve disputes, with agreements that are binding but non-precedential.
- The “mailbox rule” promotes timely filings based on postmarks, and closing agreements with the Department of Revenue offer final, binding resolutions to tax liabilities.
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On October 29, 2024, Pennsylvania enacted S.B. 1051 to make important changes to its tax administrative appeals process. If you’re a taxpayer in Pennsylvania with tax appeals, you should consider the bill’s implications for your cases and consider new opportunities to resolve any of your tax disputes.
Acquiring the Extension for Filing Your Personal Income Tax Petitions
Under current law, appeals must be filed with the Board of Appeals (BOA), which is the first level of review in the process, within 60 days after the mailing date of the notice of assessment. BOA decisions can be appealed to the Board of Finance and Revenue (BFR), the second level in the process, within 60 days after the mailing date of the notice of decision.
Effective January 27, 2025, for personal income tax assessments only, the bill extends the period to file an appeal from 60 to 90 days with the BOA or to appeal the decision from the BOA to the BFR, which may be extended by additional 30 days for cause. You should note that the bill does not provide guidance on what constitutes cause for this purpose.
Next Steps: How the Settlement Conference Works
After that, there’s another route. S.B. 1051 establishes an option for a settlement conference at the BFR. A settlement conference is a private proceeding in an informal setting designed to expedite and facilitate the resolution of tax controversies. According to the bill’s fiscal note, the settlement conference process replaces the BFR’s authority to consent to a compromise during the tax appeals process but should not affect BOA compromise procedures.
You, the taxpayer, or the Department of Revenue (DOR) must request a settlement conference in writing with its petition for review or within 30 days of filing of the petition. The BFR also can initiate a settlement conference and may approve conference requests after the deadline at its discretion or on showing of good cause.
Unless the settlement conference is initiated by the BFR, the party making the request must provide a brief description of the dispute and relief requested. Within 10 days of receiving that information, the non-requesting party must file a written response in support of or opposition to the conference. The BFR must decide whether to refer the appeal for settlement within five days of receipt of the response. However, because the process is voluntary, a party can still decline to participate.
The initial settlement conference must be held within 60 days of BFR referral. You are able to choose a representative, including an accountant, to attend the conference on your behalf if you’d like.
These settlement conferences will be held before independent, impartial officers appointed by the BFR, and they must have substantial knowledge of Pennsylvania tax law. They’ll also disclose any conflicts of interest as soon as practicable.
Remember, all settlement conferences (and any related communications) are private and cannot be introduced as evidence in any other proceeding unless agreed to by the parties. You also can’t record the conference, even if you have all parties’ consent. Also, the officer cannot be compelled to testify or divulge any records or become a witness in litigation related to the conference.
If the parties reach an agreement, the BFR has to approve it within 10 days. While the agreement binds the parties and cannot be appealed, it doesn’t create precedent.
If you’re unable to reach an agreement — even as a result of one party refusing to participate in the process — the BFR will decide the issue on the merits and issue an order within six months of settlement conference termination.
To monitor the new program’s effectiveness, the state treasurer must report to the General Assembly the number of appeals resolved through the program and associated case statistics.
Reaching a Closing Agreement
The bill also enables you and the DOR to enter closing agreements to address liabilities for any tax administered by the DOR.
If you reach one, it is considered final and conclusive and cannot be reopened absent a showing of fraud, malfeasance, or misrepresentation of material facts.
Understanding the Mailbox Rule
You’ll be deemed to have timely filed a petition for refund or reassessment or any other protest relating to the assessment of tax if the documents are postmarked by the U.S. Postal Service on or before the final day on which the petition must be filed. A postmark by the U.S. Postal Service includes any date recorded or marked by a designated delivery service as described by the Internal Revenue Code.
Insights
- Even though S.B. 1051 does not define the term “cause,” if you fail to timely file your appeals, claims should not automatically expect your requests to be granted.
- You can choose to have representation for a settlement conference, including by accountants.
- A BFR referral to proceed with a settlement conference is not binding, so a party can refuse to participate. However, strategically using the settlement conference option may reduce the time and expense of litigation and achieve favorable resolution of the controversy.
How MGO Can Help
Our team of experienced State and Local Tax professionals is equipped to guide you through the complexities of Pennsylvania’s updated tax appeals process. We can assist in meeting extended deadlines, navigating the new settlement conference procedures, and making sure you are compliant with filing requirements like the “mailbox rule.” Whether you’re facing an appeal or exploring settlement options, MGO can provide you with tailored support. Contact us to learn more.