A bill for an act relating to awarding the costs in administrative hearings or court proceedings involving the collection of tax, penalties, and interest by the department of revenue.(Formerly HSB 14 .)

House

File

773

-

Introduced

HOUSE

FILE

773

BY

COMMITTEE

ON

JUDICIARY

(SUCCESSOR

TO

HSB

14)

A

BILL

FOR

An

Act

relating

to

awarding

the

costs

in

administrative

1

hearings

or

court

proceedings

involving

the

collection

of

2

tax,

penalties,

and

interest

by

the

department

of

revenue.

3

BE

IT

ENACTED

BY

THE

GENERAL

ASSEMBLY

OF

THE

STATE

OF

IOWA:

4

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Section

1.

Section

421.60,

subsection

4,

paragraph

a,

Code

1

2025,

is

amended

by

striking

the

paragraph

and

inserting

in

2

lieu

thereof

the

following:

3

a.

A

prevailing

taxpayer

in

an

administrative

hearing

or

4

a

court

proceeding

related

to

the

determination,

collection,

5

or

refund

of

a

tax,

penalty,

or

interest

shall

be

awarded

6

reasonable

costs

by

the

department

or

a

court

that

are

incurred

7

subsequent

to

the

issuance

of

the

notice

of

assessment

or

8

denial

of

claim

for

refund

in

the

proceeding,

based

upon

the

9

following:

10

(1)

Reasonable

court

costs.

11

(2)

Reasonable

prevailing

market

rates

based

upon

the

12

services

provided

including

but

not

limited

to:

13

(a)

Expert

witnesses.

14

(b)

The

cost

of

a

study,

engineering

report,

test,

analysis,

15

or

project

that

is

found

by

the

director

of

revenue

or

court

to

16

be

necessary

for

the

preparation

of

the

case

of

the

taxpayer.

17

(c)

Fees

paid

or

incurred

by

the

taxpayer

for

the

services

18

of

an

independent

attorney

or

accountant

including

fees

paid

or

19

incurred

in

obtaining

costs

under

this

subsection.

20

Sec.

2.

Section

421.60,

subsection

4,

paragraph

c,

Code

21

2025,

is

amended

to

read

as

follows:

22

c.

For

purposes

of

this

section

,

“prevailing

taxpayer”

means

23

a

taxpayer

who

establishes

that

the

position

of

the

state

was

24

not

substantially

justified

and

who

has

substantially

prevailed

25

with

respect

to

the

amount

in

controversy

or

has

substantially

26

prevailed

with

respect

to

the

most

significant

issue

or

set

of

27

issues

presented.

The

determination

of

whether

a

taxpayer

is

28

a

prevailing

taxpayer

is

to

be

determined

in

accordance

with

29

chapter

17A

.

If

the

taxpayer

establishes

that

the

taxpayer

30

has

substantially

prevailed

with

respect

to

the

amount

in

31

controversy

or

has

substantially

prevailed

with

respect

to

the

32

most

significant

issue

or

set

of

issues

presented,

the

burden

33

of

proof

shifts

to

the

department

of

revenue

to

prove

that

the

34

position

taken

by

the

department

was

substantially

justified.

35

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If

the

department

meets

the

burden

by

proving

the

position

of

1

the

department

was

substantially

justified,

the

taxpayer

shall

2

not

be

considered

a

prevailing

taxpayer.

3

EXPLANATION

4

The

inclusion

of

this

explanation

does

not

constitute

agreement

with

5

the

explanation’s

substance

by

the

members

of

the

general

assembly.

6

This

bill

relates

to

the

costs

of

litigation

in

7

administrative

hearings

or

court

proceedings

involving

the

8

collection

of

tax,

penalties,

and

interest

(dispute)

by

the

9

department

of

revenue

(department).

10

The

bill

changes

the

costs

allowed

to

be

recovered

in

the

11

dispute.

The

costs

allowed

to

be

recovered

under

the

bill

12

include

reasonable

court

costs;

reasonable

prevailing

market

13

rates

for

expert

witnesses,

studies,

tests,

analysis,

or

14

special

projects;

and

reasonable

attorney

or

accountant

fees

15

including

fees

related

to

the

recovery

of

costs

allowed

under

16

the

bill.

17

The

bill

strikes

the

current

$25,000

cap

recoverable

by

a

18

taxpayer

in

a

dispute.

19

Under

the

bill,

if

the

taxpayer

substantially

prevails

in

20

the

dispute

relating

to

the

amount

in

controversy

or

issues

21

involved,

the

burden

of

proof

shifts

to

the

department

to

22

prove

that

the

position

of

the

department

was

substantially

23

justified.

If

the

department

proves

the

position

of

the

24

department

was

substantially

justified,

the

bill

prohibits

25

the

taxpayer

from

recovering

an

award

in

the

dispute.

If

the

26

taxpayer

prevails,

the

bill

requires

the

department

to

pay

27

the

reasonable

costs

described

in

the

bill.

Under

current

28

law,

the

taxpayer

must

prove

the

position

of

the

department

29

was

not

substantially

justified

in

addition

to

the

amount

in

30

controversy

and

issues

involved.

31

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