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Oregon’s Taxpayer Bill of Rights

By Kent Anderson & Dominic Paris

As a means of closing the state’s $1.1 billion tax gap, the Oregon Department of Revenue has some very powerful tools at its disposal to collect unpaid taxes. Once the Department has issued a Distraint Warrant, it may collect a tax liability through a wage or bank account garnishment without further notice to the taxpayer or the taxpayer’s authorized representative. In sharp contrast to IRS procedures, the Department of Revenue is under no obligation to stay collections when a taxpayer submits a settlement offer or a payment agreement request. It is not uncommon for a taxpayer to discover that the Department has suddenly garnished a bank account or wages, even though the taxpayer had been making every effort to cooperate with the Department to resolve the tax debt. Taxpayers who suffer a financial hardship as a result of these practices have little or no recourse.

When collectors are confronted by tax professionals representing clients with a balance due, they may well deny the taxpayer has any rights.  In fact, that is not the case.  The Oregon legislature has granted taxpayers very important rights that can be asserted in dealing with oppressive collection tactics.  In order to enforce these rights, taxpayers and their representatives must be aware of them.

Oregon’s Taxpayer Bill of Rights (TBOR), was enacted in 1989 and closely follows the federal Omnibus Taxpayer Bill of Rights, originally enacted by Congress in 1988. While the federal legislation has repeatedly been enhanced to accord greater taxpayer protection, the Oregon TBOR has undergone few revisions since its enactment, and there has been very little judicial interpretation. There are no regulations and few administrative materials to offer guidance. The provisions of the Oregon TBOR, are as follows:

ORS 305.860, Statement of rights of taxpayers.

ORS 305.860 requires the Director to prepare “a statement which sets forth in simple and nontechnical terms,” the rights of taxpayers with regard to audits and other activities of the Department. To fulfill its obligations under this statute, the Department has prepared a two-page document titled “Your Rights as an Oregon Taxpayer,” which provides a brief overview of the procedures for tax liens, garnishments, seizures, audits, and audit appeals. The document contains no mention of the taxpayer’s right to an installment agreement or anyaxpayer rights during the collection process. This is the only document provided to taxpayers that makes any mention taxpayer rights.

ORS 305.870, Personnel evaluation not based on amount of tax collected

 The statute provides that the Department shall not use the dollar amount of taxes collected as its primary evaluation criteria. To comply with this provision, the Department’s employee evaluation forms do not include dollar amounts as a factor for assessing revenue agent performance.

ORS 305.875, Rights of Taxpayer in meeting or communication with Department

The statute is broadly worded, providing taxpayers with the right to consult with an authorized representative “at any time during any meeting.” The statute further provides that taxpayers have the right not to be present if represented (unless subpoenaed by the Department). The Department of Revenue has no written policies or procedures regarding communications with represented taxpayers and takes the position that it is not prohibited from contacting taxpayers who have designated an authorized representative with a power of attorney form on record with the Department.  The 2-page document made available to taxpayers, “Your Rights as an Oregon Taxpayer,” contains no reference to the taxpayer’s right to consult with an attorney, right to an installment agreement, or any other provision of the TBOR.

ORS 305.880, Waiver of interest or penalty when Department misleads taxpayer

ODR’s written procedures and policy manuals contain no discussion of the statute. However, in determining whether a taxpayer has been misled by the Department, the statute incorporates the analysis carried out under ORS 305.145, When interest required to be waived. The regulations under OAR 150-305.145(4) provide limited guidance.

ORS 305.885, Right of clear explanation

 This statute guarantees taxpayers the right to a clear explanation of “the basis for underpayment, interest, and penalties.” The Department’s notices regarding the assessment of additional taxes and penalties generally comply with the statutory requirement. Although many of the Department’s notices are confusing, that is partially due to the complexity of the tax statutes. As part of the process of rolling out its new computer system in December 2015, the Department has made an effort to improve some of its assessment and collection notices.

ORS 305.890, Right to enter into agreement to satisfy liability in installment payments

 Under ORS 305.890, “a taxpayer shall have the right to enter into a written agreement with the Department of Revenue to satisfy liability for payment of any tax in installment payments if the Director of the Department of Revenue determines that the agreement will facilitate collection of such liability.” Because there are no administrative rules, guidelines or written policies that discuss the meaning of the statute, it is not clear what standards the Director must apply in order to determine whether a payment agreement will facilitate collection. When analyzing taxpayer financial statements, revenue agents have broad discretion to determine the monthly installment amount. In authorizing revenue agents to set up “creative payment plans,” the Department reminds them that “much of the information and decision making is subjective.” Revenue agents are encouraged to think “outside the box” and “make decisions on their own.” Such unfettered discretion calls into question the meaning of the taxpayer “right,” as do the Department’s procedure manuals and training materials, which have routinely stated that installment agreements are offered to taxpayers “as a courtesy.”

The Department takes the position that the right to enter into an installment agreement is not absolute, but is conditioned on the determination by the Director, or his designee, that the agreement will facilitate collection. and that “there is no path to appeal from a department-proposed payment plan that the taxpayer does not like or chooses not to enter.” To give effect to the taxpayer’s “right,” the Director should at least make a good faith determination of a taxpayer’s ability to pay when considering whether an installment agreement will facilitate collection.

 ORS 305.895, Action against property before issuance of warrant prohibited

 If a taxpayer fails to pay a balance due after receiving a Notice and Demand for Payment, the Department may issue a Distraint Warrant 30 days later. Under the Department’s new automated levy system, recorded Distraint Warrants, which serve the same function as a court judgment, will be issued automatically for any balance of $2500 or more that has not been paid in full within 30 days after the Notice and Demand for Payment. The Department of Revenue will issue a recorded Distraint Warrant even if a taxpayer has entered into a payment agreement to pay the liability in full. There is no mechanism for a taxpayer challenge to the Department of Revenue’s decision to issue a Distraint Warrant.

 .           Evolution of the Oregon TBOR

 The legislature made minor changes to ORS 305.860, Statement of rights of taxpayers, and 305.875, Rights of Taxpayers in meeting or communication with departmentin order to reflect the establishment of the Tax Court Magistrate Division in 1995. The creation of this new judicial forum shifted the first level of formal tax dispute resolution away from the executive department, allowing taxpayers to appeal a decision of the Department to a neutral judicial officer. The Magistrate has repeatedly taken the position that collections decisions of the Department fall outside the Tax Court’s jurisdiction under ORS 305.410.

Without a judicial remedy, interpretation of the Oregon TBOR is within the sole discretion of the Department of Revenue. The Department has promulgated no administrative rules to implement the provisions of the Taxpayer Bill of Rights, and its internal policies and procedures do not appear to acknowledge the existence of taxpayer rights.

Conclusion

The Oregon Taxpayer Bill of Rights will be twenty-seven years old this year. As we look back and compare its development to that of the federal TBOR, it is important to keep in mind what the Oregon legislature was trying to achieve. Oregon’s Taxpayer Bill of Rights was enacted out of a belief that taxpayers are entitled to certain protections when dealing with the Department of Revenue, just as they are when dealing with any other government agency or private debt collector. The government’s power to lay and collect taxes raises fundamental questions about the relationship between taxpayers and the state. These issues are capable of evoking powerful emotions and must be carefully considered if we are to strive for a fair and just tax system.

Despite rumors to the contrary, Oregon taxpayers do have rights when dealing with the Oregon Department of Revenue.  However, a right without a remedy is worse than useless.  It is time to put some teeth in the Oregon law and provide a remedy for Oregon taxpayers.

This analysis is part of a longer piece comparing the Oregon law to its federal counterpart for publication in the Oregon State Bar Taxation Section Newsletter.  Kent Anderson and Dominic Paris are Oregon tax lawyers whose practice focuses on the representation of taxpayers before the IRS and ODR.  They are licensed to practice in the Oregon Tax Court and the United States Tax Court.  Copies of the full article can be obtained from the authors.

As a part of a legislative project undertaken by the Kent Anderson Law Office and the Oregon Society of Enrolled Agents (ORSEA), Kent and Dominic are interested in representing taxpayers with unresolved ODR collection problems before both Oregon Department of Revenue and the Oregon Tax Court.  They hope to either convince the Tax Court to begin reviewing collection decisions or pursue a legislative change that would require judicial review.  For a no-charge case review and analysis, you may contact them at (541) 683-5100 or contact the office through their website at www.kentandersonlaw.com .

 

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