Tax Analysts Blog

Improving Transparency in Pennsylvania

Posted on Jul 24, 2013

An omnibus tax bill passed by legislators in Pennsylvania on July 3 would make significant changes to a variety of tax provisions. But while the move to market-based sourcing may have gotten more press, HB 465 would also make changes to the state’s Board of Finance and Review (board) that could improve transparency in the state.

In a press release, State Treasurer Rob McCord said, “The appeals system for Pennsylvania taxpayers will become fairer and more transparent under changes contained in legislation that has been sent to the governor affecting the Board of Finance and Review.” The changes are intended to make the board more independent of the Department of Revenue and were years in the making.

Currently, the board hears appeals involving corporate and personal tax issues. It is the second level of administrative appeal, after the DOR’s Board of Appeals. The board is comprised of the secretary of revenue, as well as the auditor general, attorney general, secretary of the commonwealth, and the governor’s general counsel. Of those members, the board has been most criticized for placing the secretary of revenue in a position to decide appeals of the DOR actions.

HB 465 would convert the board into an independent administrative tax appeal body. The new board would be housed within the Pennsylvania Treasury Department and would be comprised of three members, one of which would be the State Treasurer (or a designee). The other members would be nominated by the governor and approved by the Senate. The board would issue written decisions and orders, all of which would be published on the Internet. Appeals from the board would be to the Commonwealth Court and would be heard on a de novo basis.

The bill would also prohibit ex parte communications between either party (the DOR or taxpayers) and members of the board. Parties will have the opportunity to present oral and documentary evidence to the board, but that will be the extent of their communications. The board would, however, have the power to settle cases if both parties agree.

Having an independent tax tribunal – and one in which decisions are not being made by people that work for the DOR – is important for eliminating the perception of (or actual) bias. Another positive development is that members of the board will have specialized tax experience. The bill requires members to have “at least ten years of experience in a position requiring substantial knowledge of Pennsylvania tax law.” This is a step in the right direction for Pennsylvania.

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