AIM testifies about positive changes to tax system
TESTIMONY OF RAY MCCARTY
ASSOCIATED INDUSTRIES OF MISSOURI
SENATE INTERIM COMMITTEE ON TAX ADMINISTRATION PRACTICES
SEPTEMBER 9, 2014
Mr. Chairman and Members of the Committee:
Thanks to the President Pro Tem for appointing this Committee, to you for serving on this Committee and for the opportunity to testify today.
For the record, I am a former employee of the Missouri Department of Revenue, having served that Department for 16 years, and for eleven years of those years worked with the legislature on behalf of the Department. I left the DOR in 1998 and have worked on behalf of taxpayers since that time, so I have about equal amounts of time working on both the tax administrator and taxpayer side of tax issues.
On behalf of the members of Associated Industries of Missouri, (AIM) I attended all of your hearings around the state. You heard from many taxpayers that had many disagreements with the administration of the tax laws by the Department of Revenue (DOR). These disagreements originated with different interpretations of the tax laws by the DOR: sometimes between taxpayers and the tax collecting agency statewide, and sometimes interpretations differed between different regions of the state between DOR officials themselves. In some cases, taxpayers told you of positions that were taken by auditors that were not backed up when they contacted the Jefferson City office, leading to unfair enforcement of the tax laws, unfair assessments of taxes against taxpayers that had no opportunity to collect the proper amount of taxes, and taxpayers expressed their frustration when they tried to find out from DOR the correct interpretation of the law so they could comply and were not able to find consistent interpretations applied across their industry.
That is the reason AIM and other business groups brought issues before you that became SB 584, SB 612, SB 662, SB 860, and HB 1296. The Missouri General Assembly passed all of these bills and the Governor vetoed them and you will have an opportunity to override the Governor’s veto tomorrow. We hope you will exercise that opportunity to clarify the tax law for the sake of taxpayers that are depending on getting straight answers to their questions so they may voluntarily comply with the tax statutes.
On that point, you should also know that your action in enacting clarifying tax statutes is not a partisan issue. In fact, the Missouri General Assembly has a long history of clarifying the tax law for the Missouri Department of Revenue, in periods where the legislature was controlled by a majority of Democrats as well as Republicans, and with Democrats as well as Republicans occupying the Governor’s Office. This is a matter of the check and balance of power of the tax collecting agency versus the taxpayers, and taxpayers depend on the Legislature to help protect them by providing clarification when necessary. That is the reason for these bills and we hope you will consider that as you decide the action to take in the Veto Session tomorrow.
An additional note on the tax clarification bills: some have noted that these bills will cost the state and local governments tax dollars. As we have pointed out in our research, in fact the bills will help clarify the laws prospectively and protect against taxpayers seeking refunds on these issues, most of which should be granted because of previous court decisions and legislative changes previously enacted.
You also passed a couple of important provisions that helped provide procedural help to taxpayers in SB 584, SB 829, and HB 1455, regarding a shift in the burden of proof and SB 612 and SB 662 requiring notice to be given to taxpayers of changes in position on tax issues. Both of these are procedural changes that would help taxpayers.
The burden of proof changes have their genesis in federal legislation that was passed to reign in the Internal Revenue Service: the Internal Revenue Service Restructuring and Reform Act of 1998. That act contained two provisions that we used as a model for state level legislation in 2000: changes in the burden of proof to the state DOR in certain cases and establishment of a DOR oversight board. The burden of proof legislation was passed, but the DOR oversight board idea was not enacted. We would like to be on record in support of revisiting this idea when the legislature reconvenes in the 2015 Legislative Session.
When introduced in 2000, legislation to form a Department of Revenue Oversight Board was a bipartisan effort sponsored by the Speaker of the House Jim Kreider and House Minority Leader Michael Gibbons, and sponsored in the Senate by the late Senator Harry Wiggins and Senator Franc Flotron. This legislation needs some adjustment and we will bring a proposal forward in the next session, but essentially there needs to be a body that provides some oversight to the DOR that allows taxpayers to get good answers to tax questions, provides consistency between field offices across the state, provides accountability to the Legislature and citizens, etc. In fact, the mission of this committee could be carried forward on a regular basis with such a Board and it could transcend term limits.
In summary, Associated Industries of Missouri appreciates this forum and your attention to the taxpayers’ testimony at the hearings. You hear from us on a regular basis that guidance is necessary on issues and we are glad you heard directly from taxpayers that this guidance is essential. We hope you will consider this when you convene in the Veto Session tomorrow and as you consider our request for legislation next session.