OHIO MUNICIPAL LEAGUE INCOME TAX SEMINAR JULY 9, 2015 Did Someone Say the State Changed How Municipalities Audit, Assess, Refund & What’s the 30,000 Rule? Presented by: Amy L. Arrighi, Chief Legal Counsel Amber E. Greenleaf, Assistant Legal Counsel Regional Income Tax Agency

AGENDA  Audits  Assessments  Refunds  30,000 Rule

AUDIT  (UU) -- “Audit” defined: The examination of a person or the inspection of the books, records, memoranda or accounts of a person for the purpose of determining municipal income tax liability.

AUDIT  Sets forth procedure for conducting audit:  Reasonable notice of date/time of audit;  Conducted during regular business hours;  Notice when audit has commenced;  Written description of roles of TA and TP; and  Written statement of TP rights during audit.

AUDIT  Continued -- Provides TP rights during audit:  Represented by attorney, accountant, bookkeeper, etc.;  Right to refuse to answer questions until TP speaks with attorney, accountant, etc.; and  Record the audit.  Failure of TA to comply – penalties.

AUDIT  What is NOT an audit:  An audit is not a TA’s informal written request for information (e.g., “Dear Taxpayer, you forgot to attach a copy of your W-2 to your return…”)  An audit is not helping a TP to complete a return.  An audit is not correcting either a math error or basic preparation mistake (e.g., wrong W-2 box).  An audit is not the application of basic ratio analysis.

AUDIT  What IS an audit:  R.C. code language implies an audit is where the TP sits across the desk from the auditor and answers questions and shows documentation – face-to-face.  Example -- taxpayer assistance at a subpoena program.

AUDIT  How does audit language play with R.C Verification of Accuracy of Returns:  Despite “audit” language, TA still authorized to:  Review and examine books, papers, records, fed/state returns, etc.  Establish retention period for TP records  Compel TP to appear at a hearing, examine under oath and compel the production of books, papers, records etc.  TP may be represented at any such hearing

ASSESSMENTS  (PP) -- “Assessment” defined: A written finding by a municipal TA that commences a TP’s time to appeal to the local board of tax review.  AND – additional requirements:  “ASSESSMENT” printed at the top in all capital letters;  Advises TP of appeal rights and how to appeal.

 Examples of Assessments:  Full or partial denial of refund requests on amended returns.  Denial of TP request to use a method other than the statutorily prescribed method for allocating net profits to a municipality, or TA’s requirement.  Requiring net profit filers to make a consolidated filing. ASSESSMENTS

 Assessments are NOT:  Billing statements;  Requests for additional information;  Informal notices denying refund request on originally filed returns;  Notifications of math errors; or  Other general correspondence. ASSESSMENTS

 Assessments Issued by TA -- How:  TA issuing an assessment to TP required to do the following:  Notify TP of the finding in writing;  Inform TP of right to appeal assessment;  How to appeal assessment; and  Address to which appeal should be sent.

ASSESSMENTS  Service of Assessments:  Certified mail  Unclaimed  Undeliverable  Personal service  Delivery service  Electronic service if authorized by the TP

ASSESSMENTS  Assessments Appealed to Local Board of Review:  Local boards of review will be more active going forward, hearing appeals from assessments.  TP who wants to appeal assessment required to submit request to board of review -- request must:  Be in writing;  Include reason(s) why assessment is incorrect or unlawful; and  Be filed within 60 (new) days after TP receives assessment.

ASSESSMENTS  Continued :  Dictates makeup of board - 3 member makeup:  2 appointed by legislative authority - two-year terms; no limit to terms.  NO employees, elected officials or contractors of the municipality at appointment or in the preceding 5 years.  1 appointed by “top administrative official” of municipality – no term limit; at discretion of administrative official.  Municipal employee okay, but not the finance director, TA or other employee involved in tax administration.

ASSESSMENTS  Continued:  Board of review required to schedule hearing within 60 days (new) after receiving request.  TP may waive hearing.  Parties may agree to continue hearing.  TP permitted to be represented by attorney, CPA or other representative.

ASSESSMENTS  Continued:  Final determination required to be issued by Board within 90 days after hearing.  Copy of determination must be sent by Board via ordinary mail within 15 days of issuing.  The statute of limitations for collections is tolled while appeals are pending before local boards of review, or higher reviewing authority.

 Assessments and Enforcement (718.12):  Assessments not required to be issued prior to filing a criminal or civil actions.  All existing civil and criminal enforcement provisions for non-payment and non-filing are still available.  Civil actions may not be filed during time TP has right to appeal assessment or when appeal is pending.  Sets forth criminal sanctions for violations of certain provisions and permits municipalities to prosecute other offenses not specifically stated in Chapter 718. ASSESSMENTS

 Assessments and Enforcement Continued:  Retains existing statute of limitations:  Three years after tax due or return filed, whichever is later.  Six years for cases of fraud, failure to file or omission of 25% or more of income.  Provides for tolling of statute of limitations – NEW.  Municipalities may recover post-judgment costs and fees, including attorneys’ fees, from taxpayers. (May change municipalities’ processes for referring matters to outside collection firms, or for moving unpaid balances to litigation.)

Refunds  Minimum, SOL and Assessment :  (A) -- Minimum refunds are $10.01  (B)(1) -- statute of limitations – three years.  (PP) Def. of Assessment:  Full or partial denial of refund request on amended return = assessment.  (B)(2) TA must issue an appealable assessment when a refund is wholly or partially denied on an amended return.  Informal notices denying refund request on originally filed returns;  (B)(3) TA must notify a TP, in writing, how to request an appealable assessment when a refund is wholly or partially denied on an original return.

30,000 RULE  Large Population Municipalities :  All written correspondence from municipality with a population > 30,000, as well as RITA/CCA, must contain the name and contact information of person who can receive inquiries about the correspondence.  RITA’s review of correspondence - examples:  Billing statements / notification postcards  Forms – WH  Letter re: change of password for website  Letter re: payment plan  Letter re: change in liability  *No penalty for failure to comply.*

Thank you!