ALLEN ABAModelState 2009

The ABA "Model State Administrative Tax Tribunal Act": Why We Need to Change How
States Decide Tax Cases

Author(s): GARLAND ALLEN and CRAIG B. FIELDS
Source: The State and Local Tax Lawyer. Symposium Edition, (2009/10), pp. 295-313
Published by: American Bar Association
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The ABA Model State
Administrative Tax Tribunal Act,
Why We Need to Change
How States Decide Tax Cases
GARLAND ALLEN AND CRAIG B. FIELDS*
I. Introduction
Over the last 40 years, states have successively established independent tri
bunals or courts to adjudicate state tax disputes.1 Still, 20 states have not insti
tutionally separated the function of state tax collection from that of resolving
taxpayer challenges.2 Further, many states force a taxpayer to pay the entire
liability in question in order to obtain an independent hearing in court.3
To encourage states to rectify both of these obstacles to tax fairness, in 2006
the American Bar Association's House of Delegates officially endorsed and
recommended to the states the Model State Administrative Tax Tribunal Act
(the Model Act or the Act).4
Drafted by the State and Local Tax Committee of the American Bar
Association (ABA) Section of Taxation, the Model Act provides a legislative
template and rationale for independent tax tribunals. In addition, the Model
Act incorporates a number of state tax court or tribunal "best practices,"
including a requirement that an enacting state's revenue department main
tain a program for settling tax disputes after audit but before litigating in
'Garland Allen conducts a state and local tax legal practice in Santa Monica, California.
Formerly a Chicago partner of the law firm of Hopkins & Sutter and later PricewaterhouseC
oopers LLP, Mr. Allen is a coauthor of the Model Act and currently chair of the ABA Section
of Taxation State and Local Tax Committee task force responsible for promoting its adoption.
He can be reached at 310-260-1288 or at [email protected].
Craig B. Fields is a partner in the New York City office of Morrison & Foerster, LLP, where
his practice focuses on litigation and planning relating to state and local tax matters. Mr. Fields
is a coauthor of the Model Act and was the chair of the ABA Section of Taxation State and
Local Tax Committee task force that drafted the Model Act. He can be reached at 212-468
8193 or at [email protected].
This paper draws upon and updates a previous article, Garland Allen & Craig B. Fields,
The Model State Administrative Tax Tribunal Act: Fairness for All Taxpayers, 10 The State and
Local Tax Law. 83 (2005).
1 Garland Allen & Craig B. Fields, The Model State Administrative Tax Tribunal Act: Fairness
for All Taxpayers, 10 The State and Local Tax Law. 83, 83 (2005).
2Id.
3 Id. at 84.
4 Model State Admin. Tax Tribunal Act (2006).
295
296 SECTION OF TAXATION
the new tax tribunal.5 Prior to its adoption, the

experienced practitioners at both law firms and a
country, as well as by tax agencies, tax court and
scholars, and their comments were incorporated int
The Model Act is not a Republican or Democrat
tisan support:
• The conservative legislators' American Legisl
(ALEC) formally recommended the Model Act
• The Budgets and Revenue Committee of the
State Legislatures has published the Model Act on
• In September, 2009, the bipartisan, blue-ribb

sion on the 21st Century Economy recommen
executive branch tribunal along the lines of t
to replace the current adjudicatory functions
Board of Equalization.9
The authors would be happy to provide advice
interested in starting an effort in his or her state
similar reforms to enactment.
II. The Model Act's Core Principles

In more than 20 states—including California,
Oklahoma, and Texas—the taxpayers first and l
son who is required to be knowledgeable about st
employee of the state revenue department that mad
challenged.10 Another 15 states or so—including
Pennsylvania—make the taxpayer pay, or provide a
before letting the taxpayer have a hearing befor
which is typically the state trial court."
The Model Act has four core principles or objectiv
in the following single sentence: The Model Act
payer who receives a state tax assessment, before pa
obtain a hearing of record, in a forum that is comp
tax collector and that has a tax expert for a judge.
An admittedly cheesy acronym—"BRIE"—may
Act's four main goals: "B(efore payment)," a taxpaye
5 Allen & Fields, supra note 1, at 83.

5 Model State Admin. Tax Tribunal Act, report (2006).
7Am. Legislative Exch. Council, Inside ALEC 16 (Jan.-
8Model State Administrative Tax Tribunal Act, Nat'l Conf.
ncsl.org/default.aspx?tabid= 19264 (last visited Dec. 22, 201
9Comm'n on the 21st Century Econ., Report: App. D
http://www.cotce.ca.gov/documents/reports/documents/ C
tury_Economy-Final_Report.pdf (last visited Dec. 22, 2012
1 "Allen & Fields, supra note 1, at 83.
"Id. at 84.
State and Local Tax Lawyer—2009/10 Symposium Edition
THE ABA MODEL STATE ADMINISTRATIVE TAX TRIBUNAL ACT 297
ment must be able to make the official "R(ecord)" for any subsequent court
appeals before an "Independent body)" that has "E(xpertise in tax matters)."
A. How Does the Act Achieve These Goals?
I. "(B)efore Payment"
Per section 7(c), every "taxpayer shall have the right to have his case heard
by the Tax Tribunal prior to the payment of any of the amounts asserted as
due ... and prior to the posting of any bond."12 An exception is provided for
denials of refund claims and jeopardy assessments. Thus, a taxpayer need not
pay or post a bond for an asserted tax liability in order to obtain a hearing and
decision from the new tribunal.13
Note that the Model Act insures a pre-payment forum for an initial hear
ing of record for tax assessment challenges, without doing away with other
pre-payment remedies.14 The Act would not automatically repeal existing
state laws that allow either a suit on a refund claim, or a suit to recover a tax
paid under protest, to be brought in the regular courts.15 A state that desires
to eliminate these alternative remedies would have to take separate legisla
tive action.
The federal government and most states (except in the case of real prop
erty taxes) currently allow taxpayers to litigate tax assessment challenges all
the way up to the U.S. Supreme Court without pre-payment or bonding.16
While the Model Act does not itself preclude an enacting state from condi
tioning appeals from Tax Tribunal decisions upon prepayment or bonding
of the tax in dispute,17 doing away with such prepayment rules completely
would advance the Model Act's core objective of eliminating "pay-to-play"
and thereby greatly enhance the fairness of the state's tax adjudication process.
2. "(R)ecord"
Model Act sections 7(a) and (b) grant exclusive jurisdiction to the Tax Tri
bunal in all cases involving "questions of law and fact arising under the tax
laws of this State," except as specifically provided by other law.18 Model Act
section 15(a) provides that the taxpayer or department "shall be entitled to
judicial review" as to "a final decision of the Tax Tribunal ... in accordance
with the procedure for appeal from a decision of the [general trial] court,"
except for a decision of the Tribunal's small claims division, and as to an
"Model State Admin. Tax Tribunal Act § 7(c) (2006).

13Id.
l4Allen & Fields, supra note 1, at 84.
15id:
16 Id.
17Id.
18 Model State Admin. Tax Tribunal Act § 7(a)-(b) (2006).
interlocutory decision "under the same condition

an interlocutory decision of the [general trial] co
By providing for exclusive jurisdiction in and
bunal's decisions in the same manner as those of
the Model Act makes the Tribunal proceeding
for any court review. As a result, a taxpayer des
assessment, refund claim denial, or other revenu
will only have to incur the time and expense of p
and law once—before the Tax Tribunal.20
3. "(independent Body"
Section 2(b) of the Model Act provides that the
separate from and independent of the authorit
sioner of revenue] and the [department of revenu
separation that is the key to providing both the
fairness in this area.21
Other provisions insure that a Tribunal judge
influence of the states tax collection agency, e
the revenue department in most states, each judg
chief executive and can be removed for "neglect
duties, malfeasance in office, or other good cau
ment and any attempted removal are themsel
consent of the Senate," guaranteeing input by
ment.23 Furthermore, each judge is appointed for
exceeding that of most governors, thereby ma
Tribunal judge will be viewed as just another p
the judge some protection against the enmity, or
single governor.24
The requirement that the judge's salary be "no l
state trial court judge, combined with the ten-ye
ity candidates and encourage judges to remain
oping the additional independence that comes f
The Model Act also requires further, concrete m
the perception of the Tribunal's independence fro
agencies. The Tribunal's principal office must b
that of the revenue department.26 Hearings arou
held in facilities "physically separated" from t
KId § 15(a).
20Allen & Fields, supra note 1, at 83.
21 Model State Admin. Tax Tribunal Act § 2(b).
22Id. § 3(g).
23Id §§ 3(b), (g).
uId. § 3(b); tee Allen & Fields, supra note 1, at 84.
2f'Model State Admin. Tax Tribunal Act § 5(c).
department.27 A judge may "not engage in any other gainful employment

or business, nor hold another office or position of profit."28 The Tribunal is
responsible for the hiring and firing of its own staff.29 Finally, the Tribunal is
authorized "to promulgate and adopt all reasonable rules and forms as may
be necessary or appropriate to carry out the intent and purposes of the Act."30
4. "(E)xpertise in Tax Matters"

The Model Act requires that every judge, at the time of his or her appoint
ment, have "substantial knowledge of the tax law and substantial experience
making the record in a tax case suitable for court review."31 As a result, a newly
appointed judge should have the subject matter expertise, training, and intel
lectual confidence necessary to reach decisions that are firmly based in the tax
law and that take into account the practicalities of tax administration and tax
compliance.
These knowledge and experience requirements also increase the likelihood
that the Tax Tribunal's decisions will be well reasoned and, over time, will
provide a rational and coherent body of precedent for all of the state's taxpay
ers and the revenue department itself. As a result, the Tax Tribunal is much
more likely to achieve the institutional reputation for technical excellence
that is crucial to the public's perception of fairness.32
III. The Model Act's Other Fairness Guarantees
As already explained, the Model Act creates a state tax dispute resolution
system that assures the taxpayer a just decision on the merits, as well as a fair
opportunity to develop the factual and legal record that will be reviewed by
the courts in the event of an appeal. In addition to the provisions that directly
implement these goals, described above, the Model Act mandates a number
of resolution procedures—"best practices" of existing independent tax tribu
nals and courts around the country—that further insure the fairness of the
dispute resolution process:33
A. Department of Revenue Must Offer an Informal Review and Opportunity to

Settle Based on Litigation Risk
Section 8 requires the revenue department to maintain a robust system for
the informal review of tax determinations.34 The department would also be
mandated to attempt the settlement of all cases based on the 'hazards of litiga
27Id.
aId. § 4(c).
29id: § 6(d).
30Id. § 19.
31 Id. § 4(a).
32Allen & Fields, supra note 1, at 84-85.
33 Id. at 86.
34 Model State Admin. Tax Tribunal Act § 8.
tion as well as the case's facts and the law.35 Model

Services Appeals function,36 Section 8 also incor
the most effective informal review and settleme
exist or are being developed in several states.37 To
informal review must be done by experienced d
were not themselves involved in the tax determina
The Model Act requires that informal review b
"[b]efore the [department of revenue] finalizes a de
a taxpayers right to commence a proceeding in t
informal review is the taxpayer's option, and the t
review would not constitute a failure to exhaust an
The overwhelming majority of state tax determin
sonable dispute are currently resolved informally,
ment.41 The purpose of Section 8 is to make sur
cases—ideally, 95% or more—will be resolved by
require the taxpayer to undergo the time and ex
even the taxpayer-friendly and fair litigation proc
Tribunal.42
Section 8's mandatory settlement negotiation re
possible, unintended consequence of creating an
A state enacting the Model Act can be expected t
internal administrative hearing procedure. Once it
sibility for conducting hearings, the department
have the same incentive to devote the personnel
the effort to resolve legitimate tax disputes prior to
The result could be that taxpayers would face
cede winnable cases or that responsibility for set
be thrust upon—and threaten to overwhelm—th
sent the department in contested proceedings, o
represent a net loss of fairness to the state's taxpay
Tribunal. Section 8 prevents this result by requirin
all disputed cases and settle the overwhelming majo
Finally, mandating settlement on the basis of l
important to business and individual taxpaye
in dispute. Currently, it is common for revenu
35Id. § 8(b)(3).
36See Allen & Fields, supra note 1, at 86.
i7Id.
3'Id.
39Model State Admin. Tax Tribunal Act § 8(a).
4"/^. § 8(b)(ll).
■"Allen & Fields, supra note 1, at 86.
42 Model State Admin. Tax Tribunal Act § 1.
44See Model State Admin. Tax Tribunal Act § 8.
settle smaller cases on the unspoken, but reasonable, assumption that the
taxpayer will ultimately find litigation too expensive to undertake and will
therefore concede tax issues that she could and should win but cannot afford
to litigate.45
B. Broad Discovery and Mandatory Stipulation

In many states, state revenue departments defeat meritorious taxpayer chal
lenges simply by not cooperating with the taxpayer to stipulate the relevant
facts, by not divulging their audit methods or findings, or by not disclos
ing their prior enforcement pattern with respect to the determination in dis
pute.46 Such practices increase the burden on the taxpayer by expanding what
the taxpayer must prove to win his case, thereby making the dispute resolu
tion process more expensive, more time-consuming, and less fair.
The Model Act evens the playing field by mandating the parties to accom
plish discovery by informal means before using more formal and expensive
discovery methods;47 requiring the parties to stipulate the relevant facts to the
fullest possible extent;48 and specifically authorizing the use of written inter
rogatories and requests for admission.49 The Act gives the Tax Tribunal the
authority to enforce these important protections by order in particular cases
or by regulation.50
C. Taxpayer's Burden of Proof Is "Preponderance of the Evidence"
Section 12(g) of the Model Act specifically provides that the taxpayer in a
Tax Tribunal proceeding shall have "the burden of persuasion by a preponder
ance of the evidence in the record, except that the [department of revenue]
shall have the burden of persuasion in the case of an assertion of fraud and
in other cases provided by law."51 By adopting the proof burden common to
civil litigation, the Model Act not only clarifies the hurdle the taxpayer must
clear in litigation with the department, but makes clear that this standard of
proof applies before the Tax Tribunal notwithstanding the existence of com
mon statutory provisions that treat the Revenue Department's determination
as "prima facie correct" or give it a "presumption of correctness" or other
special evidentiary status.52
D. Payment of the Tax in Dispute Does Not "Moot" the Proceeding

After commencing a Tax Tribunal proceeding, the taxpayer may wish to
pay the tax in issue in order to stop the further accrual of interest or penalties,
45 See Allen & Fields, supra note 1, at 86-87.

46Id
47Model State Admin. Tax Tribunal Act § 11 (a).
48/^§ 11(b).
49/d(§ 11(c).
""Id. §§ 11(g), 19.
"Id. § 12(g).
52 See Allen & Fields, supra note 1, at 87.
even though she also wishes to continue challeng

liability. In many state hearing and court system
tax automatically "moots" the dispute and requires
by filing a refund claim, waiting for audit and den
initiating a new proceeding to contest the departm
Instead of that rule, Model Act section 7(d) states
the tax in issue after commencing a proceeding
nal "shall treat the taxpayer's petition as a prote
refund of the amount so paid."54 Thus the Act ena
with his challenge without further delay. This solu
19335 of the California Revenue and Taxation Code.55
E. Written Decisions
Section 13 requires the Tax Tribunal to issue a written decision, containing

at least a "concise statement of the facts found and the conclusions of law
reached," within six months after conclusion of the hearing or any related
briefing.56 In this way, the Model Act enhances the perception of fairness by
making sure that an aggrieved taxpayer not only gets a fair hearing, but also
receives a decision that sets forth its rationale and gives the parties a logical
basis for determining whether an appeal should be taken.
The Report accompanying the Model Act suggests that consideration be
given to means of enforcing the requirement that the Tribunal issue a decision
within the required six-month period.57 In Minnesota, for example, Section
271.20 of the Minnesota Statutes provides that a judge of the Minnesota Tax
Court must ordinarily file a decision within three months after submission
and that no part of the judge's salary shall be paid unless the judge has certi
fied full compliance with this requirement.58
E Publication of Decisions
By mandating publication of Tax Tribunal decisions, at least in electronic
form, the Model Act not only guarantees that Tribunal decisions will be
reviewed and criticized by law and accounting scholars and other tax experts,
but also makes available potentially useful precedent to every future taxpayer
considering a challenge to a department determination.59
G. Small Claims Division
The Model Act gives a taxpayer with a net amount of $25,000 or less in
controversy the option to proceed in the Tax Tribunal's Small Claims Divi
53Id.
54 Model State Admin. Tax Tribunal Act § 7(d).
55Id§ 7; Id., report at 18.
%Id. § 13(a).
57Id., report at 22.
"Minn. Stat. Ann. § 271.20 (West 2010).
"See Model State Admin. Tax Tribunal Act § 17.
sion, in which the taxpayer may challenge an assessment or other determina

tion in an informal setting.60 Since a Small Claims Division decision may not
be appealed by either the taxpayer or the department, may not be considered
as precedent in any other proceeding, and is not required to be published, the
Model Act allows a taxpayer with a small amount at issue, limited resources or
unusual circumstances to obtain a fair hearing before an independent forum,
without concern that the department will press a legal technicality simply
because not doing so might create precedent for other taxpayers.61
IV. Model Act Provisions That Have Generated Discussion
A few provisions of the Model Act have generated concern among tax law
yers and accountants who regularly represent taxpayers in state tax disputes,
even though most would agree that each of these provisions does further the
objective of achieving real and perceived fairness for state taxpayers.62 The fol
lowing paragraphs explain why the policy choice was made and why the con
cern is not well-founded or why the obvious alternative is not recommended.
A. Locating the Tax Tribunal in the Executive Branch

The Model Act establishes the Tax Tribunal in the executive, rather than in
the judicial, branch of state government.63 An executive branch independent
adjudication forum is more likely to be created than a judicial branch tax
court, and therefore is more likely to improve the dispute resolution process
in the states most in need of reform.64 This choice was made even though an
executive branch tribunal would be unable to overturn a tax statute or provi
sion on the ground that it is unconstitutional on its face.65
Two practical reasons recommend location of the Tax Tribunal in the exec
utive branch. First is the fact that the now nearly 40-year old effort by the
ABA to encourage states to establish judicial tax courts has been amazingly
unsuccessful.66 By contrast, executive branch tax tribunals have proven much
easier to establish.67
According to the "Explanation" accompanying the American Bar Associa
tion's Revised Model State Tax Court Act 1971-12, when the National Con
ference of Commissioners on Uniform State Laws (NCCUSL, now called
the Uniform Law Commission or ULC) promulgated its Model State Tax
Court Act in 1957, only 11 states had independent tax tribunals, and all were
located in the executive branch.68 Between 1957 and 1971, additional states
mId § 14(c).
61 See id. § 14(h).
a See Model State Admin. Tax Tribunal Act §§ 2(a)-(b).
MSee id., report at 15.
K See id.
66Cf. id. at 14.
67See id. at 15.
created independent tribunals or some kind, but,

gon and Hawaii—all were located in the executive
Inspired by Oregon, which established a tax cou
branch in 1961, and Hawaii, which converted its ad
to a judicial court in 1967, the ABA embarked on a pr
Model Act to promote the creation of independent
state judiciary.70 This effort culminated in the ABA'
Court Act 1971-12, which recommended the crea
modeled on the Oregon Tax Court.71
Despite this emphasis on judicial branch tax cour
adopting independent executive branch tax tribun
in 1957 to 26 today, including the District of Colu
four additional states have created a judicial branc
lished a tax division within the regular judicial co
Indiana (1986), Arizona (1988) and Connecticut (19
Why have states overwhelmingly chosen executi

over judicial tax courts? A major reason may be const
Many state constitutions do not permit the legis
ized court within the judicial branch.74 In such state
or tribunal can only be approximated by assigning
court judges to a tax "division," as has been done
over, a number of state constitutions require all
be elected.76
Where such limitations are present, it is difficul
that the judge hearing tax cases will have the tax
the Model Act. In Oregon, where a tax court judg
the sole expertise-related requirement is that the
law—any kind of law—for at least three years.77 And
expert trial judge acquires some expertise by hear
cases over time, experience developed solely as a ju
not the kind of deep expertise needed to insure fair
or to develop a useful, coherent body of tax preceden
The second major reason for the Model Act's ap
branch tribunals work. The track record of executive
impressive, demonstrating that such forums can eff
69Id.
7"Id.
71Id.
71Id.
73Id.
74Model State Admin. Tax Tribunal Act, report at 15 (2006).
75See Conn. Gen. Stat. Ann. § 12-391 (West 2012).
77 Id
Act's principal goals.78 Tribunals in states such as Maryland, Massachusetts,

Minnesota, Montana, New York, and Wisconsin, have operated successfully
for many years and have earned a reputation for fairness and for tax expertise.79
That being said, the Report accompanying the Model Act recognizes that
a judicial branch tax court, unlike the Tax Tribunal, could strike down a state
tax statute on the ground that it is unconstitutional on its face.80 This is a
significant advantage, given that constitutional challenges occur in the state
tax field with somewhat more frequency than in other areas of the law.81
Such power, for example, would obviate the need for the Model Act's some
what awkward provisions in section 7(e) that require a taxpayer with a con
stitutional challenge to determine whether the challenge is "facial" and, if so,
which procedure he wishes to follow to segregate that "facial" challenge from
the rest of the case, so that the facial constitutional claim can be ruled upon
by a regular, judicial branch court.82
Accordingly, the judicial branch alternative should be pursued in any state
in which it is legally and politically possible to create a new judicial branch
court that is staffed by real tax experts and is empowered to decide cases on
a pre-payment basis.83 In such a case, the Model Act's many beneficial proce
dural provisions could be adopted either by statute or by the tax court itself
as rules.84
B. Judge Not Required to Be a Licensed Attorney
Rather than requiring that a candidate for a Tax Tribunal judgeship be a

licensed attorney in practice for a certain number of years, the Model Act
requires only that any person appointed as a judge must have "substantial
knowledge of the tax law and substantial experience making the record in
a tax case suitable for judicial review."85 In the view of the task force, this
requirement not only satisfies the reason normally given for requiring that
persons performing judicial or quasi-judicial functions be licensed attorneys,
but also sets a higher standard of expertise that will ensure better decisions on
the merits and better records for review.
Notwithstanding that the Model Act does not require it, many states can
be expected to add the requirement that a person appointed as a Tax Tribunal
judge be a licensed attorney for a period of years.86
78Model State Admin. Tax Tribunal Act, report at 15.

""Model State Admin. Tax Tribunal Act, report at 15.
"Id.; see Model State Admin. Tax Tribunal Act § 7(e).
83Allen & Fields, supra note 1, at 89-90.
uId.
85Model State Admin. Tax Tribunal Act § 4(a).
86 See id.
C. Taxpayers May Choose to be Represented Before the

Other than Practicing Attorneys
Following the practice of the United States Tax

independent state tax courts and tribunals, the Mode
to be represented before the Tax Tribunal "by the
admitted to practice in this State (including an attor
or is employed by an accounting or other professi
accountant licensed in this State, or by an enrolled
tice before the Internal Revenue Service."87 The A
to permit attorneys and accountants licensed by
hac vice.**
The Model Act rule is based on several realities. In many cases, a non
attorney tax professional, such as an accountant with years of experience in
tax dispute resolution, is competent to present a tax case effectively. More
over, experienced tax attorneys and litigators are today commonly employed
as members or employees of accounting or other professional services firms.89
Finally, many taxpayers prefer to have their regular tax professionals represent
them in the first hearing before an independent forum, rather than incur the
additional time and expense of hiring and educating new legal counsel.90
Representation before the Tax Tribunal may constitute the unauthor
ized practice of law in some jurisdictions.91 At the same time, most states
either permit nonattorneys to represent taxpayers in administrative hearings,
independent tax courts, and tribunals, or have not taken a position on the
question.92 Under such circumstances, it seemed prudent to allow any unau
thorized practice of law issue that may arise to be resolved on a state-by
state basis.
D. Department Allowed Discovery

Section 11 of the Model Act allows the Department of Revenue, as well
as the taxpayer, to engage in discovery in advance of a hearing in the Tax
Tribunal.93 Some have argued that the department should not be given this
right, since the department has already conducted an audit.94 In other words,
the department should not be able to force the taxpayer to undergo a second
"audit" as the price of contesting the resulting assessment.95
Although this argument was considered, it was ultimately decided that dis
covery by the department should be permitted. Allowing discovery by the
87Id. § 16(a).
88id:
■"Id. at 90.
■>2Id.
93 Model State Admin. Tax Tribunal Act §11.

95Model State Admin. Tax Tribunal Act, report at 21.
department is justified by fairness, by current practice in many states, and by

practical considerations.96
First, discovery by the department is appropriate in cases in where some
facts that are key to the legal analysis were left undeveloped by the audit
staff. Interviews that are conducted by auditors do not rise to the level of a
trial deposition.97 Moreover, when expert witnesses are used, the other party
should "be able to discover information concerning such testimony and to
receive a copy of any report prior to the time the individual is called as a
Second, many states' hearing regimes already permit the Revenue Depart
ment to conduct some form of discovery.99 As a result, allowing discovery
would not result in an expansion of powers in those states. Moreover, the
experience in these states has shown that such departments rarely abuse the
discovery process. The Report accompanying the Model Act encourages the
tribunal to step in if such an abuse were to occur.100
Finally, not allowing state discovery would likely result in an intensified
scrutiny given by the audit staff to all taxpayers, as the audit staff would never
be sure which taxpayers would eventually go to trial.101
E. Hearing Open to the Public

Under the Model Act, hearings before the Tax Tribunal are open to the
public, although the Tax Tribunal may close part or all of a hearing based on
a showing of good cause.102 This provision makes the hearing process more
transparent and accountable and therefore contributes directly to the fairness
of the system. This is the practice followed by virtually all state trial courts
of general jurisdiction and by independent tribunals in a number of states.103
The fact that departmental hearings are often closed to the public and that
some taxpayers appreciate the opportunity to make their case in a forum that
is not open to the public was not thought to be a sufficient reason to preclude
public access to a hearing before an independent tribunal more akin to a state
trial court.104
%Id.
97Id.
98Id
'"Id.-, see, e.g., 86 111. Adm. Code § 200.125 (1996); New Jersey Judiciary Tax Court Man
agement Office, Rules Governing Tax Practice in the Tax Court of New Jersey, Rule 8:6:1
(2008).
'""Model State Admin. Tax Tribunal Act, report at 21.
mId.
W2Id. § 12(c).
"14Model State Admin. Tax Tribunal Act, report at 21-22.
F. The State, as Well as the Taxpayer, Is Allowed to

It has been asserted that, because department
are usually not subject to appeal by the departm
which permits the department as well as the ta
Tribunal decision—should be eliminated.105 This
on a false analogy.
In most states, the decision of an internal hearing
as practically, the decision of the director, comm
revenue. Thus, the hearing officer's "decision" is us
tion to the head of the revenue department, who m
decision or rewrite the decision to suit himself.106
does not typically allow the department to seek
administrative hearing decision in favor of the tax
The Tax Tribunal, in contrast, is a state agency th
dent of the department of revenue, more simila
jurisdiction than to an internal hearing system.
in tax matters are always subject to appeal by the d
of the Tax Tribunal should be as well.108
V. The Model Act or Nothing?

Section 1 of the Model Act, entitled "Statement
To increase public confidence in the fairness of th
State shall provide an independent agency with tax
putes between the [department of revenue] and taxpa
the payment of the amounts in issue or the posting o
taxpayer has had a full opportunity to attempt settl
ment of revenue] based, among other things, on th
By establishing an independent tax tribunal within t
government, this Act provides taxpayers with a mea
versies that insures both the appearance and the re
fundamental fairness.109
In other words, establishing an executive branch

one "means" for a state to achieve the Model Act's c
Act is a comprehensive legislative template that no
branch tax tribunal that is truly independent of th
with a tax expert for a judge, but also requires the
practices of tax dispute resolution.110

mId. at 92.
w7Id.
108id.:
109Model State Admin. Tax Tribunal Act § 1.

'10 See generally Model State Admin. Tax Tribunal Act.
But an executive branch tribunal is not the only way to achieve the objec
tives of the Model Act. As Section 2 of the Report accompanying the Model
Act makes clear, a second means would be for the state to create a specialized
tax court in the judicial branch, a trial court that only hears tax cases."1 As
explained in more detail below, between 1961 and 1993, six states have estab
lished some form of judicial branch court."2 If a states constitution allows
the creation of a specialized tax court in the judicial branch—and allows
assurance that the judge is a real tax expert—then this creation of a specialized
tax court would also accomplish all of the BRIE objectives of the Model Act
and would even have advantages over an administrative or executive branch
tribunal.
A third option would be to move the internal administrative law judge or
hearing officer system out of the state's department of revenue into a separate
state agency, maybe even an existing centralized hearing office."3 This reform
can also achieve the Model Act's goals provided that the judge is a tax expert
at the time of appointment and the judge's decision cannot be overturned by
the revenue department.
In summary, the overriding aim of the Model Act is to achieve its four
cheesy goals. The Model Act is one way, but a state can achieve these goals
in several ways. The Model Act task force stands ready to assist any similar
reform effort that promises to achieve more of the Model Act's goals than the
system presently in place in a state.
VI. Reform Efforts in the States
A. Model Act Enacted
Two states enacted independent tax tribunals patterned on the Model Act
in 2012:
1. Georgia
On April 19, 2012, after unanimous approval in both houses of the legisla
ture, Georgia Governor Nathan Deal (R) signed House Bill 100, the "Geor
gia Tax Tribunal Act.""4 Georgia thus became the first state to adopt the ABA
Model Act as a whole.
2. Illinois
Illinois followed on August 28, 2012, when Governor Pat Quinn (D)
signed House Bill 5192, "The Illinois Independent Tax Tribunal Act," also
after unanimous votes in both houses of the General Assembly."5
'"Id. §2, report at 15.

"2Allen & Fields, supra note 1, at 89.
113See Model State Admin. Tax Tribunal Act §§ 2, 5, report at 15.
114 Act of Apr. 9, 2012, 2012 Ga. Laws 609.
"'Illinois Independent Tax Tribunal Act, 2012 111. Legis. Serv. P.A. 97-1129 (West 2012).
B. Nearly Enacted
Two other states came close to adoption of the
expected to put Model Act legislation in place in
1. Alabama
On May 16, 2012, the legislature unanimously endorsed a conference bill

reconciling House Bill 105 and Senate Bill 549, "The Taxpayers' Bill of Rights
II Act (TBORII)," which would have established a new Alabama Tax Appeals
Commission.1"5 On May 24th, however, Governor Robert Bentley (R) vetoed
the bill, citing the conference bill's failure to include agreed amendments pre
serving the governor's final authority over judge appointments, reducing the
length of judicial terms, and requiring auditor-proposed installment payment
plans to be approved by affected local governments."7 At the same time, the
Governor endorsed the TBOR II legislation and promised to support it in the
spring 2013 regular session."8
2. Oklahoma
An Oklahoma Bar Association-drafted Model Act bill, Senate Bill 1297,

was introduced in the Senate on February 6, 2012.119 In an effort to garner
the support of key legislators and the Oklahoma Tax Commission, the State
Chamber of Commerce proposed a "Committee Substitute" bill that would
have changed the state's existing adjudicatory system in ways that would have
undercut the Model Act's key objectives.120 Rather than go forward in early
March, the Oklahoma Bar Association, the State Chamber of Commerce,
and Senate Bill 1297's chief legislative sponsor determined that they should
oppose the Committee Substitute and start over in 2013.
C. Preliminary State Efforts

As of November 1, 2012, preliminary and less-developed efforts to enact
the Model Act or Model Act-like reforms to the state's existing tax adjudica
tory system were also underway in Pennsylvania,121 Texas, Vermont,122 and
Washington.
"6S.B. 549, 2012 Reg. Sess. (Ga. 2012).

7Bruce P. Ely and James E. Long, Jr., Alabama Governor to Pocket Veto Tax Tribunal Bill,
2012 St. Tax Notes (TA) 102-2 (May 24, 2011).
mId.
'"S.B. 1297, 53rd Leg., 2nd Reg. Sess. (Okla. Feb. 7, 2012).
l20Committee Substitute for S.B. 1297, 53rd Leg., 2nd Reg. Sess. (Okla. Feb 16, 2012).
121 Garland Allen, Breaking Developments: Model Act Developments in Illinois, Alabama, Geor
gia, Maine, Oklahoma, Pennsylvania & Vermont, Law Office of Garland Allen (Feb. 15,
2012), http://garlandallen.com/Publications.html.
122See H.B. 606, 2011-12 Leg. Sess. (Vt. 2012) ("An Act Relating to the Creation of an
Independent Office of Taxpayer Appeals").
D. State Reforms Consistent with the Model Act

Legislation to separate the tax adjudication function from the state revenue
department, either inspired by the Model Act or consistent with the Model
Act's goals, has also been enacted in several states.
1. Texas
As of January 1, 2007, the Texas Comptroller voluntarily moved the inter

nal hearing officers out of the state revenue department and into a separate
state agency, the Office of Administrative Hearings. The Comptrollers reform
was later codified by the legislature in Senate Bill 242, effective June 15,
2007.123
2. North Carolina
Also in 2007, North Carolina enacted changes largely modeled on the

Model Act, expanding the jurisdiction of the states centralized hearing
agency—the Office of Administrative Hearings—to include a prepayment
hearing of tax cases, with appeal on the Office of Administrative Hearings
record to the state's business court.124
3. Mississippi
In August 2009, the Governor signed Senate Bill 2712, which renamed
the existing Tax Commission as the Department of Revenue, to be headed
by a commissioner appointed by the governor, and separated the Tax Com
missions three-member governing panel into a separate, independent Board
of Tax Appeals, with three members appointed by the Governor with the
consent of the state Senate.125 The new Board of Tax Appeals started hearing
appeals on July 1, 2010.126
4. California
As indicated above, on September 29, 2009, the California Commission
on the 21st Century Economy issued a Final Report that, inter alia, recom
mended that California remove the Board of Equalization s current tax adju
dication function and replace it with an independent tax adjudication forum
along the lines of the Model Act.127 Unfortunately, this reform died along
with, and probably because of, the controversial business gross receipts tax
proposal that was the central recommendation of the Commissions report.
123 Relating to the Transfer to the State Office of Administrative Hearings of Contested
Cases Involving the Collection, Receipt, Administration, and Enforcement of State Taxes and
Fees by the Comptroller of Public Accounts, 2007 Tex. Gen. Laws. ch. 354.
124 An Act to Reform the Process for Administrative and Judicial Review of Disputed Tax
Matters, 2007 N.C. Sess. Laws 491.
125 Act of Mar. 31, 2009, 2009 Miss. Laws ch. 492.
nr'Jd.
127Commission on the 21st Century Economy, Report 46, A-19 app. D (2009).
5. Other Endorsements
Meanwhile, several more national organizations

the Model Act.
a. Council on State Taxation (COST)

COST, the nations premier organization represe
has endorsed the Model Act and, more importa
lobbying and testimonial support for Model Act
Alabama, and other states.128
b. National Taxpayers' Union

This organization of 362,000 taxpayers across t
Model Act by letter in December of 2010.129
c. American Institute of Certified Public Account

In a position paper released in July 2012, the A
mittee endorsed the Model Act.130 The positio
that any state adopting the Model Act allow a
payer before the tribunal so "long as the CPA meet
obtain a practice privilege under the states account
d. Tax Executives Institute (TEI)

TEI is a 7000-member organization of in-hous
chapters in the United States and all over the w
letter, TEI expressed its unqualified support fo
discussed above.133 In a November 2012 email,
Jong reported that TEI expects to issue a forma
Act itself by the end of 2012.134
128 See generally Douglas L. Lindholm and Frederick J

State Tax Administration: COST Scorecard on Tax Appeals & Procedural Require
ments (2010).
'"Letter from John Stephenson, St. Gov. Affairs Mgr., National Taxpayers' Union, to Gar
land Allen (Dec. 15, 2010) (on file with author).
""A1CPA, State Tax Tribunals (July 20, 2012), available at http://http://www.aicpa.org/
Advocacy/Tax/StateLocal/Pages/StateTaxTribunals.aspx.
"'Id.
132About Us, Tax Executives Institute, Inc., http://www.tei.org/organization/Pages/
about_tei.aspx (last visited Dec. 22, 2012).
l33Letter from David M. Penney, Int'l Pres., Tax Executives Institute, to Rep. James E
DeMarco, Ala. (Feb. 14, 2012).
134 E-mail from Dan De Jong, Tax Counsel, Tax Executives Institute, to Garland Allen (Nov.
9, 2012) (on file with author).
Vil. Conclusion
No matter how hard department hearing officers and adminis

judges try, most taxpayers believe that internal hearing regimes are
That perception is logical. Why should a taxpayer trust the obje
state employee who is paid, provided office space and support, supe
evaluated by revenue department officials whose main job is to coll
The Model Act provides a template for a pre-payment, state t
resolution forum that is truly independent of the revenue departm
the Tax Tribunal judge will be an experienced tax expert, the tr
sions are likely to be legally correct—and far more likely to be
just by taxpayers.
Like other "good government" reforms, the Model Act has n
political constituency, primarily because no interest group can q
benefits of "BRIE." But the benefits are real and substantial. Since e
tax system depends on voluntary compliance, the state's taxpayers
the system to be aggressive, smart and fair. If they do not, only ver
very gullible taxpayers will end up paying the costs of government
will pay way more than his share. All taxpayers, including business
of great sophistication and size, have a stake in this proposal.
Understandably, but ironically, the tax lawyers, tax accountan
enue officials most familiar with a state's internal hearing system
reluctant to admit that the state needs an independent tax tribunal o
Like most people, we love what we know and we hate to see it chan
This opposition is short-sighted. All persons with a stake in the w
state government finances—governors, legislators, tax departm
sioners, practitioners, businessmen, consumers, and citizens of
need to accept the reality that public confidence in the fairness
collection system cannot be achieved without some form of the ind
tax tribunal or tax court envisioned by the Model Act.

»"Id.

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The ABA "Model State Administrative Tax Tribunal Act": Why We Need to Change How

States Decide Tax Cases

GARLAND ALLEN AND CRAIG B. FIELDS*

the new tax tribunal.5 Prior to its adoption, the

• In September, 2009, the bipartisan, blue-ribb

II. The Model Act's Core Principles

5 Allen & Fields, supra note 1, at 83.

State and Local Tax Lawyer—2009/10 Symposium Edition

A. How Does the Act Achieve These Goals?

"Model State Admin. Tax Tribunal Act § 7(c) (2006).

State and Local Tax Lawyer—2009/10 Symposium Edition

interlocutory decision "under the same condition

State and Local Tax Lawyer—2009/10 Symposium Edition

department.27 A judge may "not engage in any other gainful employment

4. "(E)xpertise in Tax Matters"

III. The Model Act's Other Fairness Guarantees

A. Department of Revenue Must Offer an Informal Review and Opportunity to

State and Local Tax Lawyer—2009/10 Symposium Edition

tion as well as the case's facts and the law.35 Model

State and Local Tax Lawyer—2009/10 Symposium Edition

B. Broad Discovery and Mandatory Stipulation

C. Taxpayer's Burden of Proof Is "Preponderance of the Evidence"

D. Payment of the Tax in Dispute Does Not "Moot" the Proceeding

45 See Allen & Fields, supra note 1, at 86-87.

State and Local Tax Lawyer—2009/10 Symposium Edition

even though she also wishes to continue challeng

Section 13 requires the Tax Tribunal to issue a written decision, containing

G. Small Claims Division

State and Local Tax Lawyer—2009/10 Symposium Edition

sion, in which the taxpayer may challenge an assessment or other determina

IV. Model Act Provisions That Have Generated Discussion

A. Locating the Tax Tribunal in the Executive Branch

State and Local Tax Lawyer—2009/10 Symposium Edition

created independent tribunals or some kind, but,

Why have states overwhelmingly chosen executi

State and Local Tax Lawyer—2009/10 Symposium Edition

Act's principal goals.78 Tribunals in states such as Maryland, Massachusetts,

B. Judge Not Required to Be a Licensed Attorney

Rather than requiring that a candidate for a Tax Tribunal judgeship be a

78Model State Admin. Tax Tribunal Act, report at 15.

State and Local Tax Lawyer—2009/10 Symposium Edition

C. Taxpayers May Choose to be Represented Before the

Following the practice of the United States Tax

D. Department Allowed Discovery

93 Model State Admin. Tax Tribunal Act §11.

State and Local Tax Lawyer—2009/10 Symposium Edition

department is justified by fairness, by current practice in many states, and by

E. Hearing Open to the Public

State and Local Tax Lawyer—2009/10 Symposium Edition

F. The State, as Well as the Taxpayer, Is Allowed to

V. The Model Act or Nothing?

In other words, establishing an executive branch

105Allen & Fields, supra note 1, at 91.

109Model State Admin. Tax Tribunal Act § 1.

State and Local Tax Lawyer—2009/10 Symposium Edition

VI. Reform Efforts in the States

A. Model Act Enacted

'"Id. §2, report at 15.

State and Local Tax Lawyer—2009/10 Symposium Edition