Practice Resources

October 2012

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From left to right: MBA Taxation Law Section Chair Richard M. Stone and Vice Chair David G. Saliba.

Note from Taxation Law Leadership

Welcome to the 2012-13 Taxation Law Section. Our newsletter will help keep you informed about the section's activities, including information about CLE programs, meetings, hot legal developments and other important section news.

We would like hear from the members of our section. How can the section be helpful to you in your practice? Are there any programs you would be interested in attending? Contact either of us at [e-mail jstevens] if you have comments or suggestions for section activities, CLE programs or wish to post a notice in the newsletter.

We look forward to working with you for a successful year.

Richard M. Stone, chair
David G. Saliba, vice chair
Taxation Law Section Council

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Upcoming Taxation Law section council meeting

The Taxation Law section council will be holding monthly meetings through June 2012 and as a member of this section you can keep abreast of the meeting dates by checking the Taxation Law Section Calendar.

As a member of the Taxation Law section, you are invited to attend the Taxation Law Section Council meeting on Wednesday, Oct. 24 from 5 to 6:30 p.m. at the MBA, 20 West St., Boston.

Click here to R.S.V.P.

 

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From left to right: Richard M. Stone and Caitlin M. Cianflone.

State Tax Practice Group notice

The State Tax Practice Group of the MBA's Taxation Law Section addresses the needs of members who serve businesses and individuals with Massachusetts and multi-state tax issues.

The ever-growing need of states such as Massachusetts to increase tax revenue, coupled with the increasing national (rather than strictly local) presence of business activity has resulted in numerous audit and compliance issues faced by businesses. For example, many of these issues are raised by how Massachusetts treats local and multi-state income and sales, and the complexity of proper reporting. A growing number of MBA members have been seeking help with Department of Revenue issues. The State Tax Practice Group of the MBA's Taxation Law Section helps members address these issues.

The issues are substantial in terms of their bottom line impact on Massachusetts taxpayers. The group will focus on acting as liaison with the DOR in connection with various proposals, such as the new "Unitary Combined Reporting" and apportionment requirements for Massachusetts businesses, the business entity classification rules, the numerous Sales and Use Tax positions taken by the DOR relating to manufacturing, out-of-state sales, penalties and other issues.

Members interested in participating in this group should contact MBA Taxation Section Chair Rick Stone at [e-mail rick] or (617) 848-9360.

Richard M. Stone & Caitlin M. Cianflone
State Tax Practice Group Co-Chairs

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From left to right: Mark F. Murphy and David G. Saliba.

Municipal Tax Law Practice Group notice

The purpose of the Municipal Tax Law Practice Group is to serve practitioners and the public by promoting the administration of justice, legal education and respect for the law. This practice group will provide an ongoing forum for practitioners to discuss issues unique to this area of the law and seeks to be involved in efforts to improve the laws related to municipal taxation. During the 2011-12 association year, we were fortunate to host some informative and entertaining guest speakers. We will work toward continuing this during the 2012-13 year.

The Municipal Tax Practice Group is planning to hold three meetings this year. The first will be in late fall 2012. We anticipate having as our guests, two prominent local appraisers to speak about the current real estate market. The second and third meetings will be held in the first half of 2013. Details will follow.

We look forward to seeing you.

 

Mark F. Murphy
David G. Saliba
Municipal Tax Practice Group co-chairs

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Practice alert

Administrative Procedure 635 Early Mediation Program

Below for public comment is a draft (as of Sept. 5, 2012) of an administrative procedure announcing the department's new Early Mediation Program. This document is being circulated for public comment prior to implementation of the mediation program. The department is anticipating that a limited, pilot version of the Early Mediation Program will be an alternative dispute resolution option available to taxpayers by the end of October 2012.

635.1  Introduction
The Department of Revenue is committed to resolving tax disputes in an expeditious manner, without sacrificing the quality and integrity of the resolution of the disputed matters. The Early Mediation Program expands the range of dispute resolution options available to taxpayers and, in appropriate cases, offers an expedited process, potentially avoiding time-consuming and expensive proceedings. The Early Mediation Program is a pilot program, administered jointly by the Audit Division, the Legal Division and the Office of Appeals.

Use of the Early Mediation Program in any particular case is optional for both the Department of Revenue and the taxpayer.  Early mediation does not eliminate or replace existing administrative appeal options, including the taxpayer's opportunity to request a hearing or settlement consideration with the Office of Appeals if the case is not resolved through the early mediation process.

The Early Mediation Program is a collaborative dispute resolution process, designed to resolve all issues in a disputed matter. A representative of the Office of Appeals, serving as mediator (and as a neutral participant in the mediation process), will assist the Audit Division and the taxpayer in understanding and evaluating the issues in dispute, in order to facilitate reaching an expeditious and mutually satisfactory resolution consistent with applicable law. The mediator also may recommend a settlement based on the mediator's analysis of the issues.

635.2  Case Eligibility
Early mediation is generally available for any audit case in which the department is proposing to assess tax in excess of $1 million.

Early mediation may be initiated at any time after a matter in controversy has been fully developed and prior to the issuance of a Notice of Intent to Assess. A matter may be considered for mediation after the exit conference between the taxpayer and the Audit Division and after receipt of a written position statement from the taxpayer, articulating the taxpayer's position and basis for disagreement with the Audit Division's proposed adjustment(s).

The Department of Revenue will consider mediation where:

  1. All issues are raised in the course of the audit and the audit process is substantially complete.
  2. All claims are filed and examined.
  3. Issues and facts are fully developed.
  4. The taxpayer has stated its position in writing.
  5. The parties are willing to resolve all disputed issues.

When Early mediation is unsuccessful in resolving all issues, the taxpayer will be offered the opportunity to pursue resolution through traditional Appeals processes. If the traditional appeals process is pursued, appeals management will take appropriate action to fulfill the appeals policy to be fair and impartial. This would generally involve the assignment of new appeals personnel to the matter. This policy should be made clear to the taxpayer at the beginning of the process, and if the taxpayer is unable to accept this policy, the taxpayer may decide to forgo the Early mediation option and pursue a traditional appeals process.

635.3  Early Mediation Procedures

635.3.1  Overview of Procedures
Early mediation is an alternative dispute resolution initiative which may be considered by either the Audit Division or the taxpayer when there are issues that cannot be resolved between the taxpayer and the Audit Division alone. If the Audit Division determines that the audit is likely to result in a proposed assessment of tax in excess of $1 million, the Audit Division may discuss the potential use of early mediation with the taxpayer.

635.3.2  Application Process
Either the taxpayer or the audit manager may suggest participation in the Early Mediation Program. When a case is identified as potentially appropriate for early mediation by either the taxpayer or the Audit Division, the audit manager will discuss the issues and case with the taxpayer. Discussions should include:

  1. Suitability of issues for the early mediation process,
    1. Willingness of both parties to consider alternative resolution options;
    2. Adequacy of issue and factual development; and
    3. Ability of both parties to devote resources to the mediation process.

Upon reaching agreement to participate in the early mediation process, both the taxpayer and the audit manager will jointly complete and submit an Early Mediation Program form to the Office of Appeals. In addition to the Early Mediation Program form, the taxpayer must also complete and sign a Consent Extending the Time for Assessment of Taxes (Form A-37).

If the Audit Division determines that the matter is not appropriate for mediation, the taxpayer may pursue the traditional appeals process. The taxpayer may not appeal the Audit Division's decision not to participate in the Early Mediation Program.

635.3.3  Waiver of Interest Imposed Under G.L. c. 62C, § 32(f)
As part of the application process, the taxpayer must sign a waiver extending the time period for purposes of calculating interest under G.L. c. 62C § 32(f). The 18-month period for an audit will be extended by four months (subject to potential further extension in rare and unusual cases) so that the parties may pursue resolution through the mediation process.

635.3.4  Audit Division Participation in Early Mediation
The Audit Division is fully involved in the Early Mediation Program as an equal participant. Audit Division participants will include those with knowledge and expertise that may contribute to issue resolution.

635.3.5  Representation in Early Mediation
Managers of the Audit and Legal Divisions will determine whether representatives of the Legal Division will participate in the mediation as representatives of the Audit Division. The taxpayer may choose to have professional representation in the mediation process.

635.3.6  Mediation Process
A representative of the Office of Appeals will serve as a neutral mediator. The mediator will not perform in a traditional Appeals role, but will use dispute resolution techniques to facilitate settlement between the parties. In some circumstances, there may be two representatives from the Office of Appeals, serving as co-mediators.

During early mediation, the taxpayer's and the Audit Division's representatives, including at least one representative with decision-making authority from both Audit and the taxpayer, will meet with the mediator. The taxpayer's and Audit's representatives should include individuals with the information and expertise necessary to assist the parties and the mediator during the settlement process.

The mediator will advise the participants of the procedures and establish ground rules. The early mediation sessions may include joint sessions with all parties, separate meetings, or both, as determined to be appropriate in the judgment of the mediator in consultation with the taxpayer's and DOR's representatives.

The mediator will use a Mediation Session Report to assist in planning the mediation session and to report on developments during the session(s). The Mediation Session Report will include a list of all issues approved for the Early Mediation Program, a description of the issues, the amounts in dispute, conference dates, a plan of action for the early mediation session(s) and other information useful to the process as determined by the parties and the mediator. The mediator also will prepare and update an agenda, which will guide the communications, set the order of issue discussion, pose questions to clarify the issues and guide the meetings. During the session(s), the mediator will provide decision makers from both parties with copies of the agenda and the early mediation session report.

Generally, the mediator will consider only those issues outlined in the early mediation session report, except by mutual agreement of the parties.

During the early mediation session(s), the mediator may propose settlement terms for any or all issues.

635.3.7  Third-Party Mediator
The taxpayer may request to provide a third-party mediator at the taxpayer's own expense, rather than (or in addition to) using a mediator provided by the Department of Revenue. The Department of Revenue will review the taxpayer's request to use a particular third-party mediator and in the department's discretion, may or may not for its part accept such request.  If the department does not approve the taxpayer's recommendation of a third-party mediator, the department at its option, may or may not allow the taxpayer to suggest an alternative third party mediator. The third-party mediator must be a professional trained in or otherwise qualified for mediation work, unrelated to either party, familiar with federal and Massachusetts tax law and issues, and not generally engaged in advocacy work in the state and local tax area. The third party mediator must agree that he or she will not consult with either party after the mediation process is complete.

635.3.8  Settlement Agreement
If the parties reach agreement as to the terms of a settlement, the parties will sign the Early Mediation Session Report, updated to reflect the settlement terms. After the parties and the mediator sign the Early Mediation Session Report acknowledging a basis of settlement, the mediator will draft the appropriate settlement summary to reflect the agreed-upon treatment of the issue. The settlement agreement will be drafted by the parties.

Settlements reached through the Early Mediation Program will be entered into under the authority of G.L. c. 62C, § 37C.

635.3.9  Time Limits for Early Mediation Program
The Early Mediation Program is designed to be an expedited method for resolving tax disputes. Generally, if the parties are unable to resolve the matter within four months, the matter will be removed from the Early Mediation Program and the taxpayer may pursue the traditional appeals process. Either party may withdraw from the mediation at any time.

635.3.10  Confidentiality of the Mediation Process
The mediation process is governed by the confidentiality provisions of G.L. c. 62C, § 21 and G.L. c. 233, § 23C. The disclosure of any tax information which is discussed during the mediation is limited by the disclosure provisions contained in G.L. c. 62C, § 21. Similarly, G.L. c 233, § 23C governs the confidentiality of memoranda and communication made in the course of the mediation.

During the course of the mediation, the mediator may meet with one party, without the other party present. Conversations which occur during the mediation process will be considered confidential settlement negotiations. The parties must agree that if the mediation fails to resolve the disputed matter, the mediator may not be called to testify in any subsequent litigation. Any information or documents provided to the mediator may not be disclosed by the mediator, other than by court order, to any party outside of the mediation without the express authorization of the taxpayer and the commissioner.

The parties to any mediation must agree that, if they are unable to resolve the dispute through mediation, any e-mail, correspondence or memoranda drafted for the purposes of the mediation and exchanged during the mediation process, including documents drafted and/or received by the mediator will be considered documents provided for settlement purposes and not subject to admission at the Appellate Tax Board or in any court without the express written approval of the commissioner and the taxpayer. Similarly, the substance of conversations and/or negotiations between the parties or with the mediator will likewise be considered confidential and inadmissible in proceedings before the Appellate Tax Board or any court.

 

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Put your name out there

The goal of section councils is to offer members opportunities for professional growth and development through participation in section activities. One opportunity available to section members is publishing articles which are of interest to fellow practitioners. The MBA provides several forums for articles by section members -- Lawyers Journal and the Massachusetts Law Review.  

If you are interested in writing an article for any of these publications or if you have seen articles which you think may be of interest to other Taxation Law Section members, please contact Jean Stevens at for more information regarding this opportunity.

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As an MBA member, we encourage you to both post items of interest to you, and the greater legal community, on these pages and comment on items already posted.

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