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New Tax Tribunal Busy, Backs No-Show Wedding Chapel

When last we visited the Alabama Tax Tribunal, in a January 2015 Business Alabama story called “Long Road to Tax Fairness,” the renamed Administrative Law Division of the Alabama Department of Revenue was fresh out of the Tax Fairness Act incubator.

Since that time, there’s been significant movement. Under the new system, a tax expert independent of the Alabama Department of Revenue hears tax appeals, and taxpayers don’t have to pay disputed taxes before their appeal. In May 2014, Gov. Robert Bentley appointed Judge Bill Thompson as the first chief judge of the Alabama Tax Tribunal. Thompson was eminently qualified, having served as the first and only revenue commissioner-appointed chief administrative law judge with the Department of Revenue since 1983. 

Judge Thompson told Business Alabama recently that in past years, the former system averaged from 900 to 1,200 appeals a year. “So far this calendar year, we have had about 430 filed, or way above average. We have had a smooth transition with only a few slight, statutorily mandated changes that have caused no problems to date.” 

The spike in appeals indicates that lawyers handling the so-called “big cases” are opting for the Tax Tribunal because they now feel they’ll get a fair shake, according to Birmingham tax attorney Bruce Ely, of Bradley Arant Boult Cummings. Ely was recognized with a national award from New York University in 2013, in part for his decade-long advocacy of the Alabama Taxpayers’ Bill of Rights II, which he co-authored.

“Also, knowing now that appeals from their assessments are going to Judge Thompson, a lot of cases at the city and county level are being settled more favorably to the taxpayer, suggesting that city and county hearing officers knew they had some home court advantage before this. We now have accountability so they’re more likely to settle at the local level than before,” Ely says.

Judge Thompson recently issued his first ruling involving the scope of his authority as a judge when the taxpayer did not specifically raise an argument or defense in a notice of appeal. The issue involves whether a Tax Tribunal Judge may invalidate an Alabama Department of Revenue regulation, even though the taxpayer challenging the underlying assessment did not attack the regulation in pleadings or at the hearing. 

Stone Bridge Farms LLC v. State of Alabama Department of Revenue, ATT Docket No. S. 14-510 (January 27, 2015) involves a company that owns a wedding chapel, a banquet room and three nearby chalets on the property that are rented to overnight guests. The complication arose when the Alabama Department of Revenue audited the taxpayer and wanted additional lodgings tax beyond that of the chalets, based on the proceeds from the rental of the wedding chapel, banquet room and other amenities.

The case had many twists and turns, including whether Judge Thompson could rule that a Department of Revenue regulation was invalid and whether he had jurisdiction if the taxpayer failed to attend the appeal hearing. Along with quoting the Business Alabama article in support of his argument that the Tribunal had been created to simplify such proceedings, the judge also wrote, “Fundamental fairness mandates that a taxpayer should not be required to pay a tax that is not due under Alabama law.”

Thompson denied the Department of Revenue’s motion for rehearing and affirmed his final order, which the state is now appealing to Cullman County Circuit Court. The department had no comment for this story, citing pending litigation. 

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