Texas Tax Administration Gets a C+

What does it take to make a fair state tax administration? The Council on State Taxation (COST) says a fair administration includes:

  • Even-handed statutes of limitations for refunds and assessments (no “pay to play” requirements)
  • Equalized interest rates on refunds and assessments
  • Due dates for corporate income tax returns at least 30 days beyond the federal due date with an automatic extension of the state return due date based on the federal extension
  • Adequate time to file a protest before an independent dispute forum (at least 60 days)
  • Reasonable and clearly defined procedures for filing amended state returns following an adjustment to a taxpayer’s federal corporate tax liability 
  • Transparency in the form of published letter rulings and administrative/tax tribunal decisions

COST not only describes a fair tax administration, but also rates the states on how they stack up against the criteria. COST has issued the latest version of its Scorecard on Tax Appeals & Procedural Requirements and gives Texas a C+ rating. Texas was downgraded for:

  • Requiring taxpayers to pay the tax to gain access to administrative or judicial review
  • Not having a truly independent administrative appeal because the Comptroller has the authority to modify or reject proposals for decision issued by the State Office of Administrative Hearings (SOAH)
  • Allowing only 30 days to file a protest
  • Requiring taxpayers to pay all taxes before pursuing an appeal in court
  • A higher interest rate on underpayments than on refunds
  • Recurring and significant issues related to inaccurate or multiple franchise tax notices

Texas-specific comments are found on page 33 of the report.

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