United States: Once Again, Alabama Ranks Near Bottom On COST Due Process Scorecard

On December 16, 2013, the Council On State Taxation (COST) released its fifth edition of the COST Due Process Scorecard on Tax Appeals and Procedural Requirements. For the second time in as many scorecards, Alabama ranked in the select group of states that scored the worst—a group that includes Arkansas, California, Colorado, Louisiana, and Nevada. Alabama's "D" score tied for third worst, was unimproved since the 2010 COST scorecard, and related primarily to the state's lack of an independent prepayment tax appeals tribunal and relatively short appeal periods for both preliminary and final assessments.

There is still hope for Alabama, however. Pennsylvania received the "most improved" award in this edition of the scorecard, having jumped from a D ranking (like Alabama) to an A- and earning a "top states" ranking, mainly through legislative reform to provide an independent tax appeal tribunal. If the Alabama Taxpayers' Bill of Rights II (TBOR II) passes in the upcoming 2014 legislative session, we see no reason why Alabama cannot follow Pennsylvania's lead. According to Doug Lindholm, President of COST:

"We're confident that Alabama in 2014 will join the rank of states with independent tax tribunals. It's a common sense fix to the State's tax system, and will go a long way towards improving the perception of Alabama as a balanced, fair and effective place to do business."

On a related note, the House Republican Caucus of the Alabama Legislature recently endorsed TBOR II and pledged to move the bill quickly through the House of Representatives. During the past three legislative sessions, however, the House has never been the impediment, voting for the bill unanimously last session and nearly unanimously in the previous two sessions. The bill's lead House sponsor and well-respected attorney, Rep. Paul DeMarco (R-Homewood), pledged to lead the effort again on the House side, calling on the Senate leadership and Governor Robert Bentley (R) to make the bill a priority in the upcoming session. Senator Bryan Taylor (R-Prattville) will again lead the effort on the Senate side.

The COST scorecard evaluates the rules governing the degree of taxpayer access to an independent appeals process and the state's treatment of selected procedural elements that affect taxpayers' perceptions of fairness and efficiency. In the former category, COST's criteria require the following:

  • The appeals forum must be truly independent;
  • Taxpayers must not be forced to pay or post a bond prior to an independent hearing and resolution of a dispute;
  • The record for further appeals must be established before an independent body; and
  • The arbiter at the hearing must be well-versed in the intricacies of state tax laws and concepts.

The COST scorecard also focuses on procedural fairness, including whether the state has adopted:

  • Even-handed statutes of limitations for refunds and assessments (not including an extended statute of limitations for assessments involving 25% understatements);
  • Equalized interest rates on refunds and assessments (not including the typical penalty rate for large corporate underpayments);
  • Due dates for corporate income tax returns that are at least 30 days beyond the federal return 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;
  • Reasonable and clearly defined procedures for filing amended state income/franchise tax returns following an adjustment (by the IRS) to a taxpayer's federal corporate tax liability; and
  • Any additional ineffective, burdensome, or inequitable practices, such as contingent fee audits, duplicative local revenue departments, use of outside counsel to litigate cases, or retroactive penalties, etc.

Applying those criteria to Alabama, COST dinged the state especially hard with respect to the lack of an independent dispute forum, a pay-to-play requirement to gain access to circuit court, a short, 30-day nonextendable appeal period by taxpayers, and "other issues." Alabama also received a demerit for "lamentably failing to establish an Alabama Tax Appeals Commission again this year, missing multiple opportunities to improve its tax administration and business climate."

The 2013 legislative session was the third time in as many years in which TBOR II garnered overwhelming support from Alabama legislators yet failed to pass. As readers may recall, TBOR II passed both houses easily in 2012 but was pocket vetoed by Governor Bentley after the session adjourned because of the Legislative Reference Service's failure to include certain last-minute amendments in the bill. This past legislative session, the Alabama House passed TBOR II unanimously, as did a Senate committee, only to have the bill die on the floor of the Senate without a vote. COST says it hopes "2014 is the year the legislature will finally push this legislation over the top."

Three out of four of COST's major concerns and two of its lesser concerns would be addressed by TBOR II. Under the current version of the bill (2013 H.B. 223/S.B. 264), an independent tax tribunal known as the Alabama Tax Appeals Commission (ATAC) would be created by abolishing the current Administrative Law Division and transferring both the personnel (including its only administrative law judge) and equipment to a newly formed state agency under the executive branch. TBOR II's provisions for establishing the ATAC are patterned in large part after the ABA's Model State Administrative Tax Tribunal Act. In addition, the time period for filing a notice of appeal from a final assessment and a petition for review from a preliminary assessment would both be extended from 30 days to 60 days.

Regarding the creation of the ATAC, Rep. DeMarco characterized TBOR II as an "economic development bill. An independent appeals agency would foster economic development by giving businesses more confidence in the state's tax system." He added that "most other states have tax courts that don't answer to the states' revenue departments," pointing to Georgia and Illinois as two of the most recent states to enact pro-taxpayer legislation to that end.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

In association with
Related Topics
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions