Ohio Tax Basic: You Talkin to Me? Useful Guidance to Help Tax - - PDF document

26th Annual

Tuesday & Wednesday, January 24‐25, 2017

Hya Regency Columbus, Columbus, Ohio

Ohio Tax

Workshop GG

Basic: You Talkin’ to Me? Useful Guidance to Help Tax Authorities & Taxpayers Speak the ‘Same Language’

Wednesday, January 25, 2017 11:00 a.m. to 12:30 p.m.

Biographical Information Fredrick J. Nicely, Senior Tax Counsel, Council On State Taxation (COST) 122 C Street, NW, Suite 330, Washington, DC 20001-2109 202.484.5213 fnicely@statetax.org Fred Nicely is Senior Tax Counsel for the Council On State Taxation. Fred’s role as Senior Tax Counsel at COST extends to all aspects of the COST mission statement: “to preserve and promote equitable and nondiscriminatory state and local taxation of multijurisdictional business entities.” Before joining COST, Fred served in the Ohio Department of Taxation for four years as Deputy Tax Commissioner over Legal and for the prior seven years as the Department’s Chief Counsel. Fred’s responsibilities at the Department included testifying before legislative committees, participating as an alternative delegate for Ohio at Streamlined Sales Tax Project meetings, and reviewing legal documents issued by the Department, including deciding the merits of filing an appeal. He is a frequent speaker and author on Ohio’s tax system and on multistate tax issues

• generally. Fred also has extensive experience in public utility tax law, having served as an

administrator of the Department’s public utility tax division. Fred’s undergraduate degree in psychology (with a concentration in accounting) is from the Ohio State University. He obtained his MBA and JD from Capital University in Columbus, Ohio. Shirley K. Sicilian, Managing Director of State and Local Tax Controversy, KPMG LLP 1801 K Street, NW, Ste. 12000, Washington, DC 20006 ssicilian@kpmg.com 202-533-3466 Fax: 202-379-7731 Shirley is National Director of State and Local Tax Controversy in KPMG LLP's Washington National Tax office. In this role, Ms. Sicilian is responsible for coordinating KPMG’s network of controversy specialists in every state and supporting delivery of KPMG controversy services nationwide. Prior to joining KPMG, Shirley was General Counsel for the Multistate Tax Commission, an intergovernmental agency whose membership includes forty-seven states and the District of

• Columbia. She previously served as Director of Policy and Research, and then General Counsel

for the Kansas Department of Revenue. Before working in the area of taxation, Ms. Sicilian worked in public utility regulation, serving as Chief of Economic Policy and as Assistant General Counsel for the Kansas Corporation Commission. Ms. Sicilian received the Paull Mines Award for Outstanding Contribution to State Tax Jurisprudence in July of 2013. And State Tax Notes named Ms. Sicilian as a finalist for its 2013 Person of the Year, citing her as “one of the most influential legal thinkers in the field.” Shirley is a graduate of the University of Kansas with a Masters of Economics and Juris Doctorate.

Biographical Information Christine T. Mesirow, Section Chief, Taxation, Ohio Attorney General Mike DeWine 30 E. Broad St.; 25th Floor, Columbus, OH 43215 614-995-3753 Fax: 866-459-6679 Christine.mesirow@ohioattorneygeneral.gov Christine has practiced in the area of state and local taxation for more than 25 years, in both the private and public sectors. She began her career in state & local tax as an assistant attorney general in the Taxation Section. Christine then moved to Dallas, where she gained experience in multistate tax issues affecting technology service providers as the state tax counsel for Electronic Data Systems Corp., representing the company in state tax controversies throughout the country. She later was a state & local tax consultant with PricewaterhouseCoopers and was

• f counsel with Bricker & Eckler LLP. Prior to her current appointment as chief of the tax

section, she served as the Chief Legal Counsel for the Ohio Department of Taxation. Christine’s broad range of experience in both tax controversy and tax administration issues provides her with an understanding of many issues confronted by those who must navigate the sometimes complex legal, policy and business issues challenging government and industry in the administration of and compliance with state tax law. Christine is a graduate of the Ohio State University Moritz College of Law. Eric S. Tresh, Partner, Sutherland Asbill & Brennan LLP 999 Peachtree St NE #2300, Atlanta, GA 30309 Eric.Tresh@sutherland.com 404-853-8579 Fax: 404-853-8806 Eric Tresh represents national and international companies in their state and local tax matters, including planning and policy, controversies and litigation, and mergers and acquisitions. He has represented many of the country’s largest companies in state and local tax controversies in administrative and judicial forums throughout the United States and resolved hundreds of non- public record cases. Eric has been recommended as a leading lawyer by Chambers USA, the Legal 500 US and has written extensively in the area of state and local taxation. His articles have appeared in several publications, including State Tax Notes, the Journal of State Taxation Practical U.S./Domestic Tax Strategies, and the Interstate Tax Report. A frequent lecturer on state and local taxes, Eric speaks before such organizations as the Council on State Taxation, the Tax Executives Institute, the Broadband Tax Institute, the State Tax Roundtable for Utilities and Power (STARTUP), the Wireless Tax Group, TeleStrategies, New York University's Institute on State and Local Taxation, Georgetown University Law Center's Advanced State and Local Tax Institute. He has also taught several classes on state and local taxation serving as an adjunct professor of law at Georgia State University and lecturing at the Tax Executive Institute and Counsel on State Taxation’s annual schools on state taxation. Eric is a graduate of State University of New York at Stony Brook where he received his B.A. He also attended the University of South Carolina School of Law where he received his J.D.

Biographical Information Barb Barton Weiszhaar, Head of Global Tax HP Inc. 5400 Legacy Drive, Plano, TX 75024 barb-tax.barton@hp.com

• Ms. Weiszhaar is the SVP Global Tax, HP. The tax team has 120 team members in 28
• countries. Prior to becoming the Head of Global Tax, Ms. Weiszhaar was a VP in HP’s global

tax team leading provision, operations, global transaction taxes, systems and processes, and global client/vendor deals. Prior to HP, Ms. Weiszhaar was tax director of EDS and has over 28 years of tax experience. She is an active member in several finance working groups, HP’s North Texas LGBT Exec Sponsor, and Exec Sponsor of the Global High Potential Mentoring Program. She has a strong passion for excellence in tax reporting, client negotiations and strategies, and has previously received a client service award for tax support and awarded sales inner circle.

• Ms. Weiszhaar has an MBA from UNT and a B.B.A. in Accounting from Texas State. She was
• n the Dallas Chapter Board of Directors for Tax Executives Institute (TEI); previous chapter

president; and is currently an officer and Board Member for the Council on State Taxation and the Komen North Texas Board. Outside of work, Ms. Weiszhaar likes to spend time with family, friends, and her charities of child advocacy and animal rescue.

• Ms. Weiszhaar’s current office location is Plano, Texas.

You Talkin’ to Me?

UNDERSTANDING THE DRIVERS AND OBSTACLES THAT CAN TANK EFFORTS TO RESOLVE TAX DISPUTES, AND STRATEGIES FOR FINDING COMMON GROUND

UNDERSTAND THE PROCESS

• HOW FORMAL IS THE FIRST LEVEL OF REVIEW?
• AT WHAT LEVEL WITHIN THE DEPARTMENT ARE THE

PERSONNEL INVOLVED IN THAT REVIEW?

• IS ISSUE PRIMARILY LEGAL INTERPRETATION OR

UNDERSTANDING OF DOCUMENTATION AND BUSINESS?

• WHAT IS THE NEXT LEVEL, IF UNSUCCESSFUL AT FIRST LEVEL,

AND HOW DOES IT DIFFER?

25% 25% 25% 25%

Where should the first level of review

• ccur?
• A. It should be with

the auditor

• B. It should be with

the auditor and supervisor

• C. The audit division
• D. Department’s

appeal division

Yes, but not for the taxpayer Yes, but not for the tax agency No for both parties Yes, only if both parties agree 25% 25% 25% 25%

Should the first level of review establish any kind of record?

• A. Yes, but not for the

taxpayer

• B. Yes, but not for the

tax agency

• C. No for both parties
• D. Yes, only if both

parties agree

25% 25% 25% 25%

What are your thoughts on tape recording the initial review?

• A. Yes, if both parties

agree

• B. Heck no
• C. Yes, only if the

taxpayer agrees

• D. Yes, only if the

department agrees

A. B. C. D. 25% 25% 25% 25%

A tax matter is over $1 million – when should a tax agency’s upper management get involved?

• A. Not until the refund

is denied or assessment issued

• B. At any time
• C. Not until the formal

hearing is held

• D. Not until the issue is

appealed outside the department

None Should be made aware before making

• ther

contact Should be made aware after making

• ther

contact Always before making

• ther

contact 25% 25% 25% 25%

If going around the audit division, what contact should a business make to that division?

• A. None
• B. Should be made

aware before making

• ther contact
• C. Should be made

aware after making

• ther contact
• D. Always before making
• ther contact

Yes, necessary Yes, but not by much No, there both addressing a dispute 33% 33% 33%

Should the handling of the appeal process vary based on whether the issue is a legal interpretation

• r an understanding the facts (of the business)?
• A. Yes, necessary
• B. Yes, but not by

much

• C. No, they’re both

addressing a dispute

Yes, as long as the taxpayer agrees Yes, need at least two reviews No, waste of time 33% 33% 33%

Should a tax agency have multiple appeals with the agency before appealing to an independent reviewer?

• A. Yes, as long as the

taxpayer agrees

• B. Yes, need at least

two reviews

• C. No, waste of time

20% 20% 20% 20% 20%

Should all subsequent review/appeal hearings be on the record?

• A. Yes, as long as the

taxpayer agrees

• B. Yes, if the tax

agency agrees

• C. Yes, automatically
• D. No, bad idea
• E. No, waste of

expense

PURPOSE OF FIRST LEVEL REVIEW

• TRULY A REVIEW FUNCTION IN NATURE OF QUALITY

CONTROL

• WAS THE AUDIT DONE IN ACCORDANCE WITH

DEPARTMENT’S PROCEDURES

• WAS THERE CONFUSION ABOUT THE DOCUMENTATION

REVIEWED?

• WAS THE CORRECT POLICY APPLIED AT AUDIT LEVEL?
• DOES THE APPLICATION OF THE POLICY TO YOUR

SITUATION MAKE SENSE?

Yes, usually cleans up the issues Depends, really case by case Depends, really state by state No, usually a waste of time 25% 25% 25% 25%

Do you think the first level of review works well to clean up errors?

• A. Yes, usually cleans

up the issues

• B. Depends, really case

by case

• C. Depends, really

state by state

• D. No, usually a waste
• f time

20% 20% 20% 20%

Are audits often conducted in a rogue manner (e.g., tax agency’s standard procedures are not followed)?

• A. There are no

standards

• B. Yes, the audit

manual is not followed

• C. No, but review fixes

issue

• D. No, have to appeal

to have issue fixed

25% 25% 25% 25%

At first level review, both the tax agency and taxpayers tend to understand the issues/documentation?

• A. Yes
• B. Yes, problem is on

subsequent appeals

• C. No, one side seems

lost

• D. No, both sides seem

confused

Make sense, but not followed Make sense and generally followed Do not make sense and glad not followed Do not make sense and frustrated they are followed 25% 25% 25% 25%

Regarding a tax agency’s policies, how often do the policies make sense?

• A. Make sense, but not

followed

• B. Make sense and

generally followed

• C. Do not make sense

and glad not followed

• D. Do not make sense

and frustrated they are followed

BEST PRACTICES FOR PRESENTATION AT INITIAL REVIEW LEVEL

• MEMO SUCCINTLY EXPLAINING ISSUE AND

APPLICABLE LAW

• DOCUMENTS ORGANIZED IN BINDER AND

SAMPLE WALK‐THROUGH OF THEM

• PROPOSAL OF A FRAMEWORK FOR

SETTLEMENT.

A. B. C. D. 25% 25% 25% 25%

Do you agree a detailed memo should always be provided at the initial review?

• A. Absolutely
• B. Sometimes, can
• ften be brief

summary

• C. No, should only be a

brief summary

• D. Too formal, no

memo should be provided

Always Sometimes, if a complex issue No, should

• nly be an

informal review 33% 33% 33%

Besides a memo, should a binder of documentation be provided (law and/or facts) at the initial review?

• A. Always
• B. Sometimes, if a

complex issue

• C. No, should only be

an informal review

Always Sometimes, especially if big dollar issue No, wrong time 33% 33% 33%

Should framework and/or proposal for settlement be discussed at the initial review?

• A. Always
• B. Sometimes,

especially if big dollar issue

• C. No, wrong time

FACTORS THAT MAY ENABLE SETTLEMENT AT FIRST LEVEL

• PROBLEMS WITH AUDIT THAT AGENCY MIGHT

NOT WANT TO HIGHLIGHT

• ISSUE IS NOT CONTINUING AND NOT OF

GREAT IMPORTANCE TO STATE

• SETTLEMENT PROPOSAL IS REASONABLE

20% 20% 20% 20% 20%

Has your company (or tax agency) settled an issue based on one of the following at the first level?

• A. Embarrassing

problems with audit

• B. Not an on going

issue

• C. Darn reasonable
• D. More than one of

the above

• E. None of the above

WHEN SETTLEMENT AT FIRST LEVEL IS NOT LIKELY

• YOUR INTERPRETATION OF LAW IS COUNTER TO

PUBLICLY STATED POSITION OF THE ADMINISTRATION

• ISSUE IS PRIMARILY ONE OF LEGAL INTERPRETATION
• REFUND IS AT ISSUE
• MANY OTHER TAXPAYERS COULD RAISE THE SAME

ISSUE

• THESE ARE NOT TYPICAL CONCERNS ADDRESSED BY

THE FIRST LEVEL REVIEW PERSONNEL

20% 20% 20% 20% 20%

When is it least likely for a taxpayer (or tax agency) to settle an issue at the first review level?

• A. Different

interpretation of the law

• B. Issue only addresses

legal interpretation

• C. Refund issue
• D. Issue of other

taxpayers

• E. Against it at first

review level

NEXT LEVEL REVIEW—OHIO BOARD OF TAX APPEALS

• EVIDENTIARY HEARING WITH WITNESSES AND

RECORD

• AG’S EXPERIENCED IN LITIGATION REPRESENT

TAX COMMISSIONER

• NEW OPPORTUNITY TO BROACH SETTLEMENT

No, resolve at lowest level Depends

• n the

issue Depends

• n the

state Yes, tax agency is usually more serious 25% 25% 25% 25%

When settling tax issues, do you think it is best to wait until the appeal is filed outside the tax agency?

• A. No, resolve at

lowest level

• B. Depends on the

issue

• C. Depends on the

state

• D. Yes, tax agency is

usually more serious

HOW BEST TO ENGAGE THE OTHER SIDE IN SETTLEMENT DISCUSSIONS

• TELL OPPOSING COUNSEL THAT YOU WOULD LIKE TO HAVE A

DISCUSSION ABOUT THE CASE AND THE DEPARTMENT’S POSITION AFTER THEY HAVE REVIEWED THE FILE

• AFTER RECORD IS FILED WITH BTA, PREPARE A MEMO LAYING OUT

THE ISSUES AND THE FACTUAL AND LEGAL BASES FOR YOUR CLIENT’S POSITION

• ENGAGE IN DISCUSSIONS WITH OPPOSING COUNSEL TO TEST THE

WATERS AND A POSSIBLE FRAMEWORK FOR SETTLEMENT

• ASK FOR A MEETING WITH DEPARTMENT PERSONNEL WITH

AUTHORITY TO SETTLE OR WHOSE RECOMMENDATION OF A SETTLEMENT IS HELPFUL TO DISCUSS POSSIBILITIES

A. B. C. 33% 33% 33%

What do you think is the best practice to engage settlement discussions?

• A. Ask opposing counsel

to discuss case after reviewing it

• B. Test waters with
• pposing counsel
• C. Focus on getting the

tax agency engaged in seeking settlement

DRIVERS FOR SETTLEMENT: TAXPAYER

• CERTAINTY
• LEGAL COSTS
• PERSONNEL COSTS
• DISCOVERY MAY REVEAL OTHER ISSUES
• TIME

17% 17% 17% 17% 17% 17%

What do you think is the biggest driver for taxpayers to seek a settlement (in general)?

• A. Lack of certainty
• B. Legal costs
• C. Internal personnel

costs

• D. Not having other

issues revealed

• E. Time constraints
• F. Other

DRIVERS FOR SETTLEMENT: GOVERNMENT

• RISK OF ADVERSE DECISION IN COURT
• RESOURCES NECESSARY FOR PROTRACTED

LITIGATION

• RISK OF LEGISLATIVE RESPONSE
• BUDGET

20% 20% 20% 20% 20%

What do you think the biggest driver for a tax agency to seek a settlement (in general)?

• A. Adverse decision

concerns

• B. Resources for

protracted litigation

• C. Legislative response
• D. Governor response
• E. State budget

concerns

SETTLEMENT CONSIDERATIONS

• DOES THE ISSUE HAVE IMPACT FOR THE

TAXPAYER OUTSIDE OF THIS STATE?

• IS THE ISSUE CORE TO THE BUSINESS MODEL OR

CENTRAL TO THE STATE LAW?

• IS YOUR SITUATION UNIQUE, OR WOULD

RESOLUTION OF YOUR ISSUE HAVE APPLICATION TO MANY OTHER TAXPAYERS?

• WHAT ARE THE HAZARDS OF LITIGATION?

25% 25% 25% 25%

In general, my thoughts on the settlement process is:

• A. Terrible, law is black

and white

• B. Depends, lean

towards disapproval

• C. Depends, lean

towards it being good

• D. Great, my glasses

are always foggy

HOW BEST TO MOVE SETTLEMENT FORWARD AT THE MEETING

• PREPARE A WRITTEN DOCUMENT OUTLINING

THE ISSUES AND LEGAL AND FACTUAL SUPPORT

• PRESENT A WRITTEN PROPOSAL FOR
• SETTLEMENT. IF ISSUE IS CONTINUING, HOW

WILL IT BE HANDLED ON A GO FORWARD BASIS?

• PROVIDE A RATIONALE IN SUPPORT OF

SETTLEMENT—HAZARDS OF LITIGATION, EASE OF TAX ADMINISTRATION UNDER THE SETTLEMENT

CASE STUDY

• Taxpayer:

Large company operating in 50 states

• Motivation:

Over paid tax, needs refunds

• Issue:

State is pre‐empted from taxing certain receipts under federal statutory law

• Meeting:

No dice. Why?

GENERALLY, HELPFUL OR UNHELPFUL?

• ENGAGE LEGISLATORS TO TELEPHONE ON YOUR BEHALF
• LEAD DISCUSSION WITH NUMBER OF PEOPLE YOU EMPLOY
• BRING GOVERNMENT AFFAIRS REPRESENTATIVE
• BRING LAW PROFESSOR
• RAISE CONSTITUTIONALITY OF STATUTE
• PROMISE SETTLEMENT WILL BE CONFIDENTIAL

Yes, they can help Depends on the issue and the legislator’s involvement is the law No, generally a bad idea 33% 33% 33%

Do you think it is helpful for taxpayers to engage legislators on tax controversy issues?

• A. Yes, they can help
• B. Depends on the

issue and the legislator’s involvement is the law

• C. No, generally a bad

idea

Yes, they can help explain the facts Depends on the issue and what facts are in dispute No, I prefer legal counsel take the lead 33% 33% 33%

Do you think it is helpful for a business to include multiple folks from the business?

• A. Yes, they can help

explain the facts

• B. Depends on the

issue and what facts are in dispute

• C. No, I prefer legal

counsel take the lead

25% 25% 25% 25%

Do you think it is helpful for a business to bring in a government affairs person?

• A. Yes, they know the

politics

• B. Depends on the

circumstances, lean no

• C. Depends on the

circumstances, lean yes

• D. No, bad form

20% 20% 20% 20% 20%

Do you think it is helpful for taxpayers and/or a tax agency to bring in a law professor?

• A. Yes, either side
• B. Yes, only taxpayers
• C. Yes, only the state
• D. Rarely, depends on

the circumstances

• E. No, that’s what legal

counsel is for

25% 25% 25% 25%

Do you think it is helpful to raise the constitutionality of a law?

• A. Yes, only if clearly

unconstitutional

• B. Yes, even if remote
• C. Rarely, depends on

the circumstances

• D. No, that’s for a court

to decide

20% 20% 20% 20% 20%

Most settlements have a confidentiality provision – do you believe they remain confidential?

• A. Not really, state tax

agencies share the info

• B. Not really, taxpayers

share the info

• C. Both A & B
• D. Yes, but a court can

force disclosure

• E. No, what a joke

!! Thanks for Attending !! Any Questions?

Contact Information Barb Barton‐Weiszhaar, HP Inc.

Barb‐Tax.Barton@hp.com

Christine Mesirow, Ohio Attorney General

Christine.Mesirow@ohioattorneygeneral.gov

Fred Nicely, COST

Fnicely@cost.org

Shirley Sicilian, KPMG

SSicilian@kpmg.com

Eric Tresh, Sutherland, Asbill & Brennan LLP

Eric.Tresh@sablaw.com