Workshop JJ Managing Appeals and Best Practices for Settlement and - - PDF document

28th Annual

Tuesday & Wednesday, January 29‐30, 2019

Hya Regency Columbus, Columbus, Ohio

Workshop JJ

Managing Appeals and Best Practices for Settlement and Pursuing Litigation

Wednesday, January 30, 2019 11 a.m. to 12:30 p.m.

Biographical Information Eleanor Palmer, Associate Vice President, Associate General Counsel, Corporate Tax, Office of General Counsel Nationwide Insurance, One Nationwide Plaza, Mailstop 1-32-102, Columbus, Ohio 43215 614-677-6330 palmere5@nationwide.com Eleanor Palmer is a tax attorney in the Office of General Counsel at Nationwide Insurance. She is responsible for identifying and managing Nationwide’s tax exposure and providing counsel on tax matters related to business initiatives. Eleanor has assisted with mergers and acquisitions, tax controversies, investment structuring, employee health & welfare and fringe benefits, agent and executive compensation and various projects presenting unintended tax consequences. In coordination with the Government Relations Team, Eleanor keeps abreast of federal, state and local tax legislation affecting the enterprise, its insurance agents and policyholders and advises the business units on the appropriate course of action. Prior to joining Nationwide, Eleanor was a Manager in Ernst & Young’s State and Local Tax Group. Eleanor is a graduate of The Ohio State University, where she received a Juris Doctor and a Master of Business Administration. She received a Bachelor of Science in Accounting from Oakwood University, and now serves on its National Alumni Association Board of Directors. Eleanor is admitted to the Ohio Bar and is most active with the Columbus Bar Association’s Business Tax Committee and the John Mercer Langston Bar Association. She has been a speaker on tax matters at the Ohio Tax Conference, the Columbus Bar Association, and the Association of Corporate Counsel. Eleanor is currently the chairperson of the Ohio Chamber of Commerce’s Taxation and Public Expenditures Committee. Christine T. Mesirow, Section Chief, Taxation, Ohio Attorney General 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 of 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.

Biographical Information Debora (Dardinger)McGraw JD, LLM,CPA, Member, Zaino Hall & Farrin LLC 41 South High Street, Suite 3600, Columbus, OH 43215 614-349-4813 Fax: 614-754-6368 dmcgraw@zhftaxlaw.com Deb is a member of the firm's Federal and Multistate Tax Practice Group. Deb has significant experience representing clients in various state and local tax controversies, including settlement

• negotiations. She also assists clients with a variety of federal income tax issues. Deb has

significant experience in conducting refund reviews and in assisting clients with tax planning including implementation by working with various client operational groups. Deb has worked with clients in various industry groups and has developed particular experience in the financial services and utility industries. Prior to joining the firm, Deb was a Director at PricewaterhouseCoopers where she worked for 16

• years. Prior to leaving PwC, Deb led the Columbus large company tax practice and served as

the lead contact for many Columbus based companies. She assisted clients with a variety of federal and state tax considerations including tax planning, corporate restructurings, federal and state controversy, corporate compliance, financial statement audits, etc. In particular, Deb excels at conducting federal and multi-state refund reviews for clients looking to improve cash flow or review their current tax positions. Deb led PwC's Ohio tax efforts nationally including negotiation of multiple Fortune 100 and 400 company audit settlements. She frequently used her refund review experience as offsets in Ohio and other state audits or to argue alternative positions. Deb handled the legislative analysis for the firm and acted as a national resource for other offices. She drafted updates that were circulated internally and to clients. Deb spoke regularly on client webcasts introducing new Ohio legislation, as well as, on federal and multistate tax considerations for internal PwC trainings. Deb served as the chair of PwC's local Women's Networking Circle for two years and the board for two additional years. The group was aimed at mentoring women in public accounting and providing them networking and support opportunities. She was voted coach of the year for the Ohio-Kentucky-Indiana cluster of PwC in 2009, the first year the award was offered. Deb is a frequent speaker and served as an adjunct professor at Capital University Law School.

2019 Ohio Tax Conference: Workshop JJ

January 30, 2019

Eleanor Palmer, Nationwide Christine Mesirow, Ohio Attorney General’s Office Debora Dardinger (McGraw), ZHF

Managing Appeals and Best Practices for Settlement and Pursuing Litigation

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Agenda

• Introductions
• Ohio Appeals Process
• Managing Cases and Settlement Negotiations in Ohio

and Nationwide

• Common Pitfalls

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Introductions

• Eleanor Palmer

– Associate Vice President/Associate General Counsel, Nationwide Mutual Insurance since August, 2006. – Manager, Ernst and Young LLP (August, 1998 to August, 2006).

• Christine Mesirow

– Chief of Tax Section, Ohio Attorney General’s Office since February, 2011. – Chief Legal Counsel, Ohio Department of Taxation (February, 2008 to January, 2011). – Director, Industry/Public Accounting – Tax Counsel, EDS – Assistant Attorney General, Ohio AG’s Office

• Debora (Dardinger) McGraw

– Member, Zaino, Hall, and Farrin LLC since January, 2013. – Director, PricewaterhouseCoopers LLP (January, 2007 to January, 2013)

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ODT Audit Process – Audit Division

• Notice of Audit
• Audit of Records

– Significant Change: Penalties imposed at audit division. Taxpayer must request abatement in writing and provide supporting reasons BEFORE the final proposal letter is issued. This policy is not set forth in any written guidance.

• Preliminary Proposal (“Letter of Confirmation” – SUT;

“Preliminary” CAT, PTE) – 30 Day Response

– Audit Division provides a summary of Recommended Assessment and supporting workpapers. – Taxpayer has the ability to respond to the proposed audit results. – Not a statutory deadline, an extension often available. – Taxpayer can request to make a payment on all or a portion of the audit.

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ODT Audit Process – Audit Division

• Final Proposal (“Audit Results Notification” – SUT; “Final” –

CAT, PTE)

– Formal notification of Audit Division’s position. – Informs the taxpayer that a Notice of Assessment will be sent separately.

• Notice of Assessment – 60 Day Response

– Taxpayer must file a Petition for Reassessment within 60 days from the date the Notice of Assessment was received. Petition for Reassessment Form available online at https://www.tax.ohio.gov/Forms.aspx. – By filing, the taxpayer is entitled to a review of the assessment by the Appeals Division of the Ohio Department of Taxation (“ODT”). – A taxpayer can pay the Notice of Assessment and request refund within 4 years of the date of payment.

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ODT Audit Process – Refund Process

• Desk Review of Refund

– Sometimes the refund will be sent to an audit team to complete a full audit or because the same taxpayer has an ongoing audit being audited.

• Preliminary Proposal (If Refund Adjusted): Taxpayer has the ability to

respond.

• Final Proposal

– Formal notification of Audit Division’s position.

• Appeal of Refund Denial – 60 Day Response

– Taxpayer must request a hearing and/or provide additional information within 60 days from the date the Final Proposal was received. No specific form required. – By filing, the taxpayer is entitled to a review of the refund denial by the Appeals Division of ODT.

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Audit Division Best Practices and Pitfalls

• Agreeing to a Plan of Audit that Can be Met
• Answering the Question That Has Been Asked
• Insufficient Documentation: For example, instead of providing a summary

schedule, should you be providing the underlying contract or invoice? Lack of documentation impacts the dollar amounts at issue, potentially impacting the ultimate resolution of the matter.

• Organizing the Materials to Clearly Direct the Auditor to the Answer
• Asking for Clarification on Information Requests: Confirm that the

information the agent seeks is in the information requested or whether another document would be more appropriate. Likewise, confirm whether the auditor just needs a portion of a voluminous document (e.g., a schedule in the federal return versus the entire return).

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Audit Division Best Practices and Pitfalls

• Clearly Describing the Facts Early On
• Review the Documentation Provided Like An Auditor
• Understanding All the Documentation you Provide Goes

Into the Record

• Not Responding on a Timely Basis: Failure to respond can

limit the auditor’s ability to make changes and may result in an assessment being certified to the Ohio Attorney General for collection, including collection fees.

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Audit Division Best Practices and Pitfalls

• Failing to File a Request for Penalty Abatement
• Negotiating/Requesting a Meeting at the Audit Division During the Audit
• Separately Addressing a Denial of a Refund: A taxpayer can submit additional

information or request an appeal of an initial denial of a refund but the 60 day deadline starts from the date of the denial letter.

• Not Requesting a Hearing: The request for hearing ensures that you can have

a conversation with the hearing examiner. Where information is merely sent in, the hearing examiner is not required to call and ask questions or request additional information.

• Filing a Refund Separately: A refund must be filed within the regular statute
• f limitations to be preserved at the Appeals Division.

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Appeals Division

• Review by a group of attorneys in ODT’s Appeals Division.
• Can submit information (and waiving a hearing), hearing over the

phone, or in‐person hearing.

• Informational hearing (not a tribunal) with hearing examiner to

discuss technical merits. The hearing may be the only chance for discussion with the hearing examiner.

• Witnesses statements not transcribed or recorded.
• Ability to negotiate a settlement of the matter. Appeals Division

can consider the risks of litigation.

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Appeals Division Best Practices and Pitfalls

• Avoiding Appeals: It currently takes approximately a year before a hearing is

scheduled and it may take a year or more for the matter to be resolved or a Final Determination to be issued. Taxpayers should attempt to resolve matters at the audit division, whenever possible.

• Providing All Arguments in Writing: In order to raise an argument at the Ohio

Board of Tax Appeals, the argument must have been raised in the Petition for Reassessment or a supplement to the Petition (in writing) before a Final Determination is issued. It is important that the taxpayer identify all potential issues and arguments to preserve its rights to raise such arguments at the BTA.

• Providing Sufficient Information at the Hearing or Promptly after the Hearing
• Failure to Make a Settlement Offer And/Or Follow Up with the Hearing

Examiner

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Appeal of a Final Determination (to BTA)

• Ohio Board of Tax Appeals (“BTA”): If a Final Determination (“FD”) is issued, the

taxpayer has 60 days from the date the FD is received to file a Notice of Appeals with the BTA and the Tax Commissioner. See next slide for non‐Tax Commissioner cases.

– In most instances, the taxpayer does not have to pay the assessment. In some situations, the taxpayer must pay the tax by the date the Petition for Reassessment is due.

• Attorney/Corporate Officer: Although the Ohio Supreme Court has refused to

dismiss a case that was filed by a non‐attorney, only an attorney can participate in discovery, questioning of witnesses, etc.

• Notice of Appeal: Must raise all arguments with a short, plain statement of the
• bjection.
• Right to Amend: Can amend Notice of Appeal within 60 days after Statutory

Transcript filed.

• Request a Hearing: The BTA is a tribunal. The rules of evidence apply. The hearing

allows exhibits and testimony to be entered into the record. Cannot just attach statements to Notice of Appeal.

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Types of BTA Cases

• Tax Commissioner Cases (SUT, CAT, PIT, PTE, FIT, several excise taxes,

public utility PPT, and real estate tax exemption cases, etc.): Proceed through the audit and appeals division of ODT and an adverse FD can be appealed to the BTA.

• Municipal Cases: The audit is conducted by the municipality (or its tax

administrator, such as RITA or CCA) and an assessment can be appealed to a municipal income tax local board of tax review (“Municipal Tax Board”). The decision of a Municipal Tax Board can be appealed by either party to the BTA, or by the taxpayer within 60 days to the Common Pleas Court.

• Real Property Cases: Real estate valuation, real estate classification,

CAUV cases, etc. are reviewed by the county Board of Revision. A decision of a Board of the Revision can be appealed to the BTA.

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Practice Before the BTA

• Case Management Schedule Established: With dates for amending the

appeal, discovery, identifying witnesses and evidence, etc.

• Tribunal: Important to establishing the record through testimony and

evidence.

• Briefing: The case management schedule calls for pre‐hearing briefs

but the parties typically request post‐hearing briefing.

• Opportunity to Request and Participate in Settlement Discussions
• Will Likely Take a Year or Two Before Resolved

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BTA Best Practices and Pitfalls

• Failing to Raise an Argument in the Notice of Appeal
• Not Having an Appropriate Representative
• Not Sufficient Jurisdiction: Filing at the BTA before a

Final Determination is issued, not filing with the Tax Commissioner, etc.

• Failing to Request a Hearing to Submit Evidence and

Provide Witness Testimony

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BTA Best Practices and Pitfalls

• Not Providing Binders/Copies at the Hearing
• Considering the Rules of Evidence in Evaluating the

Submission of Evidence

• Understanding the Burden is On the Taxpayer: Provide as

much support for the position as possible and ensure that testimony is supported by exhibits.

• Providing Company Representative and Expert Testimony

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BTA Best Practices and Pitfalls

• Try to Be Reasonable and Creative: Understand and communicate to

your client that the Tax Commissioner may reject the offer and refuse to provide a counteroffer so the offer should be reasonable in light of the

• case. Try to understand the Tax Commissioner’s position and be

creative in how your frame an offer or counteroffer.

• Settlement Offer Support: Understand that you have to convince both

the Asst. Attorney General and ODT that the settlement is appropriate. Provide a short summary to help them understand the key considerations.

• Advise Your Client: The representative should educate its client on

understanding information in the record, the time and risks involved in litigation, and the overall strength of the taxpayer and ODT’s position.

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Appeal to the Ohio Supreme Court (Tax Commissioner and Municipal Cases)

• 30 Days From BTA Decision: Either Party
• Mediation is Usually Scheduled by the Court
• Briefing: Filed shortly after the Appeal. Specific

requirements on formatting the brief, etc.

• Oral Arguments: 15 minutes before full court (must

request argument before full court within 20 days of Appellee’s brief) or Master Commissioner.

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Appeal to the Ohio Court of Appeals (Tax Commissioner and Municipal Cases) September 29, 2017 through September 12, 2018

• Historical: Either party could appeal a BTA decision directly to the Ohio

Supreme Court or a local court of appeals. Most tax cases were appealed to the Ohio Supreme Court.

• Change in Direct Appeal: The direct appeal to the Ohio Supreme Court was

repealed effective September 29, 2017. BTA decisions became appealable directly to a court of appeals with a discretionary appeal from Court of Appeals’ decision to the Ohio Supreme Court. Parties could move the Ohio Supreme Court to transfer the appeal to an Ohio Court of Appeals.

• Change Back for Tax Commissioner and Municipal Cases: The legislature

reinstated the direct appeal for cases that were originally determined by the Tax Commissioner cases (SUT, CAT, PIT, PTE, FIT, several excise taxes, public utility PPT, and real estate tax exemption cases, etc.) and cases originally determined by a municipal income tax board of tax review, effective September 13, 2018. As under prior law, the taxpayer can appeal to a Court of Appeals (instead of the Ohio Supreme Court).

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Appeal to the Ohio Court of Appeals (Real Estate Valuation, Classification, & CAUV Cases)

• 30 Days From BTA Decision: Either Party
• Mediation Usually Scheduled
• Briefing: Filed shortly after the Appeal. Specific

requirements on formatting the brief, etc.

• Oral Arguments: 15 minutes before full court (must

request argument before full court within 20 days of Appellee’s brief) or Master Commissioner.

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Ohio Supreme Court or Court of Appeals Best Practices and Pitfalls

• Too Late for Negotiations/Settlements?
• Watching Deadlines
• Review the Supreme Court Rules of Practice
• Preparing for Oral Arguments

Questions & Answers

Contact Information

Eleanor Palmer AVP, Associate General Counsel Proud Nationwide Member Office of the Chief Legal Officer W 614.677.6330 F 614.677.8034 Palmere5@nationwide.com Debora D. McGraw, Member Zaino Hall & Farrin LLC W 614.349.4813 C 614.595.5560 dmcgraw@zhftaxlaw.com Christine T. Mesirow Chief, Tax Section Ohio Attorney General’s Office 30 E. Broad St., 25th Floor Columbus, OH 43215 614.995.3753 Direct 614.466.5967 Main 866.459.6679 Fax Christine.mesirow@ohioattorne ygeneral.gov

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