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NYS Taxpayer Rights Advocate Outlines Services
By Jack Trachtenberg, JD

Established in 2009, the New York State Office of the Taxpayer Rights Advocate (OTRA) and its taxpayer rights advocate have already seen a number of results.

The efforts of New York’s OTRA have led to an enhanced Offer in Compromise program, previously available only in cases of bankruptcy or insolvency. In cases where payment of taxes in full would cause undue economic hardship, the New York State Department of Taxation and Finance can now accept settlements that are reasonable and justified under the circumstances. This program, which took effect in August 2011, helps taxpayers get a fresh start. Draft regulations are being proposed that will increase transparency.

In addition, the OTRA also helped to propose and implement a retroactive statute of limitations—which also went into effect in August 2011—that extinguishes tax debt after 20 years. This collection period begins on the first day a tax warrant could have been filed and can’t be extended without the consent of the taxpayer.

The following are several other accomplishments that resulted from the recommendations of the OTRA:

• A six-year time limit to docket sales tax warrants.
• Revised parameters for vacating tax warrants.
• A new “responsible person” policy for passive investors in LLCs and limited partnerships [detailed in Technical Memorandum TSB-M-11(6)S].
• Comprehensive auditor training and development of best practices for cash-intensive industries.
• Improved call center identification procedures.
• Sales tax interest netting policy.
• Steps to protect independence of Bureau of Conciliation and Mediation Services.

In addition to advocacy-specific public outreach events, efforts to engage taxpayers include a new website, which includes information on taxpayer rights and responsibilities, as well as links to Form DTF-911, Request for Assistance from the Office of the Taxpayer Rights Advocate. An online systemic-advocacy database has also been created to enable taxpayers to call attention to possible issues with tax law, policy or procedures.

Background

Tax advocacy successes like these have deep roots. The history of taxpayer advocacy began on a federal level: the Office of the IRS Taxpayer Ombudsman was created in 1979 and codified as the national taxpayer advocate under the IRS Restructuring and Reform Act of 1998. Represented in each state, the office is required to report to Congress independently and can’t be defunded by the IRS. The national taxpayer advocate is authorized to issue Taxpayer Assistance Orders, and the confidentiality of taxpayer communications is provided in statute. As of today, about 30 states have established similar offices.

Absent legislation codifying the characteristics of independence, impartiality and confidentiality, the OTRA seeks to promote these traits in its operations through administrative mechanisms, such as policies, procedures and organizational structure. These qualities, coupled with the ability to advance reforms when persuasion is ineffective, are deemed essential to an effective taxpayer advocate.

New York’s taxpayer rights advocate is a deputy commissioner-level appointment, independent of enforcement, who reports directly to the commissioner. The office employs eight full-time case advocates and one senior attorney. As a matter of policy, all communications may be kept confidential. Issues or cases may be elevated for review to the executive deputy commissioner or to the commissioner if, in a particular case, a certain program area (e.g.; Audit, Collections, Processing, etc.) does not agree with the advocate’s recommendation.

The OTRA balances enforcement with taxpayer service to ensure that the tax laws are reasonably and fairly applied, thereby relieving taxpayers of undue hardships and compliance burdens. It encourages voluntary compliance as the most cost effective and efficient means of tax collection. In this regard, the OTRA is an independent voice that supports the strategic mission of the Department of Taxation and Finance—to help ensure that all taxes are paid correctly, voluntarily and on time.

Key Responsibilities

Case advocacy is one of the key duties of the OTRA. Case advocacy involves direct involvement with taxpayers to resolve their specific tax issue. OTRA assists taxpayers when:

• tax debt is causing undue hardship or unnecessary compliance burdens,
• issues have not been resolved through normal department channels, or
• department procedures are not working as they should.

Since the OTRA was established in New York, the office has received approximately 4,000 requests for assistance from taxpayers. In about 70% of cases, the taxpayers received some or all of the relief they were requesting.

Another responsibility is systemic advocacy, which involves direct involvement with the Department of Taxation and Finance to investigate possible reforms to existing tax laws, regulations, policies or procedures. The OTRA engages in systemic advocacy when:

• the issue affects multiple taxpayers;
• the problem is caused by tax department systems, policies or procedures;
• the questions raised require study, analysis, administrative changes or legislative remedies.

Solutions produced by systemic advocacy must protect taxpayer rights, reduce or prevent taxpayer burden or ensure equitable treatment of taxpayers. (See image below for advocacy results.)

Source: The Department of Taxation and Finance, “The New York State Taxpayer Rights Advocate: Update on Case Advocacy and Systemic Reforms” by Jack Trachtenberg

Accepting Cases

The OTRA is generally not the venue of first resort. Except in cases involving imminent adverse action or undue harm, taxpayers must first try to resolve disputes through normal channels. Taxpayers should request assistance from the OTRA when:

• tax laws, regulations or policies are being administered unfairly or incorrectly, or impair the rights of the taxpayer;
• they are threatened by immediate adverse action or undue economic harm because of a disputed debt, or if the taxpayer believes the action is unwarranted, unfair or illegal;
• they face irreparable injury or long-term adverse impact if relief is not granted;
• there has been an undue delay by the Tax Department in providing a response or solution;
• the situation represents a systemic flaw that may adversely impact other taxpayers; or
• unique facts and circumstances warrant assistance from the advocate.

(See two items below for details on the OTRA.)

Source: The Department of Taxation and Finance, “The New York State Taxpayer Rights Advocate: Update on Case Advocacy and Systemic Reforms” by Jack Trachtenberg

Source: The Department of Taxation and Finance, “The New York State Taxpayer Rights Advocate: Update on Case Advocacy and Systemic Reforms” by Jack Trachtenberg

Jack Trachtenberg, JD, is the New York state taxpayer rights advocate and a deputy commissioner at the New York State Department of Taxation and Finance. He is an author, lecturer and an expert on tax and accounting issues, as well as adjunct professor at Albany Law School and the University of Buffalo Law School. Before his appointment as taxpayer rights advocate in October 2009, Mr. Trachtenberg was a senior associate with the law firm of Hodgson Russ LLP, where he specialized in tax law and tax-dispute resolution. He can be reached by e-mail at Jack.Trachtenberg@tax.ny.gov.