SF 524 (LSB 1705SV (2) 91)

SENATE FILE 524

BY  COMMITTEE ON JUDICIARY

(SUCCESSOR TO SSB 1005)

(COMPANION TO HF 773 BY COMMITTEE ON JUDICIARY)

A BILL FOR

An Act relating to awarding the costs in administrative hearings or court proceedings involving the collection of tax, penalties, and interest by the department of revenue.
BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:

    Section 1.  Section 421.60, subsection 4, paragraph a, Code 2025, is amended by striking the paragraph and inserting in lieu thereof the following:
   a.  A prevailing taxpayer in an administrative hearing or a court proceeding related to the determination, collection, or refund of a tax, penalty, or interest shall be awarded reasonable costs by the department or a court that are incurred subsequent to the issuance of the notice of assessment or denial of claim for refund in the proceeding, based upon the following:
   (1)  Reasonable court costs.
   (2)  Reasonable prevailing market rates based upon the services provided including but not limited to:
   (a)  Expert witnesses.
   (b)  The cost of a study, engineering report, test, analysis, or project that is found by the director of revenue or court to be necessary for the preparation of the case of the taxpayer.
   (c)  Fees paid or incurred by the taxpayer for the services of an independent attorney or accountant including fees paid or incurred in obtaining costs under this subsection.
    Sec. 2.  Section 421.60, subsection 4, paragraph c, Code 2025, is amended to read as follows:
   c.  For purposes of this section, “prevailing taxpayer” means a taxpayer who establishes that the position of the state was not substantially justified and who has substantially prevailed with respect to the amount in controversy or has substantially prevailed with respect to the most significant issue or set of issues presented. The determination of whether a taxpayer is a prevailing taxpayer is to be determined in accordance with chapter 17A.  If the taxpayer establishes that the taxpayer has substantially prevailed with respect to the amount in controversy or has substantially prevailed with respect to the most significant issue or set of issues presented, the burden of proof shifts to the department of revenue to prove that the position taken by the department was substantially justified. If the department meets the burden by proving the position of the department was substantially justified, the taxpayer shall not be considered a prevailing taxpayer.
EXPLANATION
The inclusion of this explanation does not constitute agreement with
the explanation’s substance by the members of the general assembly.
   This bill relates to the costs of litigation in administrative hearings or court proceedings involving the collection of tax, penalties, and interest (dispute) by the department of revenue (department).
   The bill changes the costs allowed to be recovered in the dispute. The costs allowed to be recovered under the bill include reasonable court costs; reasonable prevailing market rates for expert witnesses, studies, tests, analysis, or special projects; and reasonable attorney or accountant fees including fees related to the recovery of costs allowed under the bill.
   The bill strikes the current $25,000 cap recoverable by a taxpayer in a dispute.
   Under the bill, if the taxpayer substantially prevails in the dispute relating to the amount in controversy or issues involved, the burden of proof shifts to the department to prove that the position of the department was substantially justified. If the department proves the position of the department was substantially justified, the bill prohibits the taxpayer from recovering an award in the dispute. If the taxpayer prevails, the bill requires the department to pay the reasonable costs described in the bill. Under current law, the taxpayer must prove the position of the department was not substantially justified in addition to the amount in controversy and issues involved.