News and Insights

Texas Comptroller Implements New Procedures in Tax Hearings

Tax Development Feb 19, 2007

Recently, the Texas Comptroller of Public Accounts (Comptroller) transferred the administrative law judges (ALJs) from her office to a separate agency, the State Office of Administrative Hearings (SOAH). As an immediate consequence, oral hearings scheduled for January and February have been postponed pending the development of new procedures and rules to govern the administrative hearings process. We expect the delayed hearings to be rescheduled in the near future.

In order to implement the changes, the Comptroller proposed new rules of practice and procedure. If adopted, the rules would segregate the hearings process into three distinct phases: the prehearing phase, the hearing phase, and the posthearing phase.

The prehearing phase remains solely within the Comptroller's jurisdiction. During this phase, taxpayers may request redetermination or refund hearings, exchange discovery, and negotiate with the Assistant General Counsel (AGC) assigned to the case. Following discovery and negotiation, the AGC will issue a position letter. If the taxpayer disagrees with the position letter, the taxpayer, within 45 days, must submit a reply to the position letter, all supporting evidence, and a form selecting either an oral hearing or a hearing on written submissions. This triggers the hearing phase of the proceeding. After the reply is filed, the AGC will have 45 days to file a response. If the response does not resolve the case to the taxpayer's satisfaction, the AGC will refer the case to SOAH for docketing.

The hearing phase falls within the jurisdiction of SOAH. Upon the AGC's request, SOAH will set the case for hearing and assign an ALJ. During this phase, all pleadings and arguments are made before the ALJ, and SOAH's rules of practice govern. After the oral hearing, if any, has been held and the record has closed, the ALJ will issue a Proposal for Decision (PFD) to the taxpayer and the Comptroller. The PFD contains the ALJ's proposed findings of fact and conclusions of law, and marks the end of the hearing phase.

Following issuance of the PFD, the case is again within the Comptroller's jurisdiction. The taxpayer and AGC may submit exceptions to the PFD to the Comptroller. The Comptroller will review exceptions, change the findings of fact and conclusions of law at her discretion, and issue a Comptroller's Decision. If the taxpayer or AGC wishes to request a rehearing, the motion for rehearing will be filed with the Comptroller and either be granted, denied, or overruled by operation of law. (Deadlines and procedures for filing suit in district court have not changed.)

Although the transfer of the ALJs has caused some delays, the new procedures should not affect our practice adversely. As before, we will continue to work diligently with the AGCs to narrow the issues and, to the extent possible, resolve our clients' cases during the prehearing phase. We are qualified and prepared to appear in hearings before the ALJs at SOAH and to prosecute our cases through the conclusion of the administrative hearings process.