Possible Responses to the Awfulness of a Notice Of Determination From The Texas Comptroller of Public Accounts

Within anodyne envelopes, awfulness sometimes lurks. One such awfulness is a notice of determination from the Texas Comptroller of Public Accounts.

See, the Comptroller is charged with collecting a wide variety of taxes, including sales and use tax, franchise tax, motor vehicle sales, rental, and use tax, mixed beverage sales tax and gross receipts tax, and oil and gas production tax. If the Comptroller believes a taxpayer is delinquent in a certain tax, he may independently determine the amount of tax due. When this happens, the Comptroller is required to serve on the taxpayer, either by mail or in person, a notice of determination.

Thus, a notice of determination is a document (sometimes called a “Notification of Audit Results”, “Notification of Exam Results”, or “Notice of Tax/Fee Due”) setting out the amounts of tax, penalties, and interest the Comptroller believes are due.

The effects of a notice of determination vary according to whether the Comptroller has made a normal deficiency determination or a jeopardy determination. A normal deficiency determination becomes final 30 days after the date of service, with the amount of the determination becoming due and payable 10 days later.
On the other hand, a jeopardy determination becomes final 20 days after the notice of determination is served, with the amount of the determination due and payable immediately as of the date of service.

Once a determination becomes due and payable the Comptroller may file liens and levies, freeze assets, suspend permits, and/or file criminal charges to collect the amount of the determination.

As you can imagine, based on the above, ignoring a notice of determination almost always ends badly. Luckily, there are a couple other, more proactive ways to respond. (It may be a good idea for taxpayers to talk with a tax professional or an attorney before deciding on which way is right for them.)

First, if a taxpayer is currently unable to pay and/or wants to dispute the determination administratively, she may file a petition for redetermination and request for hearing before the date the determination becomes final. A petition for redetermination triggers an administrative proceeding to decide the appropriateness of the determination, with the upshot being that the taxpayer won’t have to pay the amount of the determination unless the proceeding is resolved against her. Even if the administrative proceeding is resolved against her, she still may be able to continue to challenge the determination via the next option, only in a different procedural context; which is:

Second, if a taxpayer is able to pay but wants to dispute the determination in district court, she can submit payment to the Comptroller with a properly drafted protest letter. The protest letter should explain why the tax is unlawful or why the public official charged with collecting the tax may not legally do so. After submitting the protest letter, the taxpayer will have a 90-day window to file suit in Travis County district court seeking recovery of the payment based on the grounds contained in the protest letter. A court case ensues.

Lastly, if the taxpayer is able to pay and doesn’t currently want to dispute the determination, she can simply pay the Comptroller. That’s not necessarily the end of the story, however. Let’s say the taxpayer later comes to suspect that the determination was improper. Provided the statute of limitations has not yet expired, she may be able to file a refund claim. Like a petition for redetermination, a refund claim initiates an administrative proceeding to decide whether the claim has merit. If this proceeding results in the denial of the refund claim, the taxpayer then has a 30-day window to file suit in Travis County district court seeking recovery of the amount of the claim. Again, a court case will ensue.

Note that there are many procedural ins and outs associated with each of the options summarized above, and care should be taken to meet all requirements of whatever option is chosen. Also, each option has its own pluses and minuses (which would be a bit much to detail for what’s supposed to be a short blog post) that taxpayers must evaluate before deciding on how best to respond to the awfulness of a notice of determination.