Pub. 3 2021 Issue 4

J U L Y / A U G U S T 2 0 2 1 10 nebraska cpas S TAT E TA X B R I E F I N G RESOLVING NEBRASKA TAX CASES: BEST PRACTICES AFTER A STATE TAX AUDIT ASSESSMENT BY NICK NIEMANN AND MATT OTTEMANN, MCGRATH NORTH In the first two articles in this series, we reviewed Nebraska tax-planning opportunities that state and local tax professionals are addressing during the life of a business or individual “before an audit” and “during an audit.” In this article, we’ll examine certain best practices that can be deployed “after an audit” to work towards efficient and effective resolution and settlement of a Nebraska tax assessment. Before we review those practices, it is important to understand Nebraska’s procedure for handling a Nebraska tax or incentive assessment once issued. Nebraska’s Procedure for Resolving Tax Assessments The first step in the legal proceeding that is considered the appeal of an audit occurs when the Petition for Redetermination (often just called the “protest”) is filed in response to the Notice of Deficiency Determination (often just called the “60-day letter”) issued by the Nebraska Department of Revenue after a Sales/Use, Income, or Incentive Tax Audit that has not been resolved. In either case, this petition, or protest, is the initial official legal “pleading” in the case. It needs to carefully lay out the factual and legal grounds for the appeal. This will impact the entire rest of the case, from the potential for settlement to the prospects for prevailing, either in a department hearing or upon further appeal to Nebraska courts. The filing of the petition, or protest, with the Department of Revenue does not necessarily mean the case is destined to end up in the Nebraska courts. Instead, in the usual Sales/Use, Income, or Incentive Tax Appeal, the case is assigned to a department attorney who will work with the taxpayer’s defense team. Both parties need to further develop the facts and the legal grounds and work towards possible settlement. If the case cannot be resolved in this “informal” process, then either party may request that the case be set up for a formal hearing with a hearing officer appointed by the tax commissioner. The purpose of this hearing is two-fold. The first purpose is to create the official “record” of the facts (in the form of documents and testimony). The second is for the hearing officer, after the case has been briefed and heard, to reach a recommended decision for the tax commissioner. If this does not result in the taxpayer’s favor, the case can be further appealed to the Nebraska District Court. The District Court will schedule a hearing, which will be based on the “record” of facts established at the department hearing. The District Court will render a judgment (after the case has been briefed and heard) based on the court’s own view of the proper result. From there, either party may appeal.