Protest/Petition + Hearing Request = “Contested Case” The request for a formal hearing has legal significance. Department Regulation 33-005.01 states: “A contested case begins with the filing of a petition or claim and request for hearing, if applicable, with the Department.” Regulation 33-001.02D further defines a “contested case” to mean “a proceeding before the Department in which the legal rights, duties, or privileges of specific parties are required by law or constitutional right to be determined after a hearing before the Department.” [Emphasis added]. As stated above, the tax commissioner, when a hearing is requested, can reach a decision only after the hearing. While some Notices of Proposed Deficiency Determination may not involve the need to determine the “legal rights, duties, or privileges of specific parties,” we expect these to be rare. The nature of appealing a Notice of Proposed Deficiency is to challenge the Department as to certain Nebraska tax obligations—which in its essence means to establish legal rights, duties, and privileges of the taxpayer and the state with respect to statutory tax obligations under the relevant tax laws. So, practically every protest/petition for redetermination is a “contested case” (or becomes one as soon as a request for hearing is amended into the protest/petition, if for some reason it was surprisingly not included in the original protest/petition). The best we can do is address what we believe the official regulations clearly require. Continued from page 21 ► “Contested Case” + “Legal Rights” Advice = “Practice of Law” Requiring Attorney (Per Tax Commissioner) This gets us to the ultimate question. Department Regulation 33-008 is clear that in every “contested case,” a CPA (who is not an employee or officer of the taxpayer) may represent the taxpayer only if all the following conditions are met: 1. “The representation does not involve a claim that the Department’s action is illegal as a matter of law or unconstitutional; 2. “The representation does not require the knowledge, judgment, or skill of a lawyer, or the preparation of legal briefs, or does not require the practice of law; and 3. “The Nebraska Evidence Rules as applicable in the District Courts do not apply to the contested case.” [Emphasis added]. Due to space limits for this article, we won’t address whether and when (1) or (3) apply. Instead, we’ll focus on (2) since any one of these three is determinative. Department Regulation 33-001.02O defines the “practice of law” to mean “the application of legal principles and judgment with regard to the circumstances or objectives of another entity or person which require the knowledge, judgment, and skill of a person trained as a lawyer. This includes, but is not limited to, the following: 1. Giving advice or counsel to another entity or person as to the legal rights of that entity or person or the legal rights of others for compensation, direct or indirect, where a relationship of trust or reliance exists between the party giving such advice or counsel and the party to whom it is given; 22 Nebraska CPAs
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