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For almost a decade, Florida TaxWatch has been working to get additional provisions that would increase taxpayer fairness incorporated into the Florida Taxpayer's Bill of Rights. Florida TaxWatch participated in the first Taxpayer's Bill of Rights Task Force in 1990 and this year formed a new Task Force to re-examine the issue. It concluded that the Taxpayer's Bill of Rights is still lacking in provisions to ensure that taxpayers are treated equitably by the state's tax collection process. Fortunately for taxpayers, the prospect for adding these long-overdue rights during the 1999 legislative session appears to be very good. |
The Origin of the Taxpayer's Bill of Rights
The 1989 Legislature created a Taxpayer's Bill of Rights Task Force and charged it with drafting proposed legislation for a Florida Taxpayer's Bill of Rights. The nine-member body, chaired by Florida TaxWatch President Dominic M. Calabro, included representatives of Associated Industries of Florida, the Florida Chamber of Commerce, the Tax Executives Institute, the Florida Bar, the Florida Retail Federation, the State Comptroller, the State Treasurer and, as a non-voting member, the Department of Revenue.
In an effort to develop a single document which compiles all rights available to Florida taxpayers
under the state's revenue laws, the Task Force drafted a proposed Bill of Rights. The Taxpayer's
Bill of Rights was designed to protect taxpayers, strengthen certain Department of Revenue rules
regarding noncompliance and demystify taxpayer compliance procedures. The Task Force issued
its report in May 1990.
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The 1992 Legislature passed the Florida Taxpayer's Bill of Rights, based on the Task Force's recommendations. Subsequently enacted was section 213.015, Florida Statutes, containing 15 separate rights.
In November 1992, Florida voters approved Constitutional Amendment #5, proposed by the Taxation and Budget Reform Commission, which called for a taxpayer bill of rights to set forth taxpayer's rights and responsibilities and state government's responsibilities to deal fairly with taxpayers.
The Legislature adopted most of the Task Force language but omitted three rights essential to fair treatment of taxpayers. Florida TaxWatch has been working to get these rights added ever since the first Bill of Rights was drafted. They include the payment of interest on late refunds and the same three-year statute of limitations on refunds and assessments and market interest rates applied to delinquent taxes. The first two rights were part of the original Task Force proposal.
Findings and Recommendations of the 1999 Task Force
Statute of Limitations. The length of time the Department of Revenue (DOR) can go back to make tax assessment on taxpayers should be the same as the period for which taxpayers can claim refunds.
Prior to the passage of the sales tax on services and a tax amnesty program in 1987, Florida law contained the same three-year statute of limitations for both audits and refunds. With 250,000 new sales tax accounts enabled by the services tax, the statute of limitations for audits was increased to 5 years, with an additional 2-year tolling period, for a total possible limitation of seven years. The statute of limitations for refunds remained at three years. However, when the services tax was repealed in 1987, the statute was not realigned for fairness. Although the 1994 Legislature helped alleviate the inequity by increasing the limitation on refunds to five years, the potential audit period remains excessive.
Only two other states have statutes of limitations of five or more years. Thirty-two states have the more reasonable three-year statutes of limitations.
For fairness and to relieve the record-keeping burden on taxpayers, the limitation on both audits and refunds should be returned the original length of three years. DOR should be able to make an assessment at any time if the taxpayer fails to make a required payment, files a required return or files a fraudulent return, unless the taxpayer notifies DOR of the liability.
Interest on Late Refunds. Florida taxpayers must pay interest on delinquent tax payments. There is no provision requiring the state to pay taxpayers, except corporate income taxpayers, interest on refunds owed to them that are late. Unlike Florida, the federal government pays interest on late refunds.
While allowing a reasonable time for DOR to process refunds, taxpayers should not incur a financial penalty if their refund applications are not handled in a timely fashion. The same interest currently afforded corporate taxpayers should be provided for other taxes as well. Interest should be paid on refunds of tax overpayments, taxes paid in error or payment of taxes not due. However, interest should not commence until 90 days after a complete refund application has been filed. If an audit of the claim is necessary, interest shall not commence until that audit is final. The rate of interest should be the same as the rate applied to corporate taxes (a floating rate tied to the prime.)
Interest rates on delinquent taxes. Interest of one percent per month or 12 percent per year is applied to most delinquent taxes. Using a flat rate does not take into account the effects of market interest rates. If market rates are under 12 percent, the current rate the state applies is punitive. There already are provisions for adding penalties to delinquent taxes. Interest should equate to the time value of money lost by the state rather than an additional penalty. Conversely, when market rates are higher than 12 percent, voluntary compliance could suffer.
Delinquent corporate income taxes are charged a floating interest rate that is tied to the prime rate offered by banks. This procedure should be applied to other delinquent taxes.
Current Taxpayer Fairness Legislation
The recommendations in this report are not new. Florida TaxWatch has been working to have them added to the Taxpayer's Bill of Rights since it was enacted. Several legislators have taken up the fight over the years, and numerous bills have been filed. Most people recognize the inherent fairness of the proposals and understand the benefits of implementing them.
Past efforts to implement these ideas have failed for the same reason they were excluded from the original Bill of Rights. That reason, of course, is money. Making these changes will have an effect on state revenues. It is currently estimated that paying interest on refunds will cost $5.0 million annually. Charging prime rate of delinquent taxes will cost $14.1 million, and reducing the statute of limitations will cost $60.0 million. Although there has been much debate over the fiscal estimates over the years, the Legislature historically has taken the position that the cost of taxpayer fairness was too high.
This year appears to be different. With much more revenue to work with than in past years, the 1999 Legislature is committed to giving something back to the taxpayers. Both the House and Senate have included Taxpayer's Bill of Rights, or "taxpayer fairness" issues in their major tax relief packages. Whereas the Senate has included all three recommendations that are contained in this report, the House has included only two, excluding the reduction in the statute of limitations.
Neither the House nor Senate bill formally embodies the changes being recommended in a bono fide taxpayer bill of rights context. To amend the statutes just by implementing the specified rights rather than incorporating them as additions to current Taxpayer Bill of Rights guarantees falls short of providing Taxpayers the extent of guarantee that they rightly deserve.
Taxpayers need assurances that they will be treated fairly as they fulfill their public duty of
funding government. If specified as rights in addition to guarantees currently afforded by the
Taxpayer's Bill of Rights, a higher level of protection from abuse, whether by commission or
omission, is enabled. This is especially important given the increased complexity of Florida's
revenue laws, the state's expanding population and the omnipresent need to balance effective tax
collection and enforcement with taxpayers' rights and responsibilities. Promoting a state policy
of fairness, efficiency and impartiality in revenue law administration is one of the most important
statutory guarantees that the state can foster.
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(16) The right to receive interest when a refund is not paid within 90 days after receipt of a
complete application for refund for overpayments, payment of taxes not due, or taxes paid in
error. |
The 1999 Florida Taxpayer's Bill of Rights Task Force
Members
| Dominic M. Calabro, Chairman Florida TaxWatch |
The Honorable George Albright The Florida House of Representatives |
| Bill Herrle National Federation of Independent Businesses |
The Honorable Jim Horne The Florida Senate |
| The Honorable Willie Logan The Florida House of Representatives |
Randy Miller Associated Industries of Florida |
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Taxpayers should receive interest when a refund is not paid within 90 days after receipt of a complete application for refund for overpayments, payment of taxes not due, or taxes paid in
error.