Bill Text: AZ HB2367 | 2019 | Fifty-fourth Legislature 1st Regular | Chaptered
Bill Title: Limited audit review; electronic portal
Spectrum: Partisan Bill (Republican 3-0)
Status: (Passed) 2019-05-06 - Chapter 169 [HB2367 Detail]
Download: Arizona-2019-HB2367-Chaptered.html
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Senate Engrossed House Bill |
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State of Arizona House of Representatives Fifty-fourth Legislature First Regular Session 2019
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CHAPTER 169
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HOUSE BILL 2367 |
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AN ACT
amending section 42‑1108 and 42‑1109, Arizona Revised Statutes; relating to tax administration.
(TEXT OF BILL BEGINS ON NEXT PAGE)
Be it enacted by the Legislature of the State of Arizona:
Section 1. Section 42-1108, Arizona Revised Statutes, is amended to read:
42-1108. Audit; deficiency assessments
A. If a taxpayer fails to file a return required by this title or title 43, or if the department is not satisfied with the return or payment of the amount of tax required to be paid under either title, the department may examine any return, including any books, papers, records or memoranda relating to the return, to determine the correct amount of tax. This examination must occur within the time periods prescribed by section 42‑1104 and may be accomplished through a detailed review of transactions or records or by a statistically valid sampling method.
B. The department shall give the taxpayer notice of its determination of a deficiency by mail or as prescribed by subsection C of this section, and the deficiency, plus penalties and interest, is final forty‑five days from after the date of receipt of the notice to the taxpayer unless an appeal is taken to the department. For individual income tax, the period is ninety days from after the date of mailing. In the case of a joint income tax return, the notice may be a single joint notice mailed to the last known address, but if either spouse notifies the department that separate residences have been established, the department shall mail duplicate originals of the joint notice to each spouse.
C. Except for individual income tax, the The department may issue notice of its determination of a deficiency under subsection B of this section by using an electronic portal in lieu of mail, if all of the requirements of this subsection are met, for taxable periods beginning from and after December 31, 2018 or when the department establishes the electronic portal, whichever is later. The use of the electronic portal in lieu of mail is subject to the following requirements and conditions:
1. The taxpayer shall provide an e-mail address to the department to receive the written notice of its determination of a deficiency using the electronic portal. The taxpayer shall notify the department of any update to the taxpayer's e-mail address.
1. The taxpayer agrees in writing to allow the department to use the electronic portal to issue notice of the department's determination of deficiency for specified tax periods. The agreement shall include an e‑mail address that the department may use to notify the taxpayer as required by paragraph 2 of this subsection. A taxpayer that provides an e‑mail address is certifying that the taxpayer regularly monitors that e‑mail address. If the taxpayer's e‑mail address changes, the taxpayer shall notify the department of a new e‑mail address.
2. The department shall notify the taxpayer, using the taxpayer's e-mail address, on the same day the notice of its determination of a deficiency is posted to the electronic portal.
3. The date of receipt for a notice provided by electronic portal is the later of the date the notice is posted to the electronic portal or the date the notification is received by the taxpayer. A notification sent by e-mail is considered to be received by the taxpayer on the day it is sent by the department.
D. If a deficiency is determined and the assessment becomes final, the department shall mail notice and demand to the taxpayer for the payment of the deficiency. Notwithstanding section 42‑1125, subsection E, the deficiency assessed is due and payable at the expiration of ten days from after the date of the notice and demand.
E. A certificate by the department of the mailing or e-mailing of the notices specified in this section is prima facie evidence of the assessment of the deficiency and the giving of the notices.
F. Any amount of tax in excess of that disclosed by the return due to a nonaudit adjustment, as listed in subsection G of this section, notice of which has been mailed to the taxpayer, is not a deficiency assessment within the meaning of this section. The taxpayer may not protest or appeal as in the case of a deficiency assessment, based on such a notice, and the assessment or collection of the amount of tax erroneously omitted in the return is not prohibited by this article.
G. An adjustment due to any of the following is considered a nonaudit adjustment:
1. An addition, subtraction, multiplication, division or other mathematical error shown on any return.
2. The failure of the taxpayer to properly compute the tax liability based on the taxable income reported on the return.
3. An incorrect usage or selection of information for a filed return from tax tables, schedules or similar documents provided by the department if the incorrect usage is apparent from the existence of other information on the return.
4. An entry on a return that is inconsistent with an entry on a schedule, form, statement, list or other document filed with the return.
5. An omission of information required on the return to substantiate an entry.
6. An entry on a return of a deduction or credit in an amount that exceeds a statutory limit if the limit is a monetary figure, a percentage, a ratio or a fraction and the items entered into the application of this limit appear on the return, including claiming a deduction or credit that is not authorized by statute for the taxable period.
7. Missing or incorrect taxpayer identification numbers for the purposes of claiming personal exemptions, dependents or credits.
8. An entry of a credit or deduction that requires a preapproval if the credit or deduction has not been preapproved or if the entry is for more than the preapproved amount.
9. An entry of a credit or deduction amount carried forward from a prior year that is outside of the statutory period allowed for the carryforward or is for an amount that is inconsistent with the taxpayer's prior year returns.
H. If a taxpayer that files its return electronically is allowed to input the information from a document into the electronic filing program instead of providing the actual document with the return, the department may request a copy of the document from the taxpayer at any time. If the taxpayer provides the document, the department may adjust the return to reflect the amounts on the document. If the taxpayer does not provide the requested document within the period provided by the department, the department may deny any deduction, credit or withholding that the document is intended to substantiate.
I. For the purposes of this section, "electronic portal" means a secure location on a website established by the department that requires the taxpayer to enter a password to access.
Sec. 2. Section 42-1109, Arizona Revised Statutes, is amended to read:
42-1109. Failure to file return; false or fraudulent return; limited scope review; mandamus; order to produce documents; electronic portal
A. If a person who is required to file a report or return fails to do so within fifteen days after written demand by the department, the department shall proceed to obtain facts and information on which to base the tax, and for such that purpose the department or its agent may examine the books, records and papers of such the person and may take evidence on oath of any person who it the department believes is in possession of has facts or information pertinent to the inquiry. The director or the director's agent may administer the oath. As soon as the department procures such the information, it shall hold a hearing for the purpose of ascertaining to determine the amount of tax payable by the person. The department shall give at least ten days' notice in writing of the time and place of holding the hearing, which shall be mailed to the person's last known address or served personally. The levy of the tax is final after the hearing as to any person who fails or refuses to file a return.
B. If a taxpayer files a false or fraudulent return or fails or neglects to file a return within fifteen calendar days after written or electronic demand by the department, the department, at any time, may require a return or a supplementary return or may make an estimate of the taxable income from any available information and may propose to assess the amount of tax, interest and penalties due. All The provisions of this article relative relating to delinquent taxes apply to the tax, interest and penalties computed pursuant to this subsection. A proceeding in court for the collection of to collect the tax, interest and penalties provided for in this subsection may be begun without assessment at any time. Notwithstanding section 42‑1004, subsection C, the assessment of tax, interest or penalties under this subsection does not preclude subsequent deficiency assessments under section 42‑1108.
C. The department may conduct a limited scope review of a filed individual income tax return if It discovers a discrepancy between amounts reported on the return and the information the department receives pursuant to section 43-412. in a notice to the taxpayer, The department may request records from a taxpayer in support of the taxpayer's filed returns and propose a tentative amount of tax, interest and penalties due on the basis of this additional information. The taxpayer shall have at least thirty calendar days to respond to this notice on a form prescribed by the department. a limited scope review under this subsection may be conducted only once per taxable year per taxpayer and shall not be considered an initial audit contact for purposes of section 42-2075 if any of the following applies:
1. The taxpayer provides documentation or an explanation that resolves the discrepancy between the originally filed return and the information received pursuant to section 43-412.
2. The taxpayer files an amended return that corrects the discrepancy.
3. The department, at the taxpayer's request, adjusts the return filed by the taxpayer based on an agreed amount. an adjustment made at the taxpayer's request under this paragraph is not considered an audit and does not preclude a future audit of the same year under section 42-1108.
4. The department notifies the taxpayer requesting the taxpayer to resolve the discrepancy by filing an amended return in order to avoid a possible future audit and reduce possible future penalties and interest. Any future audit shall be conducted pursuant to section 42-1108.
C. D. If an assessment is proposed under this section, the taxpayer has the right to protest the assessment, to have an oral hearing on the protest if requested and to appeal to the state board of tax appeals from the department's action on the protest. The taxpayer shall proceed under this section in the manner and within the time prescribed by article 6 of this chapter.
D. E. In addition to the remedies provided by subsection B of this section, if a taxpayer fails to file a return within sixty days of after the time prescribed by this chapter, the department may petition the tax court to issue a writ of mandamus requiring the person to file a return. The petition shall be returnable not later than ten days after filing the petition. The petition shall be heard and determined on the return day or on such day thereafter as the court shall fix, having regard to the speediest possible determination of the case, consistent with the rights of the parties. The court shall provide at least ten days' written notice of the hearing to the taxpayer, which shall be mailed to the taxpayer's last known address or served on the taxpayer personally. The judgment shall include costs in favor of the prevailing party. Proceedings on such suits shall comply with the rules of procedure for special actions.
E. F. If a person wilfully refuses to make available any books, papers or records for examination by the department, or wilfully refuses to attend and testify, in connection with any proceedings instituted under subsection A of this section, the department may apply to the tax court for an order directing that person to produce the books, papers or records or to compel the person's attendance and testimony. If the books, papers or records required by the department are in the custody of a corporation, the order of the court may be directed to any principal officer of the corporation or its registered statutory agent. The failure to obey such an order of the court may be punished by the court as contempt.
G. The department may issue notice of its determination of deficiency under subsection B of this section by using an electronic portal in lieu of mail if all of the following requirements are met:
1. The taxpayer agrees in writing to allow the department to use the electronic portal to issue notice of the department's determination of deficiency for specified tax periods. The agreement shall include an e‑mail address that the department may use to notify the taxpayer as required by paragraph 2 of this subsection. A taxpayer that provides an e‑mail address is certifying that the taxpayer regularly monitors that e‑mail address. If the taxpayer's e‑mail address changes, the taxpayer shall notify the department of a new e‑mail address.
2. The department notifies the taxpayer via the e-mail address when the notice of the department's determination of deficiency is posted to the electronic portal.
3. The e-mail notification under paragraph 2 of this subsection is sent on the same day the notice of the department's determination of deficiency is posted to the electronic portal.
4. The date of receipt for a notice of the department's determination of deficiency is the later of the date the notice is posted to the electronic portal or the date the taxpayer receives the e-mail notification required under paragraph 3 of this subsection. An e-mail notification is deemed received by the taxpayer on the day it is sent by the department.
APPROVED BY THE GOVERNOR MAY 6, 2019.
FILED IN THE OFFICE OF THE SECRETARY OF STATE MAY 6, 2019.
