Tax appeals panel heads to governor

The Arkansas Senate on Thursday voted to send the governor a bill that would create an Independent Tax Appeals Commission inside the state Department of Inspector General to resolve disputes between the state Department of Finance and Administration and taxpayers.

The Senate voted 34-1 to approve House Bill 1468 by Rep. Joe Jett, R-Success. Under current law, a taxpayer who receives a proposed assessment or refund claim denial from the finance department can protest the decision to the agency’s Office of Hearings and Appeals, which has two administrative law judges.

The Senate also approved 34-1 a companion bill to provide $2.57 million in spending authority and create nine positions for the proposed commission in fiscal 2022, which begins July 1. House Bill 1567, also by Jett, now goes to the governor. The nine positions would include three tax appeals commissioners with salaries from $149,862 to $181,500 a year.

Sen. Jonathan Dismang, R-Searcy, told senators that the cost of the new commission would be covered by about $4 million in increased state tax revenue projected from a new law that would impose a voluntary individual income tax on passthrough business entities, such as partnerships and S corporations, if they opt to be subject to the tax, and it would exclude certain income from gross income for pass-through entities.

The new law — Act 362 of 2021 — could provide federal tax benefits for the affected business entities while potentially increasing state tax collections.