OAH Tax Case Records Become Available to the Public

By Linda Nelson

On November 1, 2021, the Chief Judge of the Office of Administrative Hearings, Donald van der Vaart, issued a memorandum announcing all OAH records of every tax case will be available to the public following an administrative law judge’s final decision. https://www.oah.nc.gov/

The promotion of transparency in North Carolina tax appeals began two decades ago. At that time a taxpayer had the choice of paying an assessed tax and appealing to the Superior Court for de novo review or going through a prepayment administrative appeals process. The latter started with a hearing before an assistant Secretary of Revenue, appointed and employed by the Secretary of Revenue. The hearing at DOR was not governed by the rules of civil procedure, nor the rules of evidence, and taxpayers were rarely granted discovery. Yet, this proceeding set the record for all appeals that followed.

Appeal from the DOR hearing was to the Tax Review Board. The Board consisted of the State Treasurer, who served as chair, the Chair of the Utilities Commission, a citizen appointed by the Governor, and, in cases involving allocation and apportionment of corporate income or franchise tax, the Secretary of Revenue. The appeal from the Tax Review Board was to the Superior Court (later, the Business Court, after it was established in 1996). Deference was given to DOR’s determination at each level of appeal. The record for all appeals was made in the hearing controlled by the Assistant Revenue Secretary.

The decisions of the Tax Review Board were published unredacted, and the tribunal’s proceedings were public. The Assistant Revenue Secretary’s decisions were published by DOR at its discretion. Many tax practitioners complained DOR’s selective publication policy did not provide them with an accurate understanding of DOR priorities on audit or positions on important matters.

With the support of the NCBA, the General Assembly passed legislation, effective 2008, that abolished the Tax Review Board and gave OAH jurisdiction to hear both refund and prepayment appeals from DOR. Lost in that legislative action was the right of the taxpayer to pay assessments and appeal directly to the Business Court for refund.

From 2008 to 2012, appeals were brought before OAH, but ALJ opinions were recommendatory only. DOR reviewed ALJ opinions and then made the final decision. On receiving an adverse DOR final decision, the taxpayer was required to pay the assessment before appeal to the Business Court.

During 2008 – 2012, DOR was required to redact and publish all of its final decisions. The law provided OAH tax case records were not confidential following DOR’s issuance of a final decision, but it is unclear whether OAH released any tax case records. Tax practitioners complained extensive redactions made by DOR often obscured the meaning of the decisions. The General Assembly responded in 2011 by requiring the DOR to publish its opinions unredacted.

In 2012, ALJs were given final decision authority in appeals from most agencies’ final actions, including DOR’s notices of final determination. The law governing the confidentiality of OAH tax case records was unchanged. All OAH tax case records remained confidential only until a final decision was rendered. At that point, some ALJ tax opinions were published. However, by mid-2017, all OAH tax case records, including even the name of the cases, were withheld from the public.

On learning Department of Justice attorneys treat everything in OAH tax case records as nonconfidential following the issuance of a final decision (other than those records covered by confidentiality orders), Chief Judge van der Vaart ordered a review of OAH’s practice of withholding tax decisions from the public. Upon concluding the DOJ position is correct, the Chief Judge ordered OAH tax case records unsealed. Records can now be obtained through a public records request.

Petitioners in cases closed before November 1, 2021, who relied on the prior practice and did not seek protective orders during the pendency of their cases should review what is in their OAH case files. Upon the receipt of a relevant public records request, OAH will attempt to contact former petitioners and consider petitioner’s requests that specific records be withheld in conformity to the Public Records Act. If the petitioner does not respond within 30 days, all contested tax case records will be released.

ALJ Final tax decisions will start appearing along with all other ALJ decisions on the OAH website soon. https://www.oah.nc.gov/hearings-division/alj-decisions

Linda Nelson is an administrative law judge and former chair of the Tax Section.