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Some states adopting new tax courts to handle appeals

There is a current division among states over whether to create an independent state tax court system. Such courts hear tax disputes exclusively, replacing the administrative review process, which is the method used in California and 20 other states. Twenty-seven states currently have an independent tax court, although nine of those do not require employees to be experts in tax law.

Although four states have created their own tax court systems in the past decade, this does not indicate a unanimous trend regarding their creation. They have their opponents, who have argued that administrative tax hearings sufficiently meet taxpayer needs while keeping costs down. A new court system, they say, would require money that many states do not have.

But according to proponents, independent tax courts have significant benefits. Taxpayers would be able to bring their claims in front of a judge with tax-specific knowledge instead of the state revenue department, which, in addition to assessing and collecting tax revenue, operates the administrative hearings systems in some states. Appeals to all forms of assessed taxes--property, sales, personal and corporate--can typically be brought in state tax courts.

In many states, businesses are leading the movement towards the creation of the courts. Corporations and partnerships large and small are challenging more state tax assessments and they want to have an independent court system handling those cases. They also argue that tax-specific courts process cases faster.

In addition to state tax courts, there is the national U.S. Tax Court, which handles matters relating to federal taxes. Federal and state tax courts can have complex procedural requirements, so taxpayers should make sure they comply with those requirements before initiating tax litigation.

Source: Reuters, "Heard in more states: See you in tax court!" Nanette Byrnes and Patrick Temple-West, May 25, 2012.

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