Board of Tax Appeals Remands Appeal to Tax Commissioner for Failure to Address all Arguments Raised
In Parnes v. McClain, BTA Case No. 2019-2847 (August 3, 2020), the Board of Tax Appeals (“BTA”) remanded the appeal to the Tax Commissioner because the Tax Commissioner’s Final Determination failed to address one of the arguments raised by the Taxpayers in their petition for reassessment of an income tax assessment. In the proceedings before the Tax Commissioner on the petition, the Taxpayers raised two arguments against the assessment. First, the Taxpayers argued that the Tax Commissioner erroneously disallowed a deduction for repayment of income that was reported in a prior year (based on cancellation of debt). Second, the Taxpayers argued that the deduction was irrelevant because they realized a net loss on their Ohio income that year.
In the Final Determination, the Tax Commissioner rejected Taxpayers’ first argument, finding that Taxpayers’ claimed deduction based on the cancellation of debt was not proper and affirmed the assessment. However, the Tax Commissioner did not address Taxpayers’ second argument in the Final Determination.
Taxpayers appealed to the BTA. Taxpayers did not request a hearing or file a brief with the BTA. The BTA found that the Taxpayers did not specify in their notice of appeal to the BTA any error by the Tax Commissioner on the first argument. However, even though the Taxpayers did not specifically assert in their notice of appeal that the Tax Commissioner erred by failing to address their second argument (they just repeated their argument that the deduction was irrelevant because they realized a net loss on their Ohio income that year), the BTA found that the Tax Commissioner erred by failing to address that argument. The BTA remanded the appeal to the Tax Commissioner with instructions to address that argument.
Taxpayers should be alert to whether a Final Determination issued by the Tax Commissioner addresses all the objections and arguments raised by the taxpayer in the petition or in subsequent filings prior to the issuance of the Final Determination. While the taxpayers in Parnes did not do so, we would recommend including as an error in the notice of appeal to the BTA the failure of the Tax Commissioner to address specific objections or arguments.