131.081 Rules applicable to the administration of all taxes under jurisdiction of Department of Revenue

131.081 Rules applicable to the administration of all taxes under jurisdiction of

Department of Revenue.

The following rules, principles, or requirements shall apply in the administration of all

taxes subject to the jurisdiction of the department:

(1) The department shall develop and implement a Kentucky tax education and

information program that:

(a) Is directed at new taxpayers, taxpayer and industry groups, and department

employees to enhance the understanding of and compliance with Kentucky

tax laws;

(b) Includes information on:

1. The application of new tax legislation to taxpayer activities; and

2. Areas of recurrent taxpayer noncompliance or inconsistency of

administration; and

(c) Is published as part of the administrative writings posted on its official

website;

(2) The department shall publish brief statements in simple and nontechnical language

which explain procedures, remedies, and the rights and obligations of taxpayers and

the department. These statements shall be provided to taxpayers with the initial

notice of audit; each original notice of tax due; each denial or reduction of a refund

or credit claimed by a taxpayer; each denial, cancellation, or revocation of any

license, permit, or other required authorization applied for or held by a taxpayer;

and, if practical and appropriate, in informational publications by the department

distributed to the public;

(3) Taxpayers shall have the right to be assisted or represented by an attorney,

accountant, or other person in any conference, hearing, or other matter before the

department. The taxpayer shall be informed of this right prior to conduct of any

conference or hearing;

(4) The department shall perform audits and conduct conferences and hearings only at

reasonable times and places;

(5) Taxpayers shall have the right to make audio recordings of any conference with or

hearing by the department. The department may make similar audio recordings if

prior written notice is given to the taxpayer or if the taxpayer records the conference

or hearing. The taxpayer shall be entitled to a copy of this department recording or a

transcript as provided in KRS 61.874;

(6) If any taxpayer's failure to submit a timely return or payment to the department is

due to the taxpayer's reasonable reliance on written advice from the department, the

taxpayer shall be relieved of any penalty or interest with respect thereto, provided

the taxpayer requested the advice in writing from the department and the specific

facts and circumstances of the activity or transaction were fully described in the

taxpayer's request, the department did not subsequently rescind or modify the

advice in writing, and there were no subsequent changes in applicable laws or

regulations or a final decision of a court which rendered the department's earlier

written advice no longer valid;

(7) Taxpayers shall have the right to receive a copy of any audit of the department by

the Auditor of Public Accounts relating to the department's compliance with the

provisions of KRS 131.041 to 131.081;

(8) (a) The department shall include with each notice of tax due a clear and concise

description of the basis and amount of any tax, penalty, and interest assessed

against the taxpayer and the agent's written narrative setting forth the grounds

upon which the assessment is made.

(b) Copies of the agent's audit workpapers shall be:

1. Included with the notice of tax due; or

2. Delivered electronically to the taxpayer.

ll include with each notice of tax due a clear and concise

description of the basis and amount of any tax, penalty, and interest assessed

against the taxpayer and the agent's written narrative setting forth the grounds

upon which the assessment is made.

(b) Copies of the agent's audit workpapers shall be:

1. Included with the notice of tax due; or

2. Delivered electronically to the taxpayer.

(c) Taxpayers shall be similarly notified regarding the denial or reduction of any

refund or credit claim filed by a taxpayer;

(9) (a) Taxpayers shall have the right to an installment payment agreement for the

payment of delinquent taxes, penalties, and interest owed, provided the

taxpayer requests the agreement in writing clearly demonstrating:

1. His or her inability to pay in full; and

2. That the agreement will facilitate collection by the department of the

amounts owed.

(b) The department may modify or terminate an installment payment agreement

and may pursue statutory remedies against the taxpayer if it determines that:

1. The taxpayer has not complied with the terms of the agreement,

including minimum payment requirements established by the

agreement;

2. The taxpayers' financial condition has sufficiently changed;

3. The taxpayer fails to provide any requested financial condition update

information;

4. The taxpayer gave false or misleading information in securing the

agreement; or

5. The taxpayer fails to timely report and pay any other tax due the

Commonwealth.

(c) The department shall give written notice to the taxpayer at least thirty (30)

days prior to modifying or terminating an installment payment agreement

unless the department has reason to believe that collection of the amounts

owed will be jeopardized in whole or in part by delay;

(10) The department shall not knowingly authorize, require, or conduct any investigation

or surveillance of any person for nontax administration related purposes, except

internal security related investigations involving department personnel;

(11) In addition to the circumstances under which an extension of time for filing reports

or returns may be granted pursuant to KRS 131.170, taxpayers shall be entitled to

the same extension of the due date of any comparable Kentucky tax report or return

for which the taxpayer has secured a written extension from the Internal Revenue

Service provided the taxpayer notifies the department in writing and provides a

copy of the extension at the time and in the manner which the department may

require;

(12) The department shall bear the cost or, if paid by the taxpayer, reimburse the

taxpayer for recording or bank charges as the direct result of any erroneous lien or

levy by the department, provided the erroneous lien or levy was caused by

department error and, prior to issuance of the erroneous lien or levy, the taxpayer

timely responded to all contacts by the department and provided information or

documentation sufficient to establish his or her position. When the department

releases any erroneous lien or levy, notice of the fact shall be mailed to the taxpayer

and, if requested by the taxpayer, a copy of the release, together with an

explanation, shall be mailed to the major credit reporting companies located in the

county where it was filed;

(13) (a) The department shall not evaluate individual officers or employees on the

basis of taxes assessed or collected or impose or suggest tax assessment or

collection quotas or goals.

ailed to the taxpayer

and, if requested by the taxpayer, a copy of the release, together with an

explanation, shall be mailed to the major credit reporting companies located in the

county where it was filed;

(13) (a) The department shall not evaluate individual officers or employees on the

basis of taxes assessed or collected or impose or suggest tax assessment or

collection quotas or goals.

(b) No arrangement or contract shall be entered into for the service to:

1. Examine a taxpayer's books and records;

2. Collect a tax from a taxpayer; or

3. Provide legal representation of the department;

if any part of the compensation or other benefits paid or payable for the

service is contingent upon or otherwise related to the amount of tax, interest,

fee, or penalty assessed against or collected from the taxpayer. Any such

arrangement or contract shall be void and unenforceable;

(14) Taxpayers shall have the right to bring an action for damages against the

Commonwealth to the Board of Tax Appeals for actual and direct monetary

damages sustained by the taxpayer as a result of willful, reckless, or intentional

disregard by department employees of the rights of taxpayers as set out in KRS

131.041 to 131.081 or in the tax laws administered by the department. In the

awarding of damages pursuant to this subsection, the board shall take into

consideration the negligence or omissions, if any, on the part of the taxpayer which

contributed to the damages. If any proceeding brought by a taxpayer is ruled

frivolous by the Board of Tax Appeals, the department shall be reimbursed by the

taxpayer for its costs in defending the action. Any claims brought pursuant to this

subsection shall be in accordance with KRS 49.040 to 49.180; and

(15) Taxpayers shall have the right to privacy with regard to the information provided on

their Kentucky tax returns and reports, including any attached information or

documents. Except as provided in KRS 131.190, no information pertaining to the

returns, reports, or the affairs of a person's business shall be divulged by the

department to any person or be intentionally and without authorization inspected by

any present or former commissioner or employee of the department, member of a

county board of assessment appeals, property valuation administrator or employee,

or any other person.