Senate Study Bill 1005 - Introduced
SENATE FILE _____
BY (PROPOSED COMMITTEE
ON JUDICIARY BILL BY
CHAIRPERSON SCHULTZ)
A BILL FOR
1 An Act relating to awarding the costs in administrative
2 hearings or court proceedings involving the collection of
3 tax, penalties, and interest by the department of revenue.
4 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:
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1 Section 1. Section 421.60, subsection 4, paragraph a, Code
2 2025, is amended by striking the paragraph and inserting in
3 lieu thereof the following:
4 a. A prevailing taxpayer in an administrative hearing or
5 a court proceeding related to the determination, collection,
6 or refund of a tax, penalty, or interest shall be awarded
7 reasonable costs by the department or a court that are incurred
8 subsequent to the issuance of the notice of assessment or
9 denial of claim for refund in the proceeding, based upon the
10 following:
11 (1) Reasonable court costs.
12 (2) Reasonable prevailing market rates based upon the
13 services provided including but not limited to:
14 (a) Expert witnesses.
15 (b) The cost of a study, engineering report, test, analysis,
16 or project that is found by the director of revenue or court to
17 be necessary for the preparation of the case of the taxpayer.
18 (c) Fees paid or incurred by the taxpayer for the services
19 of an independent attorney or accountant including fees paid or
20 incurred in obtaining costs under this subsection.
21 Sec. 2. Section 421.60, subsection 4, paragraph c, Code
22 2025, is amended to read as follows:
23 c. For purposes of this section, “prevailing taxpayer” means
24 a taxpayer who establishes that the position of the state was
25 not substantially justified and who has substantially prevailed
26 with respect to the amount in controversy or has substantially
27 prevailed with respect to the most significant issue or set of
28 issues presented. The determination of whether a taxpayer is
29 a prevailing taxpayer is to be determined in accordance with
30 chapter 17A. If the taxpayer establishes that the taxpayer
31 has substantially prevailed with respect to the amount in
32 controversy or has substantially prevailed with respect to the
33 most significant issue set of issues presented, the burden of
34 proof shifts to the department of revenue to prove that the
35 position taken by the department was substantially justified.
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1 If the department meets the burden by proving the position of
2 the department was substantially justified, the taxpayer shall
3 not be considered a prevailing taxpayer.
4 EXPLANATION
5 The inclusion of this explanation does not constitute agreement with
6 the explanation’s substance by the members of the general assembly.
7 This bill relates to the costs of litigation in
8 administrative hearings or court proceedings involving the
9 collection of tax, penalties, and interest (dispute) by the
10 department of revenue (department).
11 The bill changes the costs allowed to be recovered in the
12 dispute. The costs allowed to be recovered under the bill
13 include reasonable court costs; reasonable prevailing market
14 rates for expert witnesses, studies, tests, analysis, or
15 special projects; and reasonable attorney or accountant fees
16 including fees related to the recovery of costs allowed under
17 the bill.
18 The bill strikes the current $25,000 cap recoverable by a
19 taxpayer in a dispute.
20 Under the bill, if the taxpayer substantially prevails in
21 the dispute relating to the amount in controversy or issues
22 involved, the burden of proof shifts to the department to
23 prove that the position of the department was substantially
24 justified. If the department proves the position of the
25 department was substantially justified, the bill prohibits
26 the taxpayer from recovering an award in the dispute. If the
27 taxpayer prevails, the bill requires the department to pay
28 the reasonable costs described in the bill. Under current
29 law, the taxpayer must prove the position of the department
30 was not substantially justified in addition to the amount in
31 controversy and issues involved.
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Statutes affected:
Introduced: 421.60