We have tried to raise our daughters to have good morals and values, and we have tried to keep their exposure to 'bad movies' to a minimum. Consequently, we don't let our girls watch "R" movies or movies with sexual content or lots of bad language, if possible. However, my oldest daughter loves action movies, like the Bourne movies. Thus, sometimes, the limit gets pushed. I know they are exposed to these things through other kids at school, etc. We just try to be a positive influence and a place of refuge at home.
With that said, about a year ago on a rainy, cold weekend, my oldest daughter wanted to watch an action movie. So we looked through the movies we own, and found "Collateral." If you don't know what it is, it's a movie about a hit man (Tom Cruise) that comes to town for one night to kill several people. Jamie Foxx is the unfortunate taxi cab driver that drives Tom around town. In one part of the movie, Tom Cruise's character gets on the radio and puts on a 'tirade' to Jamie Foxx's boss, putting Jamie's boss in 'his place.' During the 'tirade,' Tom Cruise's character uses a lot of expletives and cuss words. Right after that, we paused the movie and my oldest daughter said, "that's the worst thing I've ever heard." My heart sank (and we laughed). We had been trying to keep our daughters from being exposed to bad language. We hadn't let them watch bad movies at other kid's houses, and here, at our own house - we expose them to the worst thing they have ever heard. We laugh about it today. (Note: we stopped watching the movie at that point)
What does this have to do with state taxes? Well, I'm sure you have heard auditors say some things that just don't make sense - that go blatantly against statutes, regulations and court rulings. I recently had an auditor take a position that was obviously against the state's law. I dug up the statutes and regulations and sent them to him. After a few days, he responded saying he sent them off to the legal department and the department said I was right. A few days later, he sent me revised assessments. As I opened the files, I was thinking I would see a better number for my taxpayer. To my surprise, I saw a worse number. Why? The auditor had corrected the issue I won, but subsequently, took a new position on another issue that raised the assessment. At first glance, I thought the new position was clearly wrong. I did some research and my instincts were correct. I called the auditor and we talked about the issue. During our call he said one of the worst things I've ever heard - "I know the law doesn't say it, but it should." He went on to say that rules weren't written to explain all of these issues and the department was taking a position on 'what should be there.' I got off the phone - a little shocked and to admit, a little pissed. The department was taking a position not supported by law and requiring my client to protest it.
I know other tax professionals and taxpayers have their own horror stories that are very similar to what I just described. Why is this the case? Why do states take policy positions that are not supported by law? Why are taxpayers forced to fight or to surrender when the rules are clear?
I would love to hear your 'horror story.' Please feel free to comment on this post; or for confidentiality reasons, you can contact me directly.