Sutherland's first poll of state and local tax issues provided a mix of expected and surprising results. The poll surveyed respondents' views about granting a waiver of the statute of limitations to provide a state auditor more time to complete an audit. Following is our analysis and the results of the poll.
Not surprisingly, more than 65% of the respondents reported that their companies will grant a waiver of the statute of limitations if the requesting auditor provides a reasonable basis for requesting one. As Sutherland's Jeff Friedman noted during his presentation at the TEI Midyear conference last week, there are a number of reasons why it makes sense to grant waivers, including the importance placed on the relationship with the auditor, the desire to achieve a more accurate and thoughtful audit, and concerns that the company's tax department contributed to the need for the waiver due to delays in responding to audit requests.
The poll did provide an unexpected result: 20% of the respondents always grant waivers, regardless of the circumstances. Jeff counseled against such an approach, as some audits will linger for years (or generations). These audits often become difficult to close. Worse yet, an old audit may become impossible to defend or substantiate due to difficulties obtaining witnesses or documentation. Sutherland's SALT practice suggests that corporations create—and abide by—a standard waiver policy that describes the conditions under which a company's tax department will consider a waiver. Further, the use of "limited" waivers (that only keep the statute of limitations open for defined issues) is worth considering and incorporating into a waiver policy.
To request a copy of Jeff's presentation, “Waive or Walk: Considerations for Extending the Statute of Limitations,” click here.
Be sure to check back tomorrow for our next state and local tax poll of the week, which will explore the impact of state budget deficits on state auditors’ assessments and settlements.