Transcript Auditing Issues David Baker, MPA, PPS Director Local Government Division North Carolina Department of Revenue.

Auditing Issues
David Baker, MPA, PPS
Director
Local Government Division
North Carolina Department of Revenue
Auditing
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What is an audit?
An Audit is a systematic and methodical
examination of records with the intent to verify their
accuracy.
WHY AUDIT?
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To ensure that the tax burden is distributed in a fair
and equitable fashion.
To encourage compliance by taxpayers.
To discover unlisted and under listed personal
property.
Education of the taxpayer.
Required by 105-296 and 105-312
Audit Program
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Every county should have some type of audit
program in place.
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Will more than pay for itself.
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Unlisted property
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Under listed property
Annual Canvass
In order to conduct or confirm a successful discovery
program, a regular review or canvass of the
jurisdiction should be performed.
Non-filers should be identified and sent a return
and reminder of the filing requirements.
Types of audits
1. The review audit.
2. The informal audit.
3. The formal audit.
How to Audit?
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In-house
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Contract out
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Combination
Employment of Experts
§ 105-299. Employment of experts.
The board of county commissioners may employ
appraisal firms, mapping firms or other persons or
firms having expertise in one or more of the duties
of the assessor to assist the assessor in the
performance of these duties
Payment Methods
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Hourly
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Fee per audit basis
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Contingency Fee
Separation of Duties
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Auditor’s job is to conduct the audit and report the
findings.
Assessor’s job is to discover the property.
 Appraisal
 Assessment
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Collector’s job is to collect the taxes once the
appeal process is over with.
Notice to Taxpayer
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Assessor must mail the discovery notice to person in
whose name property is listed.
Notice must contain
Name and address of the person in whose name the
property is listed.
 Brief description of property.
 Tentative appraisal of property.
 Statement that listing will become final unless written
exception is filed with the assessor within 30 days from the
date of the notice.
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What if taxpayer appeals?
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Upon receiving a timely notice of exception to a discovery, assessor
must arrange conference with taxpayer.
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Taxpayer may present evidence and arguments at conference.
Within 15 days of conference, assessor must give written notice of
final decision.
Written notice not required if taxpayer signs agreement accepting
listing and appraisal.
Taxpayer has 15 days from date of notice of assessor’s decision to
appeal to board of equalization and review or board of county
commissioners.
Taxpayer has 30 days to appeal county board’s decision to PTC.
Due Process
U.S. Constitutional issues:
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The right to “due process” and
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The right to “equal protection under the law”.
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Due Process
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Is more than just technical in nature
Taxpayer must feel like they have been heard and
given a fair hearing
The appeal conference should be conducted by the
assessor.
Board of E and R hearings need to be held in a fair
and impartial manner.
Rolling Personal Property Forward?
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Is no provision in the law which allows the assessor
to carry personal property over from one year to
the next.
Can not just bill the property
The only way to list unlisted personal property is to
do a discovery under 105-312.
What happens when property is not listed?
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GS 105-312
Assessor has duty to list, assess and tax all property
not properly listed during regular listing period.
Process is called discovery.
Discovery
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GS 105-273(6a) defines discovered property as
 Property
that was not listed during a listing period.
 Property that was listed but the listing included a
substantial understatement.
 Property that was granted an exemption or exclusion
for which it does not qualify.
What does it mean to discover property?
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GS 105-273(6b) states that “to discover property”
means to determine that:
 Property
has not been listed.
 A taxpayer made a substantial understatement of listed
property.
 Property was granted exemption or exclusion for which
it did not qualify.
Notice to Taxpayer
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Assessor must mail the discovery notice to person in
whose name property is listed.
Notice must contain
Name and address of the person in whose name the
property is listed.
 Brief description of property.
 Tentative appraisal of property.
 Statement that listing will become final unless written
exception is filed with the assessor within 30 days from the
date of the notice.
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Special Provision for Personal Property
- G.S. 105-317.1(c)
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The value, situs, or taxability of personal property
may be appealed within 30 days of the date of the
initial written notice of value.
The written notice may be a separate valuation notice
or the tax bill.
Special Provision for Personal Property
- G.S. 105-317.1(c)
When notice of appeal is timely received:
“the assessor must arrange for a conference
with the taxpayer affording them the
opportunity to present any evidence or
argument regarding the value, situs, or
taxability of the property” in question.