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Massachusetts Revenue Commissioner Amy Pitter announced that the Department of Revenue (DOR) will give taxpayers an option for settling tax disputes faster than traditional appeal methods or litigation following the success of a year-long early mediation pilot program.

In fact, the program pilot was so well received that “[t]hree of four corporate taxpayers that participated in the pilot settled their $1 million or more tax assessments during the very first mediation session. These cases with tax assessments ranging from $2.6 to $9.7 million closed in 3 1/2 to five months compared with the year or more it would have taken through the department’s regular appeals process,” according to a DOR press release.

This could mean that taxpayers involved in a dispute with the DOR may now have an avenue to resolve cases in a more efficient manner – both from a cost and time perspective.

Commissioner Pitter credited the program’s success to training. The hearing officers had mediation training, while the DOR’s auditors and attorneys took conflict resolution classes. During the mediation, the hearing officers act as a neutral party while the taxpayer, DOR auditors and attorneys discuss resolution.

Due to the success of the pilot, early mediation is now an integral part of the DOR’s resolution process, according to the DOR’s press release. To qualify for mediation, a taxpayer must: have a tax assessment of at least $250,000 (down from the $1 million base for the pilot program), state their case and facts in writing, have fully developed the issues in the case, come to the mediation willing to settle, and have its decision makers present and participate in the mediation session (the DOR has the same last two requirements).

Of note, according to the DOR, out of 717 current pre-assessment audit cases in appeals in fiscal year 2013, 77 will likely meet the program’s threshold and may be eligible for this program.

If you are considering participating in any negotiations with a taxing authority, it is strongly suggested that experienced counsel is engaged. Not only will this help you understand your rights, obligations, and whether this is likely the best avenue for resolution, but experienced counsel will greatly assist with the presentation of your case, which should ultimately provide a better final result.

Click here to read the DOR’s press release on this intriguing alternative to litigation.

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