Auditing Issues

Auditing IssuesDavid Baker, MPA, PPS

Director

Local Government Division

North Carolina Department of Revenue

Auditing What is an audit?

An Audit is a systematic and methodical examination of records with the intent to verify their accuracy.

WHY AUDIT?

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 Every county should have some type of

audit program in place.

Will more than pay for itself.

Unlisted property

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? In-house

Contract out

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 Hourly

Fee per audit basis

Contingency Fee

Separation of Duties Auditor’s job is to conduct the audit and

report the findings.

Assessor’s job is to discover the property. Appraisal Assessment

Collector’s job is to collect the taxes once the appeal process is over with.

Notice to Taxpayer

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.

What if taxpayer appeals?

Upon receiving a timely notice of exception to a discovery, assessor must arrange conference with taxpayer. 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.

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Due Process

U.S. Constitutional issues:

The right to “due process” and

The right to “equal protection under the law”.

Due Process 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?

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? 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 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?

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

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.

Special Provision for Personal Property - G.S. 105-317.1(c)

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.