Alabama State Income Tax Protest

ALABAMA STATE INCOME TAX PROTEST

Petition for Review of Preliminary Assessment / Notice of Appeal of Final Assessment

TABLE OF CONTENTS

1. Letterhead and Addressee
2. Subject and Identification
3. Timeliness of Protest
4. Statement of Jurisdiction and Authority
5. Statement of Facts
6. Issues Presented
7. Specific Objections to the Assessment
8. Legal Argument
9. Burden of Proof and Evidentiary Showing
10. Request for Administrative Conference and Hearing
11. Request for Abatement of Penalties and Interest
12. Reservation of Rights
13. Prayer for Relief
14. Signature, Verification, and Certificate of Service
15. Appendix A — Notice of Appeal to Alabama Tax Tribunal
16. Alabama Practice Notes
17. Sources and References

1. LETTERHEAD AND ADDRESSEE

[LAW FIRM / TAXPAYER LETTERHEAD]

Date: [__/__/____]

Sent via Certified Mail, Return Receipt Requested, No. [________________________________]
(and via [email / fax / hand delivery] for confirmation)

Alabama Department of Revenue

[ADOR DIVISION — e.g., Individual & Corporate Tax Division / Income Tax Audit]

[STREET ADDRESS AS SHOWN ON ASSESSMENT NOTICE]

Montgomery, AL [ZIP]

Attention: [ASSESSMENT OFFICER / EXAMINER NAME], Examiner ID [________________________________]

2. SUBJECT AND IDENTIFICATION

RE:

This letter constitutes the Taxpayer's PETITION FOR REVIEW of the above-referenced preliminary assessment pursuant to Ala. Code § 40-2A-7(b)(4), or in the alternative, NOTICE OF APPEAL of the above-referenced final assessment to the Alabama Tax Tribunal pursuant to Ala. Code § 40-2A-7(b)(5) and § 40-2B-2.

3. TIMELINESS OF PROTEST

3.1. The preliminary / final assessment was mailed by the Department on [__/__/____] and received by the Taxpayer on [__/__/____].

3.2. This Petition / Notice of Appeal is filed within thirty (30) days of the earlier of mailing or personal service of the assessment, and is therefore timely under Ala. Code § 40-2A-7(b)(4)a. (preliminary) and § 40-2A-7(b)(5)a. / § 40-2B-2(g) (final).

3.3. The Taxpayer expressly preserves all defenses based on timeliness, mailing, service, and computation of the appeal period.

4. STATEMENT OF JURISDICTION AND AUTHORITY

4.1. The Alabama Department of Revenue ("Department") issued the contested assessment under authority of Ala. Code §§ 40-2A-7 and 40-18-1 et seq.

4.2. The Taxpayer invokes the rights guaranteed by the Alabama Taxpayers' Bill of Rights at Ala. Code § 40-2A-4, including the right to a written description of the basis for the assessment, the right to administrative review, the right to representation, and the right to appeal.

4.3. If this matter proceeds to the Alabama Tax Tribunal, jurisdiction is vested in the Tribunal under Ala. Code § 40-2B-2, an independent agency separate from the Department, as a de novo forum for the resolution of state tax disputes.

5. STATEMENT OF FACTS

5.1. Taxpayer is [a / an Alabama resident individual / domestic corporation / foreign corporation qualified to do business in Alabama / partnership / S corporation / trust] with its principal place of business / residence at [ADDRESS].

5.2. For the tax period(s) at issue, Taxpayer timely filed Alabama Form [40 / 40NR / 20 / 20S / 20C / 65] on [__/__/____], reporting the following:

5.3. On or about [__/__/____], the Department commenced an examination of the Taxpayer's Alabama income tax returns for the period(s) at issue and issued one or more Information Document Requests ("IDRs") and proposed adjustments.

5.4. The Department's preliminary / final assessment proposes the following adjustments:

5.5. [ADDITIONAL FACTUAL NARRATIVE — describe the transactions, the Taxpayer's reporting position, the records produced during audit, and any communications with the examiner].

6. ISSUES PRESENTED

6.1. Whether the Department erred in [STATE FIRST ISSUE — e.g., disallowing the Taxpayer's claimed business-expense deduction under Ala. Code § 40-18-15].

6.2. Whether the Department erred in [STATE SECOND ISSUE — e.g., applying a three-factor apportionment formula in lieu of the single-sales-factor formula authorized by Ala. Code § 40-27-1].

6.3. Whether the imposition of penalties is appropriate where Taxpayer's position is supported by substantial authority and was taken in good faith. See Ala. Code § 40-2A-11.

6.4. Whether interest should be abated for any portion of the period attributable to unreasonable delay by the Department. See Ala. Code § 40-1-44.

7. SPECIFIC OBJECTIONS TO THE ASSESSMENT

Pursuant to Ala. Code § 40-2A-7(b)(4)a., the Taxpayer sets forth the following specific objections:

7.1. Objection No. 1 — [SHORT TITLE]

• Department's Position: [QUOTE OR SUMMARIZE]
• Taxpayer's Objection: The adjustment is contrary to [STATUTE / REGULATION / CASE] because [REASONS].
• Supporting Authority: [CITATIONS].

7.2. Objection No. 2 — [SHORT TITLE]

• Department's Position: [QUOTE OR SUMMARIZE]
• Taxpayer's Objection: [REASONS].
• Supporting Authority: [CITATIONS].

7.3. Objection No. 3 — [SHORT TITLE]

• Department's Position: [QUOTE OR SUMMARIZE]
• Taxpayer's Objection: [REASONS].
• Supporting Authority: [CITATIONS].

8. LEGAL ARGUMENT

8.1. Statutory Construction. Alabama tax statutes that impose a tax are strictly construed against the taxing authority and in favor of the taxpayer. State v. Reynolds Metals Co., 263 Ala. 657 (1956). Conversely, exemptions are construed against the taxpayer, but the Department still bears the burden of demonstrating that the underlying transaction is taxable.

8.2. Issue 1 — [TITLE]

• [FULL LEGAL ANALYSIS WITH CITATIONS TO ALA. CODE, ALA. ADMIN. CODE, AND ALABAMA TAX TRIBUNAL / CIRCUIT COURT / SUPREME COURT DECISIONS].

8.3. Issue 2 — [TITLE]

• [FULL LEGAL ANALYSIS].

8.4. Issue 3 — Penalty Abatement. Under Ala. Code § 40-2A-11(g), accuracy-related and negligence penalties are not warranted where the Taxpayer's position is supported by substantial authority or there was reasonable cause and good faith. The Taxpayer relied on [CITED AUTHORITY / CPA ADVICE / PRIOR ADOR GUIDANCE].

9. BURDEN OF PROOF AND EVIDENTIARY SHOWING

9.1. The Taxpayer acknowledges that, under Ala. Code § 40-2A-7(b)(5)c. and the Tax Tribunal's procedural rules, the burden of proof generally rests on the taxpayer to demonstrate that the assessment is incorrect.

9.2. The Taxpayer is prepared to satisfy that burden through the following evidence:

• ☐ Tax returns and supporting schedules (Exhibit [__])
• ☐ General ledger, trial balances, and source documents (Exhibit [__])
• ☐ Contracts, invoices, and bank records (Exhibit [__])
• ☐ Affidavits and witness testimony (Exhibit [__])
• ☐ Expert reports (apportionment, valuation, transfer pricing) (Exhibit [__])
• ☐ Prior ADOR letter rulings and audit reports (Exhibit [__])

9.3. Taxpayer reserves the right to supplement the evidentiary record at the administrative conference and at any subsequent Tax Tribunal hearing.

10. REQUEST FOR ADMINISTRATIVE CONFERENCE AND HEARING

10.1. Pursuant to Ala. Code § 40-2A-7(b)(4)b., the Taxpayer respectfully requests an administrative conference with the Department's reviewing officer prior to entry of any final assessment.

10.2. The Taxpayer requests that the conference be held at the Department's offices in Montgomery, Alabama, or by video conference, on a mutually agreeable date.

10.3. The Taxpayer further requests that the Department provide, prior to the conference, copies of all workpapers, audit narratives, and legal memoranda relied upon in formulating the proposed adjustments. See Ala. Code § 40-2A-4(b)(7) (right to information about the basis for the assessment).

11. REQUEST FOR ABATEMENT OF PENALTIES AND INTEREST

11.1. The Taxpayer respectfully requests abatement of all penalties under Ala. Code § 40-2A-11(g) for reasonable cause and good faith.

11.2. To the extent any portion of the proposed interest is attributable to delay caused by the Department, the Taxpayer requests abatement under Ala. Code § 40-1-44.

12. RESERVATION OF RIGHTS

12.1. Taxpayer reserves the right to amend, supplement, or withdraw any portion of this Petition / Notice of Appeal as further information becomes available.

12.2. Taxpayer reserves all defenses and claims, including but not limited to constitutional challenges (Due Process, Commerce Clause), statute-of-limitations defenses (Ala. Code § 40-2A-7(b)(2)), and offsetting refund claims (Ala. Code § 40-2A-7(c)).

12.3. Nothing herein shall be construed as a waiver of the attorney-client privilege, the work-product doctrine, or any other applicable privilege.

13. PRAYER FOR RELIEF

WHEREFORE, the Taxpayer respectfully requests that the Department / Alabama Tax Tribunal:

• A. Withdraw or vacate the preliminary / final assessment in its entirety;
• B. In the alternative, reduce the assessment to reflect only those adjustments supported by clear and convincing evidence;
• C. Abate all penalties and accrued interest attributable to Department delay;
• D. Schedule an administrative conference and, if necessary, a hearing before the Alabama Tax Tribunal; and
• E. Grant such further relief as is just and proper under Alabama law.

14. SIGNATURE, VERIFICATION, AND CERTIFICATE OF SERVICE

Respectfully submitted,

[LAW FIRM NAME / TAXPAYER REPRESENTATIVE]

By: [________________________________]

[ATTORNEY / CPA NAME], Alabama State Bar No. [####] / Alabama CPA No. [####]

Counsel for Taxpayer

[STREET ADDRESS]

[CITY, STATE ZIP]

Telephone: [NUMBER]

Email: [EMAIL]

VERIFICATION

STATE OF ALABAMA

COUNTY OF [COUNTY]

I, [TAXPAYER OR OFFICER NAME], being first duly sworn, depose and say that I am the [Taxpayer / authorized officer of the Taxpayer]; that I have read the foregoing Petition / Notice of Appeal; and that the factual statements contained therein are true and correct to the best of my knowledge, information, and belief.

[________________________________]

[NAME], [TITLE]

Sworn to and subscribed before me this [____] day of [_______________], 20[____].

[________________________________]

Notary Public, State of Alabama

(My Commission Expires: [_______________])

CERTIFICATE OF SERVICE

I hereby certify that on [__/__/____] I served a true and correct copy of the foregoing Petition / Notice of Appeal upon the Alabama Department of Revenue (and, if applicable, the Alabama Tax Tribunal) by Certified Mail, Return Receipt Requested, postage prepaid, addressed as set forth on the first page hereof.

[________________________________]

[NAME]

15. APPENDIX A — NOTICE OF APPEAL TO ALABAMA TAX TRIBUNAL

BEFORE THE ALABAMA TAX TRIBUNAL

Docket No.: [________________________________] (assigned by Tribunal)

NOTICE OF APPEAL FROM FINAL ASSESSMENT

Pursuant to Ala. Code §§ 40-2A-7(b)(5) and 40-2B-2, and Ala. Admin. Code r. 887-X-1-.03, Taxpayer hereby appeals from the Final Assessment of Alabama [Individual / Corporate] Income Tax for the period(s) [YYYY–YYYY], in the amount of $[________________________________], mailed by the Department on [__/__/____].

The grounds for appeal, supporting facts, legal authorities, and prayer for relief are set forth in the foregoing Petition (Sections 5–13), which is incorporated herein by reference.

Taxpayer demands a hearing before the Alabama Tax Tribunal.

Date: [__/__/____]

[________________________________]

[ATTORNEY / CPA NAME], Alabama State Bar No. [####]

Counsel for Taxpayer / Appellant

Service Address for Tax Tribunal:

Alabama Tax Tribunal

P.O. Box 303240

Montgomery, AL 36130-3240

(Verify current address at https://www.taxtribunal.alabama.gov/)

16. ALABAMA PRACTICE NOTES

• Two-tier appeal structure. Alabama tax controversies follow a two-step administrative track. A preliminary assessment must first be protested by petition to ADOR within 30 days; if ADOR enters a final assessment, the taxpayer has another 30 days to appeal to the Alabama Tax Tribunal (or, after payment, to circuit court). Missing either deadline forfeits administrative review.
• Independent Tax Tribunal. Effective October 1, 2014, the Alabama Tax Tribunal (Ala. Code § 40-2B) replaced the ADOR Administrative Law Division and operates as an independent agency outside the Department of Revenue. Hearings are de novo. Tax Tribunal judges are appointed by the Governor.
• Burden of proof. Section 40-2A-7(b)(5)c. places the burden on the taxpayer to show the assessment is incorrect. Documentary evidence, admissions in audit workpapers, and contemporaneous business records are critical.
• Pay-and-sue alternative. Under Ala. Code § 40-2A-7(b)(5)b.2., a taxpayer may pay the final assessment and file suit for refund in circuit court rather than appeal to the Tax Tribunal. This is sometimes preferred for constitutional challenges or jury demand.
• Statute of limitations on assessments. Generally three (3) years from the later of the return's due date or filing date (Ala. Code § 40-2A-7(b)(2)). Extended to six (6) years for substantial omissions, and unlimited for fraudulent or unfiled returns.
• Petition for refund. Filed with ADOR within three (3) years from the date the return was filed or two (2) years from the date of payment, whichever is later (Ala. Code § 40-2A-7(c)).
• Federal RAR conformity. Taxpayers must report federal Revenue Agent Report (RAR) adjustments to ADOR within six (6) months of the federal final determination (Ala. Code § 40-18-43, § 40-2A-7(b)(2)c.).
• Representation. A non-attorney representative (CPA, enrolled agent) may represent the taxpayer before ADOR and the Tax Tribunal. Alabama Form 2848A (Power of Attorney) is required. Practice of law limitations apply in circuit court.
• No accountant-client privilege. Alabama does not recognize a general accountant-client privilege in tax controversies. See Ala. Code § 34-1-21 (working-paper ownership). Sensitive analyses should be conducted under a Kovel arrangement through tax counsel to preserve attorney-client privilege.
• Pure contributory background, not relevant here. (Note: Alabama is a contributory-negligence state, but that doctrine is not applicable to tax controversies.)

17. SOURCES AND REFERENCES

• Alabama Code Title 40 (Revenue and Taxation) — https://alisondb.legislature.state.al.us/alison/codeofalabama/1975/coatoc.htm
• Ala. Code § 40-2A-4 (Taxpayers' Bill of Rights) — https://law.justia.com/codes/alabama/title-40/chapter-2a/section-40-2a-4/
• Ala. Code § 40-2A-7 (Uniform Revenue Procedures) — https://codes.findlaw.com/al/title-40-revenue-and-taxation/al-code-sect-40-2a-7/
• Ala. Code § 40-2A-8 (Procedures for Contesting Acts) — https://law.justia.com/codes/alabama/title-40/chapter-2a/section-40-2a-8/
• Ala. Code § 40-2B-2 (Alabama Tax Tribunal) — https://law.justia.com/codes/alabama/title-40/chapter-2b/section-40-2b-2/
• ADOR — Preliminary Assessment Appeal Rights — https://www.revenue.alabama.gov/legal/preliminary-assessment-appeal-rights/
• ADOR — Taxpayers' Bill of Rights — https://www.revenue.alabama.gov/legal/taxpayer-bill-of-rights/
• Alabama Tax Tribunal — https://www.taxtribunal.alabama.gov/
• Ala. Admin. Code Ch. 810-14-1 (Uniform Revenue Procedures regulations) — https://admincode.legislature.state.al.us/
• Ala. Admin. Code Ch. 887-X-1 (Tax Tribunal Rules of Practice) — https://www.law.cornell.edu/regulations/alabama/Ala-Admin-Code-r-887-X-1-.3
• Alabama Form 2848A (Power of Attorney) — https://www.revenue.alabama.gov/forms/

Disclaimer: This template is provided for informational purposes only and does not constitute legal or tax advice. An attorney or CPA licensed in Alabama must review and customize this document before filing. Statutory citations, deadlines, and Tax Tribunal procedures change; verify all authorities before use.