Maine Revenue Services Audit Response and Position Statement

MAINE REVENUE SERVICES AUDIT RESPONSE AND POSITION STATEMENT

TABLE OF CONTENTS

1. Caption and Engagement Identification
2. Cover Letter to Auditor
3. Statement of Taxpayer Rights and Reservations
4. Scope and Tax Periods Under Examination
5. Information Document Request (IDR) Response Index
6. Position Statement on Proposed Adjustments
7. Statute of Limitations and Records Retention
8. Penalty Defense
9. Settlement and Closing Agreement Proposal
10. Designation of Representative
11. Reservation of Appeal Rights
12. Certification and Signature
13. Maine Audit Practice Notes
14. Sources and References

1. CAPTION AND ENGAGEMENT IDENTIFICATION

STATE OF MAINE — DEPARTMENT OF ADMINISTRATIVE AND FINANCIAL SERVICES

MAINE REVENUE SERVICES ("MRS")

2. COVER LETTER TO AUDITOR

[DATE]

Maine Revenue Services
[Division Name]
ATTN: [AUDITOR NAME]
[STREET ADDRESS]
Augusta, ME [ZIP]

Re: Taxpayer [NAME] — Audit Case No. [#] — Response to Information Document Request [#] dated [__/__/____]

Dear [Auditor Name]:

This letter and the enclosures constitute Taxpayer's response to your Information Document Request ("IDR") dated [__/__/____] in connection with the above-referenced audit. Taxpayer cooperates fully and reserves all rights under the Maine Taxpayer Bill of Rights (36 M.R.S. § 112(7-A)) and Title 36 generally.

Enclosed are the documents identified in Section 5, indexed and Bates-numbered [PREFIX] [####] through [PREFIX] [####]. Items not produced are addressed in Section 5 with the basis for objection or unavailability.

Taxpayer requests that all further audit communications be directed to the undersigned representative pursuant to the executed Form 2848-ME on file.

Respectfully,

[________________________________]

[REPRESENTATIVE NAME], [TITLE]

3. STATEMENT OF TAXPAYER RIGHTS AND RESERVATIONS

3.1. Taxpayer asserts and preserves all rights under the Maine Taxpayer Bill of Rights set forth at 36 M.R.S. § 112(7-A) and the corresponding MRS publication, including but not limited to:

• The right to professional and courteous treatment by MRS personnel;
• The right to representation by a person of Taxpayer's choosing;
• The right to confidentiality of all return and audit information under 36 M.R.S. § 191;
• The right to plain-language explanation of audit procedures and appeal rights;
• The right to request an MRS managerial review of disputed audit positions;
• The right to know the basis for any proposed assessment;
• The right to a written reconsidered decision under 36 M.R.S. § 151 if a Notice of Assessment issues; and
• The right to appeal to the Maine Board of Tax Appeals (36 M.R.S. § 151-D) or Maine Superior Court.

3.2. Taxpayer does not waive — and expressly reserves — the attorney-client privilege, the work-product doctrine, the federally authorized practitioner privilege under IRC § 7525 (and any analogous Maine privilege), and all constitutional rights, including under the Fourth, Fifth, and Fourteenth Amendments to the United States Constitution and the corresponding provisions of the Maine Constitution.

3.3. Production of any document is without waiver of privilege; inadvertently produced privileged material is subject to clawback.

4. SCOPE AND TAX PERIODS UNDER EXAMINATION

4.1. Taxpayer understands the audit to encompass:

4.2. To the extent MRS proposes adjustments outside the assessment period prescribed by 36 M.R.S. § 141, Taxpayer objects and asserts the bar of the statute of limitations.

4.3. Taxpayer ☐ has / ☐ has not executed a Form 2848-ME (Power of Attorney). Taxpayer ☐ has / ☐ has not executed a written waiver/consent to extend the limitations period (Form [___]). Any extension is limited to the issues and periods expressly identified therein.

5. INFORMATION DOCUMENT REQUEST (IDR) RESPONSE INDEX

The following table indexes the Taxpayer's response to each item in IDR No. [#]:

5.1. Format. Electronic records are produced in [native / PDF / CSV] format consistent with 36 M.R.S. § 193.

5.2. Privilege log. A privilege log is attached as Exhibit P-1 identifying all withheld documents by author, recipient, date, subject, and basis for withholding.

5.3. Items objected to. The following IDR requests are objected to as set forth below:

• IDR Item [#]: [Objection — overbroad / outside audit period / privileged / not reasonably calculated to lead to relevant evidence].
• IDR Item [#]: [Objection].

5.4. Taxpayer is willing to meet and confer to narrow disputed requests.

6. POSITION STATEMENT ON PROPOSED ADJUSTMENTS

6.1. Proposed Adjustment No. 1 — [Description].

MRS Position (as understood): [Summary].

Taxpayer Position: [Statement of legal and factual position.]

Authorities:

• 36 M.R.S. § [___];
• Code Me. R. tit. 18-125, Ch. [___];
• [Maine Case], [citation];
• IRC § [___] and Treasury Reg. § [___] (where Maine conforms under 36 M.R.S. § 111(1-A));
• MRS Information Bulletin/Instructional Bulletin No. [___].

Computation Impact: Tax $[___]; interest $[___]; penalty $[___].

6.2. Proposed Adjustment No. 2 — [Description].

MRS Position: [Summary].

Taxpayer Position: [Statement.]

Authorities: [List.]

Computation Impact: $[___].

6.3. Proposed Adjustment No. 3 — [Description].

[Repeat structure as needed.]

7. STATUTE OF LIMITATIONS AND RECORDS RETENTION

7.1. Assessment SOL — 36 M.R.S. § 141.

• Three (3) years from the later of (i) the date the return was filed or (ii) the original due date.
• Six (6) years where the return omits more than 50% of the tax required to be shown.
• No limitation where (a) no return was filed or (b) a false or fraudulent return was filed with intent to evade tax.

7.2. Refund SOL — 36 M.R.S. § 5278 (income) / § 2011 (sales).

• Generally three (3) years from the later of the date of filing or the date the tax was paid. Taxpayer ☐ does ☐ does not assert a refund claim within this audit; if asserted, see Section 6 and Exhibit [__].

7.3. Recordkeeping — 36 M.R.S. § 135 and § 193.

• Books and records must be retained until the period of limitations expires.
• For sales and use tax registrants, records are retained throughout the registration period plus the limitations period that follows cancellation.
• Electronic records satisfy retention requirements when produced in a manner that preserves integrity and accessibility.

7.4. Taxpayer's records have been retained in accordance with these requirements and are produced as available.

8. PENALTY DEFENSE

8.1. To the extent any penalty is or may be proposed under 36 M.R.S. § 187-B, Taxpayer asserts reasonable cause under § 187-B(7) for the following reasons:

• Reliance on competent professional tax advice (see Exhibit [__]);
• Reliance on prior MRS guidance, audit closures, or Information/Instructional Bulletins;
• Complexity and novelty of the legal issue;
• Substantial authority for the return position taken;
• Disclosure on the return or accompanying schedule(s);
• Records lost through casualty/disaster (see Exhibit [__]);
• Illness or extraordinary circumstances (see Exhibit [__]);
• Other: [___].

8.2. Taxpayer acted in good faith and exercised ordinary business care and prudence at all times. No willful neglect occurred.

8.3. Taxpayer requests that any negligence (§ 187-B(4-A)) and substantial-understatement (§ 187-B(5-A)) penalties be waived in full.

9. SETTLEMENT AND CLOSING AGREEMENT PROPOSAL

9.1. Without prejudice to its positions and without waiving any rights, Taxpayer is willing to discuss settlement on the following framework:

9.2. Taxpayer requests that any settlement be memorialized in a written closing agreement under 36 M.R.S. § 191(2)(W) (or successor provision) and reflected in a single revised work paper package.

9.3. This proposal is made for settlement purposes only and is inadmissible for any other purpose under M.R. Evid. 408.

10. DESIGNATION OF REPRESENTATIVE

11. RESERVATION OF APPEAL RIGHTS

11.1. Taxpayer reserves the right, upon issuance of a Notice of Assessment, to file a Petition for Reconsideration under 36 M.R.S. § 151(1) within 60 days of receipt of the assessment.

11.2. Taxpayer reserves the right to appeal any reconsidered decision to the Maine Board of Tax Appeals (36 M.R.S. § 151-D) where the amount in controversy is between $1,000 and $500,000, or to the Maine Superior Court under 36 M.R.S. § 151(2) and M.R. Civ. P. 80C.

11.3. Nothing in this submission constitutes a waiver of any procedural or substantive right, including the right to challenge the assessment in any judicial or administrative forum.

12. CERTIFICATION AND SIGNATURE

I certify that the documents produced and the statements made in this Response are true, correct, and complete to the best of my knowledge after reasonable inquiry. I understand that false statements may subject the Taxpayer or me to civil and criminal penalties under Maine law, including 36 M.R.S. § 184-A.

Date: [__/__/____]

[________________________________]

[REPRESENTATIVE NAME], [TITLE]

For: [TAXPAYER NAME]

13. MAINE AUDIT PRACTICE NOTES

• Open the file with a written engagement and Form 2848-ME. Have MRS communicate with the representative only. This protects the client and creates a clean audit record.
• Demand the Taxpayer Bill of Rights. 36 M.R.S. § 112(7-A) requires MRS to provide a written rights statement at audit initiation. If not provided, request it in writing — the request itself helps document procedural irregularities.
• Track all IDRs. MRS auditors track IDRs internally; representatives should do the same. Keep an IDR log with dates, scope, response date, and Bates ranges.
• Confidentiality is statutory. Under 36 M.R.S. § 191, audit communications are confidential. Mark submissions accordingly. § 191 also limits MRS's authority to disclose information and is a basis to object to overbroad inquiries about third parties.
• Statute of limitations is jurisdictional. Under 36 M.R.S. § 141, MRS may not assess after the limitations period absent fraud or non-filing. Verify the SOL on every audit.
• Be cautious about extension consents. If MRS requests a Form to extend the SOL, restrict the consent to specific issues and a date certain. Open-ended waivers are strongly disfavored.
• Penalty waivers are common. § 187-B(7) provides reasonable-cause relief. Build the reasonable-cause record contemporaneously — auditors often agree to waive penalties at the work-paper stage if presented with documented reliance and good faith.
• Interest is rarely waived. § 186 interest is statutory. Abatement is limited to MRS error or unreasonable delay. Consider partial deposit to stop interest accrual; mark all deposits as protest payments.
• No payment generally required during reconsideration. Per the Maine Taxpayer Bill of Rights, payment is generally not required while a case is in reconsideration; however, interest continues to run.
• Closing agreements bind both sides. A written closing agreement is conclusive absent fraud or misrepresentation. Insist on documentation of all agreed adjustments before audit closure.
• Federal/state interplay. Federal RAR adjustments must be reported to MRS within 180 days under 36 M.R.S. § 5227-A (and corresponding sales/use provisions). A pending federal audit affects strategy at the Maine level — coordinate carefully.

14. SOURCES AND REFERENCES

• 36 M.R.S. § 112 — State Tax Assessor; Taxpayer Bill of Rights: https://legislature.maine.gov/statutes/36/title36sec112.html
• 36 M.R.S. § 141 — Assessment of tax: https://legislature.maine.gov/statutes/36/title36sec141.html
• 36 M.R.S. § 151 — Reconsideration: https://legislature.maine.gov/statutes/36/title36sec151.html
• 36 M.R.S. § 186 — Interest: https://legislature.maine.gov/statutes/36/title36sec186.html
• 36 M.R.S. § 187-B — Penalties: https://legislature.maine.gov/statutes/36/title36sec187-B.html
• 36 M.R.S. § 191 — Confidentiality: https://legislature.maine.gov/statutes/36/title36sec191.html
• 36 M.R.S. § 193 — Recordkeeping; electronic filing: https://legislature.maine.gov/statutes/36/title36sec193.html
• Maine Taxpayer Bill of Rights (2023 ed., PDF): https://www.maine.gov/revenue/sites/maine.gov.revenue/files/inline-files/TBOR_book_2023.pdf
• MRS — Your Rights as a Taxpayer: https://www.maine.gov/revenue/about/taxpayer-rights
• MRS Forms (Form 2848-ME etc.): https://www.maine.gov/revenue/tax-return-forms
• Maine Tax Portal: https://revenue.maine.gov/
• Code of Maine Rules — MRS (18-125 series): https://www.maine.gov/sos/cec/rules/18/chaps18.htm
• Maine Board of Tax Appeals: https://www.maine.gov/boardoftaxappeals/

Disclaimer: This template is provided for informational purposes only and does not constitute legal advice. An attorney licensed in Maine must review and customize this document before use. Maine audit procedures, statutes, and rules change frequently; verify all citations and rights before responding.