Part 1. COMPTROLLER OF PUBLIC ACCOUNTS

Chapter 1. CENTRAL ADMINISTRATION

Subchapter A. PRACTICE AND PROCEDURES

1. PRACTICE AND PROCEDURES

34 TAC §§1.1, 1.4 - 1.7, 1.9 - 1.11, 1.14 - 1.16, 1.18, 1.20, 1.27 - 1.29, 1.33, 1.36, 1.37, 1.39, 1.41, 1.42

The Comptroller proposes amendments to §1.1, concerning the intent, scope, and construction of rules (subsections (b) and (c) were added to explain the function of these rules and SOAH's involvement), §1.4, concerning representation and participation (this section was amended to reflect SOAH's involvement in the hearings process), §1.5, concerning initiation of a hearing (the amendments to this section are non-substantive corrections), §1.6, concerning extension of time for initiating hearing process (subsection (b) was deleted to avoid duplication with §1.20), §1.7, concerning content of statement of grounds and preliminary conference (this section was amended to elaborate on the taxpayer's responsibilities when submitting a statement of grounds, and to eliminate provisions no longer necessary), §1.9, concerning the position letter (subsection (b) was deleted because it is covered in §1.28, new subsection (b) was added to address the 180-day requirement previously in §1.15), §1.10, concerning acceptance or rejection of the position letter (this section was amended to address the new procedures required because of the involvement of SOAH), §1.11, concerning modification of the position letter (this section was amended so the it corresponds to the new procedures in §1.10), §1.14, concerning notice of setting for certain cigarette, cigar, and tobacco cases (this section was amended to limit it to certain types of cases), §1.15, concerning reply to the position letter (subsection (b) was moved to §1.14, subsection (d) was moved to §1.9, the remaining amendments to this section are to clarify the new procedures), §1.16, concerning response of the administrative hearings section (this section was amended to reflect the new procedures), §1.18, concerning filing of documents (this section was amended to reflect the change in procedure due to the involvement of SOAH), §1.20, concerning continuances (this section was amended to reflect the change in procedure due to the involvement of SOAH), §1.27, concerning proposal for decision (this section was amended to reflect the change in procedure due to the involvement of SOAH), §1.28, concerning comptroller's decision (this section was amended to reflect the change in procedure due to the involvement of SOAH), §1.29, concerning motions for rehearing (this amendment is non-substantive and reflects the new procedure), §1.33, concerning discovery (this section was amended to denote that SOAH's rules for discovery will be followed; Most of the previous rule was deleted as unnecessary, conflicting, and duplicative), §1.36, concerning interested parties (this section was amended to clarify the procedure for interested parties to be admitted), §1.37, concerning joint hearings and severance (this section was amended due to the transfer of the administrative law judges), §1.39, concerning dismissal of cases (this section was amended to delete unnecessary provisions due to the transfer to SOAH), §1.41, concerning ex parte communications (this section was amended to clarify the ex parte prohibition), and §1.42, concerning definitions (this section was amended to add definitions for new terms resulting from the transfer of functions to SOAH).

John Heleman, Chief Revenue Estimator, has determined that for the first five-year period the rule will be in effect, there will be no significant revenue impact on the state or units of local government.

Mr. Heleman also has determined that for each year of the first five years the rule is in effect, it would benefit the public by clarifying to taxpayers the comptroller's office practices and procedures subsequent to the transfer of hearings to SOAH. This rule is adopted under Tax Code, Title 2, and does not require a statement of fiscal implications for small businesses. There is no significant anticipated economic cost to individuals who are required to comply with the proposed rule.

Comments on the proposals may be submitted to Rick Budd, Deputy General Counsel, General Counsel Division, Administrative Hearings Section, P.O. Box 13528, Austin, Texas 78711.

The amendments are proposed under Tax Code, §111.002, which provides the comptroller with the authority to prescribe, adopt, and enforce rules relating to the administration and enforcement of the provisions of Tax Code, Title 2.

The amendments implement Tax Code §§111.001, 111.009, and 111.105, which provide for the collection of taxes, redetermination and refund hearings.

§1.1.Intent, Scope, and Construction of Rules.

(a) The Rules of Practice and Procedure are intended to provide fair methods for hearing and resolving a taxpayer's disagreements with certain official actions of the Comptroller of Public Accounts. These rules govern all contested case proceedings within the agency [ before the administrative law judges ].

(b) These rules address those parts of the administrative process during which the parties attempt to resolve a case by agreement as well as those parts of the administrative process of an appellate nature subsequent to the receipt of a proposal for decision from an administrative law judge.

(c) After a determination has been made that a case cannot be resolved without a hearing or when prehearing matters cannot be resolved, the agency will docket the case with SOAH for a hearing or resolution of any such prehearing matters. These rules will not apply to any matters before SOAH. Instead, SOAH Rules of Procedure (1 TAC Chapter 155) will apply to those aspects of the case.

(d) [ (b) ] These rules will be given their most reasonable meaning taken in their total context, and will be construed to secure a just resolution or decision for every controversy. They will not be construed to limit or repeal rights afforded or requirements imposed by law. Unless otherwise expressly provided, the past, present, or future tense each includes the other; the masculine, feminine, or neuter gender each includes the other; and the singular and plural number each includes the other. Definitions of some of the words used in these rules are contained in §1.42 of this title (relating to Definitions).

§1.4.Representation and Participation.

A taxpayer may represent himself at any stage of a contested case or he may be represented by an authorized representative, such as an attorney, accountant, or other person of his choice. Hearings at SOAH on contested cases are not open to the public. Any person desiring to observe or participate at any stage of a contested case who is not a party, not employed by a party, or not called as a witness, must obtain [ the permission of the assigned administrative law judge and ]the agreement of all parties.

§1.5.Initiation of a Hearing.

(a) Redetermination hearing. If a taxpayer disagrees with the agency's deficiency or jeopardy determination, the taxpayer may request a redetermination hearing by timely submitting to the agency a written request for redetermination. This written request must include a Statement of Grounds [ statement of grounds ] that complies with the requirements set forth by §1.7 of this title (relating to Content of Statement of Grounds; Preliminary Conference) . To be considered timely, the request for a hearing must be filed within 30 days from the date of the deficiency determination or within 20 days from the date of the jeopardy determination. If the written request with the Statement of Grounds [ statement of grounds ] cannot be submitted within the applicable time limit, the taxpayer may request an extension as provided by §1.6 of this title (relating to Extensions of Time for Initiating Hearing Process) . A request for a redetermination hearing that is not submitted within the original time limit or before the expiration of an extended time limit will not be granted. A taxpayer who cannot obtain a redetermination hearing may pay the determination and request a refund in order to raise any objection to the determination.

(b) Required documentary evidence at the audit conference. When a taxpayer timely requests a redetermination hearing, the agency may request in writing that the taxpayer produce documentary evidence for inspection that would support the taxpayer's Statement of Grounds [ statement of grounds ]. The written request may specify that resale or exemption certificates to support tax-free sales must be submitted within 60 days from the date of the request. Resale or exemption certificates that are not submitted within the 60-day [ 60 day ] time limit will not be accepted as evidence to support a claim of tax-free sales.

(c) Refund hearing. If a taxpayer disagrees with the agency's denial of a refund claim, the taxpayer may request a refund hearing by timely submitting to the agency a written request for a refund hearing. This written request must include a Statement of Grounds [ statement of grounds ] that complies with the requirements set forth by §1.7 of this title and Tax Code, §111.104 . To be considered timely, the request for a hearing must be filed within 30 days from the date of the denial. If the written request with the Statement of Grounds [ statement of grounds ] cannot be submitted within the applicable time limit, the taxpayer may request an extension as provided by §1.6 of this title. A request for a refund hearing that is not submitted within the original time limit or before the expiration of an extended time limit will not be granted. If no grounds are stated as a basis for the claim, a hearing will not be granted and the claim will be denied. If the claim is granted for any tax amount, any corresponding penalty and interest amount previously paid will be refunded.

(d) Hearings involving licenses and permits. The agency will initiate hearings concerning the denial, suspension, or revocation of licenses or permits by sending written notice to the taxpayer, which notice will include a statement of the matters asserted and procedures to be followed.

(e) An oral hearing under [ the ] Tax Code, §154.1142 or §155.0592, will be set if requested by the permit holder within 15 calendar days of the receipt of the notice of violation(s). See, §1.14 of this title (relating to Notice of Setting for Certain Cigarette, Cigar, and Tobacco Tax Cases).

§1.6.Extensions of Time for Initiating Hearing Process .

[ (a) ] Requests [ Motions ] for extension of the due date for submitting a request for redetermination and Statement of Grounds [ statement of grounds ] may be granted in case of emergency or extraordinary circumstances. Requests [ Motions ] for extension will not be routinely granted and each request [ motion ] will be closely scrutinized to insure that the taxpayer has made every effort to comply with the original deadline. Requests [ Motions ] received after the expiration of the original due date will not be considered. The comptroller's office will not be responsible for delay in delivery of mail, messenger service, or other carriers. Requests [ Motions ] must be directed to the general counsel or his designee, who will grant or deny the extension.

[ (b) A motion for an extension of any other deadline in these sections will not be granted unless good cause is established and the need for the extension is not due to the moving party's neglect, indifference, or lack of diligence. A motion must be made in writing at least seven days prior to the expiration of the time period. In the event of an emergency, a motion may be accepted if it is postmarked, sent by facsimile transmission, or deposited with a private mail or courier service, postage or delivery charges paid, not later than the date of the original deadline. Prior to the setting of a hearing the assistant general counsel may approve one extension of the time to reply to a position letter of not more than 14 days. Any additional extension may be granted, for good cause shown, only by the general counsel or his designee. After a hearing is set, a motion for an extension of filing deadlines should be addressed to the assigned administrative law judge and will be ruled upon by him. A copy of a motion for extension of a filing deadline must be provided to all parties. ]

§1.7.Content of Statement of Grounds; Preliminary Conference.

(a) The Statement of Grounds [ statement of grounds ] must contain the reasons the taxpayer disagrees with the action of the agency. The taxpayer must list and number the items or transactions , individually or by category, with which he disagrees . [ , ] For each contested item or category of items, the taxpayer must also state [ and list and number ] the factual basis and the legal grounds to support why the taxpayer argues that the tax should not be assessed or the tax should be refunded. If [ Legal authority must be cited if ] the taxpayer disagrees with the agency's interpretation of the law , specific legal authority must be cited in support of the taxpayer's arguments .

(b) If an item or transaction, or category thereof, is not listed in the Statement of Grounds, it may be barred from consideration in a hearing.

(c) In the event that the taxpayer's Statement of Grounds fails to list and number items or transactions, individually or by category, or fails to state the factual basis and legal grounds upon which relief is sought, the case may be dismissed.

(d) [ (b) ] If a taxpayer's Statement of Grounds [ statement of grounds ] raises issues that cannot be resolved from the material contained in the audit or Statement of Grounds [ statement of grounds ], additional evidence may be obtained through:

(1) a preliminary conference;

(2) discovery as described in §1.33 of this title (relating to Discovery);

(3) written or oral requests for additional evidence; and

(4) an audit amendment.

[ (c) Time limits will be established for the completion of each of the procedures set out in subsection (b) of this section, either by agreement of the parties, or by the assigned administrative law judge if the parties cannot reach agreement. ]

(e) [ (d) ] The Statement of Grounds [ statement of grounds ] may be amended up to the time that a reply to the Position Letter [ position letter ] is required . All [ , and not later, unless by permission of the assigned administrative law judge, and unless all ] evidence on which the proving party intends to rely must be [ is ] filed with the proposed amendment.

[ (e) If the parties agree a preliminary conference would be beneficial, a conference will be scheduled as soon as practical. ]

(f) This section does not apply to hearings pursuant to [ the ] Tax Code, §154.1142 or §155.0592.

§1.9.Position Letter.

(a) If the taxpayer's contentions have not been resolved pursuant to §1.8 of this title (relating to Resolution Prior to Issuance of a Position Letter), the assistant general counsel will review the Statement of Grounds [ Following receipt of the taxpayer's statement of grounds ], documentary evidence, and any additional evidence received from the taxpayer and [ requested by the assistant general counsel, ] a Position Letter [ position letter ] will be sent to the taxpayer. The Position Letter [ position letter ] will accept or reject, in whole or in part, each contention of the taxpayer, and set forth what the assistant general counsel finds is properly subject to or exempt from taxation.

(b) Pursuant to Tax Code, §111.105(e), the assistant general counsel may issue a written demand notice to the taxpayer requesting that all documentary evidence that would support facts or contentions raised by the taxpayer in connection with a refund claim be produced within a specified time. The time period specified in the written demand notice may not be less than 180 days from the date of the original refund claim, and not less than 60 days from the date of the notice. A taxpayer who fails to produce the requested documents within the specified time period may not introduce in evidence any of the documents that were not timely produced. The assigned administrative law judge cannot consider documents that were not produced within the specified deadline. This section is only applicable to the administrative hearing and has no effect on a judicial proceeding pending under Tax Code, Chapter 112.

[ (b) The agency may elect to amend the determination, to issue an amended billing, or agree to a refund or credit request rather than issue a position letter, if the taxpayer's contentions are fully accepted or if the parties agree on a resolution of all contentions. If the determination or billing is amended, or a refund or credit is issued, the action will become final 20 days after mailing. An amended billing or determination is payable 20 days after mailing unless otherwise specified. ]

(c) This section does not apply to hearings pursuant to [ the ] Tax Code, §154.1142 or §155.0592.

§1.10.Acceptance or Rejection of Position Letter[ ; Motion To Dismiss Petition or Set for Hearing ].

(a) The taxpayer must accept or reject the Tax Division's Position Letter , in whole or in part, [ the position letter ] within 45 [ 15 ] days after the day the Position Letter [ position letter ] is dated; unless an extension of the deadline is granted [ however, note the extension exception in §1.6(b) of this title (relating to Extensions of Time) ]. A selection form for accepting or rejecting the Position Letter [ this purpose ] will be enclosed as an attachment [ with the position letter. Expiration of the 15-day period without the taxpayer filing a motion to set or dismiss will result in the filing of a motion to dismiss the hearing and dispose of the case according to the position of the Administrative Hearings Section ].

[ (b) The taxpayer is not required to respond to an amended determination or a final billing, other than by payment, unless the taxpayer disagrees with the amount of the amended determination or final billing. An amended final determination or final billing concludes the administrative proceeding unless the taxpayer notifies the agency within 20 days of the mailing date that he disagrees with the amount. ]

(b) [ (c) ] The selection form enclosed with the Position Letter [ position letter ] will offer the taxpayer two [ three ] options.

(1) Agree with the Position Letter. [ Motion to dismiss. The taxpayer may accept the conclusions of the position letter. ] The tax liability or refund will be calculated accordingly. The taxpayer will not be required to respond to the amended determination or final billing, other than by payment, unless the taxpayer disagrees with the amount of the amended determination or final billing. An amended final determination or final billing concludes the administrative proceeding unless the taxpayer notifies the agency within 20 days of the date of notification that he disagrees with the amount by filing a motion for rehearing. Pursuant to APA, Government Code, §2001.142, notification is presumed to occur on the third day after the date of mailing.

(2) Disagree with the Position Letter. The taxpayer may reject some or all of the conclusions of the Position Letter and request that the contested issues be decided in a hearing. If the taxpayer chooses this option the taxpayer must return the selection form along with two copies of its Reply setting forth all of its arguments in support of its position and all supportive documents, affidavits, and other evidence. See, §1.15 of this title (relating to Reply to the Position Letter).

[ (2) Motion to set for written submission hearing. The taxpayer may reject some or all of the conclusions of the position letter and request that the contested issues be decided in a written submission hearing by an administrative law judge. The parties will submit documents and arguments in accordance with the notice of setting issued by the assigned administrative law judge, rather than appearing at an oral hearing. ]

[ (3) Motion to set for oral hearing. ]

[ (A) The taxpayer may reject some or all of the conclusions of the position letter and request that the contested issues be decided after an oral hearing before an administrative law judge. ]

[ (B) A taxpayer who believes it will require more than two hours for the parties to present their cases must file a written request for an extended hearing at the time the motion to set is filed, and state the reasons why more time will be required; however, any party may later request an extended hearing for good cause shown. ]

(c) If the taxpayer fails to timely respond to the Tax Division's Position Letter, the comptroller may dismiss the contested case. In such case an amended final determination or final billing in accordance with the positions set forth in the Position Letter will be sent to the taxpayer. The administrative proceeding will be concluded unless the taxpayer notifies the agency within 20 days of the date of notification that he disagrees with the amount by filing a motion for rehearing. Pursuant to APA, Government Code, §2001.142, notification is presumed to occur on the third day after the date of mailing. See, §1.29 of this title (relating to Motion for Rehearing).

[ (d) In a Controlled Substances Tax case, the taxpayer will also be given the option of requesting an oral or written submissions hearing, but of holding the case in abeyance until the related criminal proceeding is concluded at the trial court level. An order of the trial court deferring adjudication will be deemed a conclusion of the trial court proceeding. ]

[ (e) The agency has the option of requesting an oral hearing in any case in which the burden of proof is on the state. All hearings held pursuant to the Tax Code, §154.1142 or §155.0592, will be oral hearings. ]

§1.11.Modification of the Position Letter.

The Position Letter [ position letter ] may be modified. [ Any modifications to the position letter will be reduced to writing by the assistant general counsel and sent to the taxpayer. ] A new 45-day [ 15-day ] period for acceptance or rejection by the taxpayer begins on the day the modified Position Letter [ position letter ] is dated [ if it is issued prior to the notice of setting being issued ].

§1.14.Notice of Setting for Certain Cigarette, Cigar, and Tobacco Tax Cases .

[ (a) Upon receipt of a motion to set, the assigned administrative law judge will send a notice to the parties giving: ]

[ (1) the date, time, and place of the oral hearing, the date the record will close in a written submission hearing, or other disposition of the hearing; ]

[ (2) the legal authority and jurisdiction under which the hearing is to be held; ]

[ (3) the date any legal brief or additional facts in reply to the position letter is due; and ]

[ (4) the date any response by the assistant general counsel to the taxpayer's reply to the position letter is due. ]

(a) [ (b) ] Hearings [ The notice of setting for hearings ] pursuant to [ the ] Tax Code, §154.1142 or §155.0592, will receive a notice of setting from the agency that will include:

(1) the date, time, and place of the oral hearing;

(2) the legal authority and jurisdiction under which the hearing is to be held;

(3) the asserted factual basis for the alleged violation(s); and

(4) the date any legal brief or additional facts in reply to the notice of setting is due.

(b) [ (c) ] All notices of setting issued by the agency pursuant to subsection (a) of this section [ the Tax Code, Chapters 154 or 155 ], will be sent certified mail, return receipt requested . Notices [ ; except for the notices ] of setting issued pursuant to [ the ] Tax Code, §§154.114(c), 154.309(d), 155.059(c) or [ § ]155.186(d), [ which ] will be sent by first class mail.

(c) After reviewing a notice of setting issued for hearings under Tax Code, §154.1142 or §155.0592, a permit holder may present facts or legal arguments for consideration by filing a Reply to the notice of setting within the specified due date. The notice of setting may not set the due date for the Reply earlier than 20 days from the date the notice of setting is issued.

§1.15.Reply to the Position Letter[ ; Demand Notice for Documents ].

(a) If after [ After ] reviewing the Position Letter [ position letter ], a taxpayer requests a hearing he should [ may ] present any additional facts , [ or ] legal arguments , or documents for consideration [ by the administrative law judge ] by filing a Reply [ reply ] to the Position Letter [ position letter ] within the due date specified in §1.10 of this title (relating to Acceptance or Rejection of Position Letter) [ the notice of setting. The notice of setting may not set the due date for the reply earlier than 20 days from the date the notice of setting is issued ].

(b) The Reply should address all unresolved contentions and provide legal and factual support for the taxpayer's position. All factual allegations should be supported by sworn affidavits, certified business records or otherwise admissible evidence.

[ (b) After reviewing a notice of setting issued for hearings under Tax Code, §154.1142 or §155.0592, a permit holder may present facts or legal arguments for consideration by the administrative law judge by filing a reply to the notice of setting within the specified due date. The notice of setting may not set the due date for the reply earlier than 20 days from the date the notice of setting is issued. ]

(c) In the case of hearings pursuant to Tax Code, §154.1142 or §155.0592, a Reply may be filed pursuant to §1.14 of this title (relating to Notice of Setting for Certain Cigarette, Cigar, and Tobacco Tax Cases).

[ (c) All documentary evidence to support facts or contention(s) should be submitted with the reply to the position letter or the notice of setting under subsection (b) of this section or on or before the due date for the reply. The assigned assistant general counsel may object to the introduction of documentary evidence that was not timely submitted, and at his or her discretion, the assigned administrative law judge may rule the documentary evidence to be inadmissible or may grant additional time for the assistant general counsel to review the documents. ]

[ (d) At any time after the original due date of the reply to position letter, the assigned assistant general counsel may issue a written demand notice to the taxpayer requesting that all documentary evidence that would support facts or contentions(s) raised by the taxpayer in connection to a refund claim be produced within a specified time period. The time period specified in the written demand notice may not be less than 180 days. A taxpayer who fails to produce the requested documents within the specified time period may not introduce in evidence any of the documents that were not timely produced. The assigned administrative law judge cannot consider documents that were not produced within the specified deadline. This section is only applicable to the administrative hearing pending before the agency and has no effect on a judicial proceeding pending under Tax Code, Chapter 112. ]

§1.16.Response of the Administrative Hearings Section.

(a) If the taxpayer presents additional facts or legal arguments in a Reply [ reply ] to the Position Letter [ position letter ], the assistant general counsel shall issue, within 45 days, [ file ] a Response to the taxpayer stating [ response by the date specified in the notice of setting. If the taxpayer files a reply to the position letter containing no additional facts or legal arguments, the assistant general counsel is not required to file a response. Any response filed must state ] the legal position of the Tax Division [ Administrative Hearings Section ], and any factual disagreement, on each issue or argument raised by the taxpayer. If the assistant general counsel is unable to respond within 45 days, the taxpayer will be notified of the delay and informed of the revised response date.

(b) If the taxpayer fails to submit a Reply to the Position Letter, or if the Reply does not contain any additional facts or legal arguments, the assistant general counsel is not required to issue a Response.

(c) [ (b) ] For hearings pursuant to [ the ] Tax Code, §154.1142 or §155.0592, the Tax Division [ Administrative Hearings Section ] is not required to file a response. However, if the permit holder presents additional facts or legal arguments in its Reply [ reply ], the Tax Division [ Administrative Hearings Section ] may file a Response [ response ] no later than seven calendar days prior to the oral hearing.

§1.18.Filing of Documents[ ; Inspection of File ].

[ (a) ] All documents submitted with or after the Position Letter selection form [ notice of setting has been issued ] must be filed with the assistant general counsel [ assigned administrative law judge with a copy to each party ]. See §1.32 of this title (relating to Service) for the manner in which these filings may be made. Note that rules of service governing filing documents at SOAH will vary. See SOAH, Rules of Procedure, 1 TAC §155.23.

[ (b) Each party to a contested case, and any authorized representative of a party, may inspect and copy, at their own expense and in the offices of the administrative law judges, all documents on file in the case, subject to the rules of confidentiality contained in the Tax Code. ]

§1.20.Continuances [ (Postponement of Hearing) ].

(a) If, prior to the time a contested case is brought under the jurisdiction of SOAH, a taxpayer needs an extension on a deadline he should request a [ A motion for ] continuance [ of a contested case set for oral hearing must be ] in writing from [ and filed with ] the assistant general counsel [ assigned administrative law judge ] at least seven days prior to the deadline [ date that the matter is to be heard. If an emergency occurs less than seven days prior to the hearing date, a motion for continuance may be filed ].

(b) The request for continuance [ motion ] must show that there is good cause for the continuance and that the need is not caused by neglect, indifference, or lack of diligence. A copy of the request [ motion ] must be served upon all other parties of record [ at the time of filing ].

(c) If the Tax Division [ Administrative Hearings Section ] increases the amount of tax deficiency at or before the time of hearing, the taxpayer is entitled to a 30-day continuance to obtain and produce further evidence applicable to the items upon which the increase is based.

(d) After a hearing is set by SOAH, a motion for an extension of filing deadlines must be filed with SOAH in accordance with SOAH's Rules of Practice.

§1.27. Proposal for [ Proposed ] Decision.

The assigned administrative law judge will issue a proposal for decision in accordance with SOAH's Rules of Procedure. Any party may file exceptions and responses in accordance with those rules [ prepare a proposed decision within 30 days after the record is closed. The proposed decision will set out each finding of fact and conclusion of law necessary to the decision. The proposed decision will be served on the parties, and any party may file exceptions and briefs within 15 days, serving copies on all parties. If a party files exceptions, the other parties will have 15 days after the filing to reply. The proposed decision will be reviewed after considering the exceptions, briefs, and replies ].

§1.28.Comptroller's Decision.

(a) Upon receipt of the proposal for decision from SOAH and review of any exceptions filed by the taxpayer and the assistant general counsel, the comptroller shall issue a final decision [ The proposed decision of the assigned administrative law judge must be approved by the Comptroller of Public Accounts before it is given effect ]. Notification of the comptroller's decision will be mailed to the taxpayer and any authorized representative. The [ For comptroller's decisions issued prior to September 1, 1999, the taxpayer and any authorized representative are presumed to have been notified of the comptroller's decision on the date notice of decision is mailed. For comptroller's decisions issued on or after September 1, 1999, the ] taxpayer and any authorized representative are presumed to have been notified of the comptroller's decision on the third day after notice of the decision is mailed. The comptroller's decision is final 20 days from the date of notification, unless a motion for rehearing is filed with the comptroller on or before [ midnight of ] the 20th day. If the motion for rehearing is granted, the decision is vacated pending a subsequent decision upon rehearing. If the motion for rehearing is overruled, whether by order or operation of law, the decision is final on the date it is overruled.

(b) The agency [ administrative law judge ] may issue a comptroller's decision without the issuance of a proposal for [ proposed ] decision if the parties are in agreement on all contested issues or if the parties agree to waive issuance of a proposal for [ proposed ] decision.

(c) The agency may issue a comptroller's decision without the issuance of a proposal for decision if a hearing is dismissed for a taxpayer's failure to respond to the Position Letter, as set forth in §1.10(c) of this title (relating to Acceptance or Rejection of Position Letter), failure to state a claim upon which relief can be brought, as set forth in §1.7(c) of this title (relating to Content of Statement of Grounds; Preliminary Conference), or for want of prosecution.

§1.29.Motion for Rehearing.

(a) A motion for rehearing may be filed with the comptroller by any party [ with the assigned administrative law judge ] no later than 20 days after the date notification of the comptroller's decision is provided to the parties. The motion must state each specific ground upon which the party believes the comptroller's decision is erroneous. In addition, a motion for rehearing on a refund claim must state the amount of the refund sought. Any reply to a motion for rehearing must be filed no later than 30 days after the date notification of the decision is provided to the parties. The motion must be acted on no later than 45 days after the date notification of the decision is provided to the parties, or the motion will be overruled by operation of law. These times may be varied as provided by APA [ the Administrative Procedure Act, Government Code ], §2001.146(e). Pursuant to APA, §2001.142, notification is presumed to occur on the third day after the date of mailing.

(b) If a rehearing is granted, a notice will be issued to the parties setting out all pertinent information.

§1.33.Discovery.

(a) Discovery. The APA [ Administrative Procedure Act, Subchapter D ] applies to matters of discovery.

(b) Discovery at the agency will be conducted under the same guidelines as set out in SOAH Rule of Procedure, 1 TAC §155.31. Discovery while a hearing is docketed at SOAH will be conducted under SOAH Rule of Procedure, 1 TAC §155.31.

[ (b) Scope, forms, and limitations of discovery. The scope of discovery is as follows: In general, parties may obtain discovery regarding any nonconfidential matter that is not privileged and is relevant to the subject matter in the pending action. It is not ground for objection that the information sought will be inadmissible at the hearing if the information sought appears reasonably calculated to lead to the discovery of admissible evidence. Permissible forms of discovery include requests for disclosure; requests for production and inspection of documents and tangible things; interrogatories to a party; requests for admission; and oral or written depositions. Discovery shall be conducted by the parties pursuant to a timetable agreed to by the parties or pursuant to a discovery control plan ordered by the Administrative Law Judge on motion of a party. Unless otherwise ordered, agreed, or otherwise modified by the provisions of this section, discovery shall be conducted within the time limitations set forth for a Level 2 Discovery Control Plan in Texas Rules of Civil Procedures, §190.3. The discovery methods permitted by this section should be limited by the Administrative Law Judge if he or she determines, on motion or on his or her own initiative and on reasonable notice that: ]

[ (1) the discovery sought is unreasonably cumulative or duplicative, or is obtainable from some other source that is more convenient, less burdensome, or less expensive; or ]

[ (2) the burden or expense of the proposed discovery outweighs its likely benefit, taking into account the needs of the case, the amount in controversy, the parties' resources, the importance of the issues at stake in the contested case, and the importance of the proposed discovery in resolving the issues. ]

[ (c) Protective orders. Texas Rules of Civil Procedure, §192.6, is incorporated herein for the protection of the party from whom discovery is sought under this section. ]

[ (d) Written discovery. ]

[ (1) Responding to written discovery. A party must respond to written discovery in writing within the time provided by order of the Administrative Law Judge or this section. When responding to written discovery a party must make a complete response, based on all information reasonably available to the responding party or its attorney at the time the response is made. The responding party's answers, objections, and other responses must be preceded by the request to which they apply. Every disclosure, discovery request, notice, response, and objection must be signed by an attorney, if the party is represented by an attorney, and must show the attorney's address, telephone number, and fax number, if any; or by the party, if the party is not represented by an attorney, and must show the party's address, telephone number, and fax number, if any. The signature of an attorney or party on a disclosure constitutes a certification that to the best of the signer's knowledge, information, and belief, formed after a reasonable inquiry, the disclosure is complete and correct as of the time it is made. The signature of an attorney or party on a discovery request, notice, response, or objection constitutes a certification that to the best of the signer's knowledge, information, and belief, formed after a reasonable inquiry, the request, notice, response, or objection is consistent with the Texas Rules of Civil Procedure and this discovery section and warranted by existing law or rule or a good faith argument for the extension, modification, or reversal of existing law or rule; has a good faith factual basis, is not interposed for any improper purpose, such as to harass or to cause unnecessary delay or needless increase in the cost of litigation; and is not unreasonable or unduly burdensome or expensive, given the needs of the contested case, the discovery already had in the case, the amount in controversy, and the importance of the issues at stake in the contested case. ]

[ (2) Objections to written discovery. On or prior to the date on which a response to a request for written discovery is due, a party may serve written objections to a specific request or portions thereof-either in the response or in a separate document. A party must state specifically the legal or factual basis for the objection and the extent to which the party is refusing to comply with the request. A party may object to written discovery only if a good faith factual and legal basis for the objection exists at the time the objection is made. Objections served after the date on which the response to a discovery request is due, or that are obscured by numerous unfounded objections are waived unless the administrative law judge excuses the waiver for good cause shown; however, objections by the comptroller to discovery requests requiring the disclosure of confidential information cannot be waived. A party should not object to a request for discovery on the grounds that it calls for a production of material or information that is privileged but should comply with subsection (e) of this section. A party who objects to production of privileged material or information does not waive the privilege but must comply with subsection (e) of this section when the error is pointed out. A party must comply with as much of the request to which the party has made no objection unless it is unreasonable under the circumstances to do so before obtaining a ruling on the objection. If the responding party objects to the requested time or place of production, the responding party must state a reasonable time and place for complying with the request and must comply at that time and place without further request or order. Either party may at any reasonable time request a hearing on objections or claims of privilege asserted under this section. ]

[ (e) Asserting a privilege. A party may preserve a privilege from written discovery in accordance with this subparagraph. For purposes of this rule, an assertion that material or information is work product, as that term is defined, protected, and limited in Texas Rules of Civil Procedure, §192.5, is an assertion of privilege. ]

[ (1) A party who claims that material or information responsive to written discovery is privileged may withhold the privileged material or information from the response. The party must state--in the response (or in an amended or supplemental response) or in a separate document--that: ]

[ (A) information or material responsive to the request has been withheld, ]

[ (B) the request to which the information or material relates, and ]

[ (C) the privilege or privileges asserted. ]

[ (2) After receiving a response indicating that material or information has been withheld from production, the party seeking discovery may serve a written request that the withholding party identify the information and material withheld. Within 15 days of service of that request, the withholding party must serve a response that: ]

[ (A) describes the information or materials withheld that, without revealing the privileged information itself or otherwise waiving the privilege, enables other parties to assess the applicability of the privilege, and ]

[ (B) asserts a specific privilege for each item or group of items withheld. ]

[ (f) Requests for disclosure. A party may obtain disclosure from another party of the information or material listed herein by serving the other party--at any time after a contested case has been assigned to an assistant general counsel but no later than 90 days before the scheduled date of the oral hearing or the date on which the record of a written submission hearing is scheduled to close--the following request: "Pursuant to §1.33(f) of this title (relating to Discovery), you are requested to disclose, within 30 days of service of this request, the information or material described in that section." A party may request disclosure of any or all of the following: ]

[ (1) the correct names of the parties to the contested case; ]

[ (2) the legal theories and, in general, the factual bases of the responding party's claims or defenses (the responding party need not marshal all evidence that may be offered at hearing); ]

[ (3) the name, address, and telephone number of persons having knowledge of relevant facts, and a brief statement of each identified person's connection with the case; ]

[ (4) for any testifying expert: ]

[ (A) the expert's name, address, and telephone number; ]

[ (B) the subject matter on which the expert will testify; ]

[ (C) the general substance of the expert's mental impressions and opinions and a brief summary of the basis for them, or if the expert is not retained by, employed by, or otherwise subject to the control of the responding party, documents reflecting such information; ]

[ (D) if the expert is retained by, employed by, or otherwise subject to the control of the responding party: ]

[ (i) all documents, tangible things, reports, models, or data compilations that have been provided to, reviewed by, or prepared by or for the expert in anticipation of the expert's testimony; and ]

[ (ii) the expert's current resume and bibliography; ]

[ (5) any witness statements described in Texas Rules of Civil Procedure, §192.3(h). The responding party must serve a written response on the requesting party within 30 days after service of the request, except that a response to a request under subsection (f)(4) of this section is governed by Texas Rules of Civil Procedure, §195. Copies of documents and other tangible items ordinarily must be served with the response. But if the responsive documents are voluminous, the response must state a reasonable time and place for the production of the documents. The responding party must produce the documents at the time and place stated, unless otherwise agreed by the parties or ordered by the Administrative Law Judge, and must provide the requesting party a reasonable opportunity to inspect them. No objection or assertion of work product is permitted to a request under subsection (f) of this section. A response to a request under subsection (f)(2) of this section that has been changed by an amended or supplemental response is not admissible and may not be used for impeachment. ]

[ (g) Discovery regarding testifying expert witnesses. Texas Rules of Civil Procedure, §195 is incorporated herein for discovery regarding testifying expert witnesses. ]

[ (h) Interrogatories to parties. Any party may serve upon any other party written interrogatories to inquire about any matter within the scope of discovery except matters covered by subsection (g) of this section. An interrogatory may inquire whether a party makes a specific legal or factual contention and may ask the responding party to state the legal theories and to describe in general the factual bases for the party's claims or defenses, but interrogatories may not be used to require the responding party to marshal all of the available proof or the proof the party intends to offer at hearing. Written interrogatories are to be answered by the party served, or, if the party served is a public or private corporation or partnership or association, by an officer or agent who must furnish such information as is available to the party. Interrogatories may be served at any time after a contested case has been assigned to an assistant general counsel. Interrogatories served upon the comptroller may be answered by the comptroller's designee who shall sign and verify the answers as required by subsection (h)(3) of this section. ]

[ (1) Interrogatories and answers to interrogatories. Service of interrogatories and answers to interrogatories must be made on the authorized representative of a party unless service upon the party is ordered by the administrative law judge. ]

[ (2) Time to answer. The party upon whom the interrogatories have been served must serve answers on the party submitting the interrogatories within 30 days after the service of the interrogatories, unless the parties agree in writing to a longer or shorter period of time. The administrative law judge, on a showing of good cause, may lengthen or shorten the time for serving answers or objections. ]

[ (3) Number of interrogatories. The number of questions including subsections in a set of interrogatories must not require more than 25 answers. Interrogatories must be answered separately and fully in writing. A responding party, not an agent or attorney, must sign the answers under oath except that when answers are based on information obtained from other persons, the party may so state, and a party need not sign answers to interrogatories about persons with knowledge of relevant facts, trial witnesses, and legal contentions. Answers to interrogatories must be preceded by the question or interrogatories to which the answer pertains. Copies of the interrogatories, and answers and objections thereto, must be served on all parties or their representatives. The answers must be signed and verified by the person making them. ]

[ (i) Subpoenas, depositions, and orders to allow entry. An administrative law judge, acting independently or on motion by any party, may, for good cause: ]

[ (1) subpoena any person to appear and testify and to produce certain documents or other tangible items at an oral hearing; ]

[ (2) commission the taking of an oral deposition in the witness' county of residence or county where the witness does business and require production of certain documents or other tangible items at the time of deposition; and ]

[ (3) order any party to allow entry upon property under the party's control for the purpose of doing any act or making any inspection not protected by privilege and reasonably calculated to lead to the discovery of evidence material to the contested case. ]

[ (j) Request for admission. ]

[ (1) At any time after a contested case has been assigned to an assistant general counsel, a party may serve upon any other party a written request for the admission, for purposes of the pending contested case only, of the truth of any matter within the scope of subsection (b) of this section set forth in the request that relates to statements or opinions of fact or the application of law to fact, including the genuineness of any documents described in the request. Copies of the documents shall be served with the request unless they have been or are otherwise furnished or made available for inspection and copying. Whenever a party is represented by an attorney or representative of record, service of a request for admissions shall be made on his attorney or representative. A true copy of any objection to the request together with a copy of the request shall be filed promptly in the administrative law judge clerk's office by the party making the objection. If no objection is filed to a request, the written answer and the request shall be filed with the assigned administrative law judge by the assistant general counsel no later than seven days prior to the date of the oral hearing or by the closing of the record of a written submission hearing. ]

[ (2) Each matter of which an admission is requested shall be separately set forth. The matter is admitted without necessity of an order of the administrative law judge, unless within 30 days after service of the request, or within such time as the court may allow, or as otherwise agreed by the parties, the party to whom the request is directed serves upon the party requesting the admission a written answer or objection addressed to the matter, signed by the party or by his attorney or representative. If objection is made, the reason therefor shall be stated. The answer shall specifically deny the matter or set forth in detail the reasons that the answering party cannot truthfully admit or deny the matter. A denial shall fairly meet the substance of the requested admission, and when good faith requires that a party qualify his answer or deny only a part of the matter of which an admission is requested, he shall specify so much of it as is true and qualify or deny the remainder. An answering party may not give lack of information or knowledge as a reason for failure to admit or deny unless he states that he has made a reasonable inquiry and that the information known or easily obtainable by him is insufficient to enable him to admit or deny. A party who considers that a matter of which an admission is requested presents a genuine issue for the contested case may not, on that ground alone, object to the request; he may deny the matter or set forth reasons why he cannot admit or deny it. ]

[ (3) Any matter admitted under this subsection is conclusively established as to the party making the admission unless the administrative law judge on motion permits the withdrawal or amendment of the admission. The administrative law judge may permit withdrawal or amendment of responses and deemed admissions upon a showing of good cause for such withdrawal or amendment if the administrative law judge finds that the parties relying upon the responses and deemed admissions will not be unduly prejudiced, that the withdrawal or amendment is necessary for factual accuracy, and that the presentation of the merits of the contested case will be subserved thereby. Any admission made by a party under this subsection is for the purpose of the pending contested case only and neither constitutes an admission by him for any other purpose nor may be used against him in any other proceeding. ]

§1.36.Interested Parties.

Any person who has a direct pecuniary interest in the resolution of a contested case may be admitted as an interested party at the discretion of the agency [ upon filing a motion to be admitted, with the administrative law judge and furnishing proof of service to all other parties. The administrative law judge will decide whether or not to admit the movant as an interested party ]. If admitted, the interested party's participation will be limited to the extent of the party's interest.

§1.37.Joint Hearings; Severance.

(a) A party may request [ file a written motion ] to have two or more cases joined for purposes of hearing[ ; or an assigned administrative law judge, acting independently, may join two or more cases ]. Proceedings involving more than one taxpayer may not be joined if any party objects. [ A motion for joinder must state the basis for joinder. ]

(b) Where two or more cases have been joined for purposes of hearing, a party may request [ move ] to sever. Severance should be allowed [ granted ] unless the hearing involves an issue which cannot be fully determined in the absence of one or more of the parties.

§1.39.Dismissal of Case.

If a motion to dismiss is filed by a taxpayer based upon agreement reached among the parties as reflected in the Position Letter [ position letter ] or any supplement to it, or upon the taxpayer's decision to abandon the case, a decision will be issued which conforms with the Position Letter [ position letter ] or the agreement reached among the parties. [ The assistant general counsel may move to dismiss a case based upon agreement reached among the parties, for want of prosecution, or for failure to state a claim upon which relief can be granted as required by §1.7 of this title (relating to Content of Statement of Grounds; Preliminary Conference) and §1.42 of this title (relating to Definitions). The motion must be served on all parties and their authorized representatives at their last known address. If there is no reply from the taxpayer within 15 days to the assistant general counsel's motion to dismiss, a decision will be issued either dismissing the case and fixing the deficiency as the amount determined by the Administrative Hearings Section or otherwise disposing of the case according to the position last taken by the Administrative Hearings Section. ] All agreements [ motions to dismiss that are based upon a representation that both parties have agreed ] to dismiss a contested case, on the basis that all issues have been settled, shall be in writing and signed by both parties or their authorized representatives.

§1.41.Ex Parte Communications.

There may be no direct or indirect [ verbal ] communications by any party with the comptroller or the final decision maker [ administrative law judge ] regarding any issue of fact or law in a case without notice and opportunity for all parties to participate, and there may be no written communications that are not transmitted at the same time to all parties, except that an individual assigned to render [ involved in rendering ] the decision or to make findings of fact and conclusions of law in a case may communicate ex parte with employees of the agency who did not participate in the hearing in the case for the purpose of utilizing their special skills or knowledge in evaluating the evidence.

§1.42.Definitions.

The following words and terms, when used in these rules [ this chapter ], shall have the following meanings, unless the context clearly indicates otherwise.

(1) Administrative law judge--An individual appointed [ by the comptroller ] to conduct hearings , as defined by SOAH, Rules of Procedure, 1 TAC §155.5(1) [ on matters within the comptroller's jurisdiction and to prepare proposed decisions to properly resolve such matters ].

(2) Agency--The Office of the Comptroller of Public Accounts.

(3) APA--The Administrative Procedure Act (Government Code, Title 10, Chapter 2001).

(4) [ (3) ] Applicant--A party seeking a license or permit from the agency, or seeking an exemption.

(5) [ (4) ] Authorized representative--An individual who represents a party in a contested case and may be any individual other than the party.

(6) [ (5) ] Contested case or case--A proceeding in which the legal rights, duties, or privileges of a party are to be determined by the agency after an opportunity for adjudicative hearing. It includes a request for redetermination or refund, as well as actions initiated by the agency to revoke or suspend permits or licenses administered by the agency on grounds other than failure to pay a final tax deficiency or failure to file a tax security. Contested cases are within the jurisdiction of the comptroller or the final decision maker by law or delegation [ administrative law judges ]. Forfeitures of rights to do business, of certificates of authority, of articles of incorporation, penalties imposed under [ the ] Tax Code, §151.7031, the refusal or failure to settle under Tax Code, §111.101 or requests for or revocation of exemptions from taxation are not contested cases [ and are not within the jurisdiction of the administrative law judges ].

(7) [ (6) ] Determination--A written notice from the agency that a person is required to pay to the State of Texas a tax, fee, penalty, or interest.

(8) [ (7) ] Assistant General Counsel--An attorney from the Administrative Hearings Section who is assigned to present the agency's position in a contested case.

(9) [ (8) ] Licensing--The agency process respecting the granting, denial, renewal, revocation, suspension, annulment, withdrawal, or amendment of a permit.

(10) [ (9) ] Party--Any person filing a petition or claim with the agency or asked by the agency to respond; the agency, acting through its Administrative Hearings Section; and any other person admitted as a party under §1.36 of this title (relating to Interested Parties).

(11) [ (10) ] Permit--The whole or any part of a license, certificate, approval, registration, or similar form of permission, the issuance, renewal, amendment, suspension or revocation of which is within the jurisdiction of the agency.

(12) [ (11) ] Permit holder--Includes a bonded agent, distributor, wholesaler, or retailer required to obtain a permit under [ the ] Tax Code, Chapters 154 or 155.

(13) [ (12) ] Person--Any individual, partnership, corporation, association, governmental subdivision, or public or private organization of any character. It may also include an estate, trust, receiver, assignee for benefit of creditors, trustee, trustee in bankruptcy, assignee, or any other group or combination acting as a unit.

(14) [ (13) ] Petition--A request for official action by the agency regarding the rights, duties or privileges accorded to the person making the request under a statute administered or enforced by the agency. If the request is made orally, it must subsequently be reduced to writing.

(15) [ (14) ] Petitioner, claimant, or taxpayer--Any person who files a petition seeking redetermination of a liability, a refund of monies paid, or determination of rights under any license or permit granted by the agency.

(16) [ (15) ] Pleading--Any document filed by a party concerning the position or assertions in a contested case.

(17) [ (16) ] Respondent or taxpayer--Any person to whom a notice of a show cause hearing for the suspension or revocation of a license has been issued.

(18) Rules--The Texas Comptroller of Public Accounts Practice and Procedure Rules set forth in 34 TAC Chapter 1.

(19) SOAH--The State Office of Administrative Hearings.

(20) SOAH Rules of Procedure--The State Office of Administrative Hearings Rules set forth in 1 TAC Chapter 155.

(21) [ (17) ] Tax Division--The divisions within the agency responsible for the particular action or actions that are the subject of the contested case.

This agency hereby certifies that the proposal has been reviewed by legal counsel and found to be within the agency's legal authority to adopt.

Filed with the Office of the Secretary of State on January 22, 2007.

TRD-200700148

Martin Cherry

General Counsel

Comptroller of Public Accounts

Earliest possible date of adoption: March 4, 2007

For further information, please call: (512) 475-0387

34 TAC §1.8, §1.22

The Comptroller proposes new §1.8, concerning resolution prior to the issuance of a position letter and new §1.22, concerning oral and written submission hearings. The new rules are being proposed in order to update and formalize procedures for the resolution of cases prior to the issuance of a Position Letter and to facilitate the transfer of cases to the State Office of Administrative Hearings ("SOAH") for oral and written submission hearings.

John Heleman, Chief Revenue Estimator, has determined that for the first five-year period the rule will be in effect, there will be no significant revenue impact on the state or units of local government.

Mr. Heleman also has determined that for each year of the first five years the rule is in effect, it would benefit the public by clarifying to taxpayers the comptroller's office practices and procedures subsequent to the transfer of hearings to SOAH. This rule is adopted under Tax Code, Title 2, and does not require a statement of fiscal implications for small businesses. There is no significant anticipated economic cost to individuals who are required to comply with the proposed rule.

Comments on the proposals may be submitted to Rick Budd, Deputy General Counsel, General Counsel Division, Administrative Hearings Section, P.O. Box 13528, Austin, Texas 78711.

The new sections are proposed under Tax Code, §111.002, which provides the comptroller with the authority to prescribe, adopt, and enforce rules relating to the administration and enforcement of the provisions of Tax Code, Title 2.

The new sections implement Tax Code §§111.001, 111.009, and 111.105, which provide for the collection of taxes, redetermination and refund hearings.

§1.8.Resolution Prior to Issuance of a Position Letter.

(a) If the taxpayer's contentions are fully accepted or if the parties agree on a resolution of all contentions, the agency may elect to amend the determination, to issue an amended billing, or agree to a refund or credit request rather than issue a Position Letter.

(b) If the determination or billing is amended, or a refund or credit is issued, the action will become final 20 days after notification. An amended billing or determination is payable 20 days after it becomes final unless otherwise specified. Pursuant to APA, Government Code, §2001.142, notification is presumed to occur on the third day after the date of mailing.

§1.22.Oral and Written Submission Hearings.

(a) It is the agency's policy to encourage resolution and early settlement of all contested matters.

(b) If, after reviewing a taxpayer's Reply to the Tax Division's Position Letter, as well as all other available evidence, the parties are unable to resolve or settle all contested matters, the Tax Division will file a Request to Docket Case form with SOAH.

(c) At the time the Request to Docket Case form is filed with SOAH, the agency shall file with SOAH a copy of all pleadings served on the agency by the taxpayer and on the taxpayer by the agency, including but not limited to the Statement of Grounds, Position Letter, Reply and Response along with any exhibits or attachments thereto in accordance with the provisions of SOAH Rules of Procedure, §155.9.

(d) If the parties are unable to resolve or settle all contested matters, and resolution requires a hearing, then, except as otherwise noted or required, the taxpayer will be given the option of selecting:

(1) A written submission hearing before a SOAH administrative law judge, or

(2) An oral hearing before a SOAH administrative law judge.

(e) If the taxpayer fails to make a selection, the case will be docketed as a written submission hearing, subject to subsection (f) of this section.

(f) A taxpayer may change the selection of oral or written submission hearing made in subsection (d) of this section, by filing a motion with SOAH. Such a motion would be filed according to SOAH Rules of Procedure.

(g) The Tax Division has the option of requesting an oral hearing in any case in which it has the burden of proof.

(h) All hearings held pursuant to Tax Code, §154.1142 or §155.0592, will be oral hearings.

This agency hereby certifies that the proposal has been reviewed by legal counsel and found to be within the agency's legal authority to adopt.

Filed with the Office of the Secretary of State on January 22, 2007.

TRD-200700145

Martin Cherry

General Counsel

Comptroller of Public Accounts

Earliest possible date of adoption: March 4, 2007

For further information, please call: (512) 475-0387

34 TAC §§1.13, 1.21, 1.34

(Editor's note: The text of the following sections proposed for repeal will not be published. The sections may be examined in the offices of the Comptroller of Public Accounts or in the Texas Register office, Room 245, James Earl Rudder Building, 1019 Brazos Street, Austin.)

The Comptroller of Public Accounts proposes the repeals of §1.13, concerning initiation of expedited hearings, §1.21, concerning oral hearings, and §1.34, concerning witness fees. The repeals are necessary because of the partial transfer of hearings responsibilities to the State Office of Administrative Hearings (''SOAH''). Repeal of these rules will prevent conflict and duplication with the SOAH Rules of Procedures.

John Heleman, Chief Revenue Estimator, has determined that repeal of the rules will not result in any fiscal implications to the state or to units of local government.

Mr. Heleman also has determined the repeal would benefit the public by clarifying for the taxpayers the comptroller's office practice and procedures subsequent to the transfer of hearings to SOAH. There would be no anticipated significant economic cost to the public. This repeal is adopted under Tax Code, Title 2, and does not require a statement of fiscal implications for small businesses. There are no additional costs to persons who are required to comply with the repeal.

Comments on the repeals may be submitted to Rick Budd, Deputy General Counsel, General Counsel Division, Administrative Hearings Section, P.O. Box 13528, Austin, Texas 78711.

The repeals are proposed under Tax Code, §111.002, which provides the comptroller with the authority to prescribe, adopt, and enforce rules relating to the administration and enforcement of the provisions of Tax Code, Title 2.

The repeals implement Tax Code §§111.001, 111.009, and 111.105, which provide for the collection of taxes, redetermination and refund hearings.

§1.13.Initiation of an Expedited Hearing.

§1.21.Oral Hearings.

§1.34.Witness Fees.

This agency hereby certifies that the proposal has been reviewed by legal counsel and found to be within the agency's legal authority to adopt.

Filed with the Office of the Secretary of State on January 22, 2007.

TRD-200700144

Martin Cherry

General Counsel

Comptroller of Public Accounts

Earliest possible date of adoption: March 4, 2007

For further information, please call: (512) 475-0387

34 TAC §1.31, §1.32

(Editor's note: The text of the following sections proposed for repeal will not be published. The sections may be examined in the offices of the Comptroller of Public Accounts or in the Texas Register office, Room 245, James Earl Rudder Building, 1019 Brazos Street, Austin.)

The Comptroller of Public Accounts proposes the repeals of §1.31, concerning computation of time and §1.32, concerning service. Existing §1.31 and §1.32 are being repealed because of the partial transfer of hearings responsibilities to the State Office of Administrative Hearings ("SOAH"). New rules concerning computation of time and service are being proposed to more closely reflect SOAH Rules of Procedure.

John Heleman, Chief Revenue Estimator, has determined that repeal of the rules will not result in any fiscal implications to the state or to units of local government.

Mr. Heleman also has determined the repeal would benefit the public by clarifying for the taxpayers the comptroller's office practice and procedures subsequent to the transfer of hearings to SOAH. There would be no anticipated significant economic cost to the public. This repeal is adopted under Tax Code, Title 2, and does not require a statement of fiscal implications for small businesses. There are no additional costs to persons who are required to comply with the repeal.

Comments on the repeals may be submitted to Rick Budd, Deputy General Counsel, General Counsel Division, Administrative Hearings Section, P.O. Box 13528, Austin, Texas 78711.

The repeals are proposed under Tax Code, §111.002, which provides the comptroller with the authority to prescribe, adopt, and enforce rules relating to the administration and enforcement of the provisions of Tax Code, Title 2.

The repeals implement Tax Code §§111.001, 111.009, and 111.105, which provide for the collection of taxes, redetermination and refund hearings.

§1.31.Computation of Time.

§1.32.Service.

This agency hereby certifies that the proposal has been reviewed by legal counsel and found to be within the agency's legal authority to adopt.

Filed with the Office of the Secretary of State on January 22, 2007.

TRD-200700146

Martin Cherry

General Counsel

Comptroller of Public Accounts

Earliest possible date of adoption: March 4, 2007

For further information, please call: (512) 475-0387

34 TAC §1.31, §1.32

The Comptroller of Public Accounts proposes new §1.31, concerning computation of time and §1.32, concerning service. The newly proposed rules will make the computation of time and service provisions consistent with SOAH rules regarding computation of time and service as well as to provide explicit guidelines for service regarding new technologies such as electronic mail.

John Heleman, Chief Revenue Estimator, has determined that for the first five-year period the rule will be in effect, there will be no significant revenue impact on the state or units of local government.

Mr. Heleman also has determined that for each year of the first five years the rule is in effect, it would benefit the public by clarifying to taxpayers the comptroller's office practices and procedures subsequent to the transfer of hearings to SOAH. This rule is adopted under Tax Code, Title 2, and does not require a statement of fiscal implications for small businesses. There is no significant anticipated economic cost to individuals who are required to comply with the proposed rule.

Comments on the proposals may be submitted to Rick Budd, Deputy General Counsel, General Counsel Division, Administrative Hearings Section, P.O. Box 13528, Austin, Texas 78711.

The new rules are proposed under Tax Code, §111.002, which provides the comptroller with the authority to prescribe, adopt, and enforce rules relating to the administration and enforcement of the provisions of Tax Code, Title 2.

The new rules implement Tax Code §§111.001, 111.009, and 111.105, which provide for the collection of taxes, redetermination and refund hearings.

§1.31.Computation of Time.

(a) Unless otherwise required by statute, in computing time periods prescribed by applicable statute or these rules, the day of the act, event, or default on which the designated period of time begins to run is not included. The last day of the period is included, unless it is a Saturday, Sunday, an official state holiday, or another day on which the agency is closed, in which case the time period will be deemed to end on the next day that the agency is open. When these rules specify a deadline or set a number of days for filing documents or taking other actions, the computation of time shall be by calendar days rather than business days, unless otherwise provided by applicable law or these rules. However, if the period specified is five days or less, the intervening Saturdays, Sundays, and legal holidays are not counted, except for purposes of §1.32 of this title (related to Service).

(b) Disputes regarding computation of time for periods not specified in these rules will be resolved by reference to applicable law and upon consideration of agency policy.

(c) When by these rules an act is required or allowed to be done at or within a specified time, the agency may for cause shown, if allowed by applicable statute, order the period enlarged if application therefore is made before the expiration of the specified period. In addition, where good cause is shown for the failure to act within the specified period, the agency may permit the act to be done after the expiration of the specified period, if allowed by applicable statute.

§1.32.Service.

(a) Service may be made by hand-delivery; by regular (United States Postal Service or private mail service), certified or registered mail; by electronic mail, upon agreement of the parties; or by facsimile transmission.

(b) Service on parties. Any person filing any document required to be served on other parties in a case shall, on the same date as the document is filed, provide a copy to each party or the party's authorized representative by hand-delivery; by regular, certified or registered mail; by electronic mail, upon agreement of the parties; or by facsimile transmission; provided however, when a party files a business record affidavit, pursuant to Supreme Court of Texas, Texas Rules of Evidence, Article IV, §902(10), or a transcript, the party may give notice of the filing without the necessity of providing a copy to each party.

(c) In the event that, pursuant to §1.36 of this title (relating to Interested Parties), a third party has been admitted as a party to the contested case, that interested party must also be served.

(d) The file stamp affixed by the agency will be the date of service for hand-delivered documents. The postmark, shipping, or transmission date indicated on other documents is presumed to be the date of service, but this is a rebuttable presumption. However, if a document was served by facsimile transmission or by electronic mail before 5:00 p.m. on a business day, it is presumed that the document was received on that day; otherwise, it is presumed that the document was received on the next business day.

(e) Certificate of service. The person filing or serving the document shall include a certificate of service that certifies compliance with this section.

(f) Service of notice of hearing. Unless otherwise required by law, service of notice of hearing shall be made by the agency in the manner required by the APA.

(g) Presumed time of receipt of served documents. The following rebuttable presumptions shall apply regarding a party's receipt of documents served by another party:

(1) If a document was hand-delivered to a party in person or by agent, it is presumed that the document was received on the date of filing at the agency.

(2) If a document was served by courier-receipted delivery, it is presumed that the document was received no later than the day after filing at the agency.

(3) If a document was sent by regular mail, certified mail, or registered mail, it is presumed that it was received no later than three days after mailing.

(4) If a document was served by facsimile transmission or by electronic mail before 5:00 p.m. on a business day, it is presumed that the document was received on that day; otherwise, it is presumed that the document was received on the next business day.

(h) Electronically transmitted documents. Documents may be served on parties by electronic mail according to the following requirements.

(1) With the exception of documents produced pursuant to a discovery request, the sender shall also file the original of the document with the agency.

(2) The sender has the burden of proving date and time of receipt of the document.

This agency hereby certifies that the proposal has been reviewed by legal counsel and found to be within the agency's legal authority to adopt.

Filed with the Office of the Secretary of State on January 22, 2007.

TRD-200700147

Martin Cherry

General Counsel

Comptroller of Public Accounts

Earliest possible date of adoption: March 4, 2007

For further information, please call: (512) 475-0387