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SSB 1005

A bill for an act relating to awarding the costs in administrative hearings or court proceedings involving the collection of tax, penalties, and interest by the department of revenue.

2025-2026 Regular Session

The bill lets taxpayers recover more costs from the Department of Revenue in tax disputes, removes the cap, and shifts the burden to show justification when the taxpayer prevails.

Committee report approving bill, renumbered as SF 524.
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Bill Summary · SSB 1005

Summary: SSB 1005 (renumbered as SF 524)

Overview

SSB 1005 is a proposed bill relating to the recovery of litigation costs in administrative hearings or court proceedings involving the Department of Revenue’s (DOR) collection of tax, penalties, and interest. The bill would significantly modify who pays costs in these disputes, set new standards for cost recovery, and remove a current cap on recoverable costs. The bill progressed through the Judiciary committee process and was renumbered as SF 524.

Purpose and tene nt

  • To determine when the taxpayer or the Department of Revenue may recover costs incurred in disputes over taxes, penalties, and interest.
  • To change the burden of proof and eligibility for cost recovery, with a focus on aligning cost recovery with whether the department’s position was substantially justified.

Key Provisions

  • Costs eligible for recovery:

    • Reasonable court costs.
    • Reasonable prevailing-market rates for expert witnesses, studies, tests, analyses, or special projects.
    • Reasonable attorney or accountant fees, including fees related to recovering these costs.

  • Removal of cap:

    • The current cap of $25,000 recoverable by a taxpayer is struck (eliminated).

  • Burden of proof (cost recovery standard):

    • If the taxpayer substantially prevails on the amount in controversy or on the issues involved, the burden shifts to the department to prove that its position was substantially justified.
    • If the department proves its position was substantially justified, the taxpayer may not recover costs.
    • If the taxpayer prevails (i.e., the department’s position was not substantially justified), the department must pay the reasonable costs described above.

  • Current law comparison:

    • Under existing law, the taxpayer must prove that the department’s position was not substantially justified (in addition to the amount in controversy and issues involved) to recover costs. The bill reverses this burden when the taxpayer substantially prevails.

  • Scope:

    • Applies to disputes arising from the department’s collection activities (tax, penalties, interest).

Affected Parties

  • Taxpayers involved in administrative hearings or court proceedings with the DOR regarding tax collection disputes.
  • Department of Revenue as the opposing party in such disputes.
  • Potentially witnesses, experts, and professionals (attorneys, accountants) retained for dispute resolution.

Procedural History and Timeline

  • Introduced: January 14, 2025.
  • Referred to: Judiciary Committee.
  • Subcommittee action: January 14, 2025, with meeting on January 15, 2025 (Lofgren, Bisignano, Reichman).
  • Subcommittee outcome: January 15, 2025, recommended amendment and passage.
  • Committee action: March 4, 2025, committee report approved the bill and renumbered it as SF 524.

Potential Implications

  • Shifts litigation incentives by aligning cost recovery with whether the department’s position was substantially justified.
  • Eliminating the cap could increase potential cost recovery for prevailing taxpayers, potentially affecting settlement dynamics.
  • The burden-shifting provision may encourage careful assessment of claims, with the department bearing greater risk of costs if its position is not substantially justified.
  • Broadens the types of recoverable costs to include expert, study, and professional fees, enhancing the financial tools available to taxpayers who prevail.

Note: This summary reflects the bill’s introduced text and subsequent committee actions indicating its renumbering to SF 524.

Compiled from official sources — confirm details with the bill’s official record.

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