S.B. No. 242
 
 
 
 
AN ACT
  relating to the transfer to the State Office of Administrative
  Hearings of contested cases involving the collection, receipt,
  administration, and enforcement of state taxes and fees by the
  comptroller of public accounts.
         BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
         SECTION 1.  Subchapter A, Chapter 111, Tax Code, is amended
  by adding Section 111.00455 to read as follows:
         Sec. 111.00455.  CONTESTED CASES CONDUCTED BY TAX DIVISION
  OF STATE OFFICE OF ADMINISTRATIVE HEARINGS. (a)  The tax division
  of the State Office of Administrative Hearings shall conduct any
  contested case hearing as provided by Section 2003.101, Government
  Code, in relation to the collection, receipt, administration, and
  enforcement of:
               (1)  a tax imposed under this title; and
               (2)  any other tax, fee, or other amount that the
  comptroller is required to collect, receive, administer, or enforce
  under a law not included in this title.
         (b)  The following are not contested cases under Subsection
  (a) and Section 2003.101, Government Code:
               (1)  a show cause hearing or any hearing not related to
  the collection, receipt, administration, or enforcement of the
  amount of a tax or fee imposed, or the penalty or interest
  associated with that amount, except for a hearing under Section
  151.157(f), 151.1575(c), 151.712(g), 154.1142, or 155.0592;
               (2)  a property value study hearing under Subchapter M,
  Chapter 403, Government Code;
               (3)  a hearing in which the issue relates to:
                     (A)  Chapters 72-75, Property Code;
                     (B)  forfeiture of a right to do business;
                     (C)  a certificate of authority;
                     (D)  articles of incorporation;
                     (E)  a penalty imposed under Section 151.7031;
                     (F)  the refusal or failure to settle under
  Section 111.101; or
                     (G)  a request for or revocation of an exemption
  from taxation; and
               (4)  any other hearing not related to the collection,
  receipt, administration, or enforcement of the amount of a tax or
  fee imposed, or the penalty or interest associated with that
  amount.
         (c)  A reference in law to the comptroller that relates to
  the performance of a contested case hearing described by Subsection
  (a) means the tax division of the State Office of Administrative
  Hearings.
         SECTION 2.  Subsection (c), Section 2003.0411, Government
  Code, is amended to read as follows:
         (c)  Except as provided by Section 2003.101, to [To] be
  appointed a master administrative law judge, a person must have at
  least 10 years of general legal experience, must have at least six
  years of experience presiding over administrative hearings or
  presiding over hearings as a judge or master of a court, and must
  meet other requirements as prescribed by the chief administrative
  law judge.
         SECTION 3.  Chapter 2003, Government Code, is amended by
  adding Subchapter D to read as follows:
  SUBCHAPTER D.  TAX DIVISION
         Sec. 2003.101.  TAX DIVISION. (a)  The office shall
  establish a tax division to conduct hearings relating to contested
  cases involving the collection, receipt, administration, and
  enforcement of taxes, fees, and other amounts as prescribed by
  Section 111.00455, Tax Code.
         (b)  An administrative law judge in the tax division is
  classified as a "master administrative law judge II."  Section
  2003.0411 does not apply to this section.
         (c)  If there are no cases in the tax division, and subject to
  the prior approval of the comptroller, an administrative law judge
  in the tax division may conduct hearings for other state agencies.  
  Before conducting a hearing for another state agency under this
  subsection, the tax division must notify the comptroller in
  writing. The notification must describe the case that will be heard
  and the administrative law judge who will conduct the hearing and
  must estimate the amount of time that the judge will spend on the
  case. The office shall reimburse the comptroller at an appropriate
  hourly rate for the time spent by the administrative law judge on
  the case.  The comptroller may revoke approval to conduct hearings
  for other state agencies under this subsection at any time.
         (d)  To be eligible to preside at a tax division hearing, an
  administrative law judge, including a temporary administrative law
  judge contracted with under Section 2003.043, must:
               (1)  be a United States citizen;
               (2)  be an attorney in good standing with the State Bar
  of Texas;
               (3)  have been licensed in this state to practice law
  for at least seven years;
               (4)  have substantial experience in tax cases in making
  the record suitable for administrative review or otherwise; and
               (5)  have devoted at least 75 percent of the person's
  legal practice to Texas state tax law in at least five of the past 10
  years before the date on which the person begins employment in the
  tax division.
         (e)  Notwithstanding Section 2001.058, the comptroller may
  change a finding of fact or conclusion of law made by the
  administrative law judge or vacate or modify an order issued by the
  administrative law judge only if the comptroller:
               (1)  determines that the administrative law judge:
                     (A)  did not properly apply or interpret
  applicable law, then existing comptroller rules or policies, or
  prior administrative decisions; or
                     (B)  issued a finding of fact that is not
  supported by a preponderance of the evidence; or
               (2)  determines that a comptroller policy or a prior
  administrative decision on which the administrative law judge
  relied is incorrect.
         (f)  The comptroller shall state in writing the specific
  reason and legal basis for a determination under Subsection (e).
         (g)  An administrative law judge, on the judge's own motion
  or on motion of a party and after notice and an opportunity for a
  hearing, may impose appropriate sanctions as provided by Subsection
  (h) against a party or its representative for:
               (1)  filing of a motion or pleading that is groundless
  and brought:
                     (A)  in bad faith;
                     (B)  for the purpose of harassment; or
                     (C)  for any other improper purpose, such as to
  cause unnecessary delay or needless increase in the cost of the
  proceeding;
               (2)  abuse of the discovery process in seeking, making,
  or resisting discovery; or
               (3)  failure to obey an order of the administrative law
  judge or the comptroller.
         (h)  A sanction imposed under Subsection (g) may include, as
  appropriate and justified, issuance of an order:
               (1)  disallowing further discovery of any kind or of a
  particular kind by the offending party;
               (2)  holding that designated facts be deemed admitted
  for purposes of the proceeding;
               (3)  refusing to allow the offending party to support
  or oppose a designated claim or defense or prohibiting the party
  from introducing designated matters in evidence;
               (4)  disallowing in whole or in part requests for
  relief by the offending party and excluding evidence in support of
  such requests; and
               (5)  striking pleadings or testimony, or both, wholly
  or partly, or staying further proceedings until the order is
  obeyed.
         (i)  For each hearing conducted under this section, an
  administrative law judge in the tax division shall issue a proposal
  for decision that includes findings of fact and conclusions of law.  
  In addition, the proposal for decision must include the legal
  reasoning and other analysis considered by the judge in reaching
  the decision.  Each finding of fact or conclusion of law made by the
  judge must be:
               (1)  independent and impartial; and
               (2)  based on state law and the evidence presented at
  the hearing.
         (j)  The comptroller may not attempt to influence the
  findings of fact or the administrative law judge's application of
  the law except by evidence and legal argument.  An administrative
  law judge conducting a hearing under this subchapter may not
  directly or indirectly communicate in connection with an issue of
  fact or law with a party or its representative, except:
               (1)  on notice and opportunity for each party to
  participate; or
               (2)  to ask questions that involve ministerial,
  administrative, or procedural matters that do not address the
  substance of the issues or positions taken in the case.
         (k)  Appearances in hearings conducted for the comptroller
  by the office may be by:
               (1)  the taxpayer;
               (2)  an attorney licensed to practice law in this
  state;
               (3)  a certified public accountant; or
               (4)  any other person designated by the taxpayer who is
  not otherwise prohibited from appearing in the hearing.
         (l)  The comptroller is represented by an authorized
  representative in all hearings conducted for the comptroller by the
  office.
         Sec. 2003.102.  SUNSET PROVISION.  (a)  The tax division is
  subject to Chapter 325 (Texas Sunset Act).
         (b)  The Sunset Advisory Commission shall evaluate the tax
  division and present to the 82nd Legislature a report on that
  evaluation and the commission's recommendations in relation to the
  tax division.
         (c)  During the regular legislative session at which the
  commission presents its report and recommendations, the
  legislature by law may continue the tax division as provided by that
  chapter.  If the tax division is not continued in existence as
  provided by that chapter, the tax division is abolished and this
  subchapter and Section 111.00455, Tax Code, expire on September 1
  of the odd-numbered year in which the regular legislative session
  occurred.
         Sec. 2003.103.  TIMELINESS OF HEARINGS. (a)  The tax
  division shall conduct all hearings under this subchapter in a
  timely manner.
         (b)  The tax division shall use every reasonable means to
  expedite a case under this subchapter when the comptroller requests
  that the division expedite the case.
         (c)  This section is not intended to impair the independence
  of the office in conducting a hearing under this subchapter.
         Sec. 2003.104.  CONFIDENTIALITY OF TAX DIVISION
  INFORMATION.  (a)  The office shall keep information that
  identifies a taxpayer who participates in a case under this
  subchapter confidential, including the taxpayer's name and social
  security number.
         (b)  The provision of information to the office that is
  confidential under any law, including Section 111.006, 151.027, or
  171.206, Tax Code, does not affect the confidentiality of the
  information, and the office shall maintain that confidentiality.
         (c)  A hearing conducted under this subchapter is
  confidential and not open to the public.
         Sec. 2003.105.  TAX DIVISION HEARINGS FEE.  The office shall
  charge the comptroller a fixed annual fee rather than an hourly rate
  for services rendered by the office to the comptroller. The office
  and the comptroller shall negotiate the amount of the fixed fee
  biennially to coincide with the comptroller's legislative
  appropriations request.
         Sec. 2003.106.  COMPTROLLER'S PRIORITIES AND PUBLIC POLICY
  NEEDS. (a)  The comptroller shall provide input to the office to
  assist the office regarding the comptroller's priorities and public
  policy needs.
         (b)  This section is intended to assist the office in
  providing efficient service under this subchapter and is not
  intended to impair the independence of the office in conducting a
  hearing under this subchapter.
         Sec. 2003.107.  TAX DIVISION REVIEW.  On request of the
  comptroller, the office shall provide the comptroller the following
  regarding the tax division:
               (1)  a list of the administrative law judges, including
  temporary administrative law judges, who have heard cases in the
  division in the past year;
               (2)  the qualifications of the judges; and
               (3)  any other information considered necessary by the
  comptroller in evaluating the performance of the judges hearing
  cases in the tax division.
         Sec. 2003.108.  REPORTS. (a)  The office shall provide the
  comptroller a monthly status report that lists pending cases and
  provides information on any case that exceeds the comptroller's
  time lines for issuing a proposal for decision or an agreed order.
         (b)  At least quarterly, the office shall review with the
  comptroller and appropriate staff of the office the status of
  pending cases under this subchapter.
         (c)  The office shall provide a quarterly report to the
  comptroller on services performed by the office for the comptroller
  under this subchapter.
         Sec. 2003.109.  RULES; EARLY REFERRAL.  (a)  The comptroller
  may adopt rules to provide for the referral to the tax division of
  issues related to a case described by Section 111.00455, Tax Code,
  to resolve a procedural or other preliminary dispute between the
  comptroller and a party.
         (b)  After a referral under this section, the tax division
  shall docket the case and assign an administrative law judge under
  Section 2003.101.  If additional proceedings are required after the
  consideration of the procedural or other preliminary dispute, the
  tax division shall appoint the same administrative law judge to
  hear the case.
         SECTION 4.  The changes in law made by this Act that relate
  to the procedures governing a hearing before the tax division of the
  State Office of Administrative Hearings apply only to a case that is
  filed with the State Office of Administrative Hearings on or after
  the effective date of this Act. Procedures relating to a case filed
  with the State Office of Administrative Hearings before the
  effective date of this Act shall continue to be used in a hearing as
  those procedures existed immediately before the effective date of
  this Act, or as provided by an interagency cooperation contract
  entered into between the comptroller and the office in effect
  immediately before the effective date of this Act, and are
  continued in effect only for that purpose.
         SECTION 5.  This Act takes effect immediately if it receives
  a vote of two-thirds of all the members elected to each house, as
  provided by Section 39, Article III, Texas Constitution.  If this
  Act does not receive the vote necessary for immediate effect, this
  Act takes effect September 1, 2007.
 
 
 
 
 
  ______________________________ ______________________________
     President of the Senate Speaker of the House     
 
         I hereby certify that S.B. No. 242 passed the Senate on
  April 19, 2007, by the following vote: Yeas 31, Nays 0; and that
  the Senate concurred in House amendments on May 15, 2007, by the
  following vote: Yeas 31, Nays 0.
 
 
  ______________________________
  Secretary of the Senate    
 
         I hereby certify that S.B. No. 242 passed the House, with
  amendments, on May 9, 2007, by the following vote: Yeas 141,
  Nays 0, one present not voting.
 
 
  ______________________________
  Chief Clerk of the House   
 
 
 
  Approved:
 
  ______________________________ 
              Date
 
 
  ______________________________ 
            Governor