A.R.S. tit. 42 ch. 2 — Arizona Revised Statutes Title 42 Chapter 2 — Taxpayer Protection And Services

42-2001. Definitions In this article, unless the context otherwise requires: 1. "Confidential information": (a) Includes the following information whether it concerns individual taxpayers or is aggregate information for specifically identified taxpayers: (i) Returns and reports filed with the department for income tax, withholding tax, transaction privilege tax, luxury tax, use tax, property tax, excise tax on marijuana and severance tax. (ii) Applications to receive a license or registration for transaction privilege tax, luxury tax, use tax, excise tax on marijuana and withholding tax. (iii) Information discovered concerning taxes and receipts by the department, whether or not by compulsory process. (iv) Return information obtained from the United States internal revenue service and United States bureau of alcohol, tobacco and firearms. (v) Information supplied at the special request of the department by a taxpayer that the taxpayer requests to be held in confidence. (vi) Guidelines, standards or procedures that are established by the department for, or other information relating to, selecting returns or taxpayers for examination or settling or compromising any tax liability. (vii) A taxpayer's identity, the nature, source or amount of the taxpayer's income, payments, receipts, deductions, exemptions, credits, assets, liabilities, net worth, tax liability, tax withheld, deficiencies, overassessments or tax payments, whether the taxpayer's return was, is being or will be examined or subject to investigation, collection or processing or any other data received by, recorded by, prepared by, furnished to or collected by the department with respect to a return or with respect to the termination, or possible existence, of liability of any person for any tax, penalty or interest imposed pursuant to this title or title 43. (viii) Information supplied by an employee to an employer regarding the employee's election to have the employee's withholding tax reduced for the purposes of contributions to qualifying charitable organizations, qualified school tuition organizations or public schools pursuant to section 43-401, subsection G. (b) Does not include information that is otherwise a public record. 2. "Report" includes a notice of insurance payments, a request for a release of a bank account and an inventory of a safe deposit box. 3. "Return" includes any form prescribed by the department and any supporting schedules, attachments and lists. 4. "Tax administration" includes assessment, collection, investigation, litigation, statistical gathering functions, enforcement, policy making functions or management of those functions of the tax revenue laws of this state. 5. "Tax official" means a nonelected employee or the nonelected employee's designee or agent who is responsible for tax administration. 6. "Taxpayer", with respect to a joint return, means either party. 42-2002. Disclosure of confidential information prohibited A. A person, including a former employee or agent of the department or the office of administrative hearings or a person previously having an administrative duty for the department or the office of administrative hearings, who has received confidential information while an employee or agent of the department or the office of administrative hearings, while performing an administrative duty for the department or the office of administrative hearings, shall not disclose that information except as provided in this article. B. A person who has received confidential information pursuant to an exception under section 42-2003, subsection B or G shall not disclose that information except as provided in this article. C. Confidential information may not be disclosed relating to applications for cannabis or controlled substance tax licenses or payments under prior law. D. Confidential information shall not be disclosed if the department determines that disclosure would seriously impair any civil or criminal tax investigation or if the disclosure would be contrary to section 6103(d), 6103(p)(8) or 7213 of the internal revenue code. 42-2003. Authorized disclosure of confidential information A. Confidential information relating to: 1. A taxpayer may be disclosed to the taxpayer, its successor in interest or a designee of the taxpayer who is authorized in writing by the taxpayer. A principal corporate officer of a parent corporation may execute a written authorization for a controlled subsidiary. If a taxpayer elects to file an Arizona small business income tax return under section 43-302, a written authorization by the taxpayer to allow the department to disclose personal income tax information to a designee includes the corresponding Arizona small business income tax return. 2. A corporate taxpayer may be disclosed to any principal officer, any person designated by a principal officer or any person designated in a resolution by the corporate board of directors or other similar governing body. If a corporate officer signs a statement under penalty of perjury representing that the officer is a principal officer, the department may rely on the statement until the statement is shown to be false. For the purposes of this paragraph, "principal officer" includes a chief executive officer, president, secretary, treasurer, vice president of tax, chief financial officer, chief operating officer or chief tax officer or any other corporate officer who has the authority to bind the taxpayer on matters related to state taxes. 3. A partnership may be disclosed to any partner of the partnership. This exception does not include disclosure of confidential information of a particular partner unless otherwise authorized. 4. A limited liability company may be disclosed to any member of the company or, if the company is manager-managed, to any manager. 5. An estate may be disclosed to the personal representative of the estate and to any heir, next of kin or beneficiary under the will of the decedent if the department finds that the heir, next of kin or beneficiary has a material interest that will be affected by the confidential information. 6. A trust may be disclosed to the trustee or trustees, jointly or separately, and to the grantor or any beneficiary of the trust if the department finds that the grantor or beneficiary has a material interest that will be affected by the confidential information. 7. A government entity may be disclosed to the head of the entity or a member of the governing board of the entity, or any employee of the entity who has been delegated the authorization in writing by the head of the entity or the governing board of the entity. 8. Any taxpayer may be disclosed if the taxpayer has waived any rights to confidentiality either in writing or on the record in any administrative or judicial proceeding. 9. The name and taxpayer identification numbers of persons issued direct payment permits may be publicly disclosed. 10. Any taxpayer may be disclosed during a meeting or telephone call if the taxpayer is present during the meeting or telephone call and authorizes the disclosure of confidential information. B. Confidential information may be disclosed to: 1. Any employee of the department whose official duties involve tax administration. 2. The office of the attorney general solely for its use in preparation for, or in an investigation that may result in, any proceeding involving tax administration before the department or any other agency or board of this state, or before any grand jury or any state or federal court. 3. The department of liquor licenses and control for its use in determining whether a spirituous liquor licensee has paid all transaction privilege taxes and affiliated excise taxes incurred as a result of the sale of spirituous liquor, as defined in section 4-101, at the licensed establishment and imposed on the licensed establishments by this state and its political subdivisions. 4. Other state tax officials whose official duties require the disclosure for proper tax administration purposes if the information is sought in connection with an investigation or any other proceeding conducted by the official. Any disclosure is limited to information of a taxpayer who is being investigated or who is a party to a proceeding conducted by the official. 5. The following agencies, officials and organizations, if they grant substantially similar privileges to the department for the type of information being sought, pursuant to statute and a written agreement between the department and the foreign country, agency, state, Indian tribe or organization: (a) The United States internal revenue service, alcohol and tobacco tax and trade bureau of the United States treasury, United States bureau of alcohol, tobacco, firearms and explosives of the United States department of justice, United States drug enforcement agency and federal bureau of investigation. (b) A state tax official of another state. (c) An organization of states, federation of tax administrators or multistate tax commission that operates an information exchange for tax administration purposes. (d) An agency, official or organization of a foreign country with responsibilities that are comparable to those listed in subdivision (a), (b) or (c) of this paragraph. (e) An agency, official or organization of an Indian tribal government with responsibilities comparable to the responsibilities of the agencies, officials or organizations identified in subdivision (a), (b) or (c) of this paragraph. 6. The auditor general, in connection with any audit of the department subject to the restrictions in section 42-2002, subsection D. 7. Any person to the extent necessary for effective tax administration in connection with: (a) The processing, storage, transmission, destruction and reproduction of the information. (b) The programming, maintenance, repair, testing and procurement of equipment for purposes of tax administration. (c) The collection of the taxpayer's civil liability. 8. The office of administrative hearings relating to taxes administered by the department pursuant to section 42-1101, but the department shall not disclose any confidential information without the taxpayer's written consent: (a) Regarding income tax or withholding tax. (b) On any tax issue relating to information associated with the reporting of income tax or withholding tax. 9. The United States treasury inspector general for tax administration for the purpose of reporting a violation of internal revenue code section 7213A (26 United States Code section 7213A), unauthorized inspection of returns or return information. 10. The financial management service of the United States treasury department for use in the treasury offset program. 11. The United States treasury department or its authorized agent for use in the state income tax levy program and in the electronic federal tax payment system. 12. The Arizona commerce authority for its use in: (a) Qualifying renewable energy operations for the tax incentives under section 42-12006. (b) Qualifying businesses with a qualified facility for income tax credits under sections 43-1083.03 and 43-1164.04. (c) Fulfilling its annual reporting responsibility pursuant to section 41-1512, subsections U and V and section 41-1517, subsection L. (d) Certifying computer data centers for tax relief under section 41-1519. (e) Certifying applicants for the tax credit for motion picture production costs under sections 43-1082 and 43-1165. 13. A prosecutor for purposes of section 32-1164, subsection C. 14. The office of the state fire marshal for use in determining compliance with and enforcing title 37, chapter 9, article 5. 15. The department of transportation for its use in administering taxes, surcharges and penalties prescribed by title 28. 16. The Arizona health care cost containment system administration for its use in administering nursing facility provider assessments. 17. The department of administration risk management division and the office of the attorney general if the information relates to a claim against this state pursuant to section 12-821.01 involving the department of revenue. 18. Another state agency if the taxpayer authorizes the disclosure of confidential information in writing, including an authorization that is part of an application form or other document submitted to the agency. 19. The department of economic security for its use in determining whether an employer has paid all amounts due under the unemployment insurance program pursuant to title 23, chapter 4. 20. The department of health services for its use in determining the following: (a) Whether a medical marijuana dispensary is in compliance with the tax requirements of chapter 5 of this title for the purposes of section 36-2806, subsection A. (b) Whether a marijuana establishment, marijuana testing facility or dual licensee licensed under title 36, chapter 28.2 is in compliance with the tax obligations under this title or title 43. 21. The Arizona department of agriculture for the purpose of ascertaining compliance with the licensing provisions in title 3. 22. The office of economic opportunity for the purpose of performing the duties and obligations to or on behalf of this state prescribed by title 41, chapter 53. C. Confidential information may be disclosed in any state or federal judicial or administrative proceeding pertaining to tax administration pursuant to the following conditions: 1. One or more of the following circumstances must apply: (a) The taxpayer is a party to the proceeding. (b) The proceeding arose out of, or in connection with, determining the taxpayer's civil or criminal liability, or the collection of the taxpayer's civil liability, with respect to any tax imposed under this title or title 43. (c) The treatment of an item reflected on the taxpayer's return is directly related to the resolution of an issue in the proceeding. (d) Return information directly relates to a transactional relationship between a person who is a party to the proceeding and the taxpayer and directly affects the resolution of an issue in the proceeding. 2. Confidential information may not be disclosed under this subsection if the disclosure is prohibited by section 42-2002, subsection C or D. D. Identity information may be disclosed for purposes of notifying persons entitled to tax refunds if the department is unable to locate the persons after reasonable effort. E. The department, on the request of any person, shall provide the names and addresses of bingo licensees as defined in section 5-401, verify whether or not a person has a privilege license and number, a tobacco product distributor's license and number or a withholding license and number or disclose the information to be posted on the department's website or otherwise publicly accessible pursuant to section 42-1124, subsection F and section 42-3401. F. A department employee, in connection with the official duties relating to any audit, collection activity or civil or criminal investigation, may disclose return information to the extent that disclosure is necessary to obtain information that is not otherwise reasonably available. These official duties include the correct determination of and liability for tax, the amount to be collected or the enforcement of other state tax revenue laws. G. Confidential information relating to transaction privilege tax, use tax, severance tax, jet fuel excise and use tax and any other tax collected by the department on behalf of any jurisdiction may be disclosed to any county, city or town tax official if the information relates to a taxpayer who is or may be taxable by a county, city or town or who may be subject to audit by the department pursuant to section 42-6002. Any taxpayer information that is released by the department to the county, city or town: 1. May be used only for internal purposes, including audits and communication with taxpayers for the purposes of the notice required by section 9-499.15, subsection C. If there is a legitimate business need relating to enforcing laws, regulations and ordinances pursuant to section 9-500.39 or 11-269.17, a county, city or town tax official may redisclose transaction privilege tax information relating to a vacation rental or short-term rental property owner or online lodging operator from the new license report and license update report, subject to the following: (a) The information redisclosed is limited to the following: (i) The transaction privilege tax license number. (ii) The type of organization or ownership of the business. (iii) The legal business name and doing business as name, if different from the legal name. (iv) The business mailing address, tax record physical location address, telephone number, email address and fax number. (v) The date the business started in this state, the business description and the North American industry classification system code. (vi) The name, address and telephone number for each owner, partner, corporate officer, member, managing member or official of the employing unit. (b) Redisclosure is limited to nonelected officials in other units within the county, city or town. The information may not be redisclosed to an elected official or the elected official's staff. (c) All redisclosures of confidential information made pursuant to this paragraph are subject to paragraph 2 of this subsection. 2. May not be disclosed to the public in any manner that does not comply with confidentiality standards established by the department. The county, city or town shall agree in writing with the department that any release of confidential information that violates the confidentiality standards adopted by the department will result in the immediate suspension of any rights of the county, city or town to receive taxpayer information under this subsection. H. The department may disclose statistical information gathered from confidential information if it does not disclose confidential information attributable to any one taxpayer. The department may disclose statistical information gathered from confidential information, even if it discloses confidential information attributable to a taxpayer, to: 1. The state treasurer in order to comply with the requirements of section 42-5029, subsection A, paragraph 3. 2. The joint legislative income tax credit review committee, the joint legislative budget committee staff and the legislative staff in order to comply with the requirements of section 43-221. I. The department may disclose the aggregate amounts of any tax credit, tax deduction or tax exemption enacted after January 1, 1994. Information subject to disclosure under this subsection shall not be disclosed if a taxpayer demonstrates to the department that such information would give an unfair advantage to competitors. J. Except as provided in section 42-2002, subsection C, confidential information, described in section 42-2001, paragraph 1, subdivision (a), item (ii), may be disclosed to law enforcement agencies for law enforcement purposes. K. The department may provide transaction privilege tax license information to property tax officials in a county for the purpose of identification and verification of the tax status of commercial property. L. The department may provide transaction privilege tax, luxury tax, use tax, property tax and severance tax information to the ombudsman-citizens aide pursuant to title 41, chapter 8, article 5. M. Except as provided in section 42-2002, subsection D, a court may order the department to disclose confidential information pertaining to a party to an action. An order shall be made only on a showing of good cause and that the party seeking the information has made demand on the taxpayer for the information. N. This section does not prohibit the disclosure by the department of any information or documents submitted to the department by a bingo licensee. Before disclosing the information, the department shall obtain the name and address of the person requesting the information. O. If the department is required or allowed to disclose confidential information, it may charge the person or agency requesting the information for the reasonable cost of its services. P. Except as provided in section 42-2002, subsection D, the department of revenue shall release confidential information as requested by the department of economic security pursuant to section 42-1122 or 46-291. Information disclosed under this subsection is limited to the same type of information that the United States internal revenue service is authorized to disclose under section 6103(l)(6) of the internal revenue code. Q. Except as provided in section 42-2002, subsection D, the department shall release confidential information as requested by the courts and clerks of the court pursuant to section 42-1122. R. To comply with the requirements of section 42-5031, the department may disclose to the state treasurer, to the county stadium district board of directors and to any city or town tax official that is part of the county stadium district confidential information attributable to a taxpayer's business activity conducted in the county stadium district. S. The department shall release to the attorney general confidential information as requested by the attorney general for purposes of determining compliance with or enforcing any of the following: 1. Any public health control law relating to tobacco sales as provided under title 36, chapter 6, article 14. 2. Any law relating to reduced cigarette ignition propensity standards as provided under title 37, chapter 9, article 5. 3. Sections 44-7101 and 44-7111, the master settlement agreement referred to in those sections and all agreements regarding disputes under the master settlement agreement. T. For proceedings before the department, the office of administrative hearings, the state board of tax appeals or any state or federal court involving penalties that were assessed against a return preparer, an electronic return preparer or a payroll service company pursuant to section 42-1103.02, 42-1125.01 or 43-419, confidential information may be disclosed only before the judge or administrative law judge adjudicating the proceeding, the parties to the proceeding and the parties' representatives in the proceeding prior to its introduction into evidence in the proceeding. The confidential information may be introduced as evidence in the proceeding only if the taxpayer's name, the names of any dependents listed on the return, all social security numbers, the taxpayer's address, the taxpayer's signature and any attachments containing any of the foregoing information are redacted and if either: 1. The treatment of an item reflected on such a return is or may be related to the resolution of an issue in the proceeding. 2. Such a return or the return information relates or may relate to a transactional relationship between a person who is a party to the proceeding and the taxpayer that directly affects the resolution of an issue in the proceeding. 3. The method of payment of the taxpayer's withholding tax liability or the method of filing the taxpayer's withholding tax return is an issue for the period. U. The department and attorney general may share the information specified in subsection S of this section with any of the following: 1. Federal, state or local agencies located in this state for the purposes of enforcement of the statutes or agreements specified in subsection S of this section or for the purposes of enforcement of corresponding laws of other states. 2. Indian tribes located in this state for the purposes of enforcement of the statutes or agreements specified in subsection S of this section. 3. A court, arbitrator, data clearinghouse or similar entity for the purpose of assessing compliance with or making calculations required by the master settlement agreement or agreements regarding disputes under the master settlement agreement, and with counsel for the parties or expert witnesses in any such proceeding, if the information otherwise remains confidential. V. The department may provide the name and address of qualifying hospitals and qualifying health care organizations, as defined in section 42-5001, to a business that is classified and reporting transaction privilege tax under the utilities classification. W. The department may disclose to an official of any city, town or county in a current agreement or considering a prospective agreement with the department as described in section 42-5032.02, subsection G any information relating to amounts that are subject to distribution and that are required by section 42-5032.02. Information disclosed by the department under this subsection: 1. May be used only by the city, town or county for internal purposes. 2. May not be disclosed to the public in any manner that does not comply with confidentiality standards established by the department. The city, town or county must agree with the department in writing that any release of confidential information that violates the confidentiality standards will result in the immediate suspension of any rights of the city, town or county to receive information under this subsection. X. Notwithstanding any other provision of this section, the department may not disclose information provided by an online lodging marketplace, as defined in section 42-5076, without the written consent of the online lodging marketplace, and the information may be disclosed only pursuant to subsection A, paragraphs 1 through 6, 8 and 10, subsection B, paragraphs 1, 2, 7 and 8 and subsections C, D and G of this section. Such information: 1. Is not subject to disclosure pursuant to title 39, relating to public records. 2. May not be disclosed to any agency of this state or of any county, city, town or other political subdivision of this state. 42-2004. Violation; classification A disclosure of confidential information in violation of this article is a class 1 misdemeanor. A knowing disclosure of confidential information in violation of this article is a class 6 felony. 42-2051. Arizona taxpayer assistance office; taxpayer problem resolution officer; duties A. The Arizona taxpayer assistance office is established as an office in the department. The employees of the office shall be selected by the director. The manager of the taxpayer assistance office is the taxpayer problem resolution officer. The office reports directly to the director's office. The employees of the office may include employees of the department and may also include residents of this state with knowledge of taxation. B. The office shall assist taxpayers in: 1. Obtaining easily understandable tax information and information on audits, corrections and appeals procedures of the department. 2. Answering questions regarding preparing and filing returns with the department. 3. Locating documents or payments filed with or submitted to the department by taxpayers. C. The office shall also: 1. Receive and evaluate complaints of improper, abusive or inefficient service by employees of the department and recommend to the director appropriate action to correct such service. 2. Identify policies and practices of the department that might be barriers to the equitable treatment of taxpayers and recommend alternatives to the director. 3. Provide expeditious service to taxpayers whose problems are not resolved through normal channels. 4. Negotiate with department personnel to resolve the most complex and sensitive taxpayer problems. 5. Take action to stop or prohibit the department from taking an action against a taxpayer. 6. Participate and represent taxpayers' interests and concerns in planning meetings, reviewing instructions and formulating department policies and procedures. 7. Compile data each year on the number and type of taxpayer complaints and evaluate the actions taken to resolve complaints. 8. Survey taxpayers each year to obtain their evaluation of the quality of service provided by the department. 9. Monitor the number and type of seizures of property under chapter 1, article 5 of this title. 10. Notify and recommend appropriate action to the director if the office determines that a seizure has occurred or will occur which has subjected or will subject the taxpayer to a seizure of property without affording a reasonable opportunity for discussion of alternative methods of payment of the obligation. 11. Perform other functions which relate to taxpayer assistance as prescribed by the director. D. Actions taken by the office may be reviewed only by the director upon request of the department or a taxpayer. The director may modify action taken by the office. 42-2052. Erroneous advice or misleading statements by the department; abatement of penalties and interest; definitions A. Notwithstanding sections 42-1123 and 42-1125, no interest or penalty may be assessed on an amount assessed as a deficiency if either: 1. The deficiency assessed is directly attributable to erroneous written advice furnished to the taxpayer by an employee of the department acting in an official capacity in response to a specific request from the taxpayer and not from the taxpayer's failure to provide adequate or accurate information. 2. All of the following are true: (a) A tax return form or tax ruling prepared by the department contains a statement that, if followed by a taxpayer, would cause the taxpayer to misapply this title or title 43. (b) The taxpayer reasonably relies on the statement. (c) The taxpayer's underpayment directly results from this reliance. B. Each employee of the department, at the time any oral advice is given to any person, shall inform the person that the department is not bound by such oral advice. C. For purposes of this section: 1. "Tax return form" includes the instructions that the department prepares for use with the tax return form whether the form or instructions are provided on paper or by electronic means. 2. "Tax ruling" means a statement issued by the director and denominated as a tax ruling or a tax procedure. 42-2053. Procedures involving taxpayer interviews A. On the request of a taxpayer, and under circumstances prescribed by the department, an employee of the department, in connection with any interview with the taxpayer that relates to a deficiency in payment of any tax owed to the department, shall: 1. Conduct the interview in the place of business of the taxpayer, or at the department office closest to the taxpayer's residence. 2. Conduct the interview at a reasonable time which imposes no unusual hardship on the taxpayer. 3. Allow the taxpayer to record the interview. B. An employee of the department may record an interview with a taxpayer that relates to a deficiency in payment of any tax owed to the department. The employee shall inform the taxpayer of the recording before the interview begins. On written request by the taxpayer, the department shall provide a transcript of the recording, if the taxpayer reimburses the department for the cost of providing the transcript. C. Before beginning any interview relating to a deficiency in the payment of any tax owed to the department an employee of the department shall provide the taxpayer with information regarding the taxpayer's rights and the audit, corrections and appeals procedures of the department relating to the taxpayer's deficiency. 42-2054. Disclosure of taxpayer information On the written request of a taxpayer, information relating to the taxpayer may be disclosed, if the disclosure does not violate article 1 of this chapter. 42-2055. Taxpayer assistance orders A. The problem resolution officer, with or without a formal written request from a taxpayer, may issue a taxpayer assistance order that suspends or stays an action or proposed action by the department if, in the problem resolution officer's determination, a taxpayer is suffering or will suffer a significant hardship due to the manner in which the department administers the tax laws. B. A taxpayer assistance order may require the department to release the taxpayer's property that has been levied on, cease any action or refrain from taking any action to enforce state tax laws against the taxpayer pending resolution of the issue or issues giving rise to the order. C. The director or the problem resolution officer may modify, reverse or rescind a taxpayer assistance order. A taxpayer assistance order is binding on the department until it is reversed or rescinded. D. The running of the applicable period of limitations for any action that is the subject of a taxpayer assistance order is suspended from the date the taxpayer applies for the order or the date the order is issued, whichever is earlier, until the order's expiration date, modification date or rescission date, if any. Interest that would otherwise accrue on an outstanding tax obligation is not affected by the issuance of a taxpayer assistance order. E. A taxpayer assistance order may not be used: 1. To contest the merits of a tax liability. 2. As a substitute for informal protest procedures or administrative or judicial proceedings to review a deficiency assessment, collection action or denial of a refund claim. 42-2056. Closing agreements in cases of extensive taxpayer misunderstanding or misapplication; attorney general approval; rules; definition A. If the department determines that noncompliance with tax obligations results from extensive misunderstanding or misapplication of provisions of this title or title 43 it may enter into closing agreements with those taxpayers under the following terms and conditions: 1. Extensive misunderstanding or misapplication of the tax laws occurs if the department determines that more than sixty per cent of the persons in the affected class have failed to properly account for their taxes owing to the same misunderstanding or misapplication of the tax laws. 2. The department shall make an initial determination as to the existence of an affected class of taxpayers. After a review of the taxpayer's request, the department may determine that there has not been an extensive misunderstanding or misapplication of the tax laws by an affected class of taxpayers. At that time, the department will notify the taxpayer that the request is denied. 3. The department shall publicly declare the nature of the possible misunderstanding or misapplication and the proposed definition of the class of affected taxpayers and shall conduct a public hearing to hear testimony regarding the extent of the misunderstanding or misapplication and the definition of the affected class. Within sixty days after close of the public hearing, the department shall notify the attendees at the public hearing and publish a public notice on its website stating whether relief will be granted. 4. If, after the public hearing, the department determines that a class of affected taxpayers has failed to comply with their tax obligations because of extensive misunderstanding or misapplication of the tax laws it shall issue a tax ruling announcing that finding and publish the ruling in a newspaper of general circulation. 5. A closing agreement under this section may abate some or all of the penalties, interest and tax that the taxpayers have failed to remit, or the agreement may provide for the prospective treatment of the matter as to the class of affected taxpayers. Notwithstanding section 42-1113, all taxpayers in the class shall be offered the opportunity to enter into a similar agreement for the same tax periods. 6. Taxpayers in the affected class who have properly accounted for their tax obligations for these tax periods shall be offered the opportunity to enter into a similar closing agreement providing for a pro rata credit or refund of their taxes previously paid, subject to section 42-1104, subsection A and section 42-1106, subsection A. 7. The closing agreement shall require the taxpayers to properly account for and pay such taxes in the future. If a taxpayer fails to comply with that requirement, the agreement is voidable by the department and the department may assess the taxpayer for the delinquent taxes. The department may issue such a proposed assessment within six months after the date that it declares the agreement void or within the period prescribed by section 42-1104, whichever is later. B. A person who filed a written request for relief under this section but has been denied relief as the result of the department's determination that the elements of subsection A, paragraph 3 of this section have not been established may appeal that determination pursuant to the same procedure as provided in chapter 1, article 6 of this title. A person who files an appeal under this subsection, who also has another appeal pending pursuant to chapter 1, article 6 of this title on a matter solely related to the matter at issue in the department's determination under this section, may petition the relevant appellate forum to hold that appeal in abeyance pending the resolution of the person's appeal pursuant to this section, and the agency, tribunal or court must grant the petition. C. Before entering into closing agreements pursuant to this section, the department shall secure the approval of the attorney general of the tax ruling and the agreements. The department may not enter into the agreements without such approval from the attorney general. D. After a closing agreement has been signed pursuant to this section, and subject to the taxpayer's compliance with the requirements of subsection A, paragraph 6 of this section, it is final and conclusive except on a showing of fraud, malfeasance or misrepresentation of a material fact. The case shall not be reopened as to the matters agreed on, and the agreement shall not be modified by any officer, employee or agent of the state. The agreement or any determination, assessment, collection, payment abatement, refund or credit made pursuant to the agreement shall not be annulled, modified, set aside or disregarded in any suit, action or proceeding. E. The department shall report in writing its activities under this section to the governor, the president of the senate and the speaker of the house of representatives on or before February 1 of each year. F. The department may adopt rules to implement this section. G. For the purposes of this section, "affected class" means taxpayers who are similarly situated and directly affected by the department's position in a tax matter. For transaction privilege or use tax purposes, affected class may include taxpayers in the same industry code under the North American industrial classification system code, if applicable to the tax matter or taxpayers that directly compete with each other. For the purposes of this section, affected class shall not be broadly described unless such description increases the number of taxpayers who are eligible for relief. 42-2057. Agreement for installment payments of tax A. The department may enter into an agreement with a taxpayer to allow the taxpayer to satisfy a liability for any tax by means of installment payments. The department may require a taxpayer who requests an installment payment agreement to complete a financial report in such form and manner as the department may prescribe. B. The department, without notice, may alter, modify or terminate an installment payment agreement if the taxpayer: 1. Fails to pay an installment at the time the installment payment is due under the agreement. 2. Fails to pay any other tax liability at the time the liability is due. 3. Fails to file any tax report or return at the time the report or return is due. 4. Fails to furnish any information requested by the department within thirty days after the request. 5. Fails to notify the department of a material improvement in the taxpayer's financial condition above the income previously reported in the most recent income statement within thirty days after the material improvement. 6. Provides inaccurate, false or incomplete information to the department. C. Notwithstanding any installment payment agreement, the department may offset any tax refunds against the liabilities provided for in the installment payment agreement, may file and fully enforce any tax liens and may engage in collection activities involving the sale of assets. D. The department, without notice, may terminate an installment payment agreement if the department believes that the collection of tax to which the payment agreement pertains is in jeopardy. E. If the department determines that the financial condition of a taxpayer has improved, the department may alter, modify or terminate the agreement by providing notice to the taxpayer at least thirty days before the effective date of the action. The notice shall include the reasons why the department believes the alteration, modification or termination is appropriate. F. An installment payment agreement shall remain in effect for the term of the agreement except as otherwise provided in this section. G. A taxpayer who is aggrieved by a decision of the department to refuse to enter into an installment payment agreement or to alter, modify or terminate an agreement entered into pursuant to this section may petition the office of taxpayer assistance to review that determination. The office of taxpayer assistance may stay such alteration, modification or termination pending its review and may modify or nullify the determination. H. The department and the taxpayer may modify any installment payment agreement at any time by entering into a new or modified agreement. I. The department may adopt rules to implement this section. 42-2058. Basis for evaluating employee performance A. The department shall establish procedures to monitor the performance of department employees that include, if applicable, using evaluations obtained from taxpayers. B. Fair and equitable treatment of taxpayers is a criterion for evaluating employee performance, including being free of favoritism or bias, reasonable and consistent with the laws of this state and the rules, procedures and rulings of the department. C. The department shall not evaluate an employee on the basis of taxes assessed or collected by that employee. 42-2059. Additional audits or proposed assessments prohibited; exceptions A. When the department completes an audit or the findings of a managed audit are accepted by the director or approved on appeal and a deficiency has been completely determined under section 42-1108 or chapter 1, article 6 of this title, the taxpayer's liability for the particular tax for the period subjected to the audit is fixed and determined, and an additional audit may not be conducted except under the following circumstances: 1. A taxpayer files a claim for refund under section 42-1251, subsection C or any other provision authorizing a claim for refund. Any departmental audit of the claim is limited to the issues presented on the claim for refund. 2. Changes or corrections are required to be reported to the department by section 43-327. The department may audit any such reports or any periods for which a report was required notwithstanding this section and may determine a tax deficiency or a refund. 3. If the taxpayer failed to disclose material information during the audit, or falsified books or records or otherwise engaged in an action that prevented the department from conducting an accurate audit, the applicability of this subsection may be part of a subsequent protest and may be contested by the taxpayer pursuant to chapter 1, article 6 of this title. 4. If a managed audit is completed under the terms of a limited managed audit agreement, the department may audit the issues not covered by the limited managed audit agreement within the statute of limitations prescribed by section 42-1104. B. If the department issues a notice of proposed assessment of taxes imposed by chapter 5, article 1 or 4 of this title or title 43, chapter 10, the department may not increase the amount of the proposed assessment except in one or more of the following circumstances: 1. The taxpayer made a material misrepresentation of facts. 2. The taxpayer failed to disclose a material fact to the auditor. 3. The department requested information and the taxpayer fails to provide that information to the department. 4. After issuing the notice of proposed assessment but before the assessment becomes final the tax court, court of appeals or supreme court issues a decision, the application of which causes the tax initially proposed to increase. C. Subsection B of this section does not apply to changes or corrections that are required to be reported to the department by section 43-327. 42-2060. Refund if items of income transfer from one year to another A. Notwithstanding any statute of limitations provided in this title or title 43: 1. Any overpayment of taxes that is paid pursuant to title 43, that is due a taxpayer for any year and that results from a transfer of items of income or deductions, or both, to or from another year for the same taxpayer, or for the same year for a related taxpayer described in sections 42-1120, 42-1121 and 43-645, shall be allowed as an offset in computing any deficiency in tax for any year resulting from the transfer of such income or deductions, or both, but no refund shall be allowed unless the overpayment is certified to the director of the department of administration or a claim for refund is filed within the time otherwise provided for in this title. 2. An overpayment due an S corporation, as defined in section 1361 of the internal revenue code, for any year that results from an improper inclusion of income is allowed as an offset in computing any deficiency in an overlapping year for the shareholders of the S corporation. B. The offsets provided by subsection A of this section shall not be allowed after the expiration of seven years from the due date of the return on which the overpayment is determined. 42-2061. Expedited review of jeopardy assessments A. Within thirty days after the day on which the department furnishes the written notice described in section 42-1111, subsection A, the taxpayer may request the department to review the action taken as provided in section 42-1251. Within fifteen days after the request for review, the department shall determine whether both the jeopardy determination and the amount assessed are reasonable. B. Within thirty days after the department notifies the taxpayer of the determination under subsection A of this section, the taxpayer may bring a civil action in tax court for a determination under this subsection. Within twenty days after service of process is made on the state, the tax court shall determine whether both the jeopardy determination and the amount assessed are reasonable. If the taxpayer requests an extension of the twenty day period and establishes reasonable grounds why an extension should be granted, the court may grant an extension of not more than forty additional days. If the court determines that either the jeopardy determination or the amount assessed is unreasonable, the court may order the department to abate the assessment, to redetermine any part of the amount assessed or to take such other action as the court finds to be appropriate. A determination made by the tax court under this subsection is final except as provided in section 12-170, subsection C. 42-2062. Abatement of penalties and fees; definition A. If a taxpayer has been assessed a penalty or fee pursuant to section 42-1107, 42-1125, 42-1126, 43-581 or 43-582, the department, on written application by the taxpayer, shall abate the penalty or fee if it determines that the conduct, or lack of conduct, that caused the assessment to be imposed was due to reasonable cause and not due to wilful neglect. B. If, before an assessment is issued, a taxpayer applies in writing requesting waiver of a penalty or fee that may be assessed pursuant to section 42-1107, 42-1125, 42-1126, 43-581 or 43-582, the department shall not assess that penalty or fee if it determines that the conduct, or lack of conduct, that would cause the assessment was due to reasonable cause and not due to wilful neglect. C. For the purpose of this section, and only as applied to the taxes imposed by chapter 5, articles 1 through 6 and chapter 6, article 3 of this title, "reasonable cause" includes situations in which the taxpayer had a reasonable basis to believe that the tax did not apply to the business activity or the storage, use or consumption of the taxpayer's tangible personal property in this state. 42-2063. Department responsibilities; decision deadlines; definition A. The department shall attempt to issue a decision from the hearing officer within ninety days after the date of a formal hearing or after the last post-hearing brief is due, whichever is later. If the department expects the decision to be delayed, the department shall notify the taxpayer or his designated representative of the proposed issue date. B. The department shall attempt to issue a decision by the director on any pending appeal to the director within ninety days after the last brief is due. If the department expects the decision to be delayed, the department shall notify the taxpayer or his designated representative of the proposed issue date. C. The department shall provide a written document to each new transaction privilege tax licensee that provides information regarding the collection, reporting and payment of taxes in the appropriate tax classification. D. For purposes of this section "designated representative" means an individual who has been authorized in writing to represent another person before the department of revenue. 42-2064. Reimbursement of fees and other costs; definitions A. A taxpayer who is a prevailing party may be reimbursed for reasonable fees and other costs related to an administrative proceeding that is brought by or against the department in connection with an assessment, determination, collection or refund of any tax listed in section 42-1101. For the purposes of this subsection, a taxpayer is considered to be a prevailing party only if both of the following are true: 1. The department's position was not substantially justified. 2. The taxpayer prevails as to the most significant issue or set of issues. B. Reimbursement under this section may be denied if any of the following circumstances apply: 1. During the course of the proceeding the taxpayer unduly and unreasonably protracted the final resolution of the matter. 2. The reason that the taxpayer prevailed is due to an intervening change in the applicable law. C. The taxpayer shall present an itemization of the reasonable fees and other costs to the taxpayer problem resolution officer within thirty days after the conclusion of the administrative proceedings. The taxpayer problem resolution officer shall determine the validity of the fees and other costs within thirty days after receiving the itemization. The taxpayer problem resolution officer's decision is considered the department's final decision or order and is subject to appeal to the state board under section 42-1253. D. The department of revenue shall pay the fees and other costs awarded as provided in this section from any monies appropriated for such purpose. If the department of revenue does not pay the fees and other costs within thirty days after demand by a person who has received an award pursuant to this section, and if no further review or appeals of the award are pending, the person may file a claim for the fees and other costs with the department of administration, which shall pay the claim within thirty days, in the same manner as an uninsured property loss under title 41, chapter 3.1, article 1. If, at the time the department of revenue failed to pay the award, it had appropriated monies either designated or assignable for the purpose of paying such awards, the legislature shall reduce the department of revenue's operating appropriation for the following year by the amount of the award and appropriate the amount of the reduction to the department of administration, risk management division, as reimbursement for the loss. E. Reimbursement to a taxpayer under this section shall not exceed seventy-five thousand dollars or actual monies spent, whichever is less. The reimbursable attorney or other representative fees shall not exceed three hundred fifty dollars per hour or actual monies spent, whichever is less, unless the state board of tax appeals determines that an increase in the cost of living or a special factor such as the limited availability of qualified attorneys for the proceeding involved justifies a higher fee. F. For each calendar year beginning from and after December 31, 2015, the income dollar amounts for maximum awards made pursuant to subsection E of this section shall be adjusted by the attorney general according to the average annual change in the metropolitan phoenix consumer price index published by the United States bureau of labor statistics. The revised dollar amounts shall be raised to the nearest whole dollar. The income dollar amounts may not be revised below the amounts prescribed in the prior calendar year. G. The department shall adopt administrative rules to implement this section. H. Notwithstanding any provision of title 12, chapter 3, article 5, a taxpayer who is a prevailing party may only be reimbursed pursuant to this section. I. For the purposes of this section: 1. "Administrative proceeding" means any review proceeding or appeal pursuant to section 42-1251 that is conducted under the authority of section 42-1003 and an appeal to the state board of tax appeals pursuant to section 42-1253. 2. "Reasonable fees and other costs" means fees and other costs that are based on prevailing market rates for the kind and quality of the furnished services, but not exceeding the amounts actually spent for expert witnesses, the cost of any study, analysis, report, test or project that is found to be necessary to prepare the party's case and necessary fees for attorneys or other representatives. 42-2065. Abatement of interest for errors or delays caused by the department A. The director, in the director's discretion, may abate all or part of any assessment if additional interest has accrued on: 1. A deficiency due to any unreasonable error or delay by an officer or employee of the department acting in the employee's official capacity. 2. Any payment of tax to the extent that any error or delay in the payment is attributable to an officer or employee of the department being unreasonably erroneous or dilatory. B. The director may consider an error or delay only if no significant aspect of the error or delay can be attributed to the taxpayer and after the department has contacted the taxpayer in writing with respect to the deficiency or payment. C. The director's decision is considered to be the department's final decision or order and is subject to appeal to the state board pursuant to section 42-1253. 42-2066. Statute of limitations on tax debts A taxpayer's obligations for any tax, interest or penalty required to be collected by the department for any tax period are extinguished, if not previously satisfied, ten years after the amount of tax determined to be due becomes final unless one of the following circumstances applies: 1. The department has commenced a suit to collect the debt pursuant to section 42-1114. 2. The taxpayer has agreed in writing to extend this time period before the time period expires. 3. Enforced collection has been stayed by the operation of federal or state law during the period. The period of limitations prescribed by this section is extended by the period of time that the department was stayed from engaging in enforced collections. 42-2067. Limitation on the use of pseudonyms by department employees A. Employees of the department shall not use pseudonyms when interacting with the public unless the director or the director's designee first determines on written request that the use of the pseudonym is appropriate. The employee's request must include adequate justification for the use of a pseudonym, such as protection of personal safety. B. The director shall maintain a list of the persons who are authorized to use pseudonyms. 42-2068. Suspension of running of period of limitations during taxpayer disability A. Notwithstanding section 42-1106, the running of the statute of limitations for refunds is suspended if an individual, as defined in section 43-104, is financially disabled and eligible for equitable tolling of the statute of limitations for refunds under section 6511(h) of the internal revenue code. The department shall suspend the statute of limitations during any period of a qualifying individual's life that the individual is financially disabled. B. A determination under this section may be appealed pursuant to section 42-1251 or 42-1253. 42-2069. Taxpayer communications with practitioners; confidentiality; definitions A. With respect to tax advice, the same common law protections of confidentiality that apply to a communication between a taxpayer and an attorney also apply to a communication between a taxpayer and a federally authorized tax practitioner to the extent that the communication would be considered to be a privileged communication if it were between a taxpayer and an attorney. B. Subsection A of this section may only be asserted in: 1. A noncriminal tax matter before the department. 2. A proceeding before the state board of tax appeals. 3. A noncriminal tax proceeding in court. C. The department may deny an individual coverage under this privilege if it determines that a practitioner has engaged in activities or practices involving matters before the department that, if they involved matters before the United States internal revenue service, would result in the practitioner losing the authorization to practice before the internal revenue service. A practitioner aggrieved by a determination to deny the privilege may appeal that determination pursuant to section 42-1253 or 42-1254. D. For the purposes of this section: 1. "Federally authorized tax practitioner" means an individual who is authorized under federal law to practice before the United States internal revenue service if the practice is subject to federal regulation under 31 United States Code section 330. Federally authorized tax practitioner includes any person who is engaged in practice with one or more federally authorized tax practitioners and who is subject to the same standards of practice and ethics requirements as a federally authorized tax practitioner. 2. "Tax advice" means advice given by an individual with respect to a matter that is within the scope of the individual's authority to practice as a federally authorized tax practitioner. 42-2070. Prohibited audit techniques The department shall not use financial status or economic reality examination techniques to determine the existence of unreported income of any taxpayer, except in the following circumstances: 1. The director may authorize the use of financial status or economic reality examination techniques in criminal investigations. 2. The director may accept amended returns due after any federal adjustment required pursuant to section 43-327 in which the change or correction was determined by the commissioner of internal revenue or other officer of the United States or other competent authority using financial status or economic reality techniques.