Reed Smith Client Alerts

Texas taxpayers may have a shot at fast tracking their refund claims. Senate Bill 903, introduced by Senator Charles Perry (a practicing CPA from Lubbock), would permit taxpayers to challenge the Comptroller’s denial of a refund claim by filing suit directly in Travis County District Court without first exhausting administrative remedies.

Currently, taxpayers seeking a refund of overpaid Texas tax must complete the Comptroller’s administrative hearing process, including the filing of a motion for rehearing, before they may seek relief in district court. For many taxpayers, this process results in two rounds of litigation: one at the administrative level and another in district court. The Texas Tax Code’s refund process stands in contrast to that for protest suits. In the case of an audit assessment, a taxpayer can bypass the administrative process and challenge the assessment directly in district court. SB 903 would create jurisdictional parity between refund and protest suits.

Allowing taxpayers to bypass the administrative process would shorten the time period in which a refund claim is pending - an important consideration given the low interest rate that the state pays on refunds. This rate has not kept pace with inflation and, over time, can reduce the value of the claim.

For Senate Bill 903 to have a chance of passing this legislative session, it must next make it into and out of the house committee process in the next few weeks.

Client Alert 2021-070