Iowa House Bill HF773

Iowa 2025-2026 Regular Session

• Introduced: 3/5/25
• Refer: 4/3/25

Caption

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.(Formerly HSB 14.)

Impact

A significant amendment in HF773 is the removal of the $25,000 cap on recoverable costs that currently limits taxpayer compensation in such disputes. This change is aimed at ensuring that taxpayers can receive adequate reimbursement for their legal expenses and related costs, thereby encouraging them to challenge tax assessments and disputes with the department without the fear of incurring substantial out-of-pocket costs. The bill fundamentally alters the financial landscape for taxpayers by potentially increasing the state’s costs in legal disputes.

Summary

House File 773 addresses the costs associated with litigation in administrative hearings or court proceedings that involve the Iowa Department of Revenue's collection of taxes, penalties, and interest. The bill introduces substantial changes to how legal costs are awarded to taxpayers who prevail against the department. Notably, it allows for the recovery of reasonable court costs, fees for expert witnesses, and attorney or accountant fees, thereby enhancing the financial protections for taxpayers engaged in disputes with the state.

Contention

Key points of contention surrounding HF773 include the shifting of the burden of proof. Under the proposed legislation, if a taxpayer substantially prevails in a dispute, the burden of proof shifts to the Department of Revenue to demonstrate that its position was substantially justified. Critics argue that this could complicate the department's ability to collect owed taxes and could lead to an increase in frivolous claims. Proponents, however, contend that it ensures fairness and protects taxpayer rights, allowing for a more equitable dispute resolution process.