NC Legislature Considers Banning Contingent Fee Audits
Business personal property ["BPP"] is generally taxable in NC. Many counties use third party auditors to assist in making sure businesses properly list and report their BPP. Some counties pay their third party auditors on a contingent fee basis for their services, i.e, the auditor's fee is based on the amount of revenue he generates. Many taxpayers feel there is an inherent conflict of interst in paying a BPP auditor on a contingent fee basis.
In the early 90s, the Property Tax Commission agreed with those taxpayers when it ruled that contingent fee audits were void as against public policy and, therefore, any assessments related to such audits were void. However, after first being affirmed by the North Carolina Court of Appeals, that decision was overturned (.pdf) on appeal by the North Carolina Supreme Court.
Now it appears that those opposed to contingent fee audits have turned to the legislature for a solution. In their recent legislative update, the North Carolina Chamber of Commerce reported the following about House Bill 462, pending legislation to ban contingent fee audits:
House Bill 462 addresses a priority issue for North Carolina businesses by prohibiting contingency fee audits. Contingent fee-based auditing threatens a fair and impartial evaluation of tax, it is quite simply unfair and a distinct threat to the business community.
Update: HB 462 was approved by the NC House Commerce and Job Development Committee on Wednesday. The full House is expected to vote next week on whether or not to concur.
Action: Passed the House (6/3/11)
Passed the Senate (6/19/12)
Passed House Commerce and Jobs Development Committee (6/27/12)
Action this week will determine if this attempt at banning contingent fee audits is successful. We will keep you posted.