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Leadership in Tax Controversy Resolution.
Dow Lohnes Price specializes in State Income & Franchise Taxes, Dispute Resolution, Tax Planning, Sales & Use Tax, Unclaimed Property, Acquisition & Disposition Transactions and Other Taxes relating to federal, state and local tax issues.
Outlined to the right and summarized below is a typical framework of our tax controversy resolution practice and process, as well as brief descriptions of our other service areas and skill-sets. Once you have a feel for our practice, please visit Our People to better understand the professional "raw materials" of our services and to know us better.
 Income & Franchise Tax
Dow Lohnes Price provides, both independently and in conjunction with Dow Lohnes PLLC (the law firm with which we are affiliated) income tax consulting services for corporations, partnerships, limited liability companies and other business entities related to federal, international, state and local tax matters. Dow Lohnes Price focuses on state and local tax matters and Dow Lohnes PLLC focuses on federal and international tax matters. The collaboration between the two firms allows each practice to easily access and utilize the tax experience and knowledge of the other in order to provide seamless and comprehensive services for the matters for which they are engaged.
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 Dispute Resolution
Dow Lohnes Price provides an ideal blend of practical and technical tax reporting experience with a proven ability to perform and effectively communicate strategic analysis and application of Constitutional and state statutory requirements, all in an effort to derive the best possible business solution. In its simplest form, we achieve the best controversy solution for our clients in two basic steps:
> Understand and correct the detailed technical and/or computational aspects of the issue.
> From this often material revised starting position, provide the appropriate strategic legal analysis and support to arrive at the best possible solution.
While many law practices begin with the second step, our practice has shown there is often material low hanging fruit to be harvested before addressing the substantive legal issues. As experienced CPAs, we are well-equipped to identify these opportunities.
On the other end of the scale, all Dow Lohnes Price professionals have the experience and wherewithal to provide a “soup-to-nuts” service product. This allows our review and planning function to focus more attention on a collaborative effort of providing alternative perspectives and value-adding suggestions throughout the process. In the end, our practice is comprehensive and our process is thorough, adaptable and effective. (See Client Successes.)
While we are flexible and adapt our approach to the particular situation, in most instances, Dispute Resolution services provided by Dow Lohnes Price fall within four main areas: Pre-Audit Tax Planning, Audit Management, Issue Resolution and Soup-to-Nuts Coverage.
Pre-Audit Tax Planning
Pre-Audit Tax Planning is a review process, ideally initiated prior to the start of the audit, which results in a strategy to maximize tax opportunities and minimize tax exposures. Pre-Audit Tax Planning provides the best platform for an efficient provision of services; it helps Dow Lohnes Price to win potentially controversial tax issues at the audit or administrative level and avoid costly litigation.
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In fact, the firm has won a number of large tax refunds at the administrative level due to successful implementation of a strategy developed in Pre-Audit Tax Planning. Note that “winning” in this context includes successfully avoiding an issue ever being raised.
Pre-Audit Tax Planning starts with a review of tax return filing positions and transactions occurring during the audit and post-audit periods. The review primarily focuses on the tax return position claimed for significant and controversial issues and, in the case of an income/franchise tax filing, may include:
- Examination of filing method used for each return.
- Review of entities included or excluded from each return.
- Review of business versus nonbusiness classification for transactions.
- Review of flow-through income and apportionment from partnerships and LLC membership interests.
- Review of sourcing and methodology used in apportionment factors.
- Review of state modifications to income such as add-backs and throw-outs.
The review may identify a situation where the statute as applied to the client’s facts is unconstitutional, an instance where distortion exists, or a circumstance where an application for relief may be made. Dow Lohnes Price and the client may then evaluate alternative tax positions which take into account legislation, tax policy changes, judicial action, industry trends and the client’s subsequent transactions, events and results. If alternative positions are identified, the tax cost or benefit associated with each alternative may be computed by either the client or Dow Lohnes Price, leading to a selection of the most favorable position. While a change in position during an audit is difficult, it is not impossible; the firm has considerable success in raising and sustaining such changes both in the context of affirmative claims and audit defense. Following are examples of filing positions, again in the context of income/franchise taxes, which could potentially be changed through affirmative action:
- Change in filing method to or from unitary line of business combination; overall unitary combination; combined, consolidated, or separate entity filings.
- Addition of entities excluded from the return.
- Removal of entities included in the return.
- Claim of instant unity for a newly acquired company.
- Defending against claim of instant unity for a newly acquired company.
- Reclassification of income or loss from business to nonbusiness.
- Reclassification of income or loss from nonbusiness to business.
- Change in sourcing in computation of apportionment factors.
- Change in methodology in computation of apportionment factors.
- Change in intercompany fee or interest allocation.
- Change in computation of add-back or throw-out.
- Change in method of reporting flow-through income and apportionment from partnerships and LLCs.
Once a determination is made as to which filing positions are to be sustained and which filing positions are to be changed, Dow Lohnes Price then develops and implements a strategy to sustain or attain each position. The firm has a solid track record of building a case for a change in position, justifying the position and sustaining same under the audit or administrative review levels (i.e., not just stating the position, but proving it through evidentiary support). As part of determining and substantiating positions, the firm will also identify the weaknesses of the position and seek contemporaneous documentation, favorable facts, and pertinent affidavits to minimize or neutralize the weaknesses.
The ability of the firm to settle controversies at the lowest possible level is directly related to Pre-Audit Tax Planning and the advance preparation to substantiate the desired position. Pre-Audit Tax Planning enables the firm to strategically manage the audit process and effectively represent the client’s position at the beginning of and throughout audit fieldwork.
Audit Management
Dow Lohnes Price handles all phases of tax controversy work from the start of the audit and fieldwork through the protest and appeals stages, including audits of income and franchise tax, sales/use tax and other state and local taxes. While the following is largely a description of our income tax Audit Management services, similar services and processes are provided with regard to other types of taxes and unclaimed property.
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The philosophy of practice at Dow Lohnes Price is to favorably resolve tax controversies at the lowest possible level, a goal which is most likely achieved through strategic handling of the audit from its inception. This does not mean that in-house professionals have no part in managing the audit – instead, a mutual and cohesive strategy is developed in cooperation with client staff in advance of the audit and is likewise executed through every subsequent phase of the audit process. For this reason, existing clients generally consult with Dow Lohnes Price at the first audit notice to develop an Audit Management plan. On the other hand, many first-time clients may not engage Dow Lohnes Price until the latter stages of an audit and Dow Lohnes Price will then intervene as needed with the audit timeline to allow for an effective assessment of the opportunities and exposures and to develop a strategy for navigating both.
In some cases, Dow Lohnes Price is not engaged until the audit has become a crisis through either a particular incident or a progression of events. The professionals of Dow Lohnes Price are able to assess the situation quickly and intervene strategically. For example, the firm has intervened to remove a cease and desist notice or lien and to return the client to an audit or appeal tax status. In other instances, the firm has intervened to establish a cooperative working relationship where the client’s relationship with the auditor had plateaued without resolution and, in other cases, where it had degenerated to becoming unproductive. Dow Lohnes Price can establish a neutral audit environment and will work with the state to create an audit plan and timeline which allows further consideration of unresolved issues.
Following is a listing of services which may be provided in connection with Audit Management as a complete package or in any combination selected by the client:
- Prepare responses to nexus questionnaires which may or may not include completion of the questionnaire.
- Prepare responses to audit notification notices including identification of the best place to conduct the audit given the opportunities and risks associated with the proposed audit period.
- Designate the office of Dow Lohnes Price, or the Washington or Atlanta offices of Dow Lohnes PLLC, as the location of the audit in situations where the goal is to limit disruption to the client and/or control or eliminate auditor’s contact with the client and its operations.
- Meet with auditor at the beginning of the audit and during fieldwork to agree on the audit plan and parameters for the auditor.
- Prepare all correspondence, including responses to Information Document Requests and other inquiries in accordance with Pre-Audit Tax Planning.
- Review client-prepared data and documents and suggest revisions as needed to attain Pre-Audit Tax Planning goals and suggest additional documents which may be useful to introduce into the record.
- Meet with the auditor and supervisor as needed to prevent the scheduling of any items which may be resolved through documentation or negotiation at the audit level.
- Establish and seek agreement with the auditor on the portrayal of the facts as a preliminary step to later seeking stipulations when the matter is expected to advance to Issue Resolution.
- Review audit schedules, workpapers, computations and results for accuracy in amount, description and portrayal, and work with the auditor to achieve a fair portrayal of the audit results.
- Research all issues raised and strategically plan how to use the issues in attaining the goals established for the Dispute Resolution.
- Identify potential affirmative refund claims for all years and develop strategies for making the claims.
- Determine effect of preliminary audit results on future years and identify potential tax planning opportunities.
Dow Lohnes Price has success in resolving issues at the audit level when other firms often take such issues to appeals or litigation. Therefore, while the depth of preparation in planning for and managing an audit may appear at first glance to be excessive, the value to the client is realized by lower total fees and quicker resolution. When significant disputes can be resolved at the audit or administrative review level, the matter retains a lower profile which is often a factor leading to greater success. However, sometimes it is simply not possible to resolve all issues with the auditor. When this occurs, the firm provides Issue Resolution services.
Issue Resolution
Some issues may not be resolvable at the audit level and will result in adjustments to the return or assessments. In these cases, Dow Lohnes Price works to resolve the issue at the administrative level, typically by developing a constructive dialogue with the hearing officer and establishing a mutual goal to explore all options for resolution without litigation.
The Position Paper: Narrative
Issue Resolution at the administrative level almost always requires the filing of a position paper, protest or brief. This document, generically referred to as a position paper, is must be thorough and generally includes every possible argument and analysis to support the client’s position on the issue. The narrative in our position papers seek to make complex issues appear simple while providing more-than-ample evidence that the client’s facts support the position to the exclusion of all other possibilities.
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The narrative creates a foundation for the client’s position and arguments by reference to judicial precedent in multiple jurisdictions. Since Dispute Resolution is the core of our practice, the firm dedicates resources to creating and maintaining a database of all precedential income tax cases on hot topics. The facts and arguments of each case are often distilled into tables; variations of the tables are maintained to illustrate nuances of the case which are extracted and used independently from other issues decided in the case. The client benefits from reduced fees since our professionals are highly experienced at Issue Resolution and individually adept at using the firm’s in-house database to develop a narrative which builds a multi-jurisdictional case to support the client’s position and illustrate the nuances in the client’s case. Rather than relying on a single “silver bullet,” the position paper typically puts forth numerous well placed “shots” which inevitably lead to the conclusion that the client’s position is appropriate to the exclusion of the state’s position.
The Position Paper: Tables
Dow Lohnes Price recognizes that hearing officers are individuals and some individuals are more responsive to bullet points and bits of information as opposed to prose and written narrative. The firm often employs a strategy to clearly state the case in the narrative and to restate the case in tables. Thus, the position paper is supported by tables which lay out the pertinent analyses, facts, and conclusions of multiple cases to illustrate how they apply to the client’s facts and arguments. Thus, a hearing officer who merely skims the narratives while studying the tables will still be presented with a fully developed position analysis in the tables.
The Position Paper: Exhibits
In most instances, Dow Lohnes Price strategically employs the use of exhibits to illustrate and prove the client’s facts in the most favorable context of the position being presented. The exhibits take a variety of formats and may include photos, business records with highlighted sections, publications, flowcharts, charts and other graphs. The firm may use technical dictionaries or industry publications in illustrating a point pertinent to the client’s facts. Thus, the exhibits restate the client’s facts and begin to build an irrefutable record.
Beyond the Position Paper
Dow Lohnes Price does not rely on the position paper alone to resolve issues. Issue Resolution also involves informal meetings, telephone conferences and other forms of information exchange. These exchanges allow for the case to be presented in a way which appeals to auditory learners while also establishing a process by which both sides engage in weighing the strength of the taxpayer’s position in an effort to reach resolution. The firm coordinates the communication in a sequence designed to bring the client’s facts into perspective and to chip away at the state’s position, while demonstrating the strength of the client’s position.
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Recognizing each situation is unique, throughout the ensuing audit and administrative appeals Dow Lohnes Price works with the client to determine and continuously re-evaluate the strength of positions developed during Pre-Audit Tax Planning. In some cases, a negotiated settlement may be envisioned from the outset and the Issue Resolution process is handled in a way to achieve the best possible settlement or compromise.
However, no matter the situation and taking into account all other business considerations, Dow Lohnes Price strives to identify and define for each client the best dispute resolution scenarios. In most instances, Dow Lohnes Price has been able to prevail in defending/implementing these positions and achieve resolution results which often exceed clients’ initial expectations. The firm does not flinch at pursuing this sort of complete win – in a number of instances prevailing on the eve of litigation.
In those rare cases where a tax dispute advances to levels requiring legal counsel, Dow Lohnes Price will make a recommendation to the client with regard to selection of counsel and typically remains actively involved in assisting counsel with the preparation of the case as it proceeds towards trial. Counsel may be selected with an eye towards local presence and/or specific case experience, depending on the nature of the issue. Services provided by Dow Lohnes Price at this stage of controversy work can include developing strategy, assisting counsel with their preparation of various trial briefs and related support, and managing counsel and other litigation support services. Typically, because of the quality and depth of our previous work on the matter, the court proceedings can be handled very efficiently, lessening the costs of litigation.
Soup-to-Nuts Dispute Coverage
If the life span of a tax controversy issue was to be depicted in a linear fashion beginning with the initial reporting of a tax position and ending with a court of law determination, Dow Lohnes Price is poised to provide high quality, value-added service throughout this entire span. Unlike the typical accounting firm, tax controversy resolution is the primary focus of each of our professionals. Our ability to serve is not hampered by inexperienced staff, nor are we distracted by compliance deadlines or other unrelated client demands. Similarly, in contrast to most specialty law firms, we are very often reducing and/or resolving issues long before the administrative appeal and litigation stages. In the unusual instance when an issue proceeds to litigation, we have extensive experience supporting the litigation process and helping the client to manage any related legal services.
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Tax Controversy Life Span
1. Tax Position Reporting
Dow Lohnes Price can help clients evaluate, analyze, and support tax reporting positions in conjunction with their tax return filings. Having extensive practical and technical experience with tax reporting and audit issue resolution, Dow Lohnes Price is well positioned to help clients understand tax reporting risks and related business considerations.
2. Financial Statement Accounting
Dow Lohnes Price professionals have experience with financial statement reporting of tax return positions and with preparation of “more likely than not” FIN 48 analyses.
3. Audit Management and Defense
We have often found that the earlier a controversy issue is thoroughly addressed, the higher the likelihood of favorable resolution. Indeed, it is the preference of the firm to begin the controversy resolution process as soon as possible within the depicted life cycle.
4. Administrative Appeals
Dow Lohnes Price has a history of proven success establishing, defending, and favorably resolving controversy issues at administrative appeal levels. We understand the appeal process and know how to strategically achieve a favorable resolution.
5. Litigation
Dow Lohnes Price has extensive experience managing and supporting the litigation stage on behalf of our clients despite not being able, as CPAs, to provide legal representation once a matter reaches a certain level within the state’s judicial system.
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 Tax Planning
Dow Lohnes Price is uniquely positioned to provide a wide range of strategic tax planning and research services. Our successful Dispute Resolution practice offers a depth of experience which allows the firm to provide strategic and insightful Tax Planning services on “hot topic” issues. The firm also often collaborates with Dow Lohnes PLLC (the law firm with which we are affiliated) to provide an optimal combination of legal and non-legal services.
Click to view a sampling of the firm’s Tax Planning services...
- Review corporate entity structure and proposed restructuring.
- Evaluate and assess the exposure associated with a client’s existing or proposed tax minimization strategy.
- Review a client’s previously established tax return filing positions, identifying exposures and making recommendations.
- Provide advice regarding practical considerations, documentation and substantiation to establish intercompany notes to support the deductibility of intercompany interest expense.
- Review and evaluate recommendations arising from tax planning and research services provided by the client’s auditors or other advisors.
- Determine options regarding non-corporate entity structures including limited liability companies, single member limited liability companies and partnerships based on specific state law and business opportunities.
- Provide advice regarding state tax treatment of income and expenses from flow-through entities and factor representation of same.
- Identify and advise regarding elections, credits and planning opportunities based on the nature of the client’s business.
- Provide advice regarding location of business activities for state and local tax minimization.
- Determine whether nexus exists and identify nexus-related tax planning opportunities.
- Provide advice regarding practical considerations, documentation and substantiation of intercompany management fee allocations to support the deductibility of intercompany fees and expenses.
- Identify possible filing options for each state and prepare/review computations to determine the cost versus the benefit of various filing options.
- Evaluate settlement offers arranged by other firms in their handling of a dispute on behalf of the client.
- Voluntary disclosure agreements.
- Evaluate treatment and reporting of partnership flow-through activity.
With regard to specific transactions and events, we recommend that Tax Planning services be provided prior to the filing of the return. Please refer to Pre-Audit Tax Planning for a description of Tax Planning services provided in anticipation of an audit.
 Sales & Use Tax
Dow Lohnes Price provides sales and use tax planning, research, and dispute resolution services to support the growth of local and multi-state business enterprises and often works in consultation with the law firm Dow Lohnes PLLC in assisting with related considerations for new products, ventures and contracts.
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Sales tax laws are constantly changing and evolving to keep up with technology and the marketplace. This environment often leads to a company inadvertently being out of tax compliance with current law. Dow Lohnes Price handles all aspects of sales and use tax strategies to restore compliance including negotiated settlements, amnesty programs and voluntary disclosure filings.
Dow Lohnes Price handles all aspects of sales and use tax audits, managed audits and dispute resolution. The level of service is tailored to the client’s needs and circumstances. The firm can serve as a resource to the in-house professional managing the audit and in this capacity can evaluate the strength of position, provide research services, gather information from similarly situated taxpayers and assist with audit strategies. The firm can also manage all aspects of the audit, a common situation which arises when a company either does not have employees with sales and use tax expertise or has no capacity to give the audit the attention needed. In many cases, the audit will be conducted at our offices in order to minimize disruptions to operations and control the flow of information to the auditor.
Specialized services provided by Dow Lohnes Price include:
- Research the state statutes and rules applicable to taxpayer's operations.
- Assist the taxpayer in determining the potential tax liability.
- Handle all correspondence with the state, including voluntary disclosures, anonymous inquiries/negotiations to settle prior years where state filings have not been made.
- Identify tax planning opportunities, including entity restructuring to minimize taxes and tax exposure.
- Negotiate three-party sales tax dispute resolutions between companies, their franchisees, and state revenue departments.
- Prepare and review ruling requests and nexus determinations.
- Reverse sales tax audits.
When our clients launch a business or product expansion, our goal is to provide the decision-makers with sufficient information to understand both the tax implications and alternatives so that informed decisions can be made. We understand that sales and use taxes impact operations, profitability, customer relations and competitiveness. Because an accurate sales and use tax determination is dependent upon a proper understanding of the facts underlying the transaction, we take the time to identify the pertinent facts and understand the business environment. In today’s environment, electronic and digital advancements often precede development of state law; if an area is gray or a fact pattern is not addressed in published guidance, we will identify alternatives and work with the client to achieve the desired level of comfort.
Related services include:
- Contract review for tax clauses, ability to pass through taxes imposed on the vendor, terms impacting the location of the sale and factors impacting the characterization of the transaction for sales and use tax purposes and provide advice and identify alternatives regarding the same.
- Research tax statutes in jurisdictions where employees travel, where new facilities are established, and where suppliers and expanded operations create new filing responsibilities or alter existing nexus positions.
- Research tax issues related to changes in delivery, risk of loss provisions, pricing structure, product bundles, marketing channels and product enhancements.
 Unclaimed Property
Dow Lohnes Price provides a variety of Unclaimed Property services tailored to the needs of the client and its in-house resources, including compliance and dispute resolution. For example, the firm handled a forty-state voluntary disclosure filing for a company whose reporting deficiencies were uncovered during a due diligence review and the filing was required by the purchaser prior to closing the deal. In this particular instance, Dow Lohnes Price prepared and mailed last contact notices using the firm’s address for property owner claims in order to minimize disruption to continuing operations and to limit the holder’s association with both the purchaser and the seller. The firm has provided unclaimed property consultation services to a variety of businesses including cable operators, not-for-profit membership corporations, and bricks-and-mortar, catalog, and Internet retailers.
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Following are examples of unclaimed property services offered by the firm:
- Manage and/or assist with unclaimed property audits conducted by states or their third-party contract auditors.
- Assess compliance with unclaimed property reporting requirements and advise on strategies to attain compliance.
- Monitor legislative and reporting trends and advise on business practices with regard to gift certificates, gift cards, re-loadable stored value cards and electronic codes.
- Analyze foreign escheat requirements and advise on the escheat of foreign property held by U. S. corporations.
- Review accounting and treasury practices and entity structures when related entities are domiciled in different jurisdictions to identify the holder and address successor liability issues.
- Advise on the structure of promotional offers in order to minimize escheat responsibilities.
- Advise on the escheat of credits to cable customer accounts generated by promotional campaigns and propose changes to the campaign to minimize escheat issues.
- Advise on escheat issues pertaining to the issuance of electronic codes as gift cards to be used to acquire membership in a not-for-profit corporation.
- Review rebate service agreements and advise on escheat issues related to consumer rebate programs.
- Handle all correspondence with the state, including voluntary disclosure and amnesty filings, anonymous inquiries, and negotiations to settle prior years where state filings have not been made or were deficient.
- Prepare and mail last contact notices and follow up with owner responses.
- Prepare and file annual unclaimed property reports.
 Acquisition & Disposition Transactions
Dow Lohnes Price provides advice during all phases of purchase/sale negotiations, including preparation of a letter of intent and review of the purchase/sale agreement. Additionally, Dow Lohnes Price provides recommendations and planning services regarding the handling and reporting of an acquisition or disposition on state, local and federal tax returns.
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- Advice regarding any sales and use tax implications, bulk sale notification requirements and other transfer tax implications of a proposed transaction.
- Advice regarding the best structure and related reporting of a transaction for state income tax purposes, including whether the transaction should be treated as business or nonbusiness, and whether the subject business or asset is unitary with other existing businesses.
- Advice regarding sales/use tax collection responsibilities for new ventures.
- Review of purchase/sale agreements for state tax planning ideas and recommendations.
- Performance of federal and state tax due diligence for potential acquisitions, including visiting the seller’s virtual data room and interviewing the seller’s tax representatives to identify potential federal and state tax exposures and benefits.
Other Taxes
Dow Lohnes Price provides tax consulting services for other types of state and local taxes including property, business license, excise, estate and gift tax. Other tax services include:
- Dispute resolution services with regard to state and local property tax assessments.
- Dispute resolution services with regard to state and local unemployment tax audits and assessments.
- Tax planning and dispute resolution services to minimize exposures and reduce the impact of “jock taxes” which may unfairly impact professional athletes.
- Estate tax research services at the state level.
- Advisory services for various state and local taxes as applicable to nonprofit and tax-exempt organizations.
Conclusion
As hopefully demonstrated by the summary descriptions above, we are experts in the resolution of state tax issues faced by nearly all corporate taxpayers.
Please visit Client Successes for some more tangible examples of the value created by Dow Lohnes Price and Our People to better know and understand the qualifications of the individuals who make it all happen.
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State + Local Tax Issues |
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Tax Controversy Life Span
1. Tax Position Reporting
Dow Lohnes Price can help clients evaluate, analyze, and support tax reporting positions in conjunction with their tax return filings. Having extensive practical and technical experience with tax reporting and audit issue resolution, Dow Lohnes Price is well positioned to help clients understand tax reporting risks and related business considerations.
2. Financial Statement Accounting
Dow Lohnes Price professionals have experience with financial statement reporting of tax return positions and with preparation of “more likely than not” FIN 48 analyses.
3. Audit Management and Defense
We have often found that the earlier a controversy issue is thoroughly addressed, the higher the likelihood of favorable resolution. Indeed, it is the preference of the firm to begin the controversy resolution process as soon as possible within the depicted life cycle.
4. Administrative Appeals
Dow Lohnes Price has a history of proven success establishing, defending, and favorably resolving controversy issues at administrative appeal levels. We understand the appeal process and know how to strategically achieve a favorable resolution.
5. Litigation
Dow Lohnes Price has extensive experience managing and supporting the litigation stage on behalf of our clients despite not being able, as CPAs, to provide legal representation once a matter reaches a certain level within the state’s judicial system.
 
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