KRS 131.081 — Rules applicable to the administration of all taxes under jurisdiction of Department of Revenue

The following rules, principles, or requirements shall apply in the administration of all
taxes subject to the jurisdiction of the department:
(1) The department shall develop and implement a Kentucky tax education and
information program that:
(a) Is directed at new taxpayers, taxpayer and industry groups, and department
employees to enhance the understanding of and compliance with Kentuck y
tax laws;
(b) Includes information on:
1. The application of new tax legislation to taxpayer activities; and
2. Areas of recurrent taxpayer noncompliance or inconsistency of
administration; and
(c) Is published as part of the administrative writings post ed on its official
website;
(2) The department shall publish brief statements in simple and nontechnical language
which explain procedures, remedies, and the rights and obligations of taxpayers and
the department. These statements shall be provided to taxp ayers with the initial
notice of audit; each original notice of tax due; each denial or reduction of a refund
or credit claimed by a taxpayer; each denial, cancellation, or revocation of any
license, permit, or other required authorization applied for or h eld by a taxpayer;
and, if practical and appropriate, in informational publications by the department
distributed to the public;
(3) Taxpayers shall have the right to be assisted or represented by an attorney,
accountant, or other person in any conference, hearing, or other matter before the
department. The taxpayer shall be informed of this right prior to conduct of any
conference or hearing;
(4) The department shall perform audits and conduct conferences and hearings only at
reasonable times and places;
(5) Taxpayers shall have the right to make audio recordings of any conference with or
hearing by the department. The department may ma ke similar audio recordings if
prior written notice is given to the taxpayer or if the taxpayer records the conference
or hearing. The taxpayer shall be entitled to a copy of this department recording or a
transcript as provided in KRS 61.874;
(6) If any t axpayer's failure to submit a timely return or payment to the department is
due to the taxpayer's reasonable reliance on written advice from the department, the
taxpayer shall be relieved of any penalty or interest with respect thereto, provided
the taxpayer requested the advice in writing from the department and the specific
facts and circumstances of the activity or transaction were fully described in the
taxpayer's request, the department did not subsequently rescind or modify the
advice in writing, and there were no subsequent changes in applicable laws or
regulations or a final decision of a court which rendered the department's earlier
written advice no longer valid;
(7) Taxpayers shall have the right to receive a copy of any audit of the department by
the Auditor of Public Accounts relating to the department's compliance with the
provisions of KRS 131.041 to 131.081;
(8) (a) The department shall include with each notice of tax due a clear and concise
description of the basis and amount of any tax, pena lty, and interest assessed
against the taxpayer and the agent's written narrative setting forth the grounds
upon which the assessment is made.
(b) Copies of the agent's audit workpapers shall be:
1. Included with the notice of tax due; or
2. Delivered electronically to the taxpayer.
(c) Taxpayers shall be similarly notified regarding the denial or reduction of any
refund or credit claim filed by a taxpayer;
(9) (a) Taxpayers shall have the right to an installment payment agreement for the
payment of delinqu ent taxes, penalties, and interest owed, provided the
taxpayer requests the agreement in writing clearly demonstrating:
1. His or her inability to pay in full; and
2. That the agreement will facilitate collection by the department of the
amounts owed.
(b) The department may modify or terminate an installment payment agreement
and may pursue statutory remedies against the taxpayer if it determines that:
1. The taxpayer has not complied with the terms of the agreement,
including minimum payment requirements e stablished by the
agreement;
2. The taxpayers' financial condition has sufficiently changed;
3. The taxpayer fails to provide any requested financial condition update
information;
4. The taxpayer gave false or misleading information in securing the
agreement; or
5. The taxpayer fails to timely report and pay any other tax due the
Commonwealth.
(c) The department shall give written notice to the taxpayer at least thirty (30)
days prior to modifying or terminating an installment payment agreement
unless the d epartment has reason to believe that collection of the amounts
owed will be jeopardized in whole or in part by delay;
(10) The department shall not knowingly authorize, require, or conduct any investigation
or surveillance of any person for nontax administ ration related purposes, except
internal security related investigations involving department personnel;
(11) In addition to the circumstances under which an extension of time for filing reports
or returns may be granted pursuant to KRS 131.170, taxpayers shall be entitled to
the same extension of the due date of any comparable Kentucky tax report or return
for which the taxpayer has secured a written extension from the Internal Revenue
Service provided the taxpayer notifies the department in writing and pr ovides a
copy of the extension at the time and in the manner which the department may
require;
(12) The department shall bear the cost or, if paid by the taxpayer, reimburse the
taxpayer for recording or bank charges as the direct result of any erroneous l ien or
levy by the department, provided the erroneous lien or levy was caused by
department error and, prior to issuance of the erroneous lien or levy, the taxpayer
timely responded to all contacts by the department and provided information or
documentation sufficient to establish his or her position. When the department
releases any erroneous lien or levy, notice of the fact shall be mailed to the taxpayer
and, if requested by the taxpayer, a copy of the release, together with an
explanation, shall be mail ed to the major credit reporting companies located in the
county where it was filed;
(13) (a) The department shall not evaluate individual officers or employees on the
basis of taxes assessed or collected or impose or suggest tax assessment or
collection quotas or goals.
(b) No arrangement or contract shall be entered into for the service to:
1. Examine a taxpayer's books and records;
2. Collect a tax from a taxpayer; or
3. Provide legal representation of the department;
if any part of the compensation or other benefits paid or payable for the
service is contingent upon or otherwise related to the amount of tax, interest,
fee, or penalty assessed against or collected from th e taxpayer. Any such
arrangement or contract shall be void and unenforceable;
(14) Taxpayers shall have the right to bring an action for damages against the
Commonwealth to the Board of Tax Appeals for actual and direct monetary
damages sustained by the ta xpayer as a result of willful, reckless, or intentional
disregard by department employees of the rights of taxpayers as set out in KRS
131.041 to 131.081 or in the tax laws administered by the department. In the
awarding of damages pursuant to this subsect ion, the board shall take into
consideration the negligence or omissions, if any, on the part of the taxpayer which
contributed to the damages. If any proceeding brought by a taxpayer is ruled
frivolous by the Board of Tax Appeals, the department shall be reimbursed by the
taxpayer for its costs in defending the action. Any claims brought pursuant to this
subsection shall be in accordance with KRS 49.040 to 49.180; and
(15) Taxpayers shall have the right to privacy with regard to the information provided on
their Kentucky tax returns and reports, including any attached information or
documents. Except as provided in KRS 131.190, no information pertaining to the
returns, reports, or the affairs of a person's business shall be divulged by the
department to any person or be intentionally and without authorization inspected by
any present or former commissioner or employee of the department, member of a
county board of assessment appeals, property valuation administrator or employee,
or any other person.