An Act To Require the Payment of Certain Costs Incurred by a Prevailing Party in Court Proceedings by or against Maine Revenue Services
Maine Legislature, Session 121, LD 0782
Committee: Judiciary
Sponsors: MUSE, MA YO, ANNIS, AUSTIN, BIERMAN, CARR, DUNLAP, JODREY, O'NEIL

Legislative Document 
No. 782 
H.P.581 
House of Representatives, February 18, 2003 
An Act To Require the Payment of Certain Costs Incurred by a 
Prevailing Party in Court Proceedings by or against Maine Revenue 
Services 
Reference to the Committee on Judiciary suggested and ordered printed. 
Presented by Representative MUSE of Fryeburg. 
Cosponsored by Senator MA YO of Sagadahoc and 
/lJ~/h.1lbc~ 
MILLICENT M. MacFARLAND 
Clerk 
Representatives: ANNIS of Dover-Foxcroft, AUSTIN of Gray, BIERMAN of Sorrento, CARR 
of Lincoln, DUNLAP of Old Town, JODREY of Bethel, McKENNEY of Cumberland, 
O'NEIL of Saco. 
Printed on recycled paper 
Be it enacted by the People of the State of Maine as follows: 
Sec. I. 36 MRSA c. 6 is enacted to read: 
CHAPTER 6 
AWARD O~ COSTS AND FEES 
§lQ6. 
Definitions 
As 
used 
in this 
chapter, 
unless 
the 
context 
otherwise 
indicates, the following terms have the following meanings. 
1. 
Administrative proceeding. 
"Administrative proceeding" 
means any procedure or other action before the bureau. 
2. 
Applicable published guidance. 
"Applicable published 
guidance" means: 
A. 
Rules, bureau rulings, bureau procedures, 
information 
releases. notices and announcements: and 
B. 
Any 
of 
the 
following 
issued by the 
bureau to 
the 
taxpayer: 
(1) 
Private letter; 
( 2 ) 
Rulings; 
(3) 
Technical advice memoranda; and 
(4) 
Determination letters. 
3. 
Attorney's fees. 
"Attorney's fees" 
means 
reasonable 
fees 
paid or 
incurred 
for 
the 
services 
of 
an 
attorney 
~n 
connection with a court proceeding, except that such fees may not 
be in excess of $150 per hour unless the court determines that a 
special factor. 
such as the limited availability of gualified 
attorneys 
for 
such proceeding, 
the difficulty of 
the 
issues 
presented in the case or the local availability of tax expertise, 
justifies a higher rate. 
The 
bureau 
shall 
automatically 
adjust 
the 
attorney's 
fees 
referred to in this SUbsection, beginning in September 2005 and 
each 
September 
thereafter, 
by 
any 
percentage 
change 
in the 
Consumer Price Index from July 1st to June 30th, but only to a 
maximum annual increase or decrease of 4%. 
"Attorney's 
fees" 
includes 
fees 
for 
the 
services 
of 
an 
individual, whether or not an attorney, including a certified 
Page l-LR0083(1) 
. , 
public accountant, enrolled agent, enrolled actuary or any other 
person permitted to represent the taxpayer; these fees must be 
treated as fees for the services of an attorney. 
4. 
Court proceeding. 
"Court proceeding" means any civil 
action brought in a court of the State, including the Supreme 
Judicial Court and a Superior Court. 
5. 
Net worth. 
"Net worth" means: 
A. 
For an estate, the value of the estate as of the date of 
the decedent's death; and 
B. 
For a trust. the value of the trust as of the last day 
of the taxable year involved in the proceeding. 
For purposes of determining net worth, individuals filing a joint 
return are treated as separate individuals. 
6. 
PartJ. 
"Party" means a taxpayer who is: 
A. 
An individual whose net worth did not exceed $2,000,000 
at the time the civil action was filed; or 
B. 
An 
owner of an unincorporated business, partnership, 
corporation or association; a unit of local government; or 
an organization, 
the net worth of which did not exceed 
$7,000,000 at the time the civil action was filed and that 
had not more than 500 employees at the time the civil action 
was filed; except that an organization described in Section 
501(c) (3) of the Code that is exempt from taxation under 
Section 501(a} of that Code or an association as defined in 
Title 
13, 
section 
1774, 
subsection 
may 
be 
a 
party 
regardless 
of 
the 
net 
worth 
of 
that 
organization 
or 
association. 
7. 
Position of bureau or State. 
"Position of the bureau or 
the State" means: 
A. 
The position taken by the State in a judicial proceeding 
to which this chapter applies; and 
B. 
The position taken by the bureau or the State in an 
administrative proceeding to which this chapter applies as 
of the earlier of: 
(I) 
The date of the receipt by the taxpayer of the 
notice of the decision of the bureau; or 
(2) 
The date of the notice of deficiency. 
8. 
Prevailing party. 
"Prevailing party" means a party in a 
proceeding to which this chapter applies, other than the United 
States, the State or the bureau or any creditor of the taxpayer 
involved, who meets the requirements of section 107 and who has 
substantially prevailed with respect to the amount in controversy 
or the most significant issue or set of issues presented. 
9. 
Qualified offer. 
"Qualified offer" 
means 
a 
written 
offer that: 
A. 
Is 
made 
by 
the 
taxpayer 
to 
the 
State 
during 
the 
qualified offer period: 
B. 
Specifies 
the 
offered 
amount 
of 
the 
taxpayer's 
liability, determined without regard to interest; 
c. 
Is designated at the time it is made as a qualified 
offer for purposes of this chapter: and 
D. 
Remain§! open during the period beginning on the date it 
is made and ending on the earliest of: 
(1) 
The date the offer is rejected; 
( 2) 
The date the trial begins: or 
( 3 } 
The 90th day after the date the offer is made. 
10. 
Qualified offer period. 
"Qualified offer period" means 
the period: 
A. 
Beginning on the date on which the first letter of 
proposed deficiency that allows the taxpayer an opportunity 
for administrative review by the assessor is sent; and 
B. 
Ending on the date that is 30 days before the date the 
case is first set for trial. 
11. 
Reasonable 
administrative 
costs. 
"Reasonable 
admini§!trati ve costs" includes the costs as described in this 
subsection. 
A. 
"Reasonable administrative cost§!" include§!: 
(1} 
Any administrative fee or similar charge imposed 
by the bureau; and 
(2) 
Ba§!ed upon prevailing market rates for the kind or 
quality of services furni§!hed: 
(a) The reasonable expenses of expert witnesses in 
connection 
with 
an 
administrative 
proceeding, 
except 
that 
an 
expert 
witness 
may 
not 
be 
compensated at a rate in excess of the highest 
rate of compensation for expert witnesses paid by 
the State; 
(b) The reasonable cost of any study, analysis, 
engineering report, test or project that is found 
by the bureau to be necessary for the preparation 
of the party's case; and 
(c) Reasonable attorney's fees. 
The bureau shall determine the amount of the award made 
under divisions (b) and (c). 
B. 
"Reasonable administrative costs" 
includes only those 
costs incurred pursuant to paragraph A on or after whichever 
of the following is the earliest: 
12. 
(1) 
The date of the receipt by the taxpayer of the 
notice of the decision of the assessor; 
(2) The date of the notice of deficiency; or 
(3) 
The date on which the first letter of proposed 
deficiency that allows the taxpayer an opportunity for 
administrative review by the assessor is sent. 
Reasonable litigation costs. 
"Reasonable -litigation 
costs" includes: 
A. 
Reasonable court costs; and 
B. 
Based upon prevailing market rates for the kind or 
quality of services furnished: 
(1) 
The 
reasonable 
expenses of expert witnesses 
in 
connection with 
a 
court proceeding, 
except that an 
expert witness may not be compensated at a 
rate in 
excess of the highest rate of compensation for expert 
witnesses paid by the State; 
(2) 
The 
reasonable 
cost 
of 
any 
study, 
analysis, 
engineering report, test or project that is found by 
the court to be necessary for the preparation of the 
party's case; and 
(3) Reasonable attorney's fees paid or incurred for the 
services of an attorney in connection with the court 
proceeding. 
13. 
Substantially prevails. 
"Substantially prevails," with 
reference 
to 
the 
taxpayer, 
means 
that the 
bureau fails 
to 
establish that its position in the proceeding was substantially 
justified. 
The position of the bureau is presumed not to be 
substantially 
justified if 
the 
bureau 
did 
not 
follow 
its 
applicable published guidance in the administrative proceeding. 
This presumption may be rebutted. 
In determining whether the 
position of the bureau was substantially justified, the court 
shall take into account whether the bureau has lost in court on 
substantially similar issues. 
§l07. 
Prevailing party awarded costs 
In any administrative or court proceeding that is brought by 
or 
against 
the 
bureau 
or 
State 
in 
connection 
with 
the 
determination, collection, or refund of any tax, 
interest or 
penalty under this Title, the prevailing party may be awarded a 
judgment or a settlement for reasonable administrative costs and 
reasonable litigation costs, as limited in this section. 
1. 
A-ihnjnistrative remedies must be emausted. 
A judgment 
for reasonable litigation costs may not be awarded in any court 
proceeding unless the court determines that the prevailing party 
has exhausted the administrative remedies available to that party 
within the bureau. A failure to agree to an extension of the time 
for the assessment of any tax may not be taken into account for 
purposes of determining whether the prevailing party meets the 
32reguirements of this subsection. 
2. 
Only costs allocable to State. 
An 
award under this 
section 
may 
be 
made 
only 
for 
reasonable 
litigation 
and 
administrative costs that are allocable to the State and not to 
any other party. 
3. 
Costs 
denied 
where 
party 
prevailing 
protracts 
proceedings. 
An 
award 
for 
reasonable 
litigation 
and 
administrative costs may not be made with respect to any portion 
of 
the 
administrative 
or 
court 
proceeding during 
which 
the 
prevailing party has unreasonably protracted that proceeding. 
4. 
Period for applying to bureau for administrative costs. 
An 
award may 
be made 
under this section by the bureau for 
reasonable administrative costs only if the prevailing party 
files an application with the bureau for those costs before the 
21st day after the date on which the final decision of the bureau 
A 
" .. 
as to the determination of the tax, interest or penalty is mailed 
to the party. 
5. 
§pecial 
rules 
where 
judgment 
less 
than 
t~ayer's 
offer. 
A party to a court proceeding who substantially prevails 
must be treated as the prevailing party if the liability of the 
taxpayer pursuant to the judgment in the proceeding, determined 
without 
regard 
to 
interest, 
is 
egual 
to 
or 
less 
than 
the 
liability of the taxpayer that would have been so determined if 
LO 
the bureau had accepted a gualified offer of the party. 
A. 
This subsection does not apply to: 
(1) 
A judgment issued pursuant to a settlement; 
(2) 
A proceeding in which the amount of tax liability 
is not in issue, 
including any declaratory judgment 
proceeding, 
any proceeding to enforce or 
guash 
any 
summons issued pursuant to this Title and any action to 
restrain disclosure under section 191; or 
(3) 
A party who is a prevailing party under any other 
provision of this section. 
B. 
If this subsection applies to any court proceeding: 
(1) 
The determination under this subsection must be 
made by reference to the last gualified offer made with 
respect 
to 
the 
tax 
liability 
at 
issue 
in 
the 
proceeding; and 
(2) 
Reasonable 
administrative 
and 
litigation costs 
only include costs incurred on and after the date of 
such offer. 
6. 
Joinder. 
If a 
case or cases involving a 
return or 
returns of the same taxpayer, including joint returns of married 
individuals, could have been joined in a single court proceeding 
in the Same court, such actions or cases must be treated as one 
court 
proceeding 
regardless 
of 
whether 
such 
joinder 
or 
consolidation actually occurs, 
unless the court in which the 
action is brought determines, in its discretion, that it would be 
inappropriate 
to 
treat 
such 
actions 
or 
cases 
as 
joined 
or 
consolidated. 
7. 
Additional attorney's fees. 
The court or the bureau in 
an administrative hearing may award reasonable attorney's fees in 
excess of the attorney's fees actually paid or incurred if: 
A. 
Those fees are less than the reasonable attorney's fees 
because an individual is representing the prevailing party 
for no fee or for a fee that. taking into account all the 
facts and circumstances, is no more than a nominal fee; and 
B. 
The 
award 
is 
paid 
to 
that 
individual 
or 
that 
individual's employer. 
Sl08. 
Application for award 
A party seeking an award of fees and other expenses shall, 
within 30 days of final judgment in the action, submit to the 
court an application for fees and other expenses that shows: 
1. 
Prevailing party. 
That the party is a prevailing party 
and is eligible to receive an award under this chapter; and 
2. 
Amount sought. 
The amount sought, including an itemized 
statement from any attorney or expert witness representing or 
appearing in behalf of the party stating the actual time expended 
and the rate at which fees and other expenses were computed. 
The party also shall allege that the position of the bureau 
or the State was not substantially justified. 
The court shall 
determine whether or not the position of the bureau or State was 
substantially justified on the basis of the record, including the 
record with respect to the action or failure to act by the bureau 
upon which the civil action is based, which record was made in 
the civil action for which fees and other expenses are sought. 
Sl09. 
Determination as to prevailing party 
A determination made 
under this chapter as to whether 
a 
party is a prevailing party must be made by: 
1. 
Parties. 
Agreement of the taxpayer and the bureau or 
State; 
2. 
Bureau. 
In the case where the final determination with 
respect 
to 
the 
tax, 
interest 
or 
penalty 
is 
made 
at 
the 
administrative level, the bureau; or 
3. 
Court. 
In the case where the final determination is 
made by a court, the court. 
SIlO. 
Right of appeal 
1. 
Court proceedings. 
An order granting or denying, 
in 
whole 
or 
in 
part, 
an 
award 
for 
reasonable 
litigation 
or 
administrative costs under section 106 in a court proceeding may 
be incorporated as a part of the decision or judgment in the 
court proceeding and is 'subject to appeal in the same manner as 
the decision or judgment. 
2. 
Administrative proceedings. 
A decision granting 
or 
denying, 
in 
whole 
or 
~n 
part, 
an 
award 
for 
reasonable 
administrative costs by the bureau is subject to the filing of a 
B 
petition for 
review with the 
Superior Court 
under 
the 
same 
conditions as the 
review allowed under section 151. 
If the 
bureau sends by certified or registered mail a notice of such 
decision to the petitioner, a proceeding in the Superior Court 
may not be initiated under this subsection unless the petition is 
filed before the gIst day after the date of the mailing. 
SUMMARY 
This bill allows a taxpayer who disputes a tax owed to the 
State and who prevails in either an administrative hearing before 
the Department of Administrative and Financial Services, Bureau 
of Revenue Services or in the Superior Court or Supreme Judicial 
Court to be 
awarded 
reasonable litigation and administrative 
costs, including attorney's fees, expert witness fees and court 
costs. 
The bill applies to both individuals and businesses and 
to all taxes due to the State. 
This bill is modeled on federal 
law.