20160330-IR-045160110NRA Letter of Findings Number: 02-20150411P Corporate Income Tax-Penalty For The 2014 Tax Year

DEPARTMENT OF STATE REVENUE

02-20150411P.LOF

Letter of Findings Number: 02-20150411P Corporate Income Tax-Penalty For The 2014 Tax Year

NOTICE: IC § 6-8.1-3-3.5 and IC § 4-22-7-7 require the publication of this document in the Indiana Register. This document provides the general public with information about the Department's official position concerning a specific set of facts and issues. This document is effective on its date of publication and remains in effect until the date it is superseded or deleted by the publication of another document in the Indiana Register. The "Holding" section of this document is provided for the convenience of the reader and is not part of the analysis contained in this Letter of Findings.

HOLDING

Company is sustained on its request of penalty waiver.

ISSUE

I. Tax Administration - Negligence Penalty.

Authority: IC § 6-8.1-10-2.1; 45 IAC 15-11-2.

Taxpayer requests that the Department abate the negligence penalty.

STATEMENT OF FACTS

Taxpayer is a company doing business in Indiana. Prior to 2014, Taxpayer was part of a group of corporations filing a consolidated Indiana income tax return. For the 2014 tax year, Taxpayer filed a separate Indiana corporate income tax return. When Taxpayer filed its return, Taxpayer reported tax due. Taxpayer remitted no tax prior to the original due date of the return. Taxpayer did pay the base tax due listed on the return by the extended due date for the return. However, Taxpayer did not pay any interest or penalty.

Upon receipt of the return, the Indiana Department of Revenue ("Department") issued a proposed assessment equal to the amount of interest, along with a ten-percent negligence penalty on the full amount of tax due. Taxpayer protested the penalty assessment.

The protest is decided on records available to the Department. This Letter of Findings results. Further facts will be provided as necessary.

I. Tax Administration - Negligence Penalty.

DISCUSSION

The Department's assessment imposed a ten percent negligence penalty for the tax period in question. Taxpayer requested that the Department abate the negligence penalty.

Pursuant to IC § 6-8.1-10-2.1(a), the Department may assess a ten (10) percent negligence penalty if the taxpayer:

(1) fails to file a return for any of the listed taxes;

(2) fails to pay the full amount of tax shown on the person's return on or before the due date for the return or payment;

(3) incurs, upon examination by the department, a deficiency that is due to negligence;

(4) fails to timely remit any tax held in trust for the state; or

(5) is required to make a payment by electronic funds transfer (as defined in IC 4-8.1-2-7), overnight courier, or personal delivery and the payment is not received by the department by the due date in funds acceptable to the department.

45 IAC 15-11-2(b) further states:

"Negligence" on behalf of a taxpayer is defined as the failure to use such reasonable care, caution, or diligence as would be expected of an ordinary reasonable taxpayer. Negligence would result from a taxpayer's carelessness, thoughtlessness, disregard or inattention to duties placed upon the taxpayer by the Indiana Code or department regulations. Ignorance of the listed tax laws, rules and/or regulations is treated as negligence. Further, failure to read and follow instructions provided by the department is treated as negligence. Negligence shall be determined on a case by case basis according to the facts and circumstances of each taxpayer.

The Department may waive a negligence penalty as provided in 45 IAC 15-11-2(c), as follows:

The department shall waive the negligence penalty imposed under IC 6-8.1-10-1 if the taxpayer affirmatively establishes that the failure to file a return, pay the full amount of tax due, timely remit tax held in trust, or pay a deficiency was due to reasonable cause and not due to negligence. In order to establish reasonable cause, the taxpayer must demonstrate that it exercised ordinary business care and prudence in carrying out or failing to carry out a duty giving rise to the penalty imposed under this section. Factors which may be considered in determining reasonable cause include, but are not limited to:

(1) the nature of the tax involved;

(2) judicial precedents set by Indiana courts;

(3) judicial precedents established in jurisdictions outside Indiana;

(4) published department instructions, information bulletins, letters of findings, rulings, letters of advice, etc.;

(5) previous audits or letters of findings concerning the issue and taxpayer involved in the penalty assessment.

Reasonable cause is a fact sensitive question and thus will be dealt with according to the particular facts and circumstances of each case.

Upon review, the Department agrees that Taxpayer has provided sufficient legal and factual grounds to conclude that penalty waiver is appropriate. Taxpayer made sufficient efforts to determine its proper liability prior to both the original due date and the extended due date of the return; in fact, the tax resulted from a change in filing status requested by the Department. Thus, Taxpayer acted with reasonable cause for not remitting its tax on or before the original due date of the return.

FINDING

Taxpayer's protest of the imposition of negligence penalty is sustained.

Posted: 03/30/2016 by Legislative Services Agency

DIN: 20160330-IR-045160110NRA

Composed: Nov 01,2016 2:10:26AM EDT

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