DEPARTMENT OF STATE REVENUE

02-20070405P.LOF

Letter of Findings Number: 07-0405P

Corporate Income Tax-Penalty

For the Periods 2000-2002, 2005

ISSUE

Taxpayer protests the imposition of the ten percent negligence penalty.

STATEMENT OF FACTS

Taxpayer was audited by the Department for corporate income tax. As a result of the audit, the Department assessed Taxpayer for additional tax along with penalties. Taxpayer protested the penalties.

The Department sent a letter to Taxpayer stating that Taxpayer could request a hearing by replying to the letter within twenty (20) days of the letter. Taxpayer did not reply to the Department's letter. Due to Taxpayer's failure to reply, this Letter of Findings is written based on the information in Taxpayer's protest file and other Department records relating to Taxpayer.

DISCUSSION

Taxpayer protests the imposition of the ten percent negligence penalty on Taxpayer's failure to report its corporate income tax and two penalties it argues are "duplicate billings."

Penalty waiver is permitted if the taxpayer shows that the failure to pay the full amount of the tax was due to reasonable cause and not due to willful neglect. IC § 6-8.1-10-2.1. The Indiana Administrative Code, 45 IAC 15-11-2 further provides:

(b) "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.

(c) 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.

With respect to 2001 and 2002, the Department issued two liabilities for penalties. The first liability for penalty (the one showing the additional tax determined to be due) was for underreporting of the final tax liability due. The second penalty assessment (the one for a penalty only) was assessed for failure to remit sufficient estimated tax payments during those years, as required by IC § 6-3-4-4.1(e). Thus, Taxpayer was actually assessed two different penalties, one for failure to report the proper amount of tax due and a second for failure to make estimated payments of tax during the tax year.

With respect to penalty waiver, Taxpayer has not provided sufficient information to justify penalty waiver. Therefore, Taxpayer's request for penalty waiver is denied.

FINDING

Taxpayer's protest is denied.

DIN: 20071205-IR-045070774NRA

Composed: May 05,2024 11:43:39PM EDT

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