DEPARTMENT OF STATE REVENUE
Letter of Findings Number: 02-20110337P
Corporate Income Tax-Penalty
For the Tax Years 1999-2008
NOTICE: Under IC § 4-22-7-7, this document is required to be published in the Indiana Register and is effective on its date of publication. It shall remain in effect until the date it is superseded or deleted by the publication of a new document in the Indiana Register. The publication of this document will provide the general public with information about the Department's official position concerning a specific issue.
I. Tax Administration–Penalty.
Taxpayer protests the imposition of the penalty for failure to file corporate income tax returns.
STATEMENT OF FACTS
Taxpayer is an organization which qualifies for tax exemption under I.R.C. § 501(c)(4). In 2010, Taxpayer filed Indiana corporate income tax returns for 1999 to 2008. Taxpayer was assessed a penalty for late filing for each year, which Taxpayer protested.
I. Tax Administration–Penalty.
Taxpayer protests the imposition of a $250 per year penalty for failure to file a tax return in a timely manner. The return showed no liability; however, the return was filed after the due date for the return.
IC § 6-8.1-10-2.1(g) provides:
A person who fails to file a return for a listed tax that shows no tax liability for a taxable year, other than an information return (as defined in section 6 of this chapter), on or before the due date of the return shall pay a penalty of ten dollars ($10) for each day that the return is past due, up to a maximum of two hundred fifty dollars ($250).
Penalty waiver is permitted if the taxpayer shows that the failure to file a tax return in a timely manner was due to reasonable cause and not due to willful neglect. IC § 6-8.1-10-2.1(d). The Indiana Administrative Code, 45 IAC 15-11-2
(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.
Taxpayer states that it is a nonprofit and that it had no unrelated business income that would have required it to file a Form IT-20NP. Even though Taxpayer had no requirement to file a return, it filed IT-20 returns for several years. Because the returns on which the Department based its penalty were not "due," the penalty for late filing of such returns should not have been imposed. Taxpayer has provided sufficient information to conclude that the penalties assessed against it should be waived.
Taxpayer's protest is sustained.
Posted: 11/30/2011 by Legislative Services Agency
Composed: Dec 20,2014 11:42:32AM EST
version of this document.