91-0717 - Income

 

BEFORE THE UTAH STATE TAX COMMISSION

_______________________________

XXXXX : FINDINGS OF FACT,

Petitioner : CONCLUSIONS OF LAW,

: AND FINAL DECISION

v. :

: Appeal No. 91-0717

OPERATIONS DIVISION OF THE : Account No. XXXXX

UTAH STATE TAX COMMISSION :

: Tax Type: Ind. Income

Respondent :

______________________

STATEMENT OF CASE

This matter came before the Utah State Tax Commission for a formal hearing on XXXXX. Alan Hennebold, Presiding Officer, heard the matter for and on behalf of the Commission. Petitioner XXXXX appeared on his own behalf. XXXXX, Assistant Utah Attorney General, appeared for Respondent.

Based upon the evidence and testimony presented at the hearing, the Tax Commission hereby makes its:

FINDINGS OF FACT

1. The tax in question is individual income tax.

2. The periods in question are XXXXX and XXXXX.

3. Petitioner is a federal retiree and a member of the plaintiff class in the class action lawsuit of XXXXX. In XXXXX, the District Court ruled that Utah improperly taxed federal retirement income for the years XXXXX through XXXXX, and that the improperly collected taxes must be refunded. The District Court's ruling is now pending on appeal before the Utah Supreme Court. The District Court's judgment has been stayed pending the Supreme Court's decision.

4. On XXXXX, Petitioner filed a joint XXXXX Utah income tax return with his wife, establishing a tax liability of $$$$$ for that year. Petitioner claimed a credit of $$$$$ for Utah income tax he had paid in XXXXX on his federal retirement benefits.

5. Petitioner's XXXXX income tax return was reviewed for mathematical errors by Respondent's staff. Following that review, Respondent issued a refund of $$$$$ to Petitioner, representing the difference between his XXXXX tax liability and the XXXXX tax amount claimed as a credit.

6. On XXXXX, Petitioner and his wife filed a joint XXXXX Utah income tax return, establishing their tax liability of $$$$$. Petitioner again claimed a credit for Utah income tax previously paid on his federal retirement benefits, this time in the amount of $$$$$ for XXXXX. Petitioner's XXXXX return included a refund request of $$$$$.

7. On approximately XXXXX, Respondent notified Petitioner that it had reviewed his XXXXX tax return and had reduced the amount of retirement deduction and had disallowed any credit claimed for taxes paid in XXXXX.

8. Upon receipt of Respondent's notice, Petitioner telephoned Respondent and explained that he had filed his XXXXX return in the same manner as his XXXXX return, and that he had received credit and a refund for XXXXX. Petitioner inquired why he was not entitled to the same treatment for his XXXXX return.

9. As a result of the foregoing telephone conversation, Respondent reviewed Petitioner's XXXXX and XXXXX returns, and his claims for credits arising from taxes paid in XXXXX and XXXXX. Respondent disallowed credit for taxes paid in XXXXX and XXXXX and imposed a 10% late payment penalty for both years.

10. Upon notice of Respondent's actions, Petitioner immediately paid the amount of tax due and requested waiver of interest and penalty. Pursuant to Petitioner's request, the Commission has waived all penalties assessed in this matter.

CONCLUSIONS OF LAW

In cases where there has been an overpayment of any tax imposed by Utah's Individual Income Tax Act, the amount of the overpayment is first credited to any other income tax liability of the taxpayer. (Utah Code Ann. 59-10-129(1).)

The Tax Commission is granted the authority to waive reduce, or compromise penalties and interest upon a showing of reasonable cause. (Utah Code Ann. 59-1-401(8).)

DECISION AND ORDER

Petitioner's appeal presents two issues: First is Petitioner entitled to a credit against XXXXX and XXXXX income tax liability for taxes he paid in XXXXX and XXXXX. Second, if no credit is appropriate, should the Commission abate interest assessed for late payment of Petitioner's XXXXX and XXXXX taxes.

Regarding Petitioner's claim to credit for taxes paid for XXXXX and XXXXX, Petitioner's entitlement to such credit depends upon the result of the XXXXX case, now under consideration by the Utah Supreme Court. While the Commission recognizes that plaintiffs in XXXXX have prevailed at the trial court level, the trial court's decision has been stayed and will not be executed until and unless approved by the Utah Supreme Court. Under these circumstances, Petitioner's right to claim a credit for taxes paid in XXXXX and XXXXX is contingent, and his attempt to claim such credit against his XXXXX and XXXXX tax liability is improper, or at least premature. The Commission therefore affirms Respondent's disallowance of such credits.

Petitioner has also requested waiver of interest arising from disallowance of the credits discussed above. As a general rule, the Commission views interest as a reasonable charge for use of tax funds during the period such funds should have been paid to the Commission. However, in this case Petitioner disclosed on his XXXXX and XXXXX returns that he was claiming a credit for taxes paid in earlier years. His XXXXX return was accepted without question. After his error was discovered in connection with his XXXXX filing, Petitioner promptly paid the amount of tax due. These mitigating circumstances constitute reasonable cause for waiver of interest.

Based upon the foregoing, the Tax Commission affirms Respondent's denial of credits claimed by Petitioner against his Utah income tax liability for XXXXX and XXXXX. However, the Commission finds reasonable cause exists to waive interest assessed with respect to Petitioner's XXXXX and XXXXX income tax liability. It is so ordered.

DATED this 28th day of October, 1992.

BY ORDER OF THE UTAH STATE TAX COMMISSION.

R. H. Hansen Roger O. Tew

Chairman Commissioner

Joe B. Pacheco S. Blaine Willes

Commissioner Commissioner