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