BEFORE THE UTAH STATE TAX COMMISSION
XXXXX ) AMENDED
Petitioner, : FINDINGS OF FACT,
: CONCLUSIONS OF LAW,
v. : AND FINAL DECISION
COLLECTION DIVISION OF THE : Appeal No. 91-0912
UTAH STATE TAX COMMISSION, :
Respondent. : Account No. XXXXX
: Tax Type: Penalty & Interest
STATEMENT OF CASE
This matter came before the Utah State Tax Commission for a formal hearing on XXXXX. XXXXX Administrative Law Judge, heard the matter for and on behalf of the Commission. Present and representing the Petitioner was XXXXX. Present and representing the Respondent was XXXXX.
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 Corporate Franchise tax.
2. The period in question is XXXXX.
3. The tax return was filed in XXXXX. According to the testimony of the Petitioner, the person responsible for filing the returns erroneously thought that he could not file the Utah return without payment. According to Petitioner, the return was timely prepared for the XXXXX extension deadline period. The federal return, with no tax due, was timely filed.
4. In XXXXX the penalty was reduced from $$$$$ to $$$$$.
The Tax Commission is granted the authority to waive, reduce, or compromise penalties and interest upon a showing of reasonable cause. (Utah Code Ann. §59-1-401(8).)
Petitioner is basing its claim for further reduction of penalty on financial hardship. Petitioner had suffered substantial losses for many years. According to Petitioner, at the end of XXXXX the net operating loss carried forward for Utah was almost $$$$$. Petitioner's only business was XXXXX. During XXXXX, XXXXX took back the remaining unsold lots as payment on its mortgage. Petitioner did not receive cash from this transaction. Petitioner felt there would be enough net operating loss carried forward to offset the forgiveness of debt income. This proved to be true for the federal income tax liability, but because Utah only allows a five year carry forward, it was not true for the Utah tax. Petitioner further represented that the company had some utility deposits refunded in December of XXXXX. These refunds were used to pay the Tax Commission in full in XXXXX. This was the first cash with which to pay the tax on what the Petitioner identified as phantom income of XXXXX. Petitioner indicated that other creditors did not receive payment before the Tax Commission received its payment.
Recognizing that financial hardship is not grounds for waiver of penalty, Respondent indicated to Petitioner at the hearing that an offer in compromise would be most appropriate. XXXXX indicated at the hearing that she would pursue the possibility of an offer in compromise on this matter.
DECISION AND ORDER
Based upon the foregoing and a thorough review of the entire evidence of record, the Tax Commission finds that the record does not establish reasonable cause to justify further reduction of the penalty associated with the corporate franchise tax for the XXXXX tax year. It is so ordered.
DATED this 6 day of October, 1994.
BY ORDER OF THE UTAH STATE TAX COMMISSION.
W. Val Oveson Roger O. Tew
Joe B. Pacheco Alice Shearer