92-2143 - Corporate Franchise

BEFORE THE UTAH STATE TAX COMMISSION

__________________________________

In Re: )

:

XXXXX, ) FINDINGS OF FACT,

: CONCLUSIONS OF LAW,

) AND FINAL DECISION

:

) Appeal No. 92-2143

: Account No. XXXXX

_____________________________________

STATEMENT OF CASE

This matter came before the Utah State Tax Commission for a formal hearing on XXXXX. Lisa L. Olpin, Presiding Officer, heard the matter for and on behalf of the Commission. Present and representing the Petitioner was XXXXX, a certified public accountant.

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 the year XXXXX.

3. At the advice of its out-of-house, certified public accountant, Petitioner did not file and pay estimated taxes on a quarterly basis during the XXXXX tax year. Instead, Petitioner filed and paid its corporate franchise taxes on XXXXX in the amount of $$$$$.

4. Due to the fact-that Petitioner's tax liability for XXXXX was over $$$$$, the Tax Commission penalized Petitioner ten percent and later added another $$$$$ for nonpayment. Interest in the amount of $$$$$ was included.

5. Petitioner's certified public accountant, XXXXX, testified that XXXXX had only paid $$$$$ in corporate franchise taxes the prior year in XXXXX. Since XXXXX's did not expect to exceed that amount in tax liability for XXXXX, Petitioner did not file estimated quarterly returns.

6. Petitioner's XXXXX tax liability far surpassed the XXXXX figure due to an unusually successful Christmas season. Petitioner had not expected to do so well.

7. Mr. XXXXX testified that he has had other clients whom the Tax Commission has penalized for failing to foresee a tax liability of $$$$$ or more in any given year. He stated that the Commission has waived the penalty and interest amounts in similar situations. At this time, however, Mr. XXXXX is advising his clients to always prepay at least the previous year's tax liability to avoid the Commission's waiver process.

8. Mr. XXXXX also explained that he felt he must be interpreting the word "expecting" differently than the Commission does because he runs into problems with these prepayments frequently.

9. Given the circumstances of this case, Petitioner is requesting a waiver of the penalty and interest amounts.

CONCLUSIONS OF LAW

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).) Relevant Utah law states the following:

(1) Every corporation subject to taxation under this chapter expecting to have a tax liability of $$$$$ or more in the current year, or which had a tax liability of $$$$$ or more in the previous tax year, shall make payments of estimated tax in the same manner as is provided for corporations in the Internal Revenue Code of 1954, or successor statutes.

(2) If a quarterly estimated tax payment is not made or is underpaid, except as provided in Subsection (3), there shall be added a penalty as provided in Section 59-1-401 and interest as provided in Section 59-1-402.

(3) The penalty or interest may be waived under Subsection (2), if:

(a) the total estimated tax payments for the tax year equal or exceed the tax liability of the previous tax year; (b) the total estimated tax payments for the tax year are equal to 90% of the current year tax liability; or (c) the total estimated tax payments equal 90% of the tax liability computed on the current year's income using the previous year's tax law. (Utah Code Ann. 59-7-122.5).

DECISION AND ORDER

Based upon the foregoing, the Tax Commission finds that sufficient cause has not been shown which would justify a waiver of penalty and interest assessments associated with the corporate franchise tax due on the year XXXXX. Pursuant to the Statute cited above, Petitioner should have at least paid the amount of taxes it owed the previous year to avoid penalty and interest assessments. It is so ordered.

DATED this 26th day of November, 1993.

BY ORDER OF THE UTAH STATE TAX COMMISSION.

W. Val Oveson Roger O. Tew

Chairman Commissioner

Joe B. Pacheco Alice Shearer

Commissioner Commissioner