94-2140

Income Tax

Signed 4/11/95

BEFORE THE UTAH STATE TAX COMMISSION

____________________________________

XXXXX, )

:

Petitioners, : ORDER

:

v. : Appeal No. 94-2140

:

COLLECTION DIVISION OF THE : Account No. XXXXX

UTAH STATE TAX COMMISSION, :

:

Respondent. : Tax Type: Income Tax

_____________________________________

STATEMENT OF CASE

This matter came before the Utah State Tax Commission for a Settlement Conference pursuant to the provisions of Utah Code Ann. §59-1-502.5, on XXXXX. Jane Phan, Administrative Law Judge, heard the matter for and on behalf of the Commission. Present and representing Petitioner were XXXXX and XXXXX, CPA. Present and representing Respondent was XXXXX.

Penalties of $$$$$ and interest of approximately $$$$$ were assessed against Petitioners relating to income tax for the XXXXX filing period. Petitioners had requested waiver of the penalties and interest from the Collection Division Waiver Unit which was denied. The underlying amount of income tax owed for XXXXX was $$$$$.

At the conference Petitioners' representative XXXXX, stated that he was a Certified Public Accountant and had prepared Petitioners' income tax return for the year in question. XXXXX stated that completing the Petitioners' XXXXX tax return by XXXXX was impossible because of the complicated issue of determining the amount of the foreign tax credit. XXXXX stated that he spoke to XXXXX of the Tax Commission who told him the State of Utah would allow a credit based on the foreign tax credit determined by the IRS. XXXXX requested an extension for the Petitioners to determine the amount of foreign tax credit. XXXXX stated that Petitioners were not trying to circumvent the tax laws and that they were trying hard to fully comply.

At the conference Respondent stated that the penalties assessed were for Petitioners' late filing and late payment because the extension requested by Petitioners was invalid. Respondent stated the extension was invalid because Petitioners did not make the required prepayment.

Petitioners replied that on XXXXX they had no idea how much the tax liability would be for XXXXX. Respondent explained that was why the law allowed either an estimate that equalled at least XXXXX of the current year or XXXXX of the prior year's liability. Petitioners' prior year's liability had been about $$$$$. Respondent stated that had Petitioners paid the prior years liability with the extension request no penalties would have been assessed against Petitioners. Neither XXXXX nor Petitioners had understood these requirements and XXXXX indicated that there could have been an error on his part. Petitioners had relied on XXXXX.

XXXXX stated that, in a recent proceeding, not part of this appeal, the Auditing Division is questioning the foreign tax credit claimed. XXXXX stated that had he been told that the State of Utah did not allow a credit for foreign tax paid when he originally spoke with XXXXX he could have filed Petitioners' income tax with the State of Utah on time. Respondent stated that Petitioners may have been given incorrect information concerning the allowance of a foreign tax credit and recommended waiver of the penalties.

The Commission may waive penalties upon a showing by Petitioners of reasonable cause. One of the established reasonable cause guidelines is reliance on a competent tax advisor. In considering Petitioners' request for waiver or reduction of the interest the Tax Commission applies more stringent reasonable cause standards because Petitioners continued to enjoy the benefit of the use funds and the State of Utah was denied the benefit of the use of the funds from the time the underlying taxes were due until they were actually paid by Petitioners.

DECISION AND ORDER

Based upon the information presented at the conference, and the records of the Tax Commission, the Commission finds sufficient cause has been shown to waive the penalties of $$$$$ assessed relating to income tax for XXXXX. Sufficient cause has not been shown to waive the interest.

This decision does not limit a party's right to a formal hearing. However, this Decision and Order will become the Final Decision and Order of the Commission unless any party to this case files a written request within thirty (30) days of the date of this decision to proceed to a Formal Hearing. Such a request shall be mailed to the address listed below and must include the Petitioner's name, address, and appeal number:

Utah State Tax Commission

Appeals Division

210 North 1950 West

Salt Lake City, Utah 84134

Failure to request a Formal Hearing will preclude any further administrative action or appeal rights in this matter.

DATED this 11 day of April, 1995.

BY ORDER OF THE UTAH STATE TAX COMMISSION.

W. Val Oveson Roger O. Tew

Chairman Commissioner

Joe B. Pacheco Alice Shearer

Commissioner Commissioner

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