96-0777

Income Tax

Signed 9/25/96

BEFORE THE UTAH STATE TAX COMMISSION

____________________________________

XXXXX, )

Petitioners, : ORDER

v. : Appeal No. 96-0777

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 an Initial Hearing pursuant to the provisions of Utah Code Ann. §59-1-502.5, on MMDDYY. Jane Phan, Administrative Law Judge, heard the matter for and on behalf of the Commission. Present and representing Petitioner was XXXXX. Present and representing Respondent were XXXXX and XXXXX.

Petitioner is appealing the assessment of penalties totaling $$$$$ along with interest of approximately $$$$$ for 19YY, penalties totaling $$$$$ along with interest of approximately $$$$$ for 19YY, and penalties of $$$$$ along with interest of approximately $$$$$ for 19YY. For 19YY, both a %%%%% late payment and a %%%%% late filing penalty had been assessed based on the law in affect at that time. For 19YY and 19YY, the returns had been filed timely and it was only the payment that was late. The penalties assessed for both these years were the %%%%% late payment penalty.

Petitioner explained that he had been unable to pay the Utah individual income tax for the years in question at the time the tax was due because the Internal Revenue Service had tied up all his finances for payment of federal tax. Petitioner did not have the funds to pay the Utah income tax. In 19YY and 19YY, Petitioner did file the returns timely but could not pay the liability. Petitioner has been making payments towards the delinquency. Petitioner asserts that the penalties are too high and that interest should not be charged.

Respondent's representative explained that financial hardship is not accepted as reasonable cause for waiver of penalties or interest. She explained that the penalties were assessed according to the law in affect at that time. For later years the legislature has reduced the penalties to a %%%%% late payment and a %%%%% late filing penalty. Interest is waived only in the event an error on the part of the Tax Commission or Tax Commission employee caused the late payment or late filing.

APPLICABLE 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(10).)

DECISION AND ORDER

Penalties for late payment and late filing of returns are not discretionary. They are established by the Utah Legislature. For the years at issue in this appeal the Legislature had set penalty rates higher than the rates currently in affect. Financial hardship or financial inability to pay the tax at the time it is due is not reasonable cause for the purpose of waiving penalties. However, sufficient circumstances were presented to reduce the penalties to the penalty rates currently in affect in Utah Code Ann. §59-1-104.

Based upon the information presented at the hearing, and the records of the Tax Commission, the Commission finds sufficient cause been shown to reduce the penalties relating to Petitioner's income tax for 19YY to a %%%%% late payment penalty and a %%%%% late filing penalty, for 19YY to a %%%%% late payment penalty and for 19YY to a late payment penalty of %%%%% or $$$$$ whichever is greater. Sufficient cause was not shown for waiver or reduction of 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 25th of September, 1996.

BY ORDER OF THE UTAH STATE TAX COMMISSION.

W. Val Oveson Richard B. McKeown

Chairman Commissioner

Joe B. Pacheco Alice Shearer

Commissioner Commissioner