96-2179

Income Tax

Signed 9/9/97

BEFORE THE UTAH STATE TAX COMMISSION

____________________________________

PETITIONER, :

:

Petitioners, : ORDER

:

v. : Appeal No. 96-2179

:

COLLECTION DIVISION OF THE : Account No. #####

UTAH STATE TAX COMMISSION, :

:

Respondent. : Tax Type: Income Tax

_____________________________________

STATEMENT OF CASE

This matter came before the Utah State Tax Commission pursuant to the Administrative Procedures Act and the rules of the Utah State Tax Commission for informal adjudicative proceeding. A hearing was held on June 30, 1997. Jane Phan, Administrative Law Judge, heard the matter for and on behalf of the Commission. Present and representing Petitioner was PETITIONER. Present and representing Respondent was Michelle Bush, Assistant Attorney General.

Based upon the evidence in the file and presented at the hearing, the Commission makes its:

FINDINGS

On July 29, 1996, Respondent assessed against Petitioner income tax, penalties and interest for the years 1988 through 1993. The total tax assessment for these years was $$$$$. At the time of the assessment interest was $$$$$. However, interest continues to accrue on the unpaid balance. Penalties of $$$$$ were also assessed.

Petitioner explained that at the age of 48 or 49 he had to take a full disability retirement from XXXXX. Petitioner testified that he had been told by the XXXXX personnel who arranged the retirement plan for him, that the disability retirement payments were not taxable for the purposes of state income tax. He relied on this information and did not file Utah income tax returns for the years 1988 through 1993. Petitioner also explained that payment of the assessment would cause financial hardship. He is seriously ill and unable to work. In addition he has medical expenses to pay.

The representative for Respondent explained that the disability retirement income is taxable to the State of Utah regardless of the advice given to Petitioner by his former employer. Utah residents are taxed based on their federal taxable income. Petitioner's disability retirement income is part of his federal taxable income. The representative for Respondent explained that there are exemptions for certain types of disability retirement income, like workers compensation and retirement disability payments to veterans and government employees. However, the income Petitioner received did not fit into any of the exempt categories.

APPLICABLE LAW

State taxable income is defined as federally taxable income with some modifications, subtractions and adjustments. (Utah Code Ann. §59-10-112.)

For the purposes of determining state taxable income, federal taxable income means taxable income as defined in Section 63, of the Internal Revenue Code. (Utah Code Ann. §59-10-111.)

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

The circumstances as described by Petitioner are unfortunate. However, Petitioners' disability retirement income is not exempt from Utah income tax under the current laws of the State of Utah. Based upon the information presented at the hearing the Commission hereby sustain the assessment of tax and interest against Petitioners for the years 1988 through 1993. However, the fact that Petitioners received erroneous information from a former employer, who was also acting as tax advisor, in conjunction with Petitioner's illness, provide sufficient reasonable cause for waiver of the penalties assessed. It is so ordered.

The Commission encourages Petitioners to contact the Collection Division to see if they qualify for the Offers and Compromise Program which is separate from this appeal process and is a process were financial hardship is considered.

_____________________________

Jane Phan

Administrative Law Judge

The agency has reviewed this case and the undersigned concur in this decision.

DATED this 9 day of SEPTEMBER, 1997.

BY ORDER OF THE UTAH STATE TAX COMMISSION.

W. Val Oveson Richard B. McKeown

Chairman Commissioner

Joe B. Pacheco Pam Hendrickson

Commissioner Commissioner

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