98-1061
____________________________________
PETITIONER, :
: ORDER
Petitioner, :
: Appeal No.
98-1061
v. :
: Account
No. #####
AUDITING
DIVISION OF THE :
UTAH STATE TAX COMMISSION, : Tax
Type: Income
Tax
:
Respondent. : Presiding: Phan
_____________________________________
Presiding:
Jane Phan,
Administrative Law Judge
Appearances:
For
Petitioner:
For
Respondent: Gale
Francis, Assistant Attorney General
Brent Taylor, Manager Income Tax Auditing
STATEMENT OF THE CASE
This
matter came before the Commission for a Initial Hearing on March 30, 1999. Petitioner is appealing the interest
assessed for the late payment of income taxes for the years 1994 and 1995. Petitioner had originally appealed the
underlying assessment of income tax but had "capitulated" to the
amount of the tax prior to the hearing.
When
Petitioner filed his 1994 and 1995 federal returns they were adjusted by the
Internal Revenue Service ("IRS") at the time they were
processed. These adjustments made by
the IRS caused discrepancies between Petitioners state return and Petitioner's
adjusted federal taxable income. Utah
law required that Petitioner file amended returns with the State of Utah, but
Petitioner did not do so. The IRS
provides electronic tapes to the State Tax Commission and when the discrepancy
was eventually discovered, Petitioner's returns were audited and the Statutory
Notices of Audit Change were issued in December 1998.
Petitioner
asked that the interest be waived based on equity. During the audit period Tax laws in Utah and California required
that Petitioner pay income taxes to both states. However, Utah law did not allow Petitioner to have full credit
for the taxes paid to California. The
result was double taxation on a portion of Petitioner's income and Petitioner
calculated the amount of double taxation to be $$$$$.
Interest
is generally waived only in the event an error on the part of a Tax Commission
employee caused the late payment or filing.
Interest is assessed to compensate the state for the time value of
money. The State of Utah was denied the
use of the funds from the time the taxes were originally due, until they were
actually paid by Petitioner. Interest
is not waived to offset taxes which are required by statute. In the situation at hand, Respondent did
make the assessment against Petitioner within a reasonable period of time. It takes time to receive the electric tape
match from the IRS, and a significant period to process that information and
match up the federal information with the state tax returns on file. Petitioner should have filed amended Utah
returns as is required by Utah law.
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.)
If
a change is made in a taxpayer's net income on his or her federal income tax
return, either because the taxpayer has filed an amended return or because of
an action by the federal government, the taxpayer must notify the Utah Tax
Commission within 90 days after the final determination of such change. The taxpayer shall file a copy of the
amended federal return and an amended state return which conforms to the
changes on the federal return. (Utah
Code Ann. §59-10-536 (5)(a).)
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
Based
upon the foregoing, the Commission finds that sufficient cause has not been
shown to justify a waiver or reduction of the interest assessed for the late
payment of Petitioner's 1994 and 1995 income tax. It is so ordered.
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 appeal rights in this
matter.
DATED
this 4TH day of May, 1999.
____________________________________
Jane Phan
Administrative Law
Judge
BY ORDER OF THE UTAH STATE TAX COMMISSION:
The Commission has reviewed this case and the
undersigned concur in this decision.
DATED
this 4th day of May, 1999.
Richard B.
McKeown Pam
Hendrickson
Chairman Commissioner
R. Bruce
Johnson
Commissioner
^^