N.H. Admin. Code § Rev 2410.01

Current through Register No. 50, December 12, 2024

Section Rev 2410.01 - Substantial Understatement of Tax Penalty

(a) The department shall assess the 25% penalty for understatement of tax provided by RSA 21-J:33-a on returns where the understatement exceeds the greater of 10% of the correct tax liability or $5,000 unless the business enterprise:

(1) Adequately disclosed the relevant facts regarding the tax treatment of the item generating the understatement; or

(2) Had substantial authority for its tax treatment of such item.

(b) A business enterprise shall have adequately disclosed the tax treatment of an item on the return or in a statement attached to the front of the return if:

(1) The statement contains:

a. A prominent caption identifying the statement as a disclosure of the tax treatment for the substantial underpayment penalty provided in RSA 21-J:33-a; and

b. Those facts affecting the tax treatment of the item will apprise the department of the potential controversy or a concise description of the legal issues presented by the facts in question;

(2) The item for which the disclosure is made is clearly identified; and

(3) The dollar amount of the item is disclosed.

(c) A business enterprise shall have substantial authority for the tax treatment of an item if the weight of the authorities supporting the treatment of the item is substantial in relation to the weight of the authorities supporting the position of the department.

(d) The department shall consider the following as authoritative sources of substantial authority for items specific to the application of the business enterprise tax:

(1) Any New Hampshire statutes having a bearing on the tax statutes;

(2) Department administrative rules;

(3) Declaratory rulings issued to the business enterprise;

(4) Department technical information releases;

(5) Superior court and board of tax and land appeals decisions;

(6) Federal District Court and First Circuit Court of Appeals decisions;

(7) United States and New Hampshire supreme court decisions;

(8) New Hampshire Legislative committee reports specifying legislative intent; and

(9) Written advice from the department issued to the business enterprise about the tax treatment of the item in question.

(e) The department shall consider the following as authoritative sources of substantial authority in arriving at the enterprise value tax base that are included in federal taxable income before any state required adjustments:

(1) Internal Revenue Code and other statutory provisions;

(2) Temporary and final United States Department of the Treasury regulations;

(3) Federal or state court cases;

(4) Internal Revenue Service or United States Department of the Treasury administrative pronouncements including revenue rulings and revenue procedures;

(5) Tax treaties and related regulations, as well as the United States Department of the Treasury's or other official explanation of such treaties;

(6) Congressional intent as reflected in Committee Reports, joint explanatory statements of managers included in the conference committee reports and floor statements made by the bill's managers prior to enactment;

(7) Controlling precedent of the United States Court of Appeals to which the business enterprise has a right of appeal;

(8) Technical advice memoranda, ruling or determination letter issued to the business enterprise or in which the business enterprise is named;

(9) An affirmative statement in a federal revenue agent's report with respect to the business enterprise's prior taxable periods; and

(10) Any source accepted by the Internal Revenue Service as substantial authority.

(f) The following shall not be considered authoritative sources:

(1) Opinions by tax professionals;

(2) Tax publication opinions or narrative statements; and

(3) Articles contained in professional or tax periodicals.

(g) The existence of substantial authority for a particular item shall be determined as of the date the tax return containing the item was filed or as of the last day of the taxable period to which the tax return relates, whichever is later.

(h) The penalty shall be applied to the net understatement determined by reducing the understatement, as defined in RSA 21-J:33-a, III, by the portion of the understatement for which the business enterprise had substantial authority or had adequately disclosed the position taken on the return.

N.H. Admin. Code § Rev 2410.01

INTERIM #5708, eff 9-23-93, EXPIRED: 1-21-94; ss by #5774, eff 1-21-94; ss by #7178, eff 12-23-99, EXPIRED: 12-23-07

New. #9065, eff 1-10-08

Amended by Volume XXXVI Number 06, Filed February 11, 2016, Proposed by #11032, Effective 1/29/2016, Expires 1/29/2026.