N.H. Code Admin. R. Rev 310.01

Current through Register No. 25, June 20, 2024

Section Rev 310.01 - Substantial Understatement of Tax

(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 organization meets one of the following exceptions:

(1) The business organization adequately disclosed the relevant facts regarding the tax treatment of the item generating the understatement; or

(2) The business organization had substantial authority for its tax treatment of such item.

(b) A business organization 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 all of the following criteria are met:

(1) The statement contains a prominent caption identifying the statement as a disclosure of the tax treatment for the substantial understatement penalty provided in RSA 21-J:33-a;

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

(3) The dollar amount of the item is disclosed; and

(4) The statement contains those facts affecting the tax treatment of the item that reasonably will apprise the department of the nature of the potential controversy or a concise description of the legal issues presented by the facts in question.

(c) A business organization 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) Substantial authority, shall be considered as the following authoritative sources:

(1) For items applying specifically to the application of the business profits tax:

a.Any New Hampshire statutes that have a bearing on the tax statutes;

b.New Hampshire department of revenue administration rules;

c.Declaratory rulings issued by the department to the business organization;

d.Department technical information releases;

e.Superior court and board of tax and land appeals decisions;

f.Federal District Court and First Circuit Court of Appeals decisions;

g.United States and New Hampshire supreme court decisions;

h.Legislative committee reports specifying legislative intent; and

i.Written advice from the department issued to the business organization about the tax treatment of the item in question; and

(2) For items arriving at federal taxable income before any state required adjustments:

a.IRC and other statutory provisions;

b.Temporary and final U.S. Department of the Treasury regulations;

c.Federal or state court cases;

d.United States Internal Revenue Service or U.S. Department of the Treasury administrative pronouncements including revenue rulings and revenue procedures;

e.Tax treaties and related regulations, as well as the U.S. Department of the Treasury or other official explanation of such treaties;

f.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;

g.Controlling precedent of the United States court of appeals to which the business organization has a right of appeal;

h.Technical advice memoranda, ruling or determination letters issued to the business organization or in which the business organization is named;

i.An affirmative statement in a U.S. Internal Revenue Service agent's report with respect to the business organization's prior taxable periods; and

j.Any other source which was accepted by the United States Internal Revenue Service as substantial authority.

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

(1) Opinions reached by tax professionals;

(2) Tax publication opinions or narrative statements; and

(3) Articles contained in professional or tax periodicals.

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

(g) 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 organization had substantial authority or had adequately disclosed the position taken on the return.

N.H. Code Admin. R. Rev 310.01

#5355, eff 3-16-92, EXPIRED: 3-16-98

New. #6853, eff 9-23-98; ss by #8709, eff 8-25-06

Amended byVolume XXXV Number 06, Filed February 12, 2015 , Proposed by #10758, Effective 1/16/2015, Expires1/16/2025.