N.H. Admin. Code § Rev 709.01

Current through Register No. 50, December 12, 2024

Section Rev 709.01 - 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 operator meets one of the following exceptions:

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

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

(b) An operator shall adequately disclose the tax treatment of an item on the return by filing, on or before the due date of the return, a written statement with:

New Hampshire Department of Revenue Administration

Audit Division

PO Box 457

Concord, NH 03302-0457

(c) The statement shall include:

(1) The operator's meals and rentals license number;

(2) The tax period affected;

(3) 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;

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

(5) The dollar amount of the item; and

(6) A statement containing 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.

(d) In determining whether an operator has substantial authority, the department shall consider the following as being authoritative sources:

(1) For items applying specifically to the application of the meals and rentals tax:

a. Meals and rentals tax law and any other New Hampshire statutes that have a bearing on the tax statutes;

b. Department rules in effect during that tax period;

c. Declaratory rulings requested by and issued to the operator during that tax period for that item;

d. Technical information releases issued by the department;

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 operator about the tax treatment of the item in question; and

(2) For items in arriving at gross receipts before any state required adjustments:

a. Internal Revenue Code and other statutory provisions;

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

c. Federal or state court cases;

d. 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's or other U.S. government 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 a bill's managers prior to enactment;

g. Controlling precedent of the United States Court of Appeals to which the operator has a right of appeal;

h. Technical advice memoranda, rulings or determination letters issued by the Internal Revenue Service to the operator or in which the operator is named;

i. An affirmative statement in an Internal Revenue Service revenue agent's report with respect to the operator's prior taxable periods; and

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

(e) An operator shall have substantial authority for the tax treatment of an item only if the weight of the authorities supporting the treatment of the item by the operator is substantially in relation to the weight of the authorities supporting the position of the department.

(f) 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 any professional or tax periodicals.

(g) 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.

(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 operator had substantial authority or had adequately disclosed the position taken in the written statement provided for in (b).

N.H. Admin. Code § Rev 709.01

#7505, eff 6-19-01; ss by #8653, eff 6-8-06

Amended byVolume XXXIV Number 46, Filed November 13, 2014, Proposed by #10714, Effective 11/7/2014.