Or. Admin. R. 150-314-0207

Current through Register Vol. 63, No. 6, June 1, 2024

Section 150-314-0207 - Waiver of 20 Percent Substantial Understatement of Net Tax Penalty Imposed under ORS 314.402

(1) The department will waive the penalty if the taxpayer shows that there was reasonable cause for the understatement and that the taxpayer acted in good faith.

(2) The department will not waive the penalty if the taxpayer was involved in an abusive transaction as defined in ORS 314.402(4) for the tax year at issue.

(3) Reasonable cause and good faith. A taxpayer's reasonable cause and good faith for a substantial understatement of net tax is demonstrated by the extent of the taxpayer's efforts to determine the taxpayer's correct tax liability under the law.

(a) The following circumstances demonstrate reasonable cause and good faith:

(A) The taxpayer relied on a position contained in a proposed federal regulation or state rule.

(B) The taxpayer honestly misunderstood the facts or law affecting the understatement, and the misunderstanding was reasonable in light of the taxpayer's experience, knowledge and education.

(C) The taxpayer or taxpayer's return preparer made a computational or transcriptional error in preparing the return.

(b) Generally, reliance on an information return, incorrect facts or advice of a professional does not demonstrate reasonable cause and good faith, unless under all the circumstances the taxpayer's reliance was reasonable. The following examples demonstrate reasonable cause and good faith:

Example 1: The taxpayer relied on erroneous information that was inadvertently included in the financial records of the taxpayer's business by others, if procedures existed that were designed to identify factual errors.

Example 2: The taxpayer relied on erroneous information reported on a Form 1099 provided by another person, if the taxpayer did not know or have reason to know that the information was incorrect.

(c) A taxpayer is considered to know or have reason to know that information is incorrect only if such information is inconsistent with other information reported to the taxpayer or is inconsistent with the taxpayer's knowledge of the underlying facts.

Or. Admin. R. 150-314-0207

REV 6-2007, f. 7-30-07, cert. ef. 7-31-07; Runumbered from 150-314.402(6) by REV 9-2015, f. 12-23-15, cert. ef. 1-1-16; Renumbered from 150-314.402-(C), REV 31-2016, f. 8-12-16, cert. ef. 9/1/2016

Stat. Auth.: ORS 305.100

Stats. Implemented: ORS 314.402