Current through Register No. 13, March 27, 2025
(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.
#5355, eff 3-16-92, EXPIRED: 3-16-98
New. #6853, eff 9-23-98; ss by
#8709, eff 8-25-06