New Hampshire Code of Administrative Rules
Rev - Department of Revenue Administration
Chapter Rev 900 - INTEREST AND DIVIDENDS TAX
Part Rev 908 - PENALTIES
Section Rev 908.01 - Substantial Understatement of Tax

Universal Citation: NH Admin Rules Rev 908.01

Current through Register No. 12, March 21, 2024

(a) The department shall assess the 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 taxpayer

(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 taxpayer 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 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 underpayment penalty;

(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 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) In determining whether a taxpayer has substantial authority, the department shall consider the following as being authoritative sources:

(1) For items applying specifically to the interest and dividends tax:
a. Interest and dividends tax law and any other New Hampshire statutes that have a bearing on the tax statutes;

b. Rules adopted by the department;

c. Declaratory rulings requested by and issued to the taxpayer;

d. Technical information releases issued by the department;

e. Decisions of New Hampshire superior court and board of tax and land appeals;

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 taxpayer about the tax treatment of the item in question;

(2) For items that are considered corporate dividends, distributions in liquidation of corporation or returns of capital from corporations for federal income tax purposes:
a. Internal Revenue Code and other statutory provisions;

b. Temporary and final United States Treasury regulations;

c. Federal district, appeals or tax court cases;

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

e. Tax treaties and related regulations, as well as the United States 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 taxpayer has a right of appeal;

h. Technical advice memoranda, ruling or determination letter issued to the taxpayer or in which the taxpayer is named;

i. An affirmative statement in a revenue agent's report with respect to the taxpayer's prior taxable periods; and

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

(d) A taxpayer 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 taxpayer is substantial in relation to the weight of the authorities supporting the position of the department;

(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 any 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; and

(g) The penalty shall be applied to the net understatement determined by reducing the understatement by the portion of the understatement for which the taxpayer had substantial authority or had adequately disclosed the position taken on the return.

#6321, eff 8-22-96; ss by #8137, eff 8-10-04; ss by #10211, eff 10-24-12

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