Current through Register Vol. 63, No. 9, September 1, 2024
(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.
Stat. Auth.: ORS
305.100
Stats. Implemented: ORS
314.402
