N.H. Admin. Code § Rev 2607.01

Current through Register No. 2, January 9, 2025

Section Rev 2607.01 - 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 taxpayer meets one of the following exceptions:

(1) The taxpayer adequately disclosed the relevant facts as stated in (b) below regarding the tax treatment of the item generating the understatement; or

(2) The taxpayer 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 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:

a. Those facts affecting the tax treatment of the item that reasonably will apprise the department of the nature of the potential controversy; or

b. A concise description of the legal issues presented by the facts in question.

(c) A taxpayer shall have substantial authority, as stated in (d) below, 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 department's positions.

(d) In determining whether a taxpayer has substantial authority, the department shall consider the following as being authoritative sources for items applying specifically to the application of the electricity consumption tax:

(1) Electricity consumption tax law and any other New Hampshire statutes that have a bearing on the tax statutes;

(2) Rules issued by the department;

(3) Declaratory rulings requested by and issued to the taxpayer;

(4) Technical information releases issued by the department to explain to the public changes in the tax caused by laws or rules;

(5) Superior court or board of tax and land appeals decisions or both;

(6) Federal District Court or First Circuit Court of Appeals decisions or both;

(7) United States Supreme Court or New Hampshire Supreme Court decisions or both;

(8) Legislative committee reports specifying legislative intent; and

(9) Written advice from the department issued to the taxpayer about the tax treatment of the item in question.

(e) 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 taxpayer had substantial authority or had adequately disclosed the position taken on the return.

N.H. Admin. Code § Rev 2607.01

#7479, eff 4-24-01; ss by #9443, eff 4-1-09

Amended by Volume XXXVII Number 15, Filed April 13, 2017, Proposed by #12138, Effective 3/22/2017, Expires 3/22/2027.