The Department imposed a ten percent penalty on Taxpayer
because the Department found that Taxpayer, having requested an extension to
pay its taxes, failed to remit ninety percent of the full amount of corporate
income tax on or before the original due date for payment.
…
Thus the question before the Department is whether or not
Taxpayer paid at least ninety percent of its Indiana income tax that Taxpayer
reasonably expected to be due on the original due date by that due date.
In a letter dated August 6, 2012, presented to the
Department subsequent to the hearing, Taxpayer argues that the tax it paid on
its original 2009 return reflected at least 90 percent of the tax "it
reasonably expected to be due on the original due date of the return."
(Taxpayer's emphasis). Taxpayer further asks the Department to note that:
[T]his provision does not say that 90[percent] of the tax
ultimately due must be paid; the test is whether the taxpayer has paid
90[percent] of the tax that is reasonably expected to be due. As explained
[...], Taxpayer used the best information available in determining what would
reasonably be expected to be due for 2009, viz., the 2008 income.
In short, on or about April 15, 2010, Taxpayer reasonably
expected that its total tax for 2009 would be approximately its 2008 tax
liability as reported on its original 2008 return, which was $1.1 million.
Taking into account the $1.4 million overpayment credit from 2008 applied to
2009, Taxpayer believed that it had paid well in excess of its reasonably
expected liability for 2009 by the original due date of the return.
Accordingly, there should be no penalty.
On October 4, 2010, Taxpayer filed its 2009 return showing
the overpayment credit of $1,409,813 carried over from the 2008 return and
applied to its 2009 estimated payments account. The 2009 return, filed in
October 2010, showed a balance due of $1,327,765 which Taxpayer paid with its
return (along with interest totaling $26,628).
Taxpayer also points out that later, on May 31, 2011, it
amended both the 2008 and 2009 returns showing significant overpayments for
both years due to the application of net operating loss carrybacks. The
Department notes that the amended returns are not legally relevant to this
analysis, since the statutory consideration is of taxes as originally filed for
2008 and 2009. It should be noted that the 2009 tax due, as originally filed by
Taxpayer, represented more than double the amount of tax that had been due for
2008, as originally filed. This doubling of tax due from one year to the next
implicates income-generating activities during 2009 that could not have escaped
Taxpayer's notice as it applied its standard business practices in accounting
for its earnings.
A statement provided by Taxpayer in support of its protest
of the penalty explains that during 2008 and 2009, the period during which the
estimated and final payments were analyzed and made, Taxpayer was involved in a
major reorganization that involved acquisitions by its affiliated group.
Taxpayer indicates that the uncertain nature of the future business created a
challenging projection process which was compounded by departures in Taxpayer's
accounting and tax departments. Taxpayer argues that the "best
available" information at the time was based on its 2008 income. Taxpayer
states that as soon as the final taxable income was determined, and the return
was prepared and reviewed, additional payment was made with the late filing of
the 2009 return.
However, even considering Taxpayer's explanation, Taxpayer
has not made an "affirmative showing" that during the business
activities that transpired during 2009 it could not have been on notice that
its income tax obligations would increase for that year and that, therefore,
"ordinary business care and prudence" would have required it to
increase its estimated payments for 2009. The implication that Taxpayer was
unable to fully attend to its tax filing obligations because its tax and
accounting departments were in flux does not justify not exercising ordinary business
care and prudence in accounting for its tax obligations.
The Department finds that Taxpayer has not made an
affirmative showing of reasonable cause for underpaying its estimated 2009
taxes. IC § 6-8.1-10-2.1, IC § 6-8.1-6-1 and 45 IAC
15-11-2.
