N.H. Admin. Code § Rev 1611.01 - Substantial Understatement of Tax

(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 retailer or customer meets the exceptions provided in RSA 21-J:33-a, IV(a) and (b).

(b) The exception as provided in RSA 21-J:33-a, IV(b) shall occur when a retailer or customer has adequately disclosed the tax treatment of an item on the return or in a statement attached to the front of the return and 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 penalty for understatement of tax on return where the understatement exceeds the greater of 10% of the correct tax liability or $5,000;

(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) In determining whether a retailer or customer has substantial authority, as stated in RSA 21-J:33-a, IV(a), the department shall consider the following as being authoritative sources, which shall be considered in the following order of review, based on the relevance of the source, the similarity of the facts, and the precedential value of the source compared to the matters at issue:

(1) United States and New Hampshire supreme court decisions;

(2) Communications services tax law and any other New Hampshire statutes that have a bearing on the tax statutes;

(3) Rules issued by the department;

(4) Declaratory rulings requested by and issued to the retailer or customer;

(5) Technical information releases issued by the department;

(6) Superior court and board of tax and land appeals decisions;

(7) Federal District Court and First Circuit Court of Appeals decisions;

(8) Legislative committee reports specifying legislative intent; and

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

(d) In addition to (c) above, a retailer or customer shall have substantial authority for the tax treatment of an item only if the authoritative sources supporting the retailer or customer's position outweighs the authoritative sources supporting the department's position on the tax treatment of the same item.

(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 period to which the return relates.

(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 retailer or customer had substantial authority or had adequately disclosed the position taken on the return.

Notes

N.H. Admin. Code § Rev 1611.01

#6336, eff 9-24-96; ss by #8178, eff 9-24-04; ss by #10213, eff 10-24-12

Amended by Number 10, Filed March 9, 2023, Proposed by #13553, Effective 2/7/2023, Expires 2/7/2033 (see Revision Note at chapter heading for Rev 1600).