in-20250430-IR-045250190NRA: DEPARTMENT OF STATE REVENUE

DEPARTMENT OF STATE REVENUE  LETTER OF FINDINGS: 02-20242808 Corporate Income Tax Penalty For the Year 2022 HOLDING The Department agreed with Multinational Conglomerate that it met its burden of establishing that it was entitled to an abatement of late and underpayment penalties but disagreed that the Department had the authority to abate interest charges. ISSUE

I. Corporate Income Tax – Late and Underpayment Penalties.

Authority: IC 6-3-4-4.1; IC 6-8.1-5-1; IC 6-8.1-10-1; IC 6-8.1-10-2.1; Dept. of State Revenue v. Caterpillar, Inc., 15 N.E.3d 579 (Ind. 2014); Indiana Dept. of State Revenue v. Rent-A-Center East, Inc., 963 N.E.2d 463 (Ind. 2012); Lafayette Square Amoco, Inc. v. Indiana Dept. of State Revenue, 867 N.E.2d 289, (Ind. Tax Ct. 2007); 45 IAC 15-11-2. Taxpayer argues that it is entitled to an abatement of penalties assessed on the grounds that, in filing its 2022 combined return, Taxpayer acted in good faith and as an ordinary and reasonable taxpayer. STATEMENT OF FACTS Taxpayer is a foreign based conglomerate conducting business in Indiana and filing Indiana corporate income tax returns. Taxpayer filed its 2022 Indiana return reporting its federal adjusted gross (“AGI”) and its total Indiana tax due. That return was due May 15, 2023. The Indiana Department of Revenue (“Department”) received the return November 15, 2023, and then processed that return. The Department found that the return was late and that Taxpayer had not timely paid the full amount of tax due. In a letter dated November 27, 2023, the Department issued a Notice of Proposed Assessment. The letter explained the reason the assessment was issued. Taxpayer disagreed with the assessment and submitted a protest to that effect. Taxpayer asked for a “[f]inal determination without a hearing.” This Letter of Findings results and is based on Taxpayer’s written explanation and on information available to the Department.

I. Corporate Income Tax – Late and Underpayment Penalties.

DISCUSSION The issue is whether Taxpayer has met its burden of establishing that the Department should exercise its statutory authority to abate the penalties. As with any assessment, it is Taxpayer’s responsibility to establish that the tax penalty is incorrect. As stated in IC 6-8.1-5-1(c), “The notice of proposed assessment is prima facie evidence that the department’s claim for the unpaid tax is valid . . . . The burden of proving that the proposed assessment is wrong rests with the person against whom the proposed assessment is made.” Indiana Dept. of State Revenue v. Rent-A-Center East, Inc. , 963 N.E.2d 463, 466 (Ind. 2012); Lafayette Square Amoco, Inc. v. Indiana Dept. of State Revenue , 867 N.E.2d 289, 292 (Ind. Tax Ct. 2007). Consequently, a taxpayer is required to provide documentation explaining and supporting his or her challenge that the Department’s position is wrong. In assessing the Department’s position, the relevant Indiana law, and Taxpayer’s argument, the Department bears in mind that “when [courts] examine a statute that an agency is ‘charged with enforcing . . . . [courts] defer to the agency’s reasonable interpretation of [the] statute even over an equally reasonable interpretation by another party.’” Dept. of State Revenue v. Caterpillar, Inc. , 15 N.E.3d 579, 583 (Ind. 2014). Thus, interpretations of Indiana tax law contained within this decision, as well as the Department’s assessment, are entitled to deference. The Department assessed penalties because Taxpayer “did not pay the full amount of tax due” and because the “payment [was] not received by the due date.” IC 6-3-4-4.1, in part, provides: In addition, the penalty as to any underpayment of tax on an estimated return shall only be assessed on the difference between the actual amount paid by the corporation on such estimated return and twenty-five percent (25[percent]) of the corporation’s final adjusted gross income tax liability for such taxable year. A payment required to be made in the manner prescribed in subsection (f), but not paid in such a prescribed manner, shall be subject to the penalty provided in IC 6-8.1-10-2.1(b)(5). IC 6-8.1-10-2.1(a) imposes on the Department the obligation to impose late penalties as follows: IC 6-8.1-10-2.1(d) obligates the Department to abate penalties when a taxpayer’s failure to timely file a return or pay the full amount of taxes was due to “reasonable cause.” Departmental regulation 45 IAC 15-11-2(c) provides that in order to establish “that the failure to file a return, pay the full amount of tax due, timely remit tax held in trust, or pay a deficiency was due to reasonable cause and not due to negligence.” Reasonable cause is established by the taxpayer demonstrating that “it exercised ordinary business care and prudence in carrying out or failing to carry out a duty giving rise to the penalty imposed under this section.” “Negligence is to “be determined on a case by case basis according to the facts and circumstances of each taxpayer.” Id . Taxpayer points out that it files a “combined with several entities and subgroups reporting . . .” and that its returns and tax payment are necessarily “based on the information provided from each subsidiary at the time estimated tax payments are due.” In preparing its combined return it relies on “records of flow-through entities that issue Schedule K-1’s reporting flow through items of income and expenses.” Taxpayer indicates that it has “processes and procedures in place allowing us to do our best to get the required estimated information timely in order to calculate our tax provisions and make estimated tax payments to federal and state tax authorities.” However, Taxpayer is faced with “late changes beyond our control” which “may or may not affect our estimated taxable income.” Taxpayer concludes that it made “every effort to ensure our processes are as diligent as possible,” that it acted with reasonable cause, that it “did not exercise any negligence” in fulfilling its Indiana tax obligations, and was “careful, thoughtful, and attentive to [its] tax duties.” The Department here recognizes the complexities in filing a combined Indiana return on behalf of a multinational conglomerate which itself consists of numerous reporting entities including those which may be part of a joint venture consisting of unrelated parties. The Department also considers Taxpayer’s past filing history and the degree to which it has, over numerous years, complied with its filing and payment obligations. Based on a “case by case” analysis and after reviewing “the facts and circumstances of [this] taxpayer,” the Department agrees that Taxpayer’s filing and reporting errors did not rise to the level of “willful neglect.” the Department concludes that Taxpayer has met its statutory burden of establishing that it acted with “reasonable care” and that the filing and payment error was not due to Taxpayer’s carelessness or willful neglect. Taxpayer also asked that the Department abate the interest charges. That is not possible because. Under IC 6-8.1-10-1(e), the Department is statutorily unable to abate or refund interest charges. FINDING Taxpayer’s protest is sustained because the Department agrees that there are sufficient grounds calling for the Department to abate both penalties. Interest charges cannot be waived because it is statutorily required. February 19, 2025 Replaces Finding Document at: New