Louisiana Administrative Code › Title 61 - REVENUE AND TAXATION › Part III - Administrative and Miscellaneous Provisions › Chapter 21 - Interest and Penalties › Section III-2121 - Reasonable Cause and Good Faith Exception to Presumption in R.S. 47:1604.1(A)(1)

Current through Register Vol. 50, No. 6, June 20, 2024
A. Definitions. For
				purposes of this Section, the following terms shall have the meaning ascribed
				herein.
Advice
-any communication, including the
				  opinion of a professional tax advisor, setting forth the analysis or conclusion
				  of a person, other than the taxpayer, provided to (or for the benefit of) the
				  taxpayer and on which the taxpayer relies, directly or indirectly, with respect
				  to the imposition of the
				  R.S.
				  47:1604.1 negligence penalty. Advice does not
				  have to be in any particular form.
Professional Tax Advisor
-a person or entity
				  whose job duty, function or service focuses on or involves providing tax and
				  tax related advice or products, which may include the preparation of or
				  providing the use of or access to tax returns, forms or documents
Professional Tax Preparer
-a person or entity
				  whose job duty, function or service focuses on or involves the preparation of
				  or providing the use of or access to tax returns, forms or documents, which may
				  include providing tax and tax related advice or products.
B. The penalty for negligent failure to
				comply authorized in
				R.S.
				47:1604.1(A)(1) is presumed
				to apply when a taxpayer understates his tax liability by ten percent or more,
				but did not demonstrate a willful disregard of the tax laws.
C. The presumed penalty shall not apply when
				the understatement was due to reasonable cause where the taxpayer acted in good
				faith.
D. A determination of
				reasonable cause and good faith will be made on a case-by-case basis,
				considering all relevant facts and circumstances.
1. Generally, the most important factor in
				determining reasonable cause and good faith is the extent of the taxpayer's
				effort to assess the proper tax liability.
2. Circumstances that may indicate the extent
				of the taxpayer's effort to assess the proper tax liability, include but are
				not limited to:
a. an honest misunderstanding
				of fact or law that is reasonable in light of all of the facts and
				circumstances, including the experience, knowledge, and education of the
				taxpayer;
b. an isolated
				computational or transcriptional error;
c. Reliance on an information return, advice,
				or other facts, if under all the circumstances such reliance was reasonable and
				the taxpayer acted in good faith.
3. Reliance on an information return,
				including the return of a pass-through entity, or on the advice of a
				professional tax advisor or tax preparer does not automatically demonstrate
				reasonable cause and good faith.
a. All facts
				and circumstances shall be considered when determining whether a taxpayer has
				reasonably relied in good faith on an information return or the advice of a
				professional tax advisor or tax preparer. Facts to be considered include, but
				are not limited to, the taxpayer's education, sophistication and business
				experience.
b. A determination of
				whether a taxpayer acted with reasonable cause and in good faith with respect
				to an underpayment that is related to an item reflected on the return of a
				pass-through entity will take into account the taxpayer's own actions, as well
				as the actions of the passthrough entity.
c. Generally, a taxpayer knows, or has reason
				to know, that the information on an information return is incorrect if such
				information is inconsistent with other information reported or otherwise
				furnished to the taxpayer, or with the taxpayer's knowledge of the transaction.
				This knowledge includes, for example, the taxpayer's knowledge of the terms of
				his employment relationship or of the rate of return on a payor's
				obligation.
d. Reliance shall not
				be considered reasonable or in good faith if the taxpayer knew, or reasonably
				should have known, that the advice was rendered by a non-tax professional or
				non-tax preparer, or a professional tax advisor or tax preparer who lacked
				knowledge in the relevant aspects of federal or Louisiana tax law.
e. The advice relied on by the taxpayer shall
				be based upon all relevant facts and circumstances and the law as it relates to
				those facts and circumstances. Reliance shall not be considered reasonable or
				in good faith if the taxpayer fails to disclose a fact that he knows, or
				reasonably should know, to be relevant to the proper tax treatment of an
				item.
f. The advice relied on by
				the taxpayer shall not be based on unreasonable factual or legal assumptions
				and shall not unreasonably rely on the un-true or inaccurate assumptions
				representations, statements, findings, or agreements of the taxpayer or any
				other person. For example, the advice shall not be based upon a representation
				or assumption which the taxpayer knows, or has reason to know, is unlikely to
				be true, such as an inaccurate representation or assumption as to the
				taxpayer's purposes for entering into a transaction or for structuring a
				transaction in a particular manner.
g. A taxpayer may not rely on an opinion or
				advice that a regulation is invalid to establish that the taxpayer acted with
				reasonable cause and good faith unless the taxpayer discloses the position that
				the regulation in question is invalid in a statement attached to and filed with
				the taxpayer's return containing the understatement.
h. A taxpayer may not rely on an opinion or
				advice that is contrary to existing, applicable case law.
i. For purposes of this Paragraph, advice is
				any communication, including the opinion of a professional tax advisor, setting
				forth the analysis or conclusion of a person, other than the taxpayer, provided
				to (or for the benefit of) the taxpayer and on which the taxpayer relies,
				directly or indirectly, with respect to the imposition of the
				R.S.
				47:1604.1 negligence penalty. Advice does not
				have to be in any particular form.