Opinion ID: 491560
Heading Depth: 2
Heading Rank: 4

Heading: Validity of Late Filing Penalties

Text: 59 The Commissioner imposed an additional penalty on the Church in the amount of $287,615 for failing to file a corporate tax return for the years in question. Internal Revenue Code Sec. 6651(a)(1) reads in pertinent part: 60 In case of failure ... to file any return ... on the date prescribed therefor ..., unless it is shown that such failure is due to reasonable cause and not due to willful neglect, there shall be added to the amount required to be shown as tax on such return 5 percent of the amount of such tax if the failure is for not more than 1 month, with an additional 5 percent for each additional month or fraction thereof during which such failure continues, not exceeding 25 percent in the aggregate.... (emphasis added) 61 The regulations provide that, to demonstrate reasonable cause a taxpayer must show that it exercised ordinary business care and prudence and was nevertheless unable to file the return within the prescribed time.... 26 C.F.R. Sec. 301.6651-1(c)(1). What elements constitute reasonable cause is a question of law which we review de novo. United States v. Boyle, 469 U.S. 241, 105 S.Ct. 687, 692 n. 8, 83 L.Ed.2d 622 (1985). 62 The Church argues that the IRS waived its right to impose the penalty because it accepted the Church's Form 990 and even extended the time for filing. This waiver, argues the Church, constitutes reasonable cause for failing to file corporate returns. The taxpayer carries the burden to show reasonable cause for failing to file the required return. Funk v. Commissioner, 687 F.2d 264, 266 (8th Cir.1982). The IRS expressly revoked the Church's tax exempt status in the July 18, 1967 letter which instructed the Church thereafter to file federal tax returns. We agree with the Tax Court that [the Church's] unilateral doubts about [the revocation letter's] effectiveness are not 'reasonable cause' for its failure to file a proper return. 83 T.C. at 526. 63 Secondly, the Church argues that its reliance on the advice of tax professionals that the Form 990 would be acceptable, constitutes reasonable cause. The Supreme Court recently held that a taxpayer's failure to file a timely return, in reliance upon an attorney's advice did not constitute reasonable cause under Sec. 6651(a)(1). Boyle, 105 S.Ct. at 693-94. Likewise, we hold that a taxpayer's failure to file the proper form, in reliance upon an attorney's advice is not reasonable cause where the IRS has expressly instructed the taxpayer to file a tax return.