Opinion ID: 2786941
Heading Depth: 3
Heading Rank: 1

Heading: The OTCs’ arguments regarding penalties

Text: The OTCs argue that the failure to file penalty should not be imposed where the taxpayer proves its inaction was “due - 29 - FOR PUBLICATION IN WEST’S HAWAIʻI REPORTS AND PACIFIC REPORTER to reasonable cause and not due to neglect.” The OTCs argue Hawaiʻi case law does not limit reasonable cause to reliance on advice of a competent accountant or attorney. Further, the OTCs cite to federal case law for the proposition that “where the law is unsettled or ambiguous, such that it does not give notice of the requirement to file a return, the circumstances of the case speak for themselves and there is reasonable cause for failure to file as a matter of law.” The OTCs represent that because they “voluntarily approached the Department to discuss potential liability,” and because the former Director and Attorney General advised them that the Department had concluded the OTCs likely were not liable for GET, they had reasonable cause to not file GET returns. In regard to the failure to pay penalty, the OTCs argue that the failure to pay penalty requires an affirmative determination by the Director that the failure to pay was due to negligence or intentional disregard of rules. The OTCs contend that there is no evidence that the Director made such a determination. With no support in the record, the OTCs contend that the failure to pay penalty is “baseless.”