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H.B. 136

             1     

REVENUE AND TAXATION CRIMINAL

             2     
OFFENSES AND PENALTIES

             3     
2001 GENERAL SESSION

             4     
STATE OF UTAH

             5     
Sponsor: Bryan D. Holladay

             6      This act modifies the Revenue and Taxation Code and the Utah Criminal Code to clarify
             7      revenue and taxation penalties and offenses. The act provides for the offense of intentionally
             8      attempting to evade or defeat a tax or the payment of a tax, modifies statute of limitations
             9      for prosecuting certain offenses, and makes technical changes. This act takes effect on July
             10      1, 2001.
             11      This act affects sections of Utah Code Annotated 1953 as follows:
             12      AMENDS:
             13          59-1-401 (Effective 07/01/01), as last amended by Chapter 253, Laws of Utah 2000
             14          76-8-1101, as enacted by Chapter 3, Laws of Utah 1987
             15      Be it enacted by the Legislature of the state of Utah:
             16          Section 1. Section 59-1-401 (Effective 07/01/01) is amended to read:
             17           59-1-401 (Effective 07/01/01). Offenses and penalties.
             18          (1) (a) The penalty for failure to file a tax return within the time prescribed by law
             19      including extensions is the greater of $20 or 10% of the unpaid tax due on the return.
             20          (b) Subsection (1) does not apply to amended returns.
             21          (2) The penalty for failure to pay tax due shall be the greater of $20 or 10% of the unpaid
             22      tax for:
             23          (a) failure to pay any tax, as reported on a timely filed return;
             24          (b) failure to pay any tax within 90 days of the due date of the return, if there was a late
             25      filed return subject to the penalty provided under Subsection (1)(a);
             26          (c) failure to pay any tax within 30 days of the date of mailing any notice of deficiency of
             27      tax unless a petition for redetermination or a request for agency action is filed within 30 days of


             28      the date of mailing the notice of deficiency;
             29          (d) failure to pay any tax within 30 days after the date the commission's order constituting
             30      final agency action resulting from a timely filed petition for redetermination or request for agency
             31      action is issued or is considered to have been [issued] denied under Subsection 63-46b-13 (3)(b);
             32      and
             33          (e) failure to pay any tax within 30 days after the date of a final judicial decision resulting
             34      from a timely filed petition for judicial review.
             35          (3) (a) Beginning January 1, 1995, in the case of any underpayment of estimated tax or
             36      quarterly installments required by Sections 59-5-107 , 59-5-207 , 59-7-504 , and 59-9-104 , there
             37      shall be added a penalty in an amount determined by applying the interest rate provided under
             38      Section 59-1-402 plus four percentage points to the amount of the underpayment for the period of
             39      the underpayment.
             40          (b) (i) For purposes of Subsection (3)(a), the amount of the underpayment shall be the
             41      excess of the required installment over the amount, if any, of the installment paid on or before the
             42      due date for the installment.
             43          (ii) The period of the underpayment shall run from the due date for the installment to
             44      whichever of the following dates is the earlier:
             45          (A) the original due date of the tax return, without extensions, for the taxable year; or
             46          (B) with respect to any portion of the underpayment, the date on which that portion is paid.
             47          (iii) For purposes of this Subsection (3), a payment of estimated tax shall be credited
             48      against unpaid required installments in the order in which the installments are required to be paid.
             49          (4) (a) In case of an extension of time to file an individual income tax or corporate
             50      franchise tax return, if the lesser of 90% of the total tax reported on the tax return or 100% of the
             51      prior year's tax is not paid by the due date of the return, not including extensions, a 2% per month
             52      penalty shall apply on the unpaid tax during the period of extension.
             53          (b) If a return is not filed within the extension time period as provided in Section 59-7-505
             54      or 59-10-516 , penalties as provided in Subsection (1) and Subsection (2)(b) shall be added in lieu
             55      of the penalty assessed under this Subsection (4) as if no extension of time for filing a return had
             56      been granted.
             57          (5) (a) Additional penalties for underpayments of tax are as provided in Subsections
             58      (5)(a)(i) through (iv).


             59          (i) Except as provided in Subsection (5)(c), if any underpayment of tax is due to
             60      negligence, the penalty is 10% of the underpayment.
             61          (ii) Except as provided in Subsection (5)(d), if any underpayment of tax is due to
             62      intentional disregard of law or rule, the penalty is 15% of the underpayment.
             63          (iii) For intent to evade the tax, the penalty is the greater of $500 per period or 50% of the
             64      tax due.
             65          (iv) If the underpayment is due to fraud with intent to evade the tax, the penalty is the
             66      greater of $500 per period or 100% of the underpayment.
             67          (b) If the commission determines that a person is liable for a penalty imposed under
             68      Subsection (5)(a)(ii), (iii), or (iv), the commission shall notify the taxpayer of the proposed penalty.
             69          (i) The notice of proposed penalty shall:
             70          (A) set forth the basis of the assessment; and
             71          (B) be mailed by registered mail, postage prepaid, to the person's last-known address.
             72          (ii) Upon receipt of the notice of proposed penalty, the person against whom the penalty
             73      is proposed may:
             74          (A) pay the amount of the proposed penalty at the place and time stated in the notice; or
             75          (B) proceed in accordance with the review procedures of Subsection (5)(b)(iii).
             76          (iii) Any person against whom a penalty has been proposed in accordance with this
             77      Subsection (5) may contest the proposed penalty by filing a petition for an adjudicative proceeding
             78      with the commission.
             79          (iv) If the commission determines that a person is liable for a penalty under this Subsection
             80      (5), the commission shall assess the penalty and give notice and demand for payment. The notice
             81      and demand for payment shall be mailed by registered mail, postage prepaid, to the person's
             82      last-known address.
             83          (c) Notwithstanding Subsection (5)(a)(i), a vendor that collects a tax under Subsection
             84      59-12-107 (1)(b) is not subject to the penalty under Subsection (5)(a)(i) if on or after July 1, 2001:
             85          (i) a court of competent jurisdiction issues a final unappealable judgment or order
             86      determining that:
             87          (A) the vendor meets one or more of the criteria described in Subsection 59-12-107 (1)(a);
             88      and
             89          (B) the commission or a county, city, or town may require the vendor to collect a tax under


             90      Subsection 59-12-103 (2)(a) or (b); or
             91          (ii) the commission issues a final unappealable administrative order determining that:
             92          (A) the vendor meets one or more of the criteria described in Subsection 59-12-107 (1)(a);
             93      and
             94          (B) the commission or a county, city, or town may require the vendor to collect a tax under
             95      Subsection 59-12-103 (2)(a) or (b).
             96          (d) Notwithstanding Subsection (5)(a)(ii), a vendor that collects a tax under Subsection
             97      59-12-107 (1)(b) is not subject to the penalty under Subsection (5)(a)(ii) if:
             98          (i) (A) a court of competent jurisdiction issues a final unappealable judgment or order
             99      determining that:
             100          (I) the vendor meets one or more of the criteria described in Subsection 59-12-107 (1)(a);
             101      and
             102          (II) the commission or a county, city, or town may require the vendor to collect a tax under
             103      Subsection 59-12-103 (2)(a) or (b); or
             104          (B) the commission issues a final unappealable administrative order determining that:
             105          (I) the vendor meets one or more of the criteria described in Subsection 59-12-107 (1)(a);
             106      and
             107          (II) the commission or a county, city, or town may require the vendor to collect a tax under
             108      Subsection 59-12-103 (2)(a) or (b); and
             109          (ii) the vendor's intentional disregard of law or rule is warranted by existing law or by a
             110      nonfrivolous argument for the extension, modification, or reversal of existing law or the
             111      establishment of new law.
             112          (6) The penalty for failure to file an information return or a complete supporting schedule
             113      is $50 for each return or schedule up to a maximum of $1,000.
             114          (7) If any taxpayer, in furtherance of a frivolous position, has a prima facie intent to delay
             115      or impede administration of the tax law and files a purported return that fails to contain
             116      information from which the correctness of reported tax liability can be determined or that clearly
             117      indicates that the tax liability shown must be substantially incorrect, the penalty is $500.
             118          (8) For monthly payment of sales and use taxes under Section 59-12-108 , in addition to
             119      any other penalties for late payment, a vendor may not retain a percentage of sales and use taxes
             120      collected as otherwise allowable under Section 59-12-108 .


             121          (9) (a) As provided in Section 76-8-1101 , [the following are] criminal offenses and
             122      penalties[:] are as provided in Subsections (9)(b) through (d).
             123          [(a)] (b) (i) Any person who is required by this title or any laws the commission
             124      administers or regulates to register with or obtain a license or permit from the commission, [or]
             125      who operates without having registered or secured a license or permit, or who operates when the
             126      registration, license, or permit is expired or not current, is guilty of a class B misdemeanor[, except
             127      that, notwithstanding].
             128          (ii) Notwithstanding Section 76-3-301 , for purposes of Subsection (9)(b)(i), the fine [is]
             129      may not:
             130          (A) be less than $500 [nor more than]; or
             131          (B) exceed $1,000.
             132          [(b)] (c) (i) Any person who, with intent to evade any tax or requirement of this title or any
             133      lawful requirement of the commission, fails to make, render, sign, or verify any return or to supply
             134      any information within the time required [under this title] by law, or who makes, renders, signs,
             135      or verifies any false or fraudulent return or statement, or who supplies any false or fraudulent
             136      information, is guilty of a third degree felony[, except that, notwithstanding].
             137          (ii) Notwithstanding Section 76-3-301 , for purposes of Subsection (9)(c)(i), the fine [is]
             138      may not:
             139          (A) be less than $1,000 [nor more than]; or
             140          (B) exceed $5,000.
             141          [(c)] (d) (i) Any person who intentionally or willfully attempts to evade or defeat any tax
             142      or the payment [thereof] of a tax is, in addition to other penalties provided by law, guilty of a
             143      second degree felony[, except that, notwithstanding].
             144          (ii) Notwithstanding Section 76-3-301 , for purposes of Subsection (9)(d)(i), the fine [is]
             145      may not:
             146          (A) be less than $1,500 [nor more than]; or
             147          (B) exceed $25,000.
             148          [(d)] (e) The statute of limitations for prosecution for a violation of this [section]
             149      Subsection (9) is the later of six years:
             150          (i) from the date the tax should have been remitted; or
             151          (ii) after the day on which the person commits the criminal offense.


             152          (10) Upon making a record of its actions, and upon reasonable cause shown, the
             153      commission may waive, reduce, or compromise any of the penalties or interest imposed under this
             154      part.
             155          Section 2. Section 76-8-1101 is amended to read:
             156           76-8-1101. Criminal offenses and penalties relating to revenue and taxation -- Statute
             157      of limitations.
             158          (1) (a) As provided in Section 59-1-401 [:], criminal offenses and penalties are as provided
             159      in Subsections (1)(b) through (d).
             160          [(a)] (b) (i) Any person who is required by Title 59 or any laws the State Tax Commission
             161      administers or regulates to register with or obtain a license or permit from the State Tax
             162      Commission, [or] who operates without having registered or secured a license or permit, or who
             163      operates when the registration, license, or permit is expired or not current, is guilty of a class B
             164      misdemeanor[, except that, notwithstanding].
             165          (ii) Notwithstanding Section 76-3-301 , for purposes of Subsection (1)(b)(i), the fine [is]
             166      may not:
             167          (A) be less than $500 [nor more than]; or
             168          (B) exceed $1,000.
             169          [(b)] (c) (i) Any person who, with intent to evade any tax or requirement of Title 59 or any
             170      lawful requirement of the State Tax Commission, fails to make, render, sign, or verify any return
             171      or to supply any information within the time required [under this title] by law, or who makes,
             172      renders, signs, or verifies any false or fraudulent return or statement, or who supplies any false or
             173      fraudulent information, is guilty of a third degree felony[, except that, notwithstanding].
             174          (ii) Notwithstanding Section 76-3-301 , for purposes of Subsection (1)(c)(i), the fine [is]
             175      may not:
             176          (A) be less than $1,000 [nor more than]; or
             177          (B) exceed $5,000.
             178          [(c)] (d) (i) Any person who intentionally or willfully attempts to evade or defeat any tax
             179      or the payment [thereof] of a tax is, in addition to other penalties provided by law, guilty of a
             180      second degree felony[, except that, notwithstanding].
             181          (ii) Notwithstanding Section 76-3-301 , for purposes of Subsection (1)(d)(i), the fine [is]
             182      may not:


             183          (A) be less than $1,500 [nor more than]; or
             184          (B) exceed $25,000.
             185          (2) The statute of limitations for prosecution for a violation of this section is the later of
             186      six years:
             187          (a) from the date the tax should have been remitted; or
             188          (b) after the day on which the person commits the criminal offense.
             189          Section 3. Effective date.
             190          This act takes effect on July 1, 2001.




Legislative Review Note
    as of 1-26-01 12:29 PM


A limited legal review of this legislation raises no obvious constitutional or statutory concerns.

Office of Legislative Research and General Counsel


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