Michael P. Maguire v. Commissioner of Revenue (October 12, 2007)

COMMONWEALTH OF MASSACHUSETTS

APPELLATE TAX BOARD


MICHAEL P. MAGUIRE 		  v.		COMMISSIONER OF REVENUE

Docket No. C282446				Promulgated:
							October 12,  2007
    

	This is an appeal filed under the formal procedure pursuant to G.L. c. 58A, § 7 and G.L. c. 62C, § 39 from the refusal of the appellee to abate penalties assessed against the appellant pursuant to G.L. c. 62C, § 33(a) and (b) for late-filed income tax returns, late payment of income tax, and the statutory addition for underpayment of estimated taxes assessed against the appellant pursuant to G.L. c. 62B, § 14(a), for tax years 1998, 1999, 2000, 2001, and 2002 ("tax years at issue").
	Commissioner Scharaffa heard the appeal.  He was joined in the decision for the appellee by Chairman Hammond and Commissioners Egan and Rose.
These findings of fact and report are promulgated pursuant to a request by the appellant under G.L. c. 58A, § 13 and 831 CMR 1.32.

	Michael P. Maguire, pro se, for the appellant.

	John J. Connors, Jr., Esq. and Celine Jackson, Esq., for the appellee.
FINDINGS OF FACT AND REPORT

On the basis of a Statement of Agreed Facts and exhibits and testimony offered at the hearing of this appeal, the Board made the following findings of fact.
At all times relevant to this appeal, the appellant, Michael Maguire ("appellant"), was a resident of the Commonwealth.  The appellant was a full-time student and was employed by the Cohasset Golf Club, which had a place of business located in Cohasset, Massachusetts.  The Cohasset Golf Club withheld taxes from the appellant's pay during tax years 1998 and 2002, but not during tax years 1999, 2000, and 2001.  The appellant did not file a timely Massachusetts Resident Income Tax Return ("tax return") for any of the tax years at issue.
At some time subsequent to the due dates of the tax returns for the tax years at issue, the appellant became aware that he "possibly had a tax situation."  On February 28, 2003, the appellant filed a Request for Extended Amnesty ("Amnesty request") with the Commissioner of Revenue ("Commissioner") for the tax years at issue.  However, the appellant did not file any tax returns or make any payments with his Amnesty request.  By letter dated December 3, 2003, the Commissioner requested that the appellant file tax returns for tax years 1997 through 1999 and tax year 2001, and make payments of all tax due, in order to complete his Amnesty request.  The December 3, 2003 letter stated that the appellant would have 15 days from the date of the letter to comply with the Commissioner's request, after which time the Amnesty request would be denied.  The appellant did not comply by filing the tax returns and making any payments pursuant to the Commissioner's request within the 15-day period.  By letter dated January 6, 2004, the Commissioner denied the appellant's Amnesty request. 
Information pertinent to the specific tax years at issue is detailed below.

Tax year 1998
The appellant filed his 1998 tax return with the Commissioner on July 23, 2004, reporting a tax due of $903.00.  The appellant made no payments with this filing.  On August 10, 2004, the Commissioner sent the appellant a Notice of Assessment ("NOA"), notifying the appellant that he was being assessed 1998 income taxes in the amount of $903.00, plus interest and penalties, for a total amount due of $1,964.39.  By letter dated August 11, 2004, the Commissioner informed the appellant that he had intercepted an overpayment of $171.01 from the appellant's 2003 income taxes and had applied this money to the appellant's 1998 tax liability.  Subsequently, by letter dated March 27, 2005, the Commissioner informed the appellant that he had intercepted an overpayment of $176.37 from the appellant's 2004 income taxes and had applied this money to the appellant's tax year 1998 tax liability.

Tax year 1999
The appellant filed his 1999 tax return with the Commissioner on February 28, 2005, reporting a tax due of $956.00.  The appellant made no payments with this filing.

Tax year 2000
By Notice of Failure to File Return dated March 15, 2003, the Commissioner notified the appellant of his failure to file a 2000 tax return.  The appellant filed his 2000 tax return with the Commissioner on March 24, 2003, reporting a tax due of $1,126.73.  The appellant made no payments with this filing.  By Notice of Change dated April 30, 2003, the Commissioner informed the appellant of changes made to the 2000 tax return, which decreased the amount of tax due to $894.00.  By notice dated May 1, 2003, the Commissioner gave notice to the appellant that he had failed to make sufficient estimated or withholding tax payments and that the amount of his underpayment of estimated tax penalty was $47.57.  By NOA dated May 1, 2003, the Commissioner notified the appellant that he had been assessed 2000 income taxes in the amount of $894.00, plus interest and penalties, for a total amount due of $1,444.73.  

Tax year 2001.
By Failure to File Notice, dated April 3, 2004, and then by NOA dated June 3, 2004, the Commissioner notified the appellant that he had been assessed 2001 income taxes in the amount of $1,323.31, plus interest and penalties, for a total amount due of $2,014.13.  On July 8, 2004, the appellant filed his 2001 tax return with the Commissioner, reporting a tax due of $1,401.00.  The appellant made no payments with this filing.  By Notice of Change dated July 30, 2004, the Commissioner informed the appellant of changes made to his 2001 return, which reduced the amount of tax to $1,155.00.  On August 17, 2004, the Commissioner sent the appellant an NOA notifying the appellant that he had been assessed 2001 income taxes in the amount of $1,155.00, plus interest and penalties, for a total amount due of $1,872.44.  

Tax year 2002.
On July 8, 2004, the appellant filed his 2002 tax return with the Commissioner, reporting a tax due of $1,003.00 and withholdings of $673.00.  The appellant made no payments with this filing.  By Notice of Change to Your 2002 Income Tax Return, dated July 30, 2004, the Commissioner informed the appellant of changes made to his return which reduced the amount of tax due to $828.00.

The following findings are pertinent to all tax years at issue:  
On April 19, 2005, the Commissioner received the appellant's Application for Abatement of penalties.  The Commissioner issued a Notice of Abatement Determination on June 21, 2005.  On August 16, 2005, the appellant seasonably filed his Petition with the Board.  On the basis of these facts, the Board found and ruled that it had jurisdiction over this appeal.
It was not until February 28, 2005, two years after the close of the extended Amnesty period, that the appellant had finished filing his required tax returns, and he still had not made any required payments as of the time that he filed his Petition to the Board.  Therefore, the Board found that the appellant did not comply with the statutory requirements of the Amnesty program administered by the Commissioner between the dates of January 1, 2003 to February 28, 2003.  The Board also found that the appellant had not met his burden of proving reasonable cause for the abatement of the penalties at issue.  Therefore, the appellant was not entitled to Amnesty or other relief for the unpaid penalties which had accrued because of his failure to timely file tax returns and failure to timely pay income taxes.  Accordingly, the Board issued a decision for the appellee in this appeal.  

OPINION
The appellant did not timely fulfill his obligation to file the tax returns at issue with the Commissioner.  G.L. c. 62C, § 6 (requiring all individual residents who receive during the tax year "Massachusetts gross income" in excess of eight thousand dollars to file a return with the Commissioner "on or before the fifteenth day of the fourth month following the close of each taxable year").  The Commissioner, therefore, assessed penalties against the appellant pursuant to G.L. c. 62C, § 33(a) and (b), which provide that:
If any return is not filed with the commissioner on or before its due date or within any extension of time granted by him, there shall be added to and become a part of the tax, as an additional tax, a penalty of one per cent of the amount required to be shown as the tax on such return for each month or fraction thereof during which such failure continues, not exceeding, in the aggregate, twenty-five per cent of said amount.
If any amount of tax is not paid to the commissioner on or before the date prescribed for payment of such tax, determined with regard to any extension of time for payment, there shall be added to the amount shown as tax on such return a penalty of one-half of one per cent of the amount of such tax for each month or fraction thereof during which such failure continues, not exceeding, in the aggregate, twenty-five per cent of said amount.

(emphasis added).  As indicated from the language emphasized above, penalties for late filing of a return and late payment of tax are imposed by operation of law.  See Fogarty v. Commissioner of Revenue, Mass. ATB Findings of Fact and Report, 1987-219, 222.  The Commissioner also imposed statutory additions for the underpayment of estimated taxes pursuant to G.L. c. 62B, § 14(a), which provides that:
Except as otherwise provided in this section, in the case of any underpayment of estimated tax, there shall be added to the tax due under chapter sixty-two for the taxable year an amount determined at the rate but without daily compounding and on a per annum basis established under section thirty-two of chapter 62C upon the amount of the underpayment for the period of underpayment.

"To encourage the voluntary disclosure and payment of delinquent tax obligations to the Commonwealth," the Legislature enacted Section 182 of Chapter 184 of the Acts of 2002, which provided for a temporary two-month Amnesty program, running from October 1, 2002 to December 2, 2002.  Technical Information Release ("TIR") 02-14.  Under this program, if an eligible taxpayer "file[d] all required returns for all taxable years beginning before January 1, 2001 and pa[id] the full amount of tax and interest due for all such taxable years and properly and timely file[d] a Request for Amnesty" during the designated two-month Amnesty period, the Commissioner was authorized to waive all unpaid penalties for failure to timely file a return, failure to timely pay a tax liability, and statutory additions to tax for failure to pay required estimated tax payments.  TIR 02-14 (citing St. 2002, c. 184, sec. 182).  By Section 11 of Chapter 429 of the Acts of 2002, the Legislature extended the Amnesty program from January 1, 2003 to February 28, 2003.  See TIR 02-25.
As detailed in the Findings, the appellant timely filed an Amnesty request with the Commissioner for tax years 1997, 1998, 1999, 2000, and 2001.  However, the appellant did not file any tax returns or make any payments with his Amnesty request, nor pursuant to the Commissioner's letter dated December 3, 2003.  Therefore, the appellant did not comply with the requirements of the extended Amnesty program provided in Section 11 of Chapter 429 of the Acts of 2002.  See TIR 02-25.  Accordingly, the Commissioner properly denied Amnesty to the appellant for the penalties and statutory additions which had accrued on tax liabilities for the tax years at issue. 
Aside from the Amnesty program, the Commissioner has discretion to waive or abate late file and late pay penalties pursuant to G.L. c. 62C, 33(f), for "reasonable cause" for the late file and late payment.  The appellant bears the burden of establishing reasonable cause.  Blakeley v. Commissioner of Revenue, 28 Mass. App. Ct. 499, 501, rev. denied, 407 Mass. 1103 (1990).  The courts and this Board have found that "reasonable cause" is an objective standard, whereby "[a]t a minimum, the taxpayer must show that he exercised the degree of care that an ordinary taxpayer in his position would have exercised."  Commissioner of Revenue v. Wells Yachts South, Inc., 406 Mass. 661, 665 (1990).  Various forms of hardships, including financial hardships, do not constitute reasonable cause to relieve a taxpayer of late-file or late-pay penalties.  See, e.g., Sign of the Surf, Inc. v. Commissioner of Revenue, 47 Mass. App. Ct. 830, 831 rev. denied, 430 Mass. 1111 (1999) (neither "personal financial problems" nor "[c]ommercial necessity" can alone constitute reasonable cause for purposes of § 33(f)).  In the instant appeal, the appellant offered no explanation for his failure to timely file returns and failure to timely pay taxes.  Therefore, the Board found that the appellant had not shown reasonable cause for the late filing of his tax returns and the late payment of the taxes at issue.  Accordingly, the appellant did not meet his burden of proving his entitlement to an abatement of penalties.   
The Commissioner also has the authority to abate the statutory additions to tax for a taxpayer's underpayment of estimated tax pursuant to G.L. c. 62B, § 14(e), if the Commissioner determines "that by reason of casualty, disaster, or other unusual circumstances the imposition of such addition to tax would be against equity and good conscience," or if the appellant had retired after reaching age sixty-two or becoming disabled.  The appellant offered no evidence of casualty, disaster, or other circumstances listed in § 14(e).  Accordingly, the appellant failed to prove that he was entitled to an abatement of the statutory addition for his underpayment of estimated taxes.
The appellant has the burden of proving reasonable cause under G.L. c. 62C, § 33(f) to justify abatement of the penalties and his entitlement to an abatement, including his qualification for relief under an Amnesty program.  See, e.g. Koch v. Commissioner of Revenue, 416 Mass. 540, 555-56 (1993); Syms Corp. v. Commissioner of Revenue, 436 Mass. 505, 515 (2002).  On the basis of the record in this appeal, the Board found and ruled that the appellant was not entitled to an abatement of penalties pursuant to the Amnesty program under Section 11 of Chapter 429 of the Acts of 2002, G.L. c. 62C, § 33(f) or G.L. c. 62B, § 14(e).  Accordingly, the Board issued a decision for the appellee in this appeal.


					APPELLATE TAX BOARD

				  By:			   _____       	
				 Thomas W. Hammond, Jr., Chairman 

A true copy,
Attest:			__________		
        Clerk of the Board

 At the hearing, the appellant explained that he could not complete and file the tax returns for the tax years at issue because he had misplaced his Forms W-2, which listed his income and withholdings for the relevant years.  
  Apparently, the Commissioner changed the name of the notice from the previous Notice of Failure to File Return.
  In addition to his abatement application, the appellant also filed with the Commissioner an Offer in Settlement on or about April 21, 2005.  By letter dated April 29, 2005, the Commissioner requested additional information.  It is unclear from the record whether the appellant provided that additional information.  By letter dated June 27, 2005, the Commissioner rejected the appellant's Offer in Settlement "due to the fact that the Department has not been able to establish the standard that there is serious doubt as to the collectibility of these taxes."  The Commissioner also rejected the appellant's request for additional review of his Offer in Settlement and notified the appellant of this determination by letter dated September 29, 2005.  The September 29, 2005 letter also stated the reason for rejecting the Offer in Settlement was "that there is not 'serious doubt as to the collectibility of the tax due', as required by G.L. c. 62C, § 37A."
  The June 21, 2005 Notice of Abatement Determination begins by informing the appellant that his application "has been denied.  The reason your application has been denied is stated on page 2, which is part of this notice."  Page 2 of the notice, contrary to the determination on page 1, states that the appellant's "request for abatement of penalties has been approved" for the tax years at issue.  After receiving this ambiguous notice, and the Commissioner's June 27, 2005 rejection of the appellant's Offer in Settlement, the appellant filed his appeal with the Board on August 16, 2005.  Subsequently, by Notice of Abatement Determination dated November 22, 2005, the Commissioner informed the appellant that his abatement request for penalties for the tax years at issue had been denied.  Because the appellant filed his appeal within sixty days of the June 21, 2005 determination notice and prior to the November 22, 2005 notice, the Board has jurisdiction over this appeal, regardless of the validity of the June 21, 2005 notice.  See Daimler Chrysler Corporation v. Commissioner of Revenue, Mass. ATB Findings of Fact and Report 2007-270 (ruling that an ambiguous and confusing notice did not constitute a valid "refusal to abate" a tax triggering the sixty-day appeal period and that a petition filed prior to the denial of an application for abatement properly invoked the Board's jurisdiction). See also Becton, Dickinson and Company v. State Tax Commission, 374 Mass. 230, 234 (1978). 
  "Massachusetts gross income" is defined in G.L. c. 62, § 2.
   For individual taxpayers who are on a calendar year tax schedule, this date is usually April 15th.
 The appellant's only testimony concerning his failure to file returns and pay tax related to his failure to respond to the Commissioner's request for returns and tax payments in connection with his Amnesty request; the appellant testified that he could not locate his W-2 forms and he did not have funds available to pay the tax due.

ATB 2007-1184