Proposed Penalty Guidelines  
Responding to complaints of uneven administration of penalties and in a further effort to accommodate the statutory mandate of “fair and consistent application of the tax laws,” F.S. s. 213.015(21), the Department of Revenue has been working for some time on standards for compromising penalties. Workshops have been held on draft Rule 12-13.0076, a proposal to employ a penalty matrix that assigns points for use by auditors, Technical Assistance & Dispute Resolution and other Department personnel in deciding how much, if any, penalty to forego. The Department interprets most of the tax statutes it administers as automatically attaching penalties to any proposed tax deficiency. The new system would be used to reduce penalties even if no taxpayer request were made. It is not applicable in cases of willful negligence or fraud.

Penalty points, negative or positive, are assigned on an “issue” by issue basis and the net score then indicates the penalty to be imposed with respect to that issue. For example, a point value of more than 30 but less than 45 points calls for a penalty equal to 10% of the tax associated with the issue in question. The greatest concern with the draft proposal is its overly broad definition of “issue” for this purpose as “a reason set forth in the Department’s work papers given to the taxpayer for any finding of a tax deficiency.” It gives exempt sales as an example of an “issue.” VMG has submitted comments indicating the difficulties with defining the term “issue” in that expansive fashion and suggesting a more focused definition that looks to the specific facts, statutes and rules supporting some identifiable deficiency. The draft proposal suffers other shortcomings as well, not the least of which is its bias in favor of high negative and low positive points, so that the imposition of penalties, or greater penalties, is clearly implied. The Department maintains that the proposal is intended to be revenue-neutral, i.e., that it is not intended to yield higher overall penalty collections than in periods prior to the adoption of the matrix. There are, however, no plans in place for assuring such neutrality and it is hard to see how the matrix, consistently applied, could be made to produce no more than a predetermined annual collection. The Department is in the process of deciding whether to schedule another workshop or proceed to a formal rulemaking hearing, the last Department step in the rule promulgation process.

Posted: 2006-09-01 00:00:00.0

Return To Current Developments