CHAPTER 54 - UNIFORM METHOD OF COLLECTION AND ENFORCEMENT OF TAXES LEVIED AND ASSESSED BY SOUTH CAROLINA DEPARTMENT OF REVENUE
Title 12 - Taxation
CHAPTER 54.
UNIFORM METHOD OF COLLECTION AND ENFORCEMENT OF TAXES LEVIED AND ASSESSED BY SOUTH CAROLINA DEPARTMENT OF REVENUE
SECTION 12-54-10. Definitions.
The word "person" or "taxpayer", for the purpose of this chapter, unless otherwise required by the text, includes any individual, firm, partnership, limited liability company, association, corporation, receiver, trustee, fiduciary, or any other group or combination acting as a unit and the State or any agency or instrumentality, authority, or political subdivision thereof, including municipalities. "Department" means the South Carolina Department of Revenue.
SECTION 12-54-15. Tax and all increases, interest, and penalties on tax are personal debt from person liable to pay.
Every tax imposed by this title and all increases, interest, and penalties on the tax is from the time it is due and payable, a personal debt from the person liable to pay it to the State.
SECTION 12-54-17. Action by Attorney General to recover taxes, penalties, and interest.
Action may be brought at any time by the Attorney General, in the name of the State, to recover taxes, penalties, and interest due under this title.
SECTION 12-54-25. Interest due on late taxes; applicable interest rate.
(A) If any tax is not paid when due, interest is due on the unpaid portion from the time the tax was due until paid in its entirety. For administrative convenience, the department may waive up to thirty days' interest.
(B) For purposes of this section, a tax is due on the last day provided for its payment, without regard for any extension of time for payment and without regard for or to any assessment under Section 12-60-910. Stamp taxes and any other tax for which no payment date is provided are due on the day the liability arises.
(C)(1) Any tax refunded or credited must include interest on the amount of the credit or refund from the latest of the date the tax was paid, the original due date of the return, or the last day prescribed for paying the tax if no return is required, to either the date the refund was sent or delivered to the taxpayer or the date the credit was made.
(2) This interest must be paid by drawing upon funds from the type of tax being refunded or credited. The funds withdrawn may be expended by the department in the payment of interest on refunds.
(3) Interest on an overpayment is not allowed pursuant to this subsection if it is refunded:
(a) within seventy-five days after the last day prescribed for filing the tax return, without regard to an extension of time for filing, or within seventy-five days after the last day prescribed for paying the tax if no return is required;
(b) within seventy-five days after the return is filed, in the case of a return filed after the last date;
(c) within seventy-five days after the taxpayer files a claim for a credit or refund for the overpayment of tax for the period between the filing of the claim to the payment of the refund; or
(d) within seventy-five days after the county has received notice from the Department of Revenue that the taxpayer is due a credit or refund for the overpayment of property taxes.
(D) Except as preempted or superseded by federal law or inter-governmental compact such as the International Fuel Tax Agreement, the rate of interest on underpayments and overpayments is established by the department in the same manner and at the same time as the underpayment rate provided in Internal Revenue Code Sections 6621(a)(2) and 6622.
SECTION 12-54-42. Penalties for an employer for failure to furnish or file withholding statement; separate violation.
(a) A person who fails to comply with the provisions of Section 12-8-1540, requiring the furnishing of a withholding statement to employees is subject to a penalty of not less than one hundred dollars nor more than one thousand dollars for each violation.
(b) A person who fails to comply with the provisions of Section 12-8-1550, requiring the filing of withholding statements with the department is subject to a penalty of not less than one hundred dollars nor more than two thousand dollars for each violation.
(c) Failure to comply with Sections 12-8-1540 and 12-8-540(A)(1) with respect to each withholding statement required to be provided to the department or each employee is considered a separate violation.
SECTION 12-54-43. Civil penalties and damages applicable to every tax or revenue law requiring return or statement filing with department.
(A) Except as otherwise provided, the civil penalties imposed by this penalty section apply to every revenue or tax law of the State that provides for the filing with the department of a return or statement of the tax or the amount taxable.
(B) The penalties described in this section must be added to and become a part of and collected as the tax imposed by the revenue or tax laws of this State.
(C)(1) In the case of failure to file a return on or before the date prescribed by law, determined with regard to any extension of time for filing, there must be added to the amount required to be shown as tax on the return, a penalty of five percent of the amount of the tax if the failure is for not more than one month, with an additional five percent for each additional month or fraction of the month during which the failure continues, not exceeding twenty-five percent in the aggregate.
(2) For the purpose of this subsection, the amount of tax required to be shown on the return must be reduced by the amount of any part of the tax which is paid on or before the date prescribed for payment of the tax and by the amount of any credit against the tax which may be claimed upon the return.
(D) In case of failure to pay the amount shown as tax on any return on or before the date prescribed by law, determined with regard to any extension of time for paying, there must be added to the tax due a penalty of one-half of one percent of the amount of the tax if the failure is for not more than one month, with an additional one-half of one percent for each additional month or fraction of the month, during which the failure continues, not exceeding twenty-five percent in the aggregate.
(E) In case of failure to pay any amount of any tax required to be shown on a return which is not shown, including an assessment within ten days of the date of the notice and demand for payment, there must be added to the amount of tax stated in the notice and demand one-half of one percent of the amount of the tax if the failure is for not more than one month, with an additional one-half of one percent for each additional month or fraction of a month during which the failure continues, not exceeding twenty-five percent in the aggregate.
(F)(1) If part of an underpayment of tax or part of a claim for refund of tax paid is due to negligence or disregard of regulations, there must be added to the tax an amount equal to the sum of five percent of the underpayment or claimed refund and an amount equal to fifty percent of the interest payable under Section 12-54-25.
(2) A portion of an underpayment attributable to fraud with respect to which a penalty is imposed under subsection (G) must not be considered under this subsection.
(3) For purposes of this subsection, "negligence" includes a failure to make a reasonable attempt to comply with the provisions of this title, and "disregard" includes careless, reckless, or intentional disregard.
(G)(1) If a part of an underpayment of tax required to be shown on a return is due to fraud, there must be added to the tax an amount equal to the sum of seventy-five percent of the portion of the underpayment which is attributable to fraud and an amount equal to fifty percent of the interest payable under Section 12-54-25 with respect to that portion for the period beginning on the last day prescribed by law for payment of the underpayment, determined without regard to any extension, and ending on the date of the assessment of the tax or, if earlier, the date of the payment of the tax.
(2) If the department establishes that a portion of an underpayment is attributable to fraud, the entire underpayment must be treated as attributable to fraud, except that portion of the underpayment which the taxpayer establishes is not attributable to fraud.
(3) In case of a joint return, this subsection applies to a spouse only if some part of the underpayment is due to the fraud of the spouse.
(4) If a penalty is assessed under this subsection for an underpayment of tax which is required to be shown on a return, a penalty relating to failure to file the return or pay tax may not be assessed with respect to the portion of the underpayment which is attributable to fraud.
(H) A person who must obtain a license or purchase stamps for identification purposes, and who fails to obtain or display the license properly, or to affix the stamps properly, or to comply with statutory provisions, is subject to a penalty of not less than fifty dollars nor more than five hundred dollars for each failure. For failure to obtain or display a license as prescribed in Sections 12-21-2720 and 12-21-2730, the penalty is fifty dollars for each failure to comply.
(I) A person:
(1)(a) who files what purports to be a return of the tax imposed by a provision of law administered by the department but which:
(i) does not contain information on which the substantial correctness of the tax liability may be judged; or
(ii) contains information that on its face indicates the liability is substantially incorrect; or
(b) who files a claim, a protest, or document, other than a return, that contains information that on its face indicates its position is substantially incorrect; and
(2) whose conduct is due to:
(a) a position which is frivolous or groundless; or
(b) a desire, which appears on the purported return, claim, protest, or document, to delay or impede the administration of state tax laws;
(3) is liable to a penalty of five hundred dollars for the first filing, twenty-five hundred dollars for the second filing, and five thousand dollars for each subsequent filing. These penalties are in addition to all other penalties provided by law.
(J) Whenever it appears to an administrative law judge that proceedings before him have been instituted or maintained by the taxpayer primarily for delay or that the taxpayer's position in the proceedings is frivolous or groundless, damages in an amount not to exceed five thousand dollars must be awarded to the State in the administrative law judge's decision. These damages must be assessed at the same time as the deficiency, paid upon notice and demand from the department, and collected as a part of the tax.
(K) A failure to deposit or pay taxes deducted and withheld pursuant to Article 5 of Chapter 8 subjects the withholding agent to a penalty of not less than ten dollars nor more than one thousand dollars. The penalty imposed by this item applies to failure to comply with the provisions of Section 12-54-250.
(L) If a taxpayer asserts a value for property used in, or owned by, a business for property tax purposes that is fifty percent or more below the property's property tax value, there must be added to the tax an amount equal to the fifty percent of the underpayment which would have resulted if the value asserted had been accepted.
(M) If a purchaser uses a resale, wholesale, or an exemption certificate issued or authorized by the department to purchase tangible personal property tax free which the purchaser knows is not excluded or exempt from the tax under the provisions of Chapter 36 of this title, then the purchaser, in addition to any other penalties due under this title, is liable for a penalty of five percent of the amount of the tax if the failure is for not more than one month, with an additional five percent for each additional month or fraction of the month during which the failure continues, not exceeding fifty percent in the aggregate. The provisions of this section do not apply to direct pay certificates.
SECTION 12-54-44. Criminal penalties applicable to every tax or revenue law requiring return or statement filing with department.
(A) Except as otherwise provided, the criminal penalties imposed by this section apply to every revenue or tax law of the State that provides for the filing with the department of a return or statement of the tax or the amount taxable.
(B)(1) A person who wilfully attempts in any manner to evade or defeat a tax or property assessment imposed by a title administered by the department or the payment of that tax or property assessment, in addition to other penalties provided by law, is guilty of a felony and, upon conviction, must be fined not more than ten thousand dollars or imprisoned not more than five years, or both, together with the cost of prosecution.
(2) A person required by a provision of law administered by the department and who wilfully fails to collect, truthfully account for, and pay over any tax imposed by a provision of law, in addition to other penalties provided by law, is guilty of a felony and, upon conviction, must be fined not more than ten thousand dollars or imprisoned not more than five years, or both, together with the cost of prosecution.
(3) A person required under any provision of law administered by the department and who wilfully fails to pay any estimated tax or tax, or who is required by any provision of law or by any regulation and who wilfully fails to make a return, keep records, or supply information, at the time or times required by law or regulation, in addition to other penalties provided by law, is guilty of a misdemeanor and, upon conviction, must be fined not more than ten thousand dollars, or imprisoned not more than one year, or both, together with the cost of prosecution.
(4) A person required by law or regulation to furnish a statement who wilfully furnishes a false or fraudulent statement in the manner, at the time, and showing the information required by law or regulation, is guilty of a misdemeanor and, upon conviction, must be fined not more than one thousand dollars or imprisoned not more than one year, or both.
(5) A person required to supply information to his employer under Chapter 8 of Title 12 who wilfully supplies false or fraudulent information or who wilfully fails to supply information which would require an increase in the tax to be withheld under Chapter 8, Title 12 is guilty of a misdemeanor and, upon conviction, must be fined not more than one thousand dollars, or imprisoned not more than one year, or both. Offenses in this item are triable in magistrate's court.
(6)(a) A person is guilty of a felony and, upon conviction, must be fined not more than five hundred dollars or imprisoned not more than five years, or both, together with the cost of prosecution, if he:
(i) wilfully makes and subscribes any return, statement, or other document, which contains or is verified by a written declaration that it is made under the penalties of perjury, and which he does not believe to be true and correct as to every material matter; or
(ii) wilfully assists in, or procures, counsels, or advises the preparation or presentation under, or in connection with a matter arising under those provisions of law administered by the department of a return, affidavit, claim, or other document which is fraudulent or is false as to any material matter, whether or not the falsity or fraud is with the knowledge or consent of the person authorized or required to present the return, affidavit, claim, or document.
(b) A person convicted of a crime described in subitem (a)(ii) is prohibited from preparing or assisting in the preparation of a tax return required to be filed under any title administered by the department. A person violating this prohibition is guilty of a felony, and, upon conviction, must be fined ten thousand dollars and imprisoned for at least five years without probation, parole, or suspension of sentence.
(c) A person who:
(i) wilfully removes, deposits, or conceals, or is concerned in removing, depositing, or concealing goods or commodities for which a tax is or must be imposed, or property upon which levying is authorized pursuant to law, with intent to evade or defeat the assessment or collection of any tax imposed by this provision of law administered by the department is guilty of a misdemeanor and, upon conviction, must be fined not more than five thousand dollars or imprisoned not more than three years, or both, together with the cost of prosecution;
(ii) in connection with the preparation of a tax return for another, the filing of a tax return, or the payment of a tax, receives money from the payment of any tax, receives money from the other person with the understanding that it is to be paid over to the department to discharge, in whole or in part, the other person's tax liability and wilfully fails to pay over the same to the department is guilty of a misdemeanor and, upon conviction, must be fined not more than five thousand dollars or imprisoned for not more than three years, or both, for each offense together with the cost of prosecution; or
(iii) wilfully delivers or discloses to the department any list, return, account, statement, or other document known by him to be fraudulent or to be false as to a material matter, is guilty of a misdemeanor and, upon conviction, must be fined not more than five thousand dollars or imprisoned for not more than one year, or both.
(C) Reserved
(D) A machine owner or distributor, as defined in Article 20, Chapter 21 of this title, who allows or causes a machine to be operated without a metering device, or who wilfully places a machine on location or who wilfully allows or causes a machine to be operated with a metering device that does not accurately record the information required under Article 20, Chapter 21 of this title is guilty of a felony and, upon conviction, must be imprisoned for not less than one year nor more than ten years, without benefit of probation, parole, or suspension of sentence, and in addition may be fined not more than twenty-five thousand dollars.
SECTION 12-54-46. Exemption certificate violations; penalties; exception.
(A) An individual subject to withholding and required to supply information to his employer pursuant to Chapter 8 of Title 12 is liable for a penalty of five hundred dollars for each of the following violations:
(1) refusing or failing to provide a withholding exemption certificate;
(2) providing a withholding exemption certificate that claims he is exempt from withholding;
(3) providing exemptions on a withholding exemption certificate exceeding the number of exemptions to which he is entitled; or
(4) requesting a waiver from withholding to which he is not entitled.
(B) An additional five-hundred-dollar penalty is imposed each January first that a violation is not corrected.
(C) The penalty does not apply to an individual described in subsection (A) who has a change in family circumstances that makes his withholding exemption certificate inaccurate unless his employer or the department has informed him to revise his withholding exemption certificate.
SECTION 12-54-47. Failure of tax preparer to include own taxpayer identification number; penalty; waiver of penalty if information submitted.
The department may impose a penalty in an amount not to exceed two hundred dollars for each failure to comply with the provisions of Section 12-6-5050. The department may waive the penalty if the tax preparer submits the required information.
SECTION 12-54-50. Penalty for checks returned to department on account of insufficient funds.
When the bank on which an uncertified check or electronic payment tendered to the department in payment of an obligation due to the department refuses payment of the check or electronic payment on account of insufficient funds of the drawer in the bank and the check or electronic payment is returned to the department, a penalty of fifteen dollars must be imposed. This penalty is in addition to and separate from any other penalty that may be imposed by the department. This section applies to all taxes or license fees levied or assessed by the department.
SECTION 12-54-55. Interest on underpayment of declaration of estimated tax.
In the case of an underpayment of declaration of estimated tax by an individual, estate, trust, or corporate taxpayer, instead of all other penalties provided by law, there must be added to the tax for the taxable year a penalty to be determined as follows:
(1) in the case of an individual taxpayer, estate, or trust in the same manner as prescribed by the provisions of Internal Revenue Code Section 6654 and applicable regulations except that the small amount provisions are one hundred dollars. No interest or penalty is due under this item for underpayments attributable to personal service income earned in another state on which income tax due the other state was withheld;
(2) in the case of a corporate taxpayer, in the same manner as prescribed by the provisions of Internal Revenue Code Section 6655 and applicable regulations, except that the small amount provisions are one hundred dollars.
SECTION 12-54-70. Extension of time for filing returns or paying tax; tentative return and payment of tentative liability.
(a) The department may allow further time for the filing of returns or remitting of tax due required by the provisions of law administered by the department. The request for an extension must be filed with the department on or before the day the return of the tax is due. Except as otherwise provided in this section, the department may allow an extension of time not to exceed six months. A tentative return is required reflecting one hundred percent of the anticipated tax to be paid for the taxable period, to be accompanied by a remittance for the tentative tax liability. Interest at the rate provided in Section 12-54-25, calculated from the date the tax was originally due, must be added to the balance due whenever an extension to file or to remit tax due is granted.
(b) If the amount remitted with the tentative return fails to reflect at least ninety percent of the tax to be paid for the period granted by the extension, a penalty as provided in Section 12-54-43(D) must be imposed from the date the tax was originally due on the difference between the amount remitted and the tax to be paid for the period.
(c) Provisions regarding prepayment of ninety percent of the estimated liability do not apply to persons filing monthly reports. For monthly filers, no extension may be granted for more than one additional month beyond the due date. The time and payment requirements of this section do not apply for estate tax purposes if a hardship extension is granted under Section 12-16-1140; but interest must be calculated on any outstanding amount until completely paid.
(d) An extension may not be granted to a taxpayer who has been granted an extension for a previous period and has not fulfilled the requirements of the previous period.
SECTION 12-54-75. Electronic collection of revenues.
(A) The State Treasurer may authorize a state agency which collects revenues, either as taxes or license fees or as payment for goods or services, to accept electronic forms of payment including, but not limited to, credit cards, debit cards, bank debits or credits, or electronic purse options. These electronic payments may be accepted in the course of an electronic commerce transaction, in which the business transaction is conducted by means of the internet, interactive voice response, or other fully electronic means.
(B) The State Treasurer may contract on behalf of the agencies with payment service providers for the processing of electronic payments, and may negotiate associated processing fees. The agency collecting revenues electronically may withhold the negotiated processing fees for payment to service providers from the revenues collected.
SECTION 12-54-85. Time limitation for assessment of taxes or fees; exceptions.
(A) Except as otherwise provided in this section, taxes must be determined and assessed within thirty-six months from the date the return or document was filed or due to be filed, whichever is later.
(B) Except as otherwise provided in this section:
(1) if a tax, except for a penalty described in item (2), is not required to be remitted with a return or document, the amount of taxes must be determined and assessed within thirty-six months after the later of the date the tax was due or the first date on which any part of the tax was paid; and
(2) a penalty that is not associated with the assessment of a tax must be determined and assessed within thirty-six months after the date of the violation giving rise to the penalty.
(C) Taxes may be determined and assessed after the thirty-six month limitation if:
(1) there is fraudulent intent to evade the taxes;
(2) the taxpayer failed to file a return or document as required by law;
(3) there is a twenty percent understatement of the total of all taxes required to be shown on the return or document. The taxes in this case may be assessed at any time within seventy-two months from the date the return or document was filed or due to be filed, whichever is later. For the purpose of this item, the total of all taxes required to be shown on the return is the total of all taxes required to be shown on the return before any reduction for estimated payments, withholding payments, other prepayments, or discount allowed for timely filing of the return and payment of the tax due, but that amount must be reduced by another credit that may be claimed on the return;
(4) the person liable for any taxes consents in writing, before the expiration of the time prescribed in this section for assessing taxes due, to the assessment of the taxes after the time prescribed by this section; or
(5) the tax is a use tax imposed under Chapter 36 of this title, or a local use tax administered and collected by the department on behalf of a local jurisdiction, and the assessment of the use tax is the result of information received from, or as a result of exchange agreements with, other state or local taxing authorities, regional or national tax administration organizations, or the federal government. The use taxes in this case may be assessed at any time within twelve months after the department receives the information, but no later than seventy-two months after the last day the use tax may be paid without penalty.
(D)(1) Taxes due to an understatement of taxes resulting from adjustments of the Internal Revenue Service also may be determined and assessed after the thirty-six month limitation if:
(a) except as provided in item (b), in the case of income, estate, and generation skipping transfer taxes, the taxes are assessed before one hundred eighty days after the department receives notice from the taxpayer of a final determination of a tax adjustment made by the Internal Revenue Service; or
(b) in the case of individual income tax returns described in subitem (4)(c) below, the taxes are assessed before one hundred eighty days after the department receives notice of the tax adjustment from the Internal Revenue Service or the taxpayer, whichever occurs first.
(2) A person, including a pass-through entity, who conducts a trade or business, other than a trade or business of being an employee, shall notify the department in writing of all changes in taxable income reported to the Internal Revenue Service when the taxable income is changed by the Internal Revenue Service. Notification to the department must be made before one hundred eighty days after a final determination of a tax adjustment is made by the Internal Revenue Service.
(3) Notwithstanding a restriction on filing a claim for refund provided in subsection (F), a person may file a claim for refund resulting from an overpayment due to changes in taxable income made by the Internal Revenue Service, if the claim for refund is filed no later than one hundred eighty days after the date a final determination of a tax adjustment is made by the Internal Revenue Service. The refund described in this subsection applies only to the overpayment of taxes resulting from adjustments of the Internal Revenue Service.
(4) For the purposes of this subsection (D):
(a) the date the Internal Revenue Service makes a final determination of a tax adjustment is the federal assessment date;
(b) underpayments and overpayments resulting from adjustments of the Internal Revenue Service include both the year for which the adjustments were made and other tax years affected by the adjustments; and
(c) the individual income tax returns referred to in subitem (D)(1)(b) are those individual income tax returns that do not include income, deductions, or credits from a trade or business, other than the trade or business of being an employee.
(E) A tax may not be collected by levy, warrant for distraint, or proceedings in court, unless the:
(1) levy, warrant for distraint, or proceedings in court were begun within ten years after the assessment of the tax;
(2) taxpayer has agreed to extend this period; or
(3) running of this period is suspended in accordance with this section.
For property tax purposes, the "assessment of the tax" occurs on the later of the last day the tax may be paid without penalty or the date of the tax notice.
(F)(1) Except as provided in subsection (D), claims for credit or refund must be filed within three years from the time the return was filed, or two years from the date the tax was paid, whichever is later. If no return was filed, a claim for credit or refund must be filed within two years from the date the tax was paid. A credit or refund may not be made after the expiration of the period of limitation prescribed in this item for the filing of a claim for credit or refund, unless the claim for credit or refund is filed by the taxpayer or determined to be due by the department within that period.
(2) If the claim was filed by the taxpayer during the three-year period prescribed in item (1), the amount of the credit or refund may not exceed the portion of the tax paid within the period, immediately preceding the filing of the claim, equal to three years plus the period of any extension of time for filing the return.
(3) If the claim was not filed within the three-year period, the amount of the credit or refund may not exceed the portion of the tax paid during the two years immediately preceding the filing of the claim.
(4) If no claim was filed, the credit or refund may not exceed the amount which would be allowable under item (2) or (3), as the case may be, as if a claim were filed on the date the credit or refund is allowed.
(5) For the purposes of this subsection:
(a) A return filed before the last day prescribed for the filing is considered as filed on the last day. Payment of any portion of the tax made before the last day prescribed for the payment of the tax is considered made on the last day. The last day prescribed for filing the return or paying the tax must be determined without regard to any extension of time.
(b) Any tax actually withheld at the source in respect of the recipient of income, is considered to have been paid by the recipient on the last day prescribed for filing his return for the taxable year, determined without regard to any extension of time for filing the return, with respect to which the taxpayer would be allowed a credit for the amount withheld.
(c) Any amount paid as estimated income tax for any taxable year is considered to have been paid on the last day prescribed for filing the return for the taxable year, determined without regard to any extension of time for filing the return.
(6) In the case of an individual, the running of the period specified in this subsection is suspended for a period of the individual's life during which he is financially disabled. For purposes of this item, an individual is financially disabled if he is unable to manage his financial affairs by reason of a medically determinable physical or mental impairment that is expected to result in death or which has lasted or is expected to last for a continuous period of not less than twelve months. An individual must not be treated as financially disabled for a period during which his spouse or another person is authorized to act on his behalf in financial matters. An individual must not be considered financially disabled unless the following statements are submitted as part of the claim for credit or refund:
(a) a written statement signed by a physician qualified to make the determination that provides the:
(i) name and a brief description of the physical or mental impairment;
(ii) physician's medical opinion that the physical or mental impairment prevented the taxpayer from managing his financial affairs;
(iii) physician's medical opinion that the taxpayer's physical or mental impairment resulted in, or is expected to result in, death, or that it has lasted, or is expected to last, for a continuous period of not less than twelve months; and ( iv) specific time period during which the taxpayer was prevented by the physical or mental impairment from managing his financial affairs, to the best of the physician's knowledge; and
(b) a written statement by the taxpayer or the person signing the claim for credit or refund that the person, including the taxpayer's spouse, was not authorized to act on his behalf in financial matters for the period during which he was unable to manage his own financial affairs. Alternatively, if a person was authorized to act on the taxpayer's behalf in financial matters during part of that period of disability, the statement must contain the beginning and ending dates of the period of time the person was authorized; and
(c) other information the department may require.
The department, in its discretion, may adopt a determination made by the Internal Revenue Service with respect to an individual, and may follow rules issued by the Internal Revenue Service or Department of Treasury with regard to interpreting Internal Revenue Code Section 6511(h).
(G) The running of the period of limitations provided in subsections (A), (B), (C), (D), and (E) of this section is suspended:
(1) for ninety days after the date the taxpayer gives notice of termination of a waiver or extension of the assessment period;
(2) for ninety days after the date of a proposed assessment, property tax assessment notice, or tax notice;
(3) from the date of a proposed assessment, property tax assessment notice, or tax notice, until ninety days after a decision becomes final, if a taxpayer protests the proposed assessment, property tax assessment notice, or tax notice;
(4) from the date when an action is stayed by injunction, order of a court, or statutory prohibition, until ninety days after the injunction or prohibition is lifted; and
(5) during the pendency of a stay ordered by the Taxpayers' Rights Advocate.
SECTION 12-54-90. Revocation of license to do business for failure to comply with law.
(A) When a person fails, neglects, violates, or refuses to comply with a provision of law or regulation administered by the department, the department, in its discretion, may refuse to issue a license to a taxpayer and may revoke one or more licenses held by the taxpayer.
(B) A person whose license has been revoked must not be issued a new license until all outstanding liabilities are satisfied.
(C) The department may review and determine whether a new license may be issued according to guidelines established by it.
SECTION 12-54-100. Authority of department to conduct examination or investigation.
(A) In the administration of a state tax law, the director or his duly authorized agent, for the purpose of ascertaining the correctness of a return or making a determination of or fixing tax liability, may examine or investigate the place of business, tangible personal property, facilities, computers, computer programs, electronic data, books, invoices, papers, records, memoranda, vouchers, other documents, equipment, or licenses of the taxpayer or other person bearing upon the matters required to be included on a return.
(B) The taxpayer or other person and his agents and employees shall exhibit to the director these places and items and facilitate the examination or investigation.
(C) A taxpayer, upon request, may delay the examination up to thirty days, except that the provisions of this subsection do not apply if there is reasonable evidence that the taxpayer is about to destroy or remove the items from the State or otherwise make them unavailable for examination or investigation.
(D) The director may employ proper and reasonable audit methods necessary to the examination or investigation, including the use of sampling.
SECTION 12-54-110. Power of department to summon taxpayer or other person; remedy for failure to comply with summons.
(A) The department may summon:
(1) a person who:
(a) is required to make a return or obtain a license pursuant to the provisions of law administered by the department and who fails to do so at the time required;
(b) delivers a return that the department considers erroneous; or
(c) refuses to allow an authorized agent of the department to examine his books and records;
(2) another person having possession, care, or custody of books of account containing entries relating to the business of such person; or
(3) another person it considers proper.
(B) The summons may demand that the person appear before the department and produce the books at a time and place named in the summons and to give testimony and answer questions under oath relating to a tax or other matter administered by the department.
(C) The summons must be served by an authorized agent of the department by delivering an attested copy to the person in hand or leaving the copy at the person's last or usual place of abode. When the summons requires the production of books and returns, it is sufficient if the books are described with reasonable certainty.
(D) If a person summoned pursuant to this section neglects or refuses to obey the summons, the department may apply to the Administrative Law Court for an attachment against him for contempt. Any Administrative Law Judge may hear the application and, if satisfactory proof is made, shall issue an attachment directed to the sheriff of the county in which the person resides for his arrest. When the person is brought before him, the judge shall proceed to a hearing of the case and may enforce obedience to the requirements of the summons by making an order consistent with existing laws for the punishment of contempt.
SECTION 12-54-120. Tax lien; property subject to seizure, levy, and sale; effective period; effect on other liens and remedies.
(A)(1) If a person liable to pay a tax neglects or refuses to pay it after demand, the amount of the tax, including interest, additional tax, addition to tax, or assessable penalty, plus accrued costs, is a lien in favor of the Department of Revenue on all property and rights to property, real or personal, tangible or intangible, belonging to the person.
(2) This lien:
(a) is referred to as a "tax lien";
(b) is effective on the date of the assessment of the tax;
(c) allows an authorized agent of the department to seize, levy on, and sell the property of the person for the payment of the amount due, with added penalties, interest, and costs of executing on the lien, and to pay the money collected to the department;
(d) extends to bank deposits, choses in action, and all other property incapable of manual levy or delivery; and
(e) continues for ten years from the date of filing.
(3) "Demand", as used in this section, means an assessment by the department.
(B) This tax lien and the limitations in Section 12-54-122 are in addition to all other liens or remedies in favor of the department and does not affect any other lien or remedy.
(C) The department, in addition to other remedies for enforcement of its tax lien, retains all remedies available to a judgment creditor.
SECTION 12-54-122. Notice of lien required; exemptions from validity of lien; priority of other liens or security interests; filing of notice; due diligence as factor determining notice or knowledge; subrogation of rights.
(A) For purposes of this section, the term:
(1) "Security interest" means any interest in property acquired by contract for the purpose of securing payment or performance of an obligation or indemnifying against loss or liability. A security interest exists if the property is in existence, the interest is protected under the laws of this State against a subsequent judgment lien arising out of an unsecured obligation, and the holder of the interest has parted with money or money's worth.
(2) "Mechanic's lienor" means a person who under the laws of this State has a lien on real property, or on the proceeds of a contract relating to real property, for services, labor, or materials furnished in connection with the construction or improvement of the property. For purposes of this item, a person has a mechanic's lien on the earliest date the lien becomes valid under the laws of this State as against subsequent purchasers without actual notice, but not before he begins to furnish the services, labor, or materials.
(3) "Motor vehicle" means a self-propelled vehicle which is registered for highway use under the laws of any state or foreign country.
(4) "Security" means:
(a) bond, debenture, note, certificate, or other evidence of indebtedness issued by a corporation or a government or its political subdivision with interest coupons or in registered form;
(b) share of stock;
(c) voting trust certificate;
(d) a certificate of interest or participation in, certificate of deposit or receipt for, temporary or interim certificate for, or warrant or right to subscribe to or purchase any of the instruments set forth in subitems (a) through (c);
(e) negotiable instrument; or
(f) money.
(5) "Tax lien filing" means the filing of notice of the tax lien imposed by Section 12-54-120.
(6) "Purchaser" means a person who, for adequate and full consideration in money or money's worth, acquires an interest other than a lien or security interest in property and the interest is valid under the laws of this State as against subsequent purchasers without actual notice. An interest in property includes a lease of property, a written executory contract to purchase or lease property, an option to purchase or lease property or an interest in it, or an option to renew or extend a lease of property which is not a lien or security interest.
(7) "Notice of lien" and "warrant for distraint", as used throughout Title 12, have the same legal effect and both mean the notice of tax lien filing.
(B) The tax lien is not valid against a purchaser, holder of a security interest, mechanic's lienor, or judgment lien creditor until notice, as prescribed by subsection (G), is filed by the Department of Revenue.
(C) The tax lien is not valid even though notice, as prescribed by subsection (G), is filed by the department with respect to:
(1) a security as defined in subsection (A)(4):
(a) as against a purchaser of the security who, at the time of purchase, did not have actual notice or knowledge of the existence of the lien; and
(b) as against a holder of a security interest in the security who, at the time the interest came into existence, did not have actual notice or knowledge of the existence of the lien;
(2) a motor vehicle as defined in subsection (A)(3), as against a purchaser of the motor vehicle if:
(a) at the time of the purchase, the purchaser did not have actual notice or knowledge of the existence of the lien; and
(b) before the purchaser obtains actual notice or knowledge of the existence of the lien, he has acquired possession of the motor vehicle and has not relinquished possession of the motor vehicle to the seller or his agent;
(3) tangible personal property purchased at retail, as against a purchaser in the ordinary course of the seller's trade or business, unless at the time of the purchase the purchaser intends the purchase to, or knows the purchase will, hinder, evade, or defeat the collection of any tax under this title;
(4) household goods, personal effects, or other tangible personal property purchased, not for resale, in a casual sale for less than two hundred fifty dollars, as against the purchaser, but only if the purchaser does not have actual notice or knowledge of the existence of the lien or that the sale is one of a series of sales;
(5) tangible personal property subject to a lien under the laws of this State securing the reasonable price of the repair or improvement of the property, as against a holder of that lien, if the holder has been continuously in possession of the property from the time that lien arose;
(6) real property, as against a holder of a lien upon real property, if the real property lien has priority over security interests in the property which are prior in time, and that lien secures payment of:
(a) a tax of general application levied by a taxing authority based upon the value of the property;
(b) a special assessment imposed directly upon the property by a taxing authority, if the assessment is imposed for the purpose of defraying the cost of a public improvement; or
(c) charges for utilities or public services furnished to the property by this State or its political subdivision or an instrumentality of either of them;
(7) a judgment or other amount in settlement of a claim or of a cause of action, as against an attorney who, under the laws of this State, holds a lien upon or a contract enforceable against the judgment or settlement amount, to the extent of his reasonable compensation for obtaining the judgment or procuring the settlement. This item does not apply to a judgment or an amount in settlement of a claim or of a cause of action against this State to the extent that this State offsets the judgment or settlement amount against any liability of the taxpayer to this State;
(8) a life insurance, endowment, or annuity contract, as against the organization which is the insurer under the contract, at any time:
(a) before the organization had actual notice or knowledge of the existence of the lien; or
(b) after the organization had notice or knowledge of the existence of the lien, with respect to advances required to maintain the contract in force under an agreement entered into before the organization had notice or knowledge of the existence of the lien;
(9) a savings deposit, share, or other account, evidenced by a passbook, with an institution described in 26 U.S.C. Section 581 or 591, to the extent of a loan made by the institution without actual notice or knowledge of the existence of the lien, as against the institution, if the loan is secured by the account and if the institution has been continuously in possession of the passbook from the time the loan was made.
(D)(1) To the extent provided in this subsection, even though notice of a tax lien has been filed, the tax lien is not valid with respect to a security interest which came into existence after the tax lien filing but which is:
(a) in qualified property covered by the terms of a written agreement entered into before the tax lien filing and constituting:
(i) a commercial transaction financing agreement;
(ii) a real property construction or improvement financing agreement; or
(iii) an obligatory disbursement agreement; and
(b) is protected as of the time of the tax lien filing, under the laws of this State, against a judgment lien arising out of an unsecured obligation.
(2) For purposes of this subsection, the term:
(a) "Commercial transaction financing agreement" means an agreement entered into by a person in the course of his trade of business:
(i) to make loans to the taxpayer secured by commercial financing security acquired by the taxpayer in the ordinary course of his trade or business; or
(ii) to purchase commercial financing security other than inventory acquired by the taxpayer in the ordinary course of his trade or business, but only to the extent that the loan or purchase is made before the forty-sixth day after the date of the tax lien filing or, if earlier, before the lender or purchaser had actual notice or knowledge of the tax lien filing.
(b) "Commercial financing security" means:
(i) paper of a kind ordinarily arising in commercial transactions;
(ii) accounts receivable;
(iii) mortgages on real property; and
(iv) inventory.
(c) "Real property construction or improvement financing agreement" means an agreement to make cash disbursements to finance:
(i) the construction or improvement of real property;
(ii) a contract to construct or improve real property; or
(iii) the raising or harvesting of a farm crop or the raising of livestock or other animals. For purposes of this subsubitem, the furnishing of goods and services is treated as the disbursement of cash.
(d) "Obligatory disbursement agreement" means an agreement entered into by a person in the course of his trade or business to make disbursements, but only to the extent of disbursements required to be made by reason of the intervention of the rights of a person other than the taxpayer.
(e) "Qualified property", when used with respect to a commercial transaction financing agreement, means only commercial financing security acquired by the taxpayer before day forty-six after the date of the tax lien filing.
(f) "Qualified property", when used with respect to a real property construction or improvement financing agreement, means only:
(i) the real property with respect to which construction or improvement has been or will be made;
(ii) the proceeds of a contract to construct or improve real property; and
(iii) property subject to the tax lien at the time of the tax lien filing and the crop or the livestock or other animals referred to in item (2)(c)(iii).
(g)(i) "Qualified property", when used with respect to an obligatory disbursement agreement, means property subject to the tax lien imposed by Section 12-54-120 at the time of the tax lien filing and, to the extent the acquisition is directly traceable to the disbursements referred to in subitem (d), property acquired by the taxpayer after the tax lien filing.
(ii) When the obligatory disbursement agreement is an agreement ensuring the performance of a contract between the taxpayer and another person, the term "qualified property" also includes the proceeds of the surety contract.
(iii) If the surety contract ensured performance of a contract to construct or improve real property, to produce goods, or to furnish services, the term "qualified property" also includes any tangible personal property used by the taxpayer in the performance of the ensured contract.
(E) Even though notice of a tax lien is filed, the lien is not valid with respect to a security interest arising out of disbursements made before the forty-sixth day after the date the tax lien was filed or before the person making the disbursement had actual notice or knowledge of the tax lien filing, whichever is earlier, but only if the security interest is:
(1) in property subject to the tax lien at the time it is filed and covered by the terms of a written agreement entered into before the filing; and
(2) protected under the laws of this State against a judgment lien arising out of an unsecured obligation.
(F) If the tax lien is not valid as against another lien or security interest, the priority of the other lien or security interest extends to:
(1) any interest or carrying charges upon the secured obligation;
(2) the reasonable charges and expenses of a trustee or agent holding the security interest for the benefit of the holder of the security interest;
(3) the reasonable expenses, including reasonable attorney's fee, actually incurred in collecting or enforcing the secured obligation;
(4) the reasonable costs of insuring, preserving, or repairing the property to which the lien or security interest relates;
(5) the reasonable costs of insuring payment of the secured obligation; and
(6) amounts paid to satisfy a lien on the property to which the other lien or security interest relates, but only if the satisfied lien has priority over the tax lien to the extent that, under the laws of this State, any such item has the same priority as the lien or security interest to which it relates.
(G)(1) The tax lien notice must be filed with the clerk of court or, where appropriate, the register of mesne conveyances. The appropriate official shall enter the name of the taxpayer in the judgment docket in the column for judgment debtors and, in appropriate columns, the amount of tax, penalties, and the date of filing, and shall index the tax lien on the index of judgment.
(2) The form and content of the notice of tax lien must be prescribed by the department, and the notice, as prescribed, is valid notwithstanding another provision of law regarding the form or content of a notice of lien.
(3) The notice of tax lien may be filed by the department or its authorized agent at any time and in any county the department finds appropriate.
(H)(1) For purposes of this section, an organization has actual notice or knowledge of a fact about a particular transaction from the time the fact is brought to the attention of the individual conducting the transaction or from the time the fact would have been brought to his attention if the organization had exercised due diligence. An organization exercises due diligence if it maintains reasonable routines for communicating significant information to the person conducting the transaction and there is reasonable compliance with the routine. Due diligence does not require an individual acting for the organization to communicate information unless the communication is part of his regular duties or unless he has reason to know of the transaction and that the transaction would be materially affected by the information.
(2) When a person is subrogated to the rights of another with respect to a lien or interest under the laws of this State, that person is subrogated to those rights for purposes of the tax lien imposed by Section 12-54-120.
SECTION 12-54-123. Surrender of property upon which levy has been made; liability to taxpayer.
A person in possession of property upon which a levy has been made who, upon demand by the department, surrenders the property to the department must not be held personally liable for any obligation or liability to the taxpayer and any other person with respect to the property that arises from the surrender or payment. If a person brings an action not allowed pursuant to this section in any court of this State, the court shall dismiss the case.
SECTION 12-54-124. Transfer of business assets; tax liens; suspension of business license; certificate of compliance.
In the case of the transfer of a majority of the assets of a business, other than cash, whether through sale, gift, devise, inheritance, liquidation, distribution, merger, consolidation, corporate reorganization, lease or otherwise, any tax generated by the business which was due on or before the date of any part of the transfer constitutes a lien against the assets in the hands of a purchaser, or any other transferee, until the taxes are paid. Whether a majority of the assets have been transferred is determined by the fair market value of the assets transferred, and not by the number of assets transferred. The department may not issue a license to continue the business to the transferee until all taxes due the State have been settled and paid and may revoke a license issued to the business in violation of this section.
This section does not apply if the purchaser receives a certificate of compliance from the department stating that all tax returns have been filed and all taxes generated by the business have been paid. The certificate of compliance is valid if it is obtained no more than thirty days before the sale or transfer.
SECTION 12-54-125. Withdrawal of warrants of distraint.
If, upon investigation, the department determines that any corporation which has been dissolved by the Secretary of State has not conducted any business since the last return was filed with the department, or if there are no available assets of the corporation, the department may deem that warrants of distraint issued against the corporation were issued in error and may withdraw them.
SECTION 12-54-126. Return of licenses.
A person operating a business within this State who has been issued a license or licenses by the department, after closing, selling, or otherwise transferring the business to another person, shall return all licenses issued by the department to the department for cancellation and remit unpaid or accrued taxes. The department may refuse to issue a license to a person and may revoke one or more licenses held by a person who has failed to comply with the provisions of this section.
SECTION 12-54-127. Transfer of personal or real property; liability for tax; lien; inapplicability of provisions to certain transfers.
When title to property, both real and personal, is transferred and the payment or collection of any tax is defeated because of the transfer, then the transferor, the spouse of the transferor, a fiduciary holding title to the property and a person for whose benefit the property is held, the officers and stockholders of a corporation transferring the property, and the transferee of the property, are personally liable for tax in an amount equal to the interest in the property transferred, and the liens provided by law for the tax attach to the property as if no transfer was made. The above provisions do not apply to a transfer to a bona fide purchaser or mortgagee for an adequate and full consideration in money or moneys' worth. The provisions of this section are in addition to and do not supersede any other provision of law.
SECTION 12-54-130. Service upon taxpayer's employer of notice to withhold compensation; withholding by employer.
If any person liable to pay any tax neglects or refuses to pay the same within ten days after notice and demand, the department, or its authorized representatives, may serve the person's employer with a notice to withhold, setting forth thereon the amount to be withheld and the applicable tax period. The employer shall upon service of the notice withhold twenty-five percent of the compensation due or payable to the person for each pay period until the full amount is withheld, after which the same must be remitted to the department. Should the employment of the person terminate, the employer shall withhold the full amount of compensation due the employee, not exceeding, the amount in the notice. The employer shall at that time remit the amount so withheld and give further notice to the department of the termination of the person's employment.
SECTION 12-54-135. Notice of failure to withhold or remit sum due; liability of person failing to withhold or remit; issuance of warrant for collection of sum due; no right of action by person against employer for compliance with section.
(A) If a person after notice fails to withhold a sum due by a taxpayer in accordance with the notice, or fails to remit the sum in accordance with the provisions of Section 12-54-130, then the person failing to withhold or remit is liable for the total of the notice in the same manner and with similar effect as though the amount as shown by the notice was due by the person as a direct obligation to the State. Where a person fails to withhold or to remit after withholding in accordance with the provisions of Section 12-54-130, the amount of the notice is due and payable by the person in the same manner as now is provided for the collection of similar taxes and by Section 12-54-130. The department shall, upon failure of the person to pay the amount of the notice which was not withheld in accordance with Section 12-54-130, issue its warrant for distraint to a duly authorized representative of the department, who shall proceed to the collection of the warrant.
(B) No person has a right of action against his employer in respect of any monies withheld and paid to the department or its duly authorized representative in compliance or intended compliance with the provisions of this section.
SECTION 12-54-138. Recovery of duplicate refund.
If it is determined that a taxpayer has received a duplicate refund, the department may assess and collect the amount of one of the refund checks in the same manner as a tax. If the taxpayer returns one of the refund checks uncashed, no interest must be charged.
SECTION 12-54-155. Substantial underpayment of tax or substantial valuation misstatement.
(A)(1) If there is an underpayment attributable to either a substantial understatement of tax for a taxable period or a substantial valuation misstatement, there must be added to the tax an amount equal to twenty-five percent of the amount of the underpayment.
(2) This section does not apply to a portion of an underpayment attributable to fraud on which a penalty is imposed pursuant to Section 12-54-43(G).
(3) This section does not apply to a portion of an underpayment on which a penalty for underpayment of property tax on business-related property is imposed pursuant to Section 12-54-43(L).
(B)(1)(a) For purposes of this section, there is a substantial understatement of tax for a taxable period if the amount of the understatement for the taxable period exceeds the greater of ten percent of the tax required to be shown on the return for the taxable period or five thousand dollars.
(b) In the case of a corporation other than an "S" Corporation or a personal holding company, as defined in Internal Revenue Code Section 542, item (1) must be applied by substituting "ten thousand dollars" for "five thousand dollars".
(2)(a) For purposes of item (1), "understatement" means the excess of the amount of the tax required to be shown on the return for the taxable period over the amount of the tax imposed which is shown on the return.
(b) The amount of the understatement under subitem (a) must be reduced by that portion of the understatement which is attributable to the tax treatment of an item: (i) by the taxpayer if there is or was substantial authority for that treatment, or (ii) with respect to which the relevant facts affecting the item's tax treatment are adequately disclosed in the return or in a statement attached to the return and there is a reasonable basis for the tax treatment of the item by the taxpayer. For purposes of subsection (B)(2)(b)(ii) a corporation must not be treated as having a reasonable basis for its tax treatment of an item attributable to a multiple-party financing transaction if the treatment does not clearly reflect the income of the corporation. For purposes of this paragraph, the words "substantial authority" and "adequately disclosed" must be interpreted in accordance with Treasury Regulation Section 1.6662-4 as of the date on which the Internal Revenue Code is applied to state tax laws pursuant to Section 12-6-40.
(c)(i) Subitem (b) does not apply to an item attributable to a tax shelter.
(ii) For purposes of subsubitem (i), "tax shelter" means:
(A) a partnership or other entity;
(B) an investment plan or arrangement; or
(C) another plan or arrangement if the principal purpose of the partnership, entity, plan, or arrangement is the avoidance or evasion of income tax.
(C) For purposes of this