Florida Regulations 12-13.007: Grounds for Reasonable Cause for Compromise of Penalties
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(1) The Executive Director or the Executive Director’s designee will make a determination whether the taxpayer’s noncompliance was due to reasonable cause and not to willful negligence, willful neglect, or fraud based on the facts and circumstances of the specific case. The standard used in this determination is whether the taxpayer exercised ordinary care and prudence and was nevertheless unable to comply.
(a) When evaluating the facts and circumstances relevant to penalties assessed as a result of an audit, the Department shall consider information provided by the taxpayer in relation to the following:
1. Whether the taxpayer has been audited previously, and, if so, whether the penalties which are the subject of the compromise request result from taxpayer actions that resulted in a specific issue-related deficiency assessment during one or more of the previous audits. It is not the intent of this subparagraph to apply to infrequent occurrences of human error;
2. The materiality of the tax deficiency assessed in an audit when considered within the context of taxes correctly reported and timely remitted by the taxpayer for the same tax during the same audit period;
3. Whether the taxpayer has initiated controls or other actions that will promote proper future reporting with respect to those activities which contributed to the audit deficiency and related penalties; and,
4. Whether the tax was collected and not remitted to the state by the taxpayer.
(b) When evaluating the facts and circumstances relevant to penalties imposed pursuant to a billing not resulting from an audit, the Department shall consider:
1. The timeliness of payments made by the taxpayer during previous reporting periods;
2. The materiality of the tax deficiency to which the penalty relates within the context of the amount of the same taxes correctly reported and remitted;
3. Whether the taxpayer has initiated controls or other actions related to the errors that resulted in the billing and related penalties in order to promote better compliance in the future; and,
4. Whether the tax was collected and not remitted to the state by the taxpayer.
(2) Reasonable cause is indicated by the existence of facts and circumstances which support the exercise of ordinary care and prudence on the part of the taxpayer in complying with the revenue laws of this state. Depending upon the circumstances, reasonable cause may exist even though the circumstances indicate that slight negligence, inadvertence, mistake, or error resulted in noncompliance. Consideration will be given to the complexity of the facts and the difficulty of the tax law and the issue involved, and also to the existence or lack of clear rules or instructions covering the taxpayer’s situation.
(3) Ignorance of the law or an erroneous belief as to the need to comply with a revenue law constitutes reasonable cause when there are facts and circumstances which indicate ordinary care and prudence was exercised by the taxpayer.
(a) For example, ignorance of the law or an erroneous belief held by the taxpayer is a basis for reasonable cause when the taxpayer has a limited knowledge of business, a limited education, limited experience in Florida tax matters, or advice received from a competent advisor was relied upon in complying with the provisions of a revenue law.
(b) A good faith belief held by a taxpayer with limited business knowledge, limited education, or limited experience with Florida tax matters is a basis for reasonable cause when there is reasonable doubt as to whether compliance is required in view of conflicting rulings, decisions, or ambiguities in the law.
(4) Reliance upon the erroneous advice of an advisor is a basis for reasonable cause when the taxpayer relied in good faith upon written advice of an advisor who was competent in Florida tax matters and the advisor acted with full knowledge of all of the essential facts. Informal advice, advice based upon insufficient facts, advice received in cases where facts were deliberately concealed, or obviously erroneous advice are not grounds for reasonable cause. To establish reasonable cause based upon reliance on the advice of a competent advisor, the taxpayer shall demonstrate:
(a) That the taxpayer sought timely advice of a person who was competent in Florida tax matters;
(b) That the taxpayer provided the advisor with all of the necessary information and withheld nothing; and,
(c) That the taxpayer acted in good faith upon written advice actually received from the advisor.
(5) Reasonable reliance upon the express terms of written advice given by the Department establishes reasonable cause when the taxpayer shows that the advice was timely sought from a departmental employee and that all material facts were disclosed, and that the express terms of the advice were actually followed. “”Written advice”” for purposes of establishing reasonable cause as a basis for compromise of penalties includes a writing issued to the same taxpayer by the Department in response to that taxpayer’s request for advice. The determination whether the taxpayer has reasonably relied on such written advice will be made in accordance with the criteria for determining if a taxpayer has reasonably relied on a written determination for purposes of compromise of tax and interest as set forth in subsection 12-13.005(2), F.A.C.
(6) Reliance upon another person to comply with filing requirements, or to obtain information, or to properly prepare returns or reports, is a basis for reasonable cause, depending upon the circumstances. Noncompliance due to nonperformance of a ministerial-type function, inadvertent misplacement of returns, reports, or information, or the failure of the taxpayer’s agent to properly prepare or file returns or reports are each a basis for reasonable cause when the taxpayer establishes that adequate procedures or steps for complying existed; that the person responsible for performing the function ordinarily performed the task properly; or, that extenuating or unusual circumstances prevented compliance.
(7)(a) Death, illness, or incapacity of the taxpayer is a basis for reasonable cause when such circumstances directly prevented compliance or adversely affected the taxpayer’s ability to comply. An unexplained or unsupported claim of noncompliance due to death, illness, or incapacity is not a basis for reasonable cause. It must be shown that the death, illness, or incapacity directly prevented compliance, in spite of reasonable efforts to comply.
(b) Death, illness, or incapacity of a member of the taxpayer’s immediate family, or of a person solely responsible for maintaining information necessary to comply, or of a person with sole authority to prepare required returns or reports is a basis for reasonable cause when the noncompliance resulted directly from such a circumstance, in spite of reasonable efforts to comply.
(8) Circumstances beyond a taxpayer’s reasonable control, such as acts of war, natural disaster, accidental destruction by fire or other casualty, or unavoidable absence are a basis for reasonable cause when the taxpayer demonstrates such circumstances directly prevented compliance, or adversely affected the taxpayer’s ability to comply.
(9) Reasonable cause shall be presumed to exist whenever a taxpayer voluntarily self-discloses liability for tax, interest, or penalty by contacting the Department in writing to disclose and pay tax and interest due prior to any contact by the Department concerning such liability. The presumption does not apply when the taxpayer is registered with the Department or has routinely filed returns with the Department and the taxpayer’s self-disclosure relates to a delinquency or deficiency that is obvious and would routinely generate a billing if not otherwise self-disclosed.
(10) Reasonable cause shall be presumed to exist whenever a taxpayer voluntarily and timely participates in completion of forms provided to the taxpayer by the Department as part of a self-audit or self-analysis program and promptly remits tax and interest due pursuant to such self-audit or self-analysis.
(11) Reasonable cause shall be presumed to exist whenever a person who is not otherwise required to register as a dealer pursuant to Florida Statutes Chapter 212, purchases consumer goods for personal use pursuant to a remote sale and remits Florida use tax and interest, either voluntarily or in prompt response to a proposed assessment, assessment, or use tax billing issued by the Department.
(12) Reasonable cause shall be presumed to exist whenever a person who is not otherwise required to register as a dealer pursuant to Florida Statutes Chapter 212, purchases tangible personal property and imports same into Florida for business purposes and remits Florida use tax and interest, either voluntarily or in prompt response to a proposed assessment, assessment, or use tax billing issued by the Department.
(13) Reasonable cause shall be presumed to exist whenever the penalty at issue relates to tax or interest which is compromised on the basis of doubt as to liability or doubt as to collectibility.
(14) Subsections (3) through (13) are intended to provide examples and guidance to taxpayers and Department employees, but should not be construed to limit penalty compromises to only those circumstances described in such subsections. Penalty may be compromised whenever the facts and circumstances demonstrate reasonable cause.
Rulemaking Authority Florida Statutes § 213.06(1), 213.21(5) FS. Law Implemented Florida Statutes § 213.21. History-New 5-23-89, Amended 8-10-92, 5-18-94, 10-2-01, 10-29-13, 5-23-22.
Terms Used In Florida Regulations 12-13.007
- Fraud: Intentional deception resulting in injury to another.
- Personal property: All property that is not real property.
1. Whether the taxpayer has been audited previously, and, if so, whether the penalties which are the subject of the compromise request result from taxpayer actions that resulted in a specific issue-related deficiency assessment during one or more of the previous audits. It is not the intent of this subparagraph to apply to infrequent occurrences of human error;
2. The materiality of the tax deficiency assessed in an audit when considered within the context of taxes correctly reported and timely remitted by the taxpayer for the same tax during the same audit period;
3. Whether the taxpayer has initiated controls or other actions that will promote proper future reporting with respect to those activities which contributed to the audit deficiency and related penalties; and,
4. Whether the tax was collected and not remitted to the state by the taxpayer.
(b) When evaluating the facts and circumstances relevant to penalties imposed pursuant to a billing not resulting from an audit, the Department shall consider:
1. The timeliness of payments made by the taxpayer during previous reporting periods;
2. The materiality of the tax deficiency to which the penalty relates within the context of the amount of the same taxes correctly reported and remitted;
3. Whether the taxpayer has initiated controls or other actions related to the errors that resulted in the billing and related penalties in order to promote better compliance in the future; and,
4. Whether the tax was collected and not remitted to the state by the taxpayer.
(2) Reasonable cause is indicated by the existence of facts and circumstances which support the exercise of ordinary care and prudence on the part of the taxpayer in complying with the revenue laws of this state. Depending upon the circumstances, reasonable cause may exist even though the circumstances indicate that slight negligence, inadvertence, mistake, or error resulted in noncompliance. Consideration will be given to the complexity of the facts and the difficulty of the tax law and the issue involved, and also to the existence or lack of clear rules or instructions covering the taxpayer’s situation.
(3) Ignorance of the law or an erroneous belief as to the need to comply with a revenue law constitutes reasonable cause when there are facts and circumstances which indicate ordinary care and prudence was exercised by the taxpayer.
(a) For example, ignorance of the law or an erroneous belief held by the taxpayer is a basis for reasonable cause when the taxpayer has a limited knowledge of business, a limited education, limited experience in Florida tax matters, or advice received from a competent advisor was relied upon in complying with the provisions of a revenue law.
(b) A good faith belief held by a taxpayer with limited business knowledge, limited education, or limited experience with Florida tax matters is a basis for reasonable cause when there is reasonable doubt as to whether compliance is required in view of conflicting rulings, decisions, or ambiguities in the law.
(4) Reliance upon the erroneous advice of an advisor is a basis for reasonable cause when the taxpayer relied in good faith upon written advice of an advisor who was competent in Florida tax matters and the advisor acted with full knowledge of all of the essential facts. Informal advice, advice based upon insufficient facts, advice received in cases where facts were deliberately concealed, or obviously erroneous advice are not grounds for reasonable cause. To establish reasonable cause based upon reliance on the advice of a competent advisor, the taxpayer shall demonstrate:
(a) That the taxpayer sought timely advice of a person who was competent in Florida tax matters;
(b) That the taxpayer provided the advisor with all of the necessary information and withheld nothing; and,
(c) That the taxpayer acted in good faith upon written advice actually received from the advisor.
(5) Reasonable reliance upon the express terms of written advice given by the Department establishes reasonable cause when the taxpayer shows that the advice was timely sought from a departmental employee and that all material facts were disclosed, and that the express terms of the advice were actually followed. “”Written advice”” for purposes of establishing reasonable cause as a basis for compromise of penalties includes a writing issued to the same taxpayer by the Department in response to that taxpayer’s request for advice. The determination whether the taxpayer has reasonably relied on such written advice will be made in accordance with the criteria for determining if a taxpayer has reasonably relied on a written determination for purposes of compromise of tax and interest as set forth in subsection 12-13.005(2), F.A.C.
(6) Reliance upon another person to comply with filing requirements, or to obtain information, or to properly prepare returns or reports, is a basis for reasonable cause, depending upon the circumstances. Noncompliance due to nonperformance of a ministerial-type function, inadvertent misplacement of returns, reports, or information, or the failure of the taxpayer’s agent to properly prepare or file returns or reports are each a basis for reasonable cause when the taxpayer establishes that adequate procedures or steps for complying existed; that the person responsible for performing the function ordinarily performed the task properly; or, that extenuating or unusual circumstances prevented compliance.
(7)(a) Death, illness, or incapacity of the taxpayer is a basis for reasonable cause when such circumstances directly prevented compliance or adversely affected the taxpayer’s ability to comply. An unexplained or unsupported claim of noncompliance due to death, illness, or incapacity is not a basis for reasonable cause. It must be shown that the death, illness, or incapacity directly prevented compliance, in spite of reasonable efforts to comply.
(b) Death, illness, or incapacity of a member of the taxpayer’s immediate family, or of a person solely responsible for maintaining information necessary to comply, or of a person with sole authority to prepare required returns or reports is a basis for reasonable cause when the noncompliance resulted directly from such a circumstance, in spite of reasonable efforts to comply.
(8) Circumstances beyond a taxpayer’s reasonable control, such as acts of war, natural disaster, accidental destruction by fire or other casualty, or unavoidable absence are a basis for reasonable cause when the taxpayer demonstrates such circumstances directly prevented compliance, or adversely affected the taxpayer’s ability to comply.
(9) Reasonable cause shall be presumed to exist whenever a taxpayer voluntarily self-discloses liability for tax, interest, or penalty by contacting the Department in writing to disclose and pay tax and interest due prior to any contact by the Department concerning such liability. The presumption does not apply when the taxpayer is registered with the Department or has routinely filed returns with the Department and the taxpayer’s self-disclosure relates to a delinquency or deficiency that is obvious and would routinely generate a billing if not otherwise self-disclosed.
(10) Reasonable cause shall be presumed to exist whenever a taxpayer voluntarily and timely participates in completion of forms provided to the taxpayer by the Department as part of a self-audit or self-analysis program and promptly remits tax and interest due pursuant to such self-audit or self-analysis.
(11) Reasonable cause shall be presumed to exist whenever a person who is not otherwise required to register as a dealer pursuant to Florida Statutes Chapter 212, purchases consumer goods for personal use pursuant to a remote sale and remits Florida use tax and interest, either voluntarily or in prompt response to a proposed assessment, assessment, or use tax billing issued by the Department.
(12) Reasonable cause shall be presumed to exist whenever a person who is not otherwise required to register as a dealer pursuant to Florida Statutes Chapter 212, purchases tangible personal property and imports same into Florida for business purposes and remits Florida use tax and interest, either voluntarily or in prompt response to a proposed assessment, assessment, or use tax billing issued by the Department.
(13) Reasonable cause shall be presumed to exist whenever the penalty at issue relates to tax or interest which is compromised on the basis of doubt as to liability or doubt as to collectibility.
(14) Subsections (3) through (13) are intended to provide examples and guidance to taxpayers and Department employees, but should not be construed to limit penalty compromises to only those circumstances described in such subsections. Penalty may be compromised whenever the facts and circumstances demonstrate reasonable cause.
Rulemaking Authority Florida Statutes § 213.06(1), 213.21(5) FS. Law Implemented Florida Statutes § 213.21. History-New 5-23-89, Amended 8-10-92, 5-18-94, 10-2-01, 10-29-13, 5-23-22.