There is a lot of uncertainty around state tax penalties. The standards are murky because the authority to impose penalties often turns on whether a taxpayer exercised “ordinary business care” or had “reasonable cause” for its tax positions. And while many states use similar standards, courts interpret them differently.
Taxpayers are in a tough spot because they lack the necessary information as they operate across jurisdictions with inconsistent penalty regimes. In this installment of “A Pinch of SALT,” published by Tax Notes State, Eversheds Sutherland attorneys Jeremy Gove, Chelsea Marmor and Megan Long examine the legal standard for penalty imposition, how courts have interpreted these rules, and where this leaves taxpayers in this challenging landscape.