H*4848(Rat #0519, Act #0386 of 1998)  General Bill, By Boan
 A BILL TO AMEND TITLE 12, CODE OF LAWS OF SOUTH CAROLINA, 1976, RELATING TO
 TAXATION, BY ADDING SECTION 12-58-185 SO AS TO ALLOW THE DEPARTMENT OF REVENUE
 TO GRANT AN EXTENSION OF TIME TO AN INNOCENT TAXPAYER FOR PAYMENT OF AN AMOUNT
 DUE; TO AMEND SECTION 12-54-40, AS AMENDED, RELATING TO PENALTIES IN
 CONNECTION WITH TAX COLLECTION AND ENFORCEMENT, SO AS TO PROHIBIT THE
 PREPARATION OF A TAX RELATED DOCUMENT BY ONE WHO HAS BEEN CONVICTED OF
 PREPARING A FRAUDULENT TAX DOCUMENT AND TO PROVIDE PENALTIES FOR ONE WHO
 VIOLATES THE PROHIBITION; TO AMEND SECTION 12-54-85, AS AMENDED, RELATING TO
 TIME LIMITS AND EXCEPTIONS FOR ASSESSMENT OF A TAX OR FEE, SO AS TO ALLOW A
 CORPORATE TAXPAYER NINETY DAYS TO REPORT TO THE DEPARTMENT OF REVENUE AN
 ADJUSTMENT IN THE TAXPAYER'S TAXABLE INCOME MADE BY THE INTERNAL REVENUE
 SERVICE; TO AMEND SECTION 12-54-227, AS AMENDED, RELATING TO OUT-OF-STATE TAX
 COLLECTION, SO AS TO ALLOW THE NOTICE TO INCLUDE LATER TAX DEBTS; AND TO
 REPEAL SECTION 12-54-140 RELATING TO REPORTING REQUIREMENTS FOR INTERNAL
 REVENUE SERVICE ADJUSTMENTS IN TAXABLE INCOME AND SECTION 12-58-140, RELATING
 TO THE AUTHORITY OF THE DEPARTMENT OF REVENUE TO ENTER INTO AN INSTALLMENT
 PLAN FOR PAYMENT BY A TAXPAYER.

   03/19/98  House  Introduced and read first time HJ-55
   03/19/98  House  Referred to Committee on Ways and Means HJ-56
   04/08/98  House  Committee report: Favorable Ways and Means HJ-14
   04/14/98  House  Read second time HJ-30
   04/15/98  House  Read third time and sent to Senate HJ-20
   04/21/98  Senate Introduced and read first time SJ-24
   04/21/98  Senate Referred to Committee on Finance SJ-24
   05/20/98  Senate Recalled from Committee on Finance SJ-16
   06/02/98  Senate Amended SJ-81
   06/02/98  Senate Read second time SJ-81
   06/03/98  Senate Read third time and returned to House with amendments
   06/04/98  House  Concurred in Senate amendment and enrolled HJ-23
   06/10/98         Ratified R 519
   06/15/98         Signed By Governor
   06/15/98         Effective date Upon approval by the Governor,
                     this act is effective for tax years beginning
                     after 12/31/97
   06/23/98         Copies available
   06/30/98         Act No. 386

AN ACT TO AMEND TITLE 12, CODE OF LAWS OF SOUTH CAROLINA, 1976, RELATING TO TAXATION, BY ADDING SECTION 12-58-185 SO AS TO ALLOW THE DEPARTMENT OF REVENUE TO GRANT AN EXTENSION OF TIME TO AN INNOCENT TAXPAYER FOR PAYMENT OF AN AMOUNT DUE; TO AMEND SECTION 12-54-40, AS AMENDED, RELATING TO PENALTIES IN CONNECTION WITH TAX COLLECTION AND ENFORCEMENT, SO AS TO PROHIBIT THE PREPARATION OF A TAX RELATED DOCUMENT BY ONE WHO HAS BEEN CONVICTED OF PREPARING A FRAUDULENT TAX DOCUMENT AND TO PROVIDE PENALTIES FOR ONE WHO VIOLATES THE PROHIBITION; TO AMEND SECTION 12-54-85, AS AMENDED, RELATING TO TIME LIMITS AND EXCEPTIONS FOR ASSESSMENT OF A TAX OR FEE, SO AS TO ALLOW A CORPORATE TAXPAYER NINETY DAYS TO REPORT TO THE DEPARTMENT OF REVENUE AN ADJUSTMENT IN THE TAXPAYER'S TAXABLE INCOME MADE BY THE INTERNAL REVENUE SERVICE; TO AMEND SECTION 12-54-227, AS AMENDED, RELATING TO OUT-OF-STATE TAX COLLECTION, SO AS TO ALLOW THE NOTICE TO INCLUDE LATER TAX DEBTS; AND TO REPEAL SECTION 12-54-140 RELATING TO REPORTING REQUIREMENTS FOR INTERNAL REVENUE SERVICE ADJUSTMENTS IN TAXABLE INCOME AND SECTION 12-58-140, RELATING TO THE AUTHORITY OF THE DEPARTMENT OF REVENUE TO ENTER INTO AN INSTALLMENT PLAN FOR PAYMENT BY A TAXPAYER.

Be it enacted by the General Assembly of the State of South Carolina:

Extension of time for payment by innocent taxpayer

SECTION 1. The 1976 Code is amended by adding:

Section 12-58-185. (A) The department may extend the time for payment of an amount due it for a period not to exceed eighteen months from the date fixed for the payment and, in exceptional cases, for a further period not to exceed twelve months. An extension under this section may be granted only where it is shown to the satisfaction of the department that the payment of the amount due it upon the date originally fixed for the payment will result in undue hardship to the taxpayer.

(B) An extension may not be granted under this section for an amount due the department if the taxpayer acted negligently, disregarded rules or regulations intentionally, or committed fraud with intent to evade tax.

Penalties

SECTION 2. A. Section 12-54-40 of the 1976 Code, as last amended by Act 155 of 1997, is further amended to read:

"Section 12-54-40. (A) Except as otherwise provided, this penalty section applies 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) In case of a failure to file a return of tax within sixty days of the date prescribed for filing the return, determined with regard to any extension of time for filing, the addition to tax must not be less than the lesser of one hundred dollars or one hundred percent of the amount required to be shown as tax on the return.

(3) 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) who files what purports to be a return of the tax imposed by a provision of law administered by the department but which:

(a) does not contain information on which the substantial correctness of the tax liability may be judged; or

(b) contains information that on its face indicates the liability is substantially incorrect; and

(2) whose conduct is due to:

(a) a position which is frivolous; or

(b) a desire, which appears on the purported return, to delay or impede the administration of state tax laws;

(3) is liable to a penalty of five hundred dollars. This penalty is 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)(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) Instead of any other penalty provided by law, 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, instead of any other penalty provided, is guilty of a misdemeanor and, upon conviction, must be fined not more than five hundred dollars, or imprisoned not more than one year, or both.

(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.

(L) 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.

(M) 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."

B. The provisions of subsection (K)(6)(b) do not affect an action or proceeding commenced or a right accrued before the effective date of this act.

Time limits on assessments

SECTION 3. Section 12-54-85(D) of the 1976 Code is amended to read:

"(D) A corporation 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 within ninety days after a final determination is received from the Internal Revenue Service. Notification of adjustments made by the Internal Revenue Service must be made under separate cover from a return filed or due to be filed with the department.

Notwithstanding any restrictions on filing a claim for refund provided in subsection (F) below, a corporation may file a claim for refund resulting from an overpayment due to changes in taxable income made by the Internal Revenue Service within thirty days from the date the Internal Revenue Service changes the taxable income."

Out-of-state collections

SECTION 4. Section 12-54-227(A) of the 1976 Code, as last amended by Act 60 of 1995, is further amended to read:

"(A)(1) As provided by Section 12-4-340, the department may contract with a collection agency, within or without this State, for the collection of delinquent taxes, including penalties and interest. Delinquent tax claims may be assigned to the collection agency, for the purpose of litigation in the agency's name and at the agency's expense, to facilitate and expedite the collection process.

(2) For purposes of this section, 'delinquent tax claim' means a tax liability that is due and owing for a period longer than six months and for which the taxpayer has been given at least three notices requesting payment and for any subsequent tax debts issued, one notice of which has been sent by certified or registered mail. The notice sent by certified or registered mail must include a statement that the taxpayer's delinquency may be referred to a collection agency in the taxpayer's home state."

Repeal

SECTION 5. Sections 12-54-140 and 12-58-140 of the 1976 Code are repealed.

Time effective

SECTION 6. Upon approval by the Governor, this act is effective for tax years beginning after December 31, 1997.

Approved the 15th day of June, 1998.