(b) The department is authorized to adopt rules (including interpretive and emergency rules), issue forms and instructions, issue administrative notices, and take such other actions as it deems necessary to implement the provisions of this article.
(c) Election. -- An eligible taxpayer that meets the requirements of subsection (d) of this section with respect to any taxable year to which this article applies may elect to participate in the program under either method below for any particular tax avoidance transaction period. Such election shall be made separately for each taxable year in the form and manner prescribed by the Tax Commissioner, and once made shall be irrevocable.
(1) Voluntary compliance without appeal. -- If an eligible taxpayer elects to participate under this paragraph: (i) The Tax Commissioner shall abate and not seek to collect any penalty that may be applicable to the underreporting or underpayment of West Virginia income tax attributable to the use of tax avoidance transactions for such taxable year; (ii) except as otherwise provided in this article, the Tax Commissioner shall not seek civil or criminal prosecution against the taxpayer for such taxable year with respect to tax avoidance transactions; and (iii) the taxpayer may not file a claim for credit or refund with respect to the tax avoidance transaction for such taxable year. Nothing in this subsection shall preclude a taxpayer from filing a claim for credit or refund for the same taxable year in which a tax avoidance transaction was reported if such credit or refund is not attributable to the tax avoidance transaction. No penalty may be waived or abated under this article if the penalty imposed relates to an amount of West Virginia income tax assessed prior to the first day of August, two thousand six.
(2) Voluntary compliance with appeal. -- If an eligible taxpayer elects to participate under this paragraph, then: (i) The Tax Commissioner shall abate and not seek to collect the penalties for failure to report listed transactions, with respect to such taxable year; (ii) except as otherwise provided in this article, the Tax Commissioner shall not seek civil or criminal prosecution against the taxpayer for such taxable year with respect to tax avoidance transactions; and (iii) the taxpayer may file a claim for credit or refund as provided in article ten of this chapter with respect to such taxable year. Notwithstanding any other provision of the code to the contrary, the taxpayer may not file an appeal until after either of the following: (i) The Tax Commissioner issues a notice of denial; or (ii) the earlier of: (1) The date which is one hundred eighty days after the date of a final determination by the Internal Revenue Service with respect to the transactions at issue; or (2) the date that is three years after the date the claim for refund was filed or one year after full payment of all tax, including penalty and interest. No penalty may be waived or abated under this article if the penalty imposed relates to an amount of West Virginia income tax assessed prior to the first day of August, two thousand six.
(d) Eligible taxpayer. -- The tax shelter voluntary compliance program applies to any eligible taxpayer who, during the period from the first day of August, two thousand six, to the first day of November, two thousand six, does both of the following: (1) Files an amended return for the taxable year for which the taxpayer used a tax avoidance transaction to underreport the taxpayer's West Virginia income tax liability, reporting the total West Virginia taxable income and income tax for such taxable year computed without regard to any tax avoidance transactions; and (2) makes full payment of the additional income tax and interest due for such taxable year that is attributable to the use of the tax avoidance transaction. For purposes of this subsection (d), if the Tax Commissioner subsequently determines that the correct amount of West Virginia income tax was not paid for the taxable year, then the penalty relief under this section shall not apply to any portion of the underpayment not paid to the state that is attributable to a tax avoidance transaction.
An "eligible taxpayer" is an individual, partnership, estate, trust, corporation, limited liability company, joint stock company, or any other company, trustee, receiver, assignee, referee, society, association, business or any other person as described in the tax law, who or which has a tax liability relating to income tax imposed under article twenty-one or article twenty-four of this chapter. However, an otherwise eligible taxpayer would be prohibited from participating in the voluntary compliance initiative if:
(a) The taxpayer is a party to any federal or state criminal investigation for underreporting or underpayment of tax;
(b) As of the taxpayer's application date under the voluntary compliance initiative, the taxpayer is a party to any pending administrative proceeding or civil or criminal litigation relating to the designated taxes under the voluntary compliance initiative. An administrative proceeding or civil litigation shall be deemed not to be pending on the application date if the taxpayer withdraws from that proceeding or litigation before the Tax Commissioner's penalty waiver under the voluntary compliance initiative;
(c) The taxpayer has a criminal conviction concerning the tax on which penalty relief is sought; or
(d) The taxpayer was eligible to participate in the amnesty program under article ten-d of this chapter but did not do so, and the taxpayer participated in the voluntary compliance programs of any other state.
(b) Reportable transaction understatement penalty. -- If a taxpayer has a reportable transaction understatement for any taxable year, there shall be added to the tax an amount equal to twenty percent of the amount of that understatement. This penalty shall be deemed assessed upon the assessment of the tax to which such penalty relates and shall be collected and paid on notice and demand in the same manner as the tax.
(1) Reportable transaction understatement. -- For purposes of this section, the term "reportable transaction understatement" means the product of: (i) The amount of the increase (if any) in taxable income, as determined by reference to the amount of post-apportioned income that results from a difference between the proper tax treatment of an item to which this subsection applies and the taxpayer's treatment of that item as shown on the taxpayer's return, including an amended return filed prior to the date the taxpayer is first contacted by the Tax Commissioner regarding the examination of the return; and (ii) the applicable tax rates.
(2) Items to which subsection (b) applies. -- This subsection shall apply to any item which is attributable to either of the following: (i) any listed transaction as defined in Treasury Regulations Section 1.6011-4; and (ii) any reportable transaction as defined in Treasury Regulations Section 1.6011-4 (other than a listed transaction) if a significant purpose of the transaction is the avoidance or evasion of federal income tax.
(3) Subsection (b) shall be applied by substituting thirty percent for twenty percent with respect to the portion of any reportable transaction understatement with respect to which the requirements of this subsection are not met.
(4) Reasonable cause exception. --
(A) In general. -- No penalty shall be imposed under this subsection with respect to any portion of a reportable transaction understatement if it is shown by clear and convincing evidence that there was a reasonable cause for such portion and that the taxpayer acted in good faith with respect to such portion.
(B) Special rules. -- Subparagraph (A) does not apply to any reportable transaction (including a listed transaction) unless all of the following requirements are met:
(C)The relevant facts affecting the tax treatment of the item are adequately disclosed in accordance with this article. A taxpayer failing to adequately disclose shall be treated as meeting the requirements of this subparagraph: (i) If the penalty for that failure was rescinded; (ii) there is or was substantial authority for such treatment; and (iii) the taxpayer reasonably believed that such treatment was more likely than not the proper treatment.
(c) One hundred percent interest penalty for failure to participate. -- If an eligible taxpayer who fails to participate in the program is contacted by the Internal Revenue Service or the Tax Commissioner regarding the potential use of a tax avoidance transaction with respect to a taxable year and has a deficiency with respect to such taxable year or years, there shall be added to the tax attributable to the potential tax avoidance transaction an amount equal to one hundred percent of the interest due under article ten of this chapter for the period beginning with the statutory due date of the return (determined without regard to extensions) on which the income should have been reported to the date of the notice of assessment. Such penalty shall be deemed assessed upon the assessment of the interest to which such penalty relates and shall be collected and paid in the same manner as such interest. The penalty imposed by this subsection is in addition to any other penalty imposed by this article or article ten. This subsection shall apply to taxable years ending on and after the thirty-first day of December, two thousand five.
(d) Coordination with other penalties. -- Unless provided otherwise by rules, the penalties imposed by this section are in addition to any other penalty imposed by this article or article ten of this chapter.
(b) Amount of penalty. -- The following penalties apply:
(1) In the case of each failure to comply with the requirements of subsection (a), subsection (b) or subsection (d) of section eight, the penalty shall be ten thousand dollars;
(2) If the failure to comply with the requirements of subsection (a), subsection (b) or subsection (d) of section eight is with respect to a listed transaction described in subsection (c) of section eight, the penalty shall be one hundred thousand dollars;
(3) In the case of each failure to comply with the requirements of subsection (a) or subsection (b) of section nine, the penalty shall be ten thousand dollars; and
(4) If the failure to comply with the requirements of subsection (a) or subsection (b) of section nine is with respect to a listed transaction described in subsection (c) of section nine, the penalty shall be one hundred thousand dollars.
(c) Authority to rescind penalty. -- The office of tax appeals, with the written approval of the Tax Commissioner, may rescind all or any portion of any penalty imposed by this section with respect to any violation only if one or more of the following apply: (1) It is determined that failure to comply did not jeopardize the best interests of the state and is not due to any willful neglect or any intent not to comply; (2) it is shown that the violation is due to an unintentional mistake of fact; (3) rescinding the penalty would promote compliance with the requirements of this article and effective tax administration; or (4) the taxpayer can show that there was reasonable cause for the failure to disclose and that the taxpayer acted in good faith.
(d) Coordination with other penalties. -- The penalty imposed by this section is in addition to any penalty imposed by this article or article ten of this chapter.
(b) Additional requirements for listed transactions. -- In addition to the requirements of subsection (a), for any transactions entered into on or after the twenty-eighth day of February, two thousand, that become listed transactions (as defined under Treasury Regulations Section 1.6011-4) at any time, those transactions shall be registered with the Tax Commissioner (in the form and manner prescribed by the Tax Commissioner) by the later of: (i) Sixty days after entering into the transaction; (ii) sixty days after the transaction becomes a listed transaction; or (iii) the first day of July, two thousand six.
(c) Tax shelters subject to this section for taxable years commencing before the first day of January, two thousand seven. -- The provisions of this section apply to any tax shelter herein described in which a person:
(1) Organizes or participates in the sale of an interest in a partnership, entity or other plan or arrangement; and
(2) Makes or causes another person to make a false or fraudulent statement with respect to securing a tax benefit or a gross valuation as to any material matter, and which is or was one or more of the following: (A) Organized in this state; (B) doing business in this state; or (C) deriving income from sources in this state.
(d) Tax shelters subject to this section for taxable years commencing on or after the first day of January, two thousand seven. -- The provisions of this section apply to any tax shelter herein described in which a person organizes or participates in the sale of an interest in a partnership, entity or other plan or arrangement that is or was one or more of the following: (i) Organized in this state; (ii) doing business in this state; or (iii) deriving income from sources in this state.
(e) Tax shelter identification number. -- Any person required to file a return under this article and required to include on the person's federal income tax return a tax shelter identification number pursuant to Section 6111 of the Internal Revenue Code shall furnish such number when filing the person's West Virginia return.
(b) Additional requirements for listed transactions. -- For transactions entered into on or after the twenty-eighth day of February, two thousand, that become listed transactions (as defined under Treasury Regulations Section 1.6011-4) at any time thereafter, the list shall be furnished to the Tax Commissioner by the later of sixty days after entering into the transaction or sixty days after the transaction becomes a listed transaction.
(c) Tax shelters subject to this section. -- The provisions of this section apply to any tax shelter herein described in which a person:
(1) Organizes or participates in the sale of an interest in a partnership, entity or other plan or arrangement; and
(2) Makes or causes another person to make a false or fraudulent statement with respect to securing a tax benefit or a gross valuation as to any material matter; and which is or was one or more of the following: (A) Organized in this state; (B) doing business in this state; or (C) deriving income from sources in this state.
(d) Tax shelters subject to this section for taxable years commencing on or after the first day of January, two thousand seven. -- The provisions of this section apply to any tax shelter herein described in which a person organizes or participates in the sale of an interest in a partnership, entity or other plan or arrangement that is or was one or more of the following: (i) Organized in this state; (ii) doing business in this state; or (iii) deriving income from sources in this state.
Note: WV Code updated with legislation passed through the 2012 1st Special Session
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