Subchapter II. Penalties.

§ 47–4211. Imposition of accuracy-related penalty.

(a) For purposes of this section, the term:

(1) “Negligence” means a failure to make a reasonable attempt to comply with the provisions of this title or to exercise ordinary and reasonable care in the preparation of a tax return without the intent to defraud. A position with respect to an item is attributable to negligence if it lacks a reasonable basis. Negligence is indicated where:

(A) The taxpayer fails to include on an income tax return an amount of income shown on an information return;

(B) The taxpayer fails to make a reasonable attempt to ascertain the correctness of a deduction, credit, or exclusion on a return; or

(2) “Gross valuation misstatement” means the reporting on any return for a tax imposed by this title of the value of a property or the adjusted basis of a property which is greater than or equal to 400%, or less than or equal to 25%, of the amount determined to be the correct amount of the valuation or adjusted basis.

(3)(A) “Substantial understatement of income tax” means, for a taxable year, an understatement made by taxpayer in filing an individual or estate tax return if the amount of the understatement for the taxable year exceeds the greater of:

(i) Ten percent of the tax required to be shown on the return for the taxable year; or

(ii) $2,000.

(B) In the case of a taxpayer other than an individual or estate, subparagraph (A) of this paragraph shall be applied by substituting “$4,000” for “$2,000”.

(C)(i) For purposes of this section, the term “understatement” means the excess of the amount of tax required to be shown on a return less the tax shown on the return.

(ii) The amount of the understatement under sub-subparagraph (i) of this paragraph shall be reduced by the portion of the understatement which is attributable to:

(I) The tax treatment of an item by the taxpayer if there is or was substantial authority for the treatment; or

(II) An item if:

(aa) The relevant facts affecting the item’s tax treatment are adequately disclosed in a statement attached to the return; and

(bb) There is a reasonable basis for the tax treatment of the item by the taxpayer.

(4) “Substantial valuation misstatement” means the reporting on any return for a tax imposed by this title of the value of a property or the adjusted basis of a property which is greater than or equal to 200%, or less than or equal to 50%, of the amount determined to be the correct amount of the valuation or adjusted basis.

(b)(1) There shall be added to a tax imposed by this title an amount equal to 20% of the portion of an underpayment which is attributable to one or more of the following:

(A) Negligence;

(B) A substantial understatement of income tax; or

(2) There shall be added to the tax imposed by this title an amount equal to 40% of the portion of an underpayment which is attributable to a gross valuation misstatement.

(c)(1) Subsection (b) of this section shall not apply to the portion of an underpayment on which a penalty is imposed under § 47-4212.

(2) No penalty shall be imposed under subsection (b) of this section by reason of a substantial valuation misstatement or a gross valuation misstatement unless the portion of the underpayment for the taxable year attributable to the substantial valuation misstatement exceeds $5,000 ($10,000 in the case of a corporation).

(June 9, 2001, D.C. Law 13-305, § 403(b), 48 DCR 334; Apr. 4, 2003, D.C. Law 14-282, § 11(xx), 50 DCR 896.)

Section References

This section is referenced in § 47-2763 and § 47-4221.

Effect of Amendments

D.C. Law 14-282, in subsec. (a)(2), substituted “greater than or equal to 400%, or less than or equal to 25%, of” for “400% or more greater or less than”; and in subsec. (a)(4), substituted “greater than or equal to 200%, or less than or equal to 50%, of” for “200% or more greater or less than”.

Emergency Legislation

For temporary (90 day) amendment of section, see § 12(fff) of Tax Clarity and Recorder of Deeds Emergency Act of 2002 (D.C. Act 14-381, June 6, 2002, 49 DCR 5674).

For temporary (90 day) amendment of section, see § 12(ggg) of Tax Clarity and Related Amendments Emergency Act of 2002 (D.C. Act 14-456, July 23, 2002, 49 DCR 8107).

For temporary (90 day) amendment of section, see § 12(ggg) of Tax Clarity and Related Amendments Congressional Review Emergency Act of 2002 (D.C. Act 14-510, October 23, 2002, 49 DCR 10247).

Temporary Legislation

For temporary (225 day) amendment of section, see § 12(ggg) of Tax Clarity and Recorder of Deeds Temporary Act of 2002 (D.C. Law 14-191, October 5, 2002, law notification 49 DCR 9549).

For temporary (225 day) amendment of section, see § 12(ggg) of Tax Clarity and Related Amendments Temporary Act of 2003 (D.C. Law 14-228, March 23, 2003, law notification 50 DCR 2741).

§ 47–4212. Imposition of fraud penalty.

(a) If a portion of an underpayment of tax required to be shown on a return is attributable to fraud, there shall be added to the tax imposed by this title an amount equal to 75% of the portion of the underpayment which is attributable to fraud.

(b) If the Mayor establishes that a portion of an underpayment is attributable to fraud, the entire underpayment shall be deemed to be attributable to fraud, except with respect to any portion of the underpayment which the taxpayer establishes, by a preponderance of the evidence, is not attributable to fraud.

(c) In the case of a joint return, this section shall not apply with respect to a spouse (including a domestic partner who files under § 47-1805.01(f)) unless a portion of the underpayment is attributable to the fraud of the spouse (including a domestic partner who files under § 47-1805.01(f)).

(d) Fraud is indicated where a taxpayer willfully:

(1) Fails to pay a tax imposed by this title; or

(2) Attempts to evade or defeat in any way the tax or the payment thereof.

§ 47–4213. Failure to file return or to pay tax.

(a)(1) In case of failure to file a return required by this title on the date prescribed (determined with regard to any extension of time for filing), unless it is shown that the failure is due to reasonable cause and not due to willful neglect, there shall be added to the amount required to be shown as tax on the return 5% of the amount of the tax if the failure is for not more than one month, with an additional 5% for each additional month or fraction thereof during which the failure continues, not exceeding 25% in the aggregate. The amount of tax required to be shown on the return shall be reduced by the amount 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 on the return.

(2) In the case of a failure to pay the amount shown as tax on a return specified in paragraph (1) of this subsection on or before the date prescribed for payment of the tax (determined with regard to any extension of time for payment), unless it is shown that the failure is due to reasonable cause and not due to willful neglect, there shall be added to the amount shown as tax on the return 5% of the amount of the tax if the failure is for not more than one month, with an additional 5% for each additional month or fraction thereof during which the failure continues, not exceeding 25% in the aggregate. For purposes of computing the addition for a month, the amount of tax shown on the return shall be reduced by the amount of the tax which is paid on or before the beginning of the month and by the amount of any credit against the tax which may be claimed on the return.

(3) In the case of a failure to pay an amount in respect of a tax that is required to be shown on a return specified in paragraph (1) of this subsection which is not shown (including an assessment made under this title), within 30 calendar days from the date of notice and demand for payment, unless it is shown that the failure is due to reasonable cause and not due to willful neglect, there shall be added to the amount of tax stated in the notice and demand 5% of the amount of the tax if the failure is for not more than one month, with an additional 5% for each additional month or fraction thereof during which the failure continues, not exceeding 25% in the aggregate. For the purpose of computing the addition for a month, the amount of tax stated in the notice and demand shall be reduced by the amount of the tax which is paid before the beginning of the month.

(b) With respect to a return, the amount of the addition under subsection (a)(1) of this section shall be reduced by the amount of the addition under subsection (a)(2) of this section for any month (or fraction thereof) to which an addition to tax applies under both subsection (a)(1) and (2) of this section.

§ 47–4214. Underpayment of estimated tax by individuals. [Repealed]

[Repealed].

(June 9, 2001, D.C. Law 13-305, § 403(b), 48 DCR 334; Apr. 24, 2007, D.C. Law 16-305, § 73(i), 53 DCR 6198; Mar. 25, 2009, D.C. Law 17-353, § 172(e)(2), 56 DCR 1117; Sept. 14, 2011, D.C. Law 19-21, § 8062(a), 58 DCR 6226; Feb. 26, 2015, D.C. Law 20-155, § 7122(c), 61 DCR 9990.)

Section References

This section is referenced in § 47-2763.

Effect of Amendments

D.C. Law 16-305, in subsec. (e)(3)(A), substituted “having a disability” for “became disabled”.

D.C. Law 17-353, in subsec. (e)(3)(A), substituted “developed a disability” for “having a disability”.

D.C. Law 19-21 rewrote subsec. (b)(1)(B)(ii) and (iii), which formerly read:

“(ii) One hundred percent of the tax shown on the return of the individual for the preceding taxable year if the individual filed a return for the preceding taxable year consisting of 12 months; or

“(iii) One hundred percent of the tax computed on the basis of the facts shown on his return for the preceding taxable year if the individual filed a return for the preceding taxable year consisting of 12 months.”

Emergency Legislation

For temporary (90 day) addition, see § 2 of Self-Assessing Taxpayer Fairness in Notice Emergency Act of 2005 (D.C. Act 16-241, December 22, 2005, 53 DCR 262).

For temporary (90 day) amendment of section, see § 2 of Self-Assessing Taxpayer Fairness in Notice Emergency Act of 2005 (D.C. Act 16-241, December 22, 2005, 53 DCR 262).

For temporary (90 days) repeal of this section, see §§ 7132(c) and 7133 of the Fiscal Year 2015 Budget Support Emergency Act of 2014 (D.C. Act 20-377, July 14, 2014, 61 DCR 7598, 20 STAT 3696).

For temporary (90 days) repeal of this section, see §§ 7122(c) and 7123 of the Fiscal Year 2015 Budget Support Congressional Review Emergency Act of 2014 (D.C. Act 20-449, October 10, 2014, 61 DCR 10915, 20 STAT 4188).

For temporary (90 days) repeal of this section, see §§ 7122(c) and 7123 of the Fiscal Year 2015 Budget Support Second Congressional Review Emergency Act of 2014 (D.C. Act 20-566, January 9, 2015, 62 DCR 884, 21 STAT 541).

Short Title

Short title: Section 8061 of D.C. Law 19-21 provided that subtitle G of title VIII of the act may be cited as “Tax Penalty Safe Harbor Act of 2011”.

Editor's Notes

Applicability of D.C. Law 20-155: Section 7123 of D.C. Law 20-155 provided that this subtitle shall be applicable for tax years beginning after December 31, 2014.

§ 47–4215. Underpayment of estimated tax by corporations, financial institutions, and unincorporated businesses. [Repealed]

[Repealed].

(June 9, 2001, D.C. Law 13-305, § 403(b), 48 DCR 334; Apr. 4, 2003, D.C. Law 14-282, § 11(yy), 50 DCR 896; Sept. 14, 2011, D.C. Law 19-21, § 8062(b), 58 DCR 6226; Feb. 26, 2015, D.C. Law 20-155, § 7122(c), 61 DCR 9990.)

Section References

This section is referenced in § 47-2763 and § 47-4201.

Effect of Amendments

D.C. Law 14-282 rewrote subsec. (e)(1) which had read as follows: “(1) The tax shown on the return for the taxable year (or, if no return is filed, the tax) reduced by applicable credits and estimated payments which are made timely, is less than $100; or”

D.C. Law 19-21 rewrote subsec. (b)(1)(B)(ii), which formerly read:

“(ii) One hundred percent of the tax shown on the return of the entity for the preceding taxable year if the individual filed a return for the preceding taxable year consisting of 12 months.”

Emergency Legislation

For temporary (90 day) amendment of section, see § 12(ggg) of Tax Clarity and Recorder of Deeds Emergency Act of 2002 (D.C. Act 14-381, June 6, 2002, 49 DCR 5674).

For temporary (90 day) amendment of section, see § 12(hhh) of Tax Clarity and Related Amendments Emergency Act of 2002 (D.C. Act 14-456, July 23, 2002, 49 DCR 8107).

For temporary (90 day) amendment of section, see § 12(hhh) of Tax Clarity and Related Amendments Congressional Review Emergency Act of 2002 (D.C. Act 14-510, October 23, 2002, 49 DCR 10247).

For temporary (90 day) addition, see § 2 of Self-Assessing Taxpayer Fairness in Notice Emergency Act of 2005 (D.C. Act 16-241, December 22, 2005, 53 DCR 262).

For temporary (90 day) amendment of section, see § 2 of Self-Assessing Taxpayer Fairness in Notice Emergency Act of 2005 (D.C. Act 16-241, December 22, 2005, 53 DCR 262).

For temporary (90 days) repeal of this section, see §§ 7132(c) and 7133 of the Fiscal Year 2015 Budget Support Emergency Act of 2014 (D.C. Act 20-377, July 14, 2014, 61 DCR 7598, 20 STAT 3696).

Temporary Legislation

For temporary (225 day) amendment of section, see § 12(hhh) of Tax Clarity and Recorder of Deeds Temporary Act of 2002 (D.C. Law 14-191, October 5, 2002, law notification 49 DCR 9549).

For temporary (225 day) amendment of section, see § 12(hhh) of Tax Clarity and Related Amendments Temporary Act of 2003 (D.C. Law 14-228, March 23, 2003, law notification 50 DCR 2741).

Editor's Notes

Applicability of D.C. Law 20-155: Section 7123 of D.C. Law 20-155 provided that this subtitle shall be applicable for tax years beginning after December 31, 2014.

§ 47–4216. Frivolous returns.

(a) An individual shall pay a penalty of $500 if:

(1) The individual files what purports to be a tax return but which:

(A) Does not contain information on which the substantial correctness of the self-assessment may be judged; or

(B) Contains information that on its face indicated that the self-assessment is substantially incorrect; and

(2) The conduct referred to in paragraph (1) of this subsection 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 the District of Columbia’s tax laws.

(b) The penalty imposed by subsection (a) of this section shall be in addition to any other penalty provided by law.

§ 47–4217. Tax return preparers; aiding and abetting by others.

(a) For the purposes of this section, the term:

(1) “Tax return preparer” means a person who prepares for compensation, or who employs one or more persons to prepare for compensation, a return of tax imposed by this title or a claim for refund of tax imposed by this title. The preparation of a substantial portion of a return or claim for refund shall be deemed to be the preparation of the entire return or claim for refund. The term “tax return preparer” shall not mean a person who only:

(A) Furnishes typing, reproducing, or other mechanical assistance;

(B) Prepares a return or claim for refund of the employer (or an officer, partner, member, or employee of the employer) by whom the person is regularly and continuously employed; or

(2) “Understatement of liability” means an understatement of the net amount due with respect to a tax imposed by this title or an overstatement of the net amount creditable or refundable with respect to the tax.

(b) A tax return preparer shall sign the return or claim for refund as a tax return preparer. A tax return preparer who fails to sign a return or claim for refund shall pay a penalty of $50 for each unsigned return or claim for refund unless it is shown that the failure is due to reasonable cause.

(c) A tax return preparer shall pay a penalty of $250 for each return or claim for refund prepared by the tax preparer which understates a taxpayer’s liability if:

(1) A part of an understatement of liability with respect to a return or claim for refund was due to the tax treatment of an item for which there was not a realistic possibility of success on its merits;

(2) The tax return preparer knew or reasonably should have known of the tax treatment of the item; and

(3)(A) The relevant facts affecting the tax treatment of the item were not adequately disclosed in the return or claim for refund or in a statement attached to the return or claim for refund (or in a copy of the federal return which was filed with the return or claim for refund, if applicable); or

(B) The position was frivolous.

(d)(1) A tax return preparer shall pay a penalty of $1,000 for each return or claim for refund prepared by the tax return preparer that understates a taxpayer’s liability if a part of an understatement of liability with respect to a return or claim for refund was due to:

(A) A willful attempt in any manner to understate the liability for tax with respect to the return or claim for refund; or

(B) A reckless or intentional disregard of rules or regulations.

(2) The amount of the penalty payable by a person by reason of paragraph (1) of this subsection shall be reduced by the amount of the penalty paid by the person by reason of subsection (c) of this section.

(e)(1) Except as provided in paragraph (2) of this subsection, a person is subject to a penalty of $1,000 if the person:

(A) Aids or assists in, procures, or advises with respect to, the preparation or presentation of a portion of a return, affidavit, claim for refund, or other document (for purposes of this paragraph, the term “procures” includes ordering or otherwise causing a subordinate to perform an act and knowing of, and not attempting to prevent, participation in the act by any other person (whether or not the person is a director, officer, employee, or agent of the taxpayer involved) over whose activities the person has direction, supervision, or control);

(B) Knows or has reason to believe that the portion will be used in connection with a material matter arising under a tax imposed by this title; and

(2) If the return, affidavit, claim for refund, or other document relates to the tax liability of a corporation, the amount of the penalty imposed by this subsection shall be $10,000.

(3) If a person is subject to a penalty under this subsection with respect to a document relating to a taxpayer for a taxable period (or where there is no taxable period, a taxable event), the person shall not be subject to a penalty under this subsection with respect to another document relating to the taxpayer for the taxable period (or event).

(4) This subsection shall apply whether or not the understatement is made with the knowledge or consent of the persons authorized or required to present the return, affidavit, claim for refund, or other document.

(5) For purposes of paragraph (1) of this subsection, a person furnishing typing, reproducing, or other mechanical assistance with respect to a document shall not be treated as having aided or assisted in the preparation of the document by reason of the assistance.

(6) The penalty imposed by this section shall be in addition to any penalty assessed under subsection (b) of this section.

(7) A penalty on a person shall not be assessed under subsection (c) of this section with respect to a return for which a penalty is imposed on the person under this subsection.

(f)(1) Assessment of any penalty under this section shall be governed by § 47-4312.

(2) Any assessment of a penalty that has become final pursuant to § 47-4312 shall be due and payable within 30 days after service of a final assessment by the Mayor or service of a final order by the Office of Administrative Hearings, as applicable.

(g) [Repealed].

(June 9, 2001, D.C. Law 13-305, § 403(b), 48 DCR 334; Dec. 7, 2004, D.C. Law 15-217, § 4(j), 51 DCR 9126.)

Section References

This section is referenced in § 47-4221.

Effect of Amendments

D.C. Law 15-217, rewrote subsec. (f); and repealed subsec. (g).

Emergency Legislation

For temporary (90 day) amendment of section, see § 3(j) of Office of Administrative Hearings Establishment Emergency Amendment Act of 2004 (D.C. Act 15-513, August 2, 2004, 51 DCR 8976).

For temporary (90 day) amendment of section, see § 3(j) of Office of Administrative Hearings Establishment Congressional Review Emergency Amendment Act of 2004 (D.C. Act 15-553, October 26, 2004, 51 DCR 10359).

§ 47–4218. Penalties for Qualified High Technology Company.

A taxpayer certifying in good faith that it is a Qualified High Technology Company shall not be subject to any penalties under this chapter if it is determined that the taxpayer does not qualify as a Qualified High Technology Company.