WSR 00-14-028

EXPEDITED ADOPTION

DEPARTMENT OF REVENUE


[ Filed June 29, 2000, 9:32 a.m. ]

Title of Rule: WAC 458-57-035 Washington estate tax return to be filed--Penalty for late filing--Interest on late payments--Waiver or cancellation of penalty--Application of payment and 458-57-045 Administration of the tax--Releases, amended returns, refunds, heirs of escheat estates.

Purpose: Rule 035 discusses the due date for filing Washington's estate tax return, the interest and penalties imposed when the return is not timely filed, and the circumstances under which a penalty can be waived or cancelled. Rule 045 discusses the releases issued to personal representatives by the department when the state estate taxes are paid. Rule 045 also explains how and when an amended state return should be filed.

Statutory Authority for Adoption: RCW 83.100.200.

Statute Being Implemented: RCW 83.100.050, 83.100.060, 83.100.070, 83.100.080, 83.100.090, 83.100.130.

Summary: Rule 035 is being revised to incorporate chapter 105, Laws of 2000, which limits the late payment penalty to the lesser of 25% of the tax due or $1500. Rule 045 is being revised to eliminate the requirement that refund claims for overpaid taxes be made within one year of the date the taxes were paid. RCW 83.100.130 no longer places this limitation on refund claims.

Reasons Supporting Proposal: To incorporate statutory changes.

Name of Agency Personnel Responsible for Drafting: Alan R. Lynn, 1025 Union Avenue, Room 400, Olympia, WA, (360) 570-6125; Implementation and Enforcement: Gary O'Neil, 2735 Harrison N.W., Building 4, Olympia, WA, (360) 753-2871.

Name of Proponent: Department of Revenue, governmental.

Rule is not necessitated by federal law, federal or state court decision.

Explanation of Rule, its Purpose, and Anticipated Effects: WAC 458-57-035 discusses the due date for filing of Washington's estate tax return and payment of the tax due. It explains that a penalty is imposed on the taxes due with the state return when the return is not filed on or before the due date, and that interest is imposed when the tax due is not paid by the due date. The rule also discusses the limited circumstances under which the law allows the Department of Revenue to cancel or waive the penalty, and the procedure for requesting that cancellation or waiver.

WAC 458-57-045 contains information on releases issued by the department for state estate taxes paid. It explains how and when an amended state return should be filed. The rule also identifies the requirements for notification to the department when a claimed heir to an escheat estate is located.

Proposal Changes the Following Existing Rules: The department is proposing a revision of two existing rules, WAC 458-57-035 Washington estate tax return to be filed--Penalty for late filing--Interest on late payments--Waiver or cancellation of penalty--Application of payment and 458-57-045 Administration of the tax--Releases, amended returns, refunds, heirs of escheat estates. The rules are being revised to incorporate legislative changes as discussed above.

NOTICE

THIS RULE IS BEING PROPOSED TO BE ADOPTED USING AN EXPEDITED RULE-MAKING PROCESS THAT WILL ELIMINATE THE NEED FOR THE AGENCY TO HOLD PUBLIC HEARINGS, PREPARE A SMALL BUSINESS ECONOMIC IMPACT STATEMENT, OR PROVIDE RESPONSES TO THE CRITERIA FOR A SIGNIFICANT LEGISLATIVE RULE. IF YOU OBJECT TO THIS RULE BEING ADOPTED USING THE EXPEDITED RULE-MAKING PROCESS, YOU MUST EXPRESS YOUR OBJECTIONS IN WRITING AND THEY MUST BE SENT TO Alan R. Lynn, Department of Revenue, P.O. Box 47467, Olympia, WA 98504-7467, fax (360) 664-0693, e-mail alanl@dor.wa.gov , AND RECEIVED BY September 6, 2000.

To Obtain a Copy of this Form and Rule in an Alternative Format: Contact Ginny Dale, at (360) 570-6176, TDD 1-800-451-7985. Please allow ten days for the form and rule to be prepared and sent to you.


June 29, 2000

Claire Hesselholt

Rules Manager

Legislation and Policy Division

OTS-4119.2


AMENDATORY SECTION(Amending WSR 99-15-095, filed 7/21/99, effective 8/21/99)

WAC 458-57-035
Washington estate tax return to be filed -- Penalty for late filing -- Interest on late payments -- Waiver or cancellation of penalty -- Application of payment.

(1) Introduction. This rule discusses the due date for filing of Washington's estate tax return and payment of the tax due. It explains that a penalty is imposed on the taxes due with the state return when the return is not filed on or before the due date, and that interest is imposed when the tax due is not paid by the due date. The rule also discusses the limited circumstances under which the law allows the department of revenue to cancel or waive the penalty, and the procedure for requesting that cancellation or waiver.

(2) Filing the state return -- Payment of the tax due. The Washington estate tax return (state return) referred to in RCW 83.100.050 and a copy of the federal estate tax return (federal return) must be filed on or before the date that the federal return is required to be filed. The tax due with the state return must be paid on or before the date that the federal estate tax is required to be paid.

(a) Section 6075 of the Internal Revenue Code (IRC) requires that the federal return be filed within nine months after the date of the decedent's death. In the case of any estate for which a federal return must be filed, a state return must be filed with the Washington state department of revenue (department) on or before the date on which the federal return is required to be filed. (This may include a federally granted extension of time for filing. See subsection (2)(b).)

(b) Section 6081 of the IRC permits the granting of a reasonable extension of time for filing the federal return, generally not to exceed six months from the original due date. If a federal extension of the time to file is granted, the personal representative is required to file a true copy of that extension with the department on or before the original due date, or within thirty days of the issuance of the federal extension, whichever is later. RCW 83.100.050(2). If the personal representative fails to do so, the department may require the personal representative to file the state return on the date that the federal return would have been due had the federal extension not been granted.

(c) When the personal representative obtains an extension of time for payment of the federal tax, or elects to pay that tax in installments, the personal representative may choose to pay the state estate tax over the same time period and in the same manner as the federal tax. The personal representative is required to file a true copy of that extension with the department on or before the original due date, or within thirty days of the issuance of the federal extension, whichever is later. RCW 83.100.060(2). If the personal representative fails to do so, the department may require the personal representative to pay the state tax on the date that the federal tax would have been due had the federal extension not been granted.

(d) The department shall issue a release when Washington's estate tax has been paid. Upon issuance of a release, all property subject to the tax shall be free of any claim for the tax by the state. RCW 83.100.080.

(3) The late filing penalty. If the state return is not filed by the due date, or any extension of the state return's due date, the person required to file the federal return ((shall pay a penalty)) may be subject to a late filing penalty. This penalty applies if the person required to file the federal return has not timely filed the state return with the department prior to being notified by the department, in writing, of the necessity to file the state return. The late payment penalty is equal to five percent of the tax due for each month during which the ((report)) state return has not been filed((. RCW 83.100.070. The total penalty may)), not to exceed the lesser of twenty-five percent of the tax or one thousand five hundred dollars. RCW 83.100.070.

(a) The penalty is the equivalent of five percent for each month, but is accrued on a daily basis for those periods less than a month. For any portion of a month, it is calculated by taking the five percent monthly rate and dividing it by the number of days from the beginning of the month through the date the return is filed, including the filing date.

(((a))) For example, assume a state return is due on February 3rd but is not filed until April 20th of the same year. The state return is delinquent starting with February 4th. The amount of tax due with the state return is $10,000.

(i) The penalty should be computed as follows:


Feb 4-Mar 3 $10,000 tax at 5% per month $500.00
Mar 4-Apr 3 $10,000 tax at 5% per month $500.00
Apr 4-Apr 20 $10,000 tax at .1667% x 17 days $283.39

Total delinquent penalty due on April

20th filing date

$1,283.39


(ii) In this example, the first two calendar months are complete and incur the full five percent penalty. The last portion of a month is a total of seventeen days, including both April 4th and April 20th. Since April has thirty days total, the five percent monthly rate is divided by the thirty days in April to arrive at a daily rate of.001667 (or.1667 percent). The daily rate is then multiplied by the seventeen days of penalty accrual to arrive at the total percentage of penalty due for that portion of a month (.001667 x 17 days = .028339 or 2.8339 percent).

(b) If a federal extension of the due date is requested, the penalty provided for late filing of the state return will be imposed if the state return is filed after the due date and the federal extension is ultimately denied.

(4) Interest is imposed on late payment. The department is required by law to impose interest on the tax due with the state return if payment of the tax is not made on or before the due date. RCW 83.100.070. Interest applies to the delinquent tax only, and is calculated from the due date until the date of payment. Interest imposed for periods after December 31, 1996, will be computed at the annual variable interest rate described in RCW 82.32.050(2). Interest imposed for periods prior to January 1, 1997, will be computed at the rate of twelve percent per annum.

(5) Waiver or cancellation of penalties. RCW 83.100.070(3) authorizes the department to waive or cancel the penalty for late filing of the state return under limited circumstances.

(a) Claiming the waiver. A request for a waiver or cancellation of penalties should contain all pertinent facts and be accompanied by such proof as may be available. The request must be made in the form of a letter and submitted to the department's special programs division. The person responsible bears the burden of establishing that the circumstances were beyond the responsible person's control and directly caused the late filing. The department will cancel or waive the late filing penalty imposed on the state return when the delinquent filing is the result of circumstances beyond the control of the person responsible for filing of the state return. The person responsible for filing the state return is the same person who is responsible for filing the federal return.

(b) Circumstances eligible for waiver. In order to qualify for a waiver of penalty the circumstances beyond the control of the person responsible for filing the state return must directly cause the late filing of the return. These circumstances are generally immediate, unexpected, or in the nature of an emergency. Such circumstances result in the person responsible not having reasonable time or opportunity to obtain an extension of their due date (see subsection (2)(b)) or to otherwise timely file the state return. Circumstances beyond the control of the responsible person include, but are not necessarily limited to, the following:

(i) The delinquency was caused by the death or serious illness of the person responsible for filing the state return or a member of the responsible person's immediate family. In order to qualify for penalty waiver, the death or serious illness must directly prevent the person responsible from having reasonable time or opportunity to arrange for timely filing of the state return. Generally, the death or serious illness must have occurred within sixty days prior to the due date, provided that a valid state return is filed within sixty days of the due date.

(ii) The delinquency was caused by an unexpected and unavoidable absence of the person responsible. Generally, this absence must be within sixty days prior to the due date, provided that a valid state return is filed within sixty days of the due date. "Unavoidable absence of the person responsible" does not include absences because of business trips, vacations, personnel turnover, or personnel terminations.

(iii) The delinquency was caused by the destruction by fire or other casualty of estate records necessary for completion of the state return.

(iv) An estate tax return was timely filed, but was filed incorrectly with another state due to an issue of the decedent's domicile.

(v) A Washington estate tax return was properly prepared and timely filed, but was sent to the location for filing of the federal estate tax return.

(6) Waiver or cancellation of interest. Title 83 RCW (Estate Taxation) does not provide any circumstances that allow for waiver of the interest, even though penalty may be waived under limited circumstances (see subsection (5)).

(7) Application of payment towards liability. The department will apply taxpayer payments first to interest, next to penalties, and then to the tax, without regard to any direction of the taxpayer.

[Statutory Authority: RCW 83.100.200. 99-15-095, 458-57-035, filed 7/21/99, effective 8/21/99.]

OTS-4120.2


AMENDATORY SECTION(Amending WSR 99-15-095, filed 7/21/99, effective 8/21/99)

WAC 458-57-045
Administration of the tax -- Releases, amended returns, refunds, heirs of escheat estates.

(1) Introduction. This rule contains information on releases issued by the department for state estate taxes paid. It explains how and when an amended state return should be filed((, and states the time limit for claiming a refund of overpaid taxes)). The rule also gives several requirements for notification to the department when a claimed heir to an escheat estate is located.

(2) Releases. When the state estate taxes have been paid in full, the department will issue a release to the personal representative upon request. The request will include a completed state return and a copy of the completed federal return. The final determination of the amount of taxes due from the estate is contingent on receipt of a copy of the final closing letter issued by the Internal Revenue Service (IRS). The department may require additional information to substantiate information provided by the estate. The release issued by the department will not bind or estop the department in the event of a misrepresentation of facts.

(3) Amended returns. An amended state return must be filed with the department within five days after any amended federal return is filed with the IRS and must be accompanied by a copy of the amended federal return.

(a) Any time that the amount of federal tax due is adjusted or when there is a final determination of the federal tax due the person responsible must give written notification to the department. This notification must include copies of any final examination report, any compromise agreement, the state tax closing letter, and any other available evidence of the final determination.

(b) If any amendment, adjustment or final determination results in additional state estate tax due, interest will be calculated on the additional tax due at the annual variable interest rate described in RCW 82.32.050(2).

(4) Refunds. ((Claims for refund of taxes overpaid must be initiated within one year of the time the taxes are first paid to the state of Washington.)) Only the personal representative or the personal representative's retained counsel may make ((such)) a claim for a refund of overpaid tax. Any refund issued by the department will include interest at the existing statutory rate defined in RCW 82.32.050(2), computed from the date the overpayment was received by the department until the date it is mailed to the estate's representative. RCW 83.100.130(2).

(5) Heirs of escheat estates. Heirs to an estate may be located after the estate escheats to Washington. The personal representative of an escheat estate or a claimed heir must provide the department with all information and documentary evidence available that supports the heir's claim. All supporting documents must be in the English language when submitted to the department. The English translation of any foreign document shall be authenticated as reasonably required by the department.

(a) In all cases where there is a court hearing or the taking of a deposition on the question of a claimed heir, the personal representative shall give the department twenty days' written notice of such hearing or matter.

(b) The personal representative must give the department at least twenty days' written notice of the hearing on the final account and petition for distribution.

[Statutory Authority: RCW 83.100.200. 99-15-095, 458-57-045, filed 7/21/99, effective 8/21/99.]

Washington State Code Reviser's Office