HRS § 231-36.8 — Erroneous claim for refund or credit


§231-36.8 Erroneous claim for refund or
credit. (a) If a claim for refund or credit with respect to tax is made
for an excessive amount, the person making the claim shall be liable for a
penalty in an amount equal to twenty per cent of the excessive amount; provided
that there shall be no penalty assessed where the penalty calculation under
this section results in an amount of less than $400.
(b) It shall be a defense to the penalty under
this section that the claim for refund or credit had a reasonable basis. A
person claiming the reasonable basis defense shall have the burden of proof to
demonstrate the reasonableness of the claim.
(c) This section shall be construed in
accordance with regulations and judicial interpretations given to section 6676
of the Internal Revenue Code.
(d) For purposes of this section:
"Excessive amount" means the amount
by which the amount of the claim for refund or credit for any taxable year
exceeds the amount of the claim allowable for such taxable year.
"Reasonable basis" means a standard
of care used in tax reporting that is significantly higher than not frivolous
or not patently improper. A reasonable basis position will be more than
arguable and based on at least one or more authorities of either state or
federal tax administration. A position is considered to have a reasonable
basis if a reasonable and well-informed analysis by a person knowledgeable in
tax law would lead that person to conclude that the position has approximately
a one-in-four, or greater, likelihood of being sustained on the merits. A
reasonable basis includes innocent mistakes where the excessive amount is the
result of inadvertence, mathematical error, or where otherwise defined as
innocent by the director pursuant to a formal pronouncement issued without
regard to chapter 91.
(e) This section shall not apply to any
portion of an underpayment on which a penalty is imposed under section
231-36.6.