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You can search the entire site. or go to the recent opinions, or the chronological or subject indices. State; Dept. of Revenue v. Dyncorp (12/22/00) sp-5352

State; Dept. of Revenue v. Dyncorp (12/22/00) sp-5352

     Notice:  This opinion is subject to correction before publication in
the Pacific Reporter.  Readers are requested to bring errors to the attention of the
Clerk of the Appellate Courts, 303 K Street, Anchorage, Alaska 99501, phone (907)
264-0608, fax (907) 264-0878.


OF REVENUE,                   )    Supreme Court No. S-9221
               Appellant,     )    Superior Court No.
                              )    1JU-98-1019 CI
          v.                  )    
                              )    O P I N I O N
                              )    [No. 5352 - December 22, 2000]
               Appellee.      )   

          Appeal from the Superior Court of the State of
Alaska, First Judicial District, Juneau,
                    Donald D. Hopwood, Judge.

          Appearances: Stephen C. Slotnick, Assistant
Attorney General, and Bruce M. Botelho, Attorney General, Juneau,
for Appellant.  David C. Crosby, Wickwire, Greene, Crosby, Brewer
& Seward, Juneau, and Kenneth H. Silverberg, Nixon, Peabody, LLP,
Washington, D.C., for Appellee.

          Before: Matthews, Chief Justice, Eastaugh,
          Fabe, Bryner, and Carpeneti, Justices.

          BRYNER, Justice.

          The Office of Tax Appeals abated a late-filing penalty
imposed against DynCorp by the Department of Revenue (the
department), finding reasonable cause for DynCorp's failure to give
the department timely notice of changes to its federal tax returns. 
The department appeals, arguing that the Office of Tax Appeals
erred in failing to defer to the department's decision assessing
the penalty and that it misapplied the reasonable-cause exception.
We conclude that the Office of Tax Appeals properly applied de novo
review and therefore owed no special deference to the department. 
But because the facts do not support a finding of reasonable cause
under the correct legal standard, we reverse the Office of Tax
Appeals' decision abating the penalty.            
          DynCorp is a multinational corporation with forty-nine
domestic subsidiaries and several foreign partnerships.  It is
based in Virginia and does business in almost every state.  The
corporation does over one billion dollars worth of business each
year.  In 1995 DynCorp and its subsidiaries filed almost 300 state
tax returns.  DynCorp pays Alaska taxes under AS 43.20.
          A corporation's Alaska tax return is based in part on its
federal return. [Fn. 1]  When an Internal Revenue Service (IRS)
audit requires changes to a corporation's federal return, AS
43.20.030(d) requires that the corporation notify the state and pay
any additional state taxes within sixty days.
          The IRS audited DynCorp's tax returns for 1983 through
1987.  Following its audit, the IRS adjusted DynCorp's federal tax
returns for these years and directed it to pay additional taxes.
DynCorp first received notice of the amount of the federal
adjustments on July 8, 1994, and the IRS issued its formal
assessment on April 3, 1995.  DynCorp paid the federal taxes
shortly after receiving this assessment.  
          In addition to assessing a tax liability for several
years, the IRS found that DynCorp was entitled to a substantial
refund for one of the years in question.  Under the Internal
Revenue Code, the IRS must refer its refund determination to a
congressional joint committee for review and approval before the
decision can be made final. [Fn. 2]  The joint committee approved
the IRS's recommendation and the IRS issued a final decision on
December 7, 1995.
          DynCorp acknowledges that under AS 43.20.030(d), it was
required to provide notice of the IRS assessment to the Department
of Revenue by February 7, 1996, sixty days after the IRS issued its
final decision.  The department did not receive DynCorp's amended
returns until June 24, 1996.
          Upon receiving DynCorp's late notice, the department
assessed a fifteen percent penalty on the late-filed returns for
tax years 1983 through 1987.  DynCorp protested the penalty and
requested an informal conference.  During that proceeding, the
department confirmed the penalty and adjusted it upwards to the
twenty-five percent maximum.  The total penalty amounted to $5,506. 
          DynCorp appealed to the Office of Tax Appeals.  An
administrative law judge from that office conducted an evidentiary
hearing in which DynCorp attempted to show that its failure to pay
the additional taxes on time was due to a reasonable cause and not
willful neglect.
          The facts presented at the hearing were undisputed.  Upon
receiving the IRS's final assessment in December 1995, DynCorp
determined that it was obligated to file over 300 amended state
returns.  DynCorp only had four employees assigned to work on these
returns.  Because the staff was not sufficient to do the job,
DynCorp hired Peat Marwick, LLC, an accounting firm, to assist.  In
order to keep costs down, however, Peat Marwick was instructed not
to complete any returns, but only to prepare spreadsheets, or
workpapers, which DynCorp would then use to prepare the amended
          DynCorp's work was slowed because the supervisor DynCorp
assigned to the project, John Ireland, personally reviewed each
amended return before it went out.  Ireland testified that nobody
else in the corporation could have assisted him with these reviews,
because "you have to have institutional knowledge of what's
happened, and you know, I was the person that had to really do
this."  Although Ireland needed to review each of the amended
returns personally, he spent time on other projects, including
supervising an ambitious fifty-year earnings and profit study and
preparing SEC filings.  At the start of the project, Ireland
instructed his staff to give priority to filing amended returns in
those states where DynCorp would obtain a refund.  Ireland also
decided that his staff and Peat Marwick should complete the more
complicated returns last, including the return required by Alaska.
          Ireland knew of Alaska's sixty-day deadline.  He knew
that DynCorp was not going to file its Alaska return on time, but
he did not ask Alaska to extend the deadline because he did not
realize that DynCorp would be subject to a penalty for a late
          After hearing this evidence, the administrative law judge
issued an opinion reversing the department and abating DynCorp's
penalty, finding that DynCorp had reasonable cause to file a late
return.  The department moved for reconsideration.  Following a
second evidentiary hearing, the administrative law judge issued a
final decision confirming the earlier opinion.  The judge found
that the sheer number of returns that DynCorp had to file, combined
with the short filing period, amounted to extraordinary
circumstances and that DynCorp had sound business reasons for
preparing other state returns before completing Alaska's. 
          The department appealed to the superior court, which 
affirmed the tax court's decision.  The department appeals.
     A.   Standard of Review

          1.   Standard of review for Office of Tax Appeals'
review of department's decision

          As a preliminary matter, the department asks this court
to determine what level of deference the Office of Tax Appeals must
give to the department's decisions.  The department contends that
the Office of Tax Appeals "must uphold the Department's decision on
imposition of a penalty unless the decision is not supported by a
reasonable basis."  According to the department, the administrative
law judge should have deferred to the decision the department
reached in its informal conference with DynCorp.  Instead, the
judge "[made] findings of fact based on a preponderance of the
evidence and exercise[d] her own independent judgment in reaching
a conclusion as to whether the circumstances surrounding the late
filing or payment constitute reasonable cause." 
          Before the legislature created the Office of Tax Appeals
in 1996, disputes between taxpayers and the department were
adjudicated at the administrative level by the Commissioner of
Revenue. [Fn. 3]  In creating the Office of Tax Appeals, the
legislature removed the department's adjudicatory role, creating a
new "quasi-judicial agency" charged with the duty of resolving tax
disputes. [Fn. 4]  In AS 43.05.435, the statute creating the Office
of Tax Appeals, the legislature wrote:
          The administrative law judge shall hear all
questions de novo under AS 43.05.400-- 43.05.499.  The
administrative law judge shall

               (1) resolve a question of fact by a
preponderance of the evidence or, if a different standard of proof
has been set by law for a particular question, by that standard of

               (2) resolve a question of law in the
exercise of the independent judgment of the administrative law

               (3)  defer to the Department of Revenue
as to a matter for which discretion is legally vested in the
Department of Revenue, unless not supported by a reasonable basis.[[Fn. 5]]   
By describing the Office of Tax Appeals as a "quasi-judicial
agency," and adopting the standards of review provided in
AS 43.05.435, the legislature created the functional equivalent of
a full trial court charged with the task of impartially resolving
tax disputes.  Accordingly, the Office of Tax Appeals, like any
trial court, must review and determine facts de novo, [Fn. 6] and
exercise its independent judgment in interpreting and applying the
law to the facts. [Fn. 7]  And, like the superior court, the Office
of Tax Appeals shall defer to agency decisions only where a
question of law involves particularized agency expertise or where
the agency's specialized knowledge and experience would be
especially probative as to the meaning of a statute or regulation.
[Fn. 8]
          This case involves the application of the department's
regulation defining reasonable cause for missing a tax deadline.
[Fn. 9]  That regulation incorporates by reference the body of
federal law interpreting the Internal Revenue Code's reasonable-
cause exception. [Fn. 10]  Because the outcome of this case rests
solely on the application of established federal law to undisputed
facts, it cannot be said that "the answer depends on the
particularized experience or knowledge of the administrative
personnel." [Fn. 11] Therefore, acting as the functional equivalent
of a court of original jurisdiction, the Office of Tax Appeals
correctly concluded that it owed no special deference to the
decision reached by the department.
          2.   Standard of review for appellate review of Office
of Tax Appeals and superior court decisions

          In reviewing the Office of Tax Appeals' decision, we
apply the "substantial evidence" test to questions of fact, and the
"substitution of judgment" test for questions of law. [Fn. 12] 
Finally, when the superior court acts as an intermediate court of
appeal, we give no deference to the superior court's decision;
instead, we independently review the merits of the administrative
determination. [Fn. 13]   
     B.   Did DynCorp Show Reasonable Cause for Late Filing?
          The department argues that the Office of Tax Appeals
erred by reversing the department's finding that no reasonable
cause existed for DynCorp's failure to give the department timely
notice of changes to its federal tax returns. 
          Under AS 43.20.030(d), a taxpayer must notify the
Department of Revenue of any alteration of the taxpayer's federal
income tax return and pay any additional taxes within sixty days.
[Fn. 14]  A late-filing taxpayer is subject to a five percent
penalty for each thirty-day period during which the taxpayer fails
to file, up to a maximum penalty of twenty-five percent. [Fn. 15] 
A taxpayer can avoid this penalty by showing "that the failure is
due to a reasonable cause and not to wilful neglect." [Fn. 16] 
          The department has adopted a regulation defining
"reasonable cause," which references the administrative and
judicial interpretations of the federal Internal Revenue Code and
Treasury Regulations:  "In determining whether the delinquency was
due to reasonable cause and not to willful neglect, the department
will apply the administrative and judicial interpretations of
Internal Revenue Code Sec. 6651 and the Treasury Regulation
Sec. 301.6651-1(c)." [Fn. 17]  Thus, because the reasonable-cause
exception in AS 43.05.220(a) mirrors the Internal Revenue Code's
reasonable-cause exception, and because the department's regulation
defining that exception explicitly adopts the body of federal law
interpreting the Internal Revenue Code's exception and its related
treasury regulation, we rely heavily on the decisions of the
federal courts in resolving the question before us.
          The Supreme Court discussed the reasonable-cause
exception in United States v. Boyle, [Fn. 18] noting that the term
"reasonable cause" requires "the taxpayer to demonstrate that he
exercised 'ordinary business care and prudence' but nevertheless
was 'unable to file the return within the prescribed time.'" [Fn.
19]  The Court also noted that the IRS regulations exempt taxpayers
from the penalty "when the tardiness results from postal delays,
illness, and other factors largely beyond the taxpayer's control. 
The principle underlying the IRS regulations and practices [is]
that a taxpayer should not be penalized for circumstances beyond
his control . . . ." [Fn. 20]
          In In re Craddock, [Fn. 21] the Tenth Circuit considered
a case similar to DynCorp's, where the taxpayer argued that being
"too busy" could constitute reasonable cause for late filing. 
Craddock owned a real estate development firm and his accounting
department prepared the company's tax returns. [Fn. 22]  The firm
experienced exponential growth, and Craddock hired additional
accountants to keep up with the increased workload, building the
accounting staff from five in the early 1980s to fifty by 1985.
[Fn. 23]  Craddock also hired an outside accounting firm to review
the returns prepared by his accounting department. [Fn. 24] 
Through the relevant years, Craddock spent about fifty percent of
his total payroll (approximately $1 million) on accounting and tax
staff, and an additional $100,000 per year in fees to the outside
accounting firm. [Fn. 25]  Craddock also purchased a new accounting
system to help manage his growing business. [Fn. 26]  Despite all
these efforts, he knew that his tax returns were not being timely
filed, but did not instruct his staff to file them on time, because
he wanted them to be accurate. [Fn. 27]  He also did not hire an
outside firm to complete the returns, because "they were too
expensive." [Fn. 28]
          The court ruled that, although Craddock had exercised
some care in increasing his accounting staff, having outside firms
review the tax returns, and replacing his antiquated computer
system, he had "failed to exercise 'ordinary business care and
prudence' in ensuring his returns were timely filed and failed to
show that he was 'unable' to file the returns on time." [Fn. 29] 
The court wrote:
          Mr. Craddock's reasons for his failure to
timely file, such as his records or information could not be
assimilated fast enough, his accounting staff was overworked, and
his computer system was inefficient, are not reasonable cause.  A
taxpayer is "expected in the exercise of ordinary business care and
prudence . . . not [to] take on such a load that he could not
fulfill his own legal obligations within the required time." 
Dustin v. Commissioner, 467 F.2d 47, 50 (9th Cir. 1972) (internal
quotation marks omitted); Oliver v. Commissioner, 73 T.C.M. (CCH)
2035, 2051, 1997 WL 66769 (1997) ("[A] taxpayer is not excused from
timely filing his income tax return merely because he is
overworked."); Merriam v. Commissioner, 70 T.C.M. (CCH) 627, 1995
WL 522813 (1995) ("[A] heavy workload and preoccupation with
business affairs do not constitute reasonable cause for the
untimely filing of a tax return."), aff'd, 107 F.3d 877 (9th Cir.
1997) (table opinion). . . . The complexity of one's affairs also
does not give reasonable cause. Edgar v. Commissioner, 56 T.C. 717,
762-63, 1971 WL 2464 (1971).[ [Fn. 30]]

          Considering that Craddock was a sole proprietor, the
efforts that he undertook to avoid late filing stand in sharp
contrast to the steps taken by DynCorp -- a billion-dollar-a-year
multinational corporation -- to achieve the same result.  Craddock
hired fifty employees to work on his tax returns, while DynCorp
employed a staff of four.  While Craddock paid an outside firm more
than $100,000 to review his staff's work, DynCorp paid
approximately $51,000 for Peat Marwick's work.  If Craddock could
not escape the penalty for late filing, there is little basis for
accepting DynCorp's claim that it should not have to pay.
          Moreover, Craddock, like Boyle and other federal cases
applying Boyle, emphasized a second aspect of the reasonable-cause
requirement: that in order to demonstrate reasonable cause for a
late filing, the taxpayer must be able to show that the
circumstances surrounding the late filing were beyond the
taxpayer's control. [Fn. 31]  In Craddock, the court deferred to
the bankruptcy court's finding that the circumstances surrounding
the taxpayer's late filing were within "his ability to control,"
and therefore he could not "prove that he was unable to file the
tax returns on time." [Fn. 32]
          As in Craddock, the circumstances surrounding DynCorp's
late filing were within the company's ability to control.  The
record shows that DynCorp chose to file amended returns first in
states where DynCorp was entitled to a refund and to file unitary
returns, like the Alaska return, last.  DynCorp was aware of
Alaska's sixty-day deadline, but decided to put the Alaska return
low on its list of priorities.  Moreover, despite DynCorp's
reliance on an internal structure that required Ireland to review
each of the amended returns, Ireland spent time on other projects
instead of devoting his full time to supervising the amended
returns.  Thus, the company made choices to use the resources that
it did have in a manner that prevented timely filing.  These facts
all indicate that DynCorp's late filing, like Craddock's, was
within its ability to control.  Because the company's delay in
filing resulted from the manner in which it elected to allocate its
resources, DynCorp's claim of reasonable cause is unavailing.    
          DynCorp argues that Craddock is distinguishable because
that case involved Craddock's ongoing knowledge that his annual tax
returns were not being filed on time.  In contrast, DynCorp argues,
here the "IRS forced a massive, one-time adjustment to DynCorp's
numerous state tax returns."  DynCorp insists that it could not
have foreseen that its normal tax staff would not be up to the job
of completing the amended returns.
          The Office of Tax Appeals adopted this position, finding
that this case was distinguishable from cases involving "original
tax returns that were filed long after the date set by statute for
filing annual returns."  The Office of Tax Appeals deemed it
significant that, instead of missing a fixed statutory deadline,
like April 15, DynCorp missed a "'floating' sixty day period for
taxpayers to file a notice of adjustment of tax liability."  Thus,
the Office of Tax Appeals found that "DynCorp had no control over,
or advance notice of, the date that the IRS would issue its final
          The Office of Tax Appeals found this case analogous to In
re Hudson Oil Co. [Fn. 33]  There, a bankruptcy trustee was
appointed over the taxpayer's estate three weeks before the
taxpayer's federal tax return was due.  The bankruptcy court found
that the trustee had reasonable cause for late filing.  A
controlling factor was that the circumstances surrounding the late
filing were beyond the trustee's control. [Fn. 34]  The trustee was
given three weeks to prepare a tax return, using books that were
"in disarray." [Fn. 35]  The court found that "it was physically
impossible for the trustee to have prepared the . . . return within
that three week period." [Fn. 36]  
          But the record in this case belies the conclusion that
DynCorp lacked advance notice of the IRS assessment.  The IRS first
notified DynCorp of the amount of its federal adjustments on
July 8, 1994.  The IRS issued DynCorp a second copy of its report
in February 1995, and issued its final assessment on April 3, 1995. 
Because a refund was involved, the assessment was referred to a
congressional joint committee for review.  The committee approved
the assessment without exception and issued a final decision on
December 7, 1995.  DynCorp thus knew for well over one year that it
would have to file amended state tax returns.  It also knew the
probable amount of the impending adjustments eight months before
the IRS's final determination.  The only thing DynCorp did not know
in advance was the exact time when Congress would stamp final
approval on an IRS action where eventual approval could be
predicted with reasonable certainty.  Furthermore, the record
reveals that DynCorp was penalized in 1992 when it failed to notify
Alaska within sixty days of an IRS assessment, so it was on notice
of the consequences of failing to comply with AS 43.20.030(d).
Given these circumstances, surprise simply was not an element of
this case. 
          And in contrast to Hudson, the record here provides no
support for the proposition that "it would have been physically
impossible" for DynCorp to have anticipated, planned for, and met
the demands that it faced as a result of the IRS assessment.  In
Hudson, a company's books were thrust on the trustee with no
advance notice; and through no fault of the trustee, those books
were in disarray.  Here, on the other hand, DynCorp knew well in
advance of congressional action that adjustments to its state
returns would likely be necessary; and the company's late filing 
reflects its deliberate decision to keep its costs low and to
prioritize its filing of amended returns to collect refunds first. 
This is not a case where the taxpayer was unable to meet Alaska's
deadline, but rather is one where the taxpayer chose a course that
predictably prevented it from filing on time.     
          DynCorp nevertheless refers to the workload resulting
from the IRS's assessment as the "proverbial '100-year flood.'" 
But the record hardly supports this assertion.  DynCorp is a
billion-dollar-a-year corporation, doing business in nearly every
state and several foreign nations.  The  record shows that DynCorp
was the subject of similar IRS assessments in the audit cycles
preceding and following the one involved in this case.  In a
typical year, DynCorp files close to 300 state tax returns.  Thus,
the number of amended returns that DynCorp was required to prepare
was not in itself unusual.  In any event, the federal courts have
consistently held that exercising "ordinary business care and
prudence" requires the taxpayer to anticipate the magnitude and
complexity of his tax obligations, and to plan accordingly. [Fn.
37]  For this reason, the size and complexity of the taxpayer's
returns cannot establish reasonable cause for late filing. [Fn. 38] 
Thus, even if the IRS assessment created an unusual amount of work
for DynCorp, the applicable case law would recognize no ground for
finding reasonable cause for late filing. 
          Instead of questioning whether DynCorp had exercised
"ordinary business care and prudence" in anticipating the size and
complexity of its tax obligations, the Office of Tax Appeals
applied a "good business judgment" test.  The administrative law
judge wrote 
          DynCorp had sound business reasons for
deciding to give first priority to preparing the amended returns in
states where refunds were due and to place a lower priority on
making the adjustments to more complicated unitary returns, like
those of New York and Alaska.  Mr. Hevey, a Peat Marwick partner
with 30 years of professional experience in tax matters, testified
that in his opinion DynCorp acted responsibly under the
circumstances.  I agree.

Thus, the Office of Tax Appeals turned what should have been an
inquiry into whether DynCorp exercised ordinary business care and
prudence in ensuring timely compliance with Alaska's sixty-day
deadline into an analysis of whether it made good business sense
for DynCorp to deliberately choose not to comply with the deadline. 
          DynCorp's actions might have been prudent business
decisions in the narrow sense of being advantageous from the
standpoint of the company's financial interests.  But for purposes
of the reasonable-cause exception, that is beside the point.  From 
a business perspective, it always makes sense to make money.  Were
we to equate this kind of business prudence, or "good business
sense," with the reasonable-cause exception's requirement of
ordinary business care, then businesses would always have
reasonable cause to avoid paying taxes on time.  
          Federal case law -- which the department's regulation
expressly adopts as Alaska's measure -- confirms this point.  By
requiring circumstances beyond a company's control and proof that
the company is actually unable to comply, these cases firmly
establish that the exception for reasonable cause is not meant to
spare the company from the disadvantageous legal consequences of
its own financially advantageous decisions.  Instead, the exception
protects only against events that prove unavoidable despite the
exercise of ordinary business care to avoid them and that
unavoidably prevent a timely filing, once they occur. [Fn. 39] 
Absent such circumstances, a claim of "too busy" does not establish
reasonable cause, because the size of the taxpayer's workload is
within the control of the taxpayer, and thus the taxpayer cannot
show an inability to meet the tax deadline. [Fn. 40] 
          "[O]ur system of self-assessment . . . of a tax simply
cannot work on any basis other than one of strict filing standards. 
Any less rigid standard would risk encouraging a lax attitude
toward filing dates." [Fn. 41]  "'If every taxpayer who . . . was
too busy to file a return escaped the penalty for failure to file,
our tax system would soon collapse.'" [Fn. 42]         
          The Office of Tax Appeals erred in finding that DynCorp
had reasonable cause for notifying the Department of Revenue of
changes to its federal tax returns more than sixty days after the
IRS's action.  Because being "too busy" is not reasonable cause for
late filing, DynCorp cannot avoid the penalty.  Therefore, we


Footnote 1:

     See AS 43.20.021; AS 43.20.030.

Footnote 2:

     See 26 U.S.C. sec. 6405(a) (1994).

Footnote 3:

     See former AS 43.05.240.

Footnote 4:

     See preamble, ch. 108, SLA 1996; AS 43.05.405, AS 43.05.435. 

Footnote 5:

     AS 43.05.435.

Footnote 6:

     See AS 43.05.435(1); see generally Williams v. Wainscott, 974
P.2d 975 (Alaska 1999) (discussing trial court's role in conducting
de novo factual hearing).     

Footnote 7:

     See AS 43.05.435(2).

Footnote 8:

     See AS 43.05.435(3); State, Dep't of Revenue v. Atlantic
Richfield Co., 858 P.2d 307, 308 (Alaska 1993).

Footnote 9:

     See 15 Alaska Administrative Code (AAC) 05.200 (1999).

Footnote 10:

     See 15 AAC 05.200(b).

               A taxpayer who wishes to avoid the
penalty established by AS 43.05.220 for failure to file a tax
return or pay a tax must make an affirmative showing of all facts
alleged as a reasonable cause for his or her failure to file the
return or pay the tax on time in a written statement containing a
declaration that it is made under penalty of perjury. The statement
should be filed with the return or filed with the Department of
Revenue as soon as possible thereafter. In determining whether the
delinquency was due to reasonable cause and not to willful neglect,
the department will apply the administrative and judicial
interpretations of Internal Revenue Code Sec. 6651 and the Treasury
Regulation Sec. 301.6651-1(c).      

Footnote 11:

     Gulf Oil Corp. v. State, Dep't of Revenue, 755 P.2d 372, 378
n.19 (Alaska 1988) (internal quotation omitted).

Footnote 12:

     See Handley v. State, Dep't of Revenue, 838 P.2d 1231, 1233
(Alaska 1992).

Footnote 13:

     See id. (citation omitted).

Footnote 14:

     AS 43.20.030(d) provides:

               A taxpayer, upon request by the
department, shall furnish to the department a true and correct copy
of the tax return which the taxpayer has filed with the United
States Internal Revenue Service.  Every taxpayer shall notify the
department in writing of any alteration in, or modification of, the
taxpayer's federal income tax return and of a recomputation of tax
or determination of deficiency, whether with or without assessment. 
A full statement of the facts must accompany this notice.  The
notice shall be filed within 60 days after the final determination
of the modification, recomputation or deficiency, and the taxpayer
shall pay the additional tax or penalty under this chapter.  For
purposes of this section, a final determination shall mean the time
that an amended federal return is filed or a notice of deficiency
or an assessment is mailed to the taxpayer by the Internal Revenue
Service, except that in no event will there be a final
determination for purposes of this section until the taxpayer has
exhausted rights of appeal under federal law. 

Footnote 15:

     AS 43.05.220(a) provides:

               Five percent shall be added to a tax for
each 30-day period or fraction of the period during which the
taxpayer fails to file at the time or times required by law or
regulation a return or report, or pay the full amount of the tax,
or a portion or a deficiency of the tax, as finally determined by
the department and required by this title, unless it is shown that
the failure is due to a reasonable cause and not to wilful neglect. 
The penalty may not exceed 25 percent in the aggregate.  The
penalty is computed only on the unpaid balance of the tax liability
as determined by the department.  The department shall prescribe by
regulation circumstances which constitute reasonable cause for
purposes of this section.

Footnote 16:


Footnote 17:

     15 AAC 05.200(b).

Footnote 18:

     469 U.S. 241, 245 (1985).

Footnote 19:

     Id. at 246 (quoting 26 C.F.R. sec. 301.6651(c)(1) (1984)); see26
C.F.R. sec. 301.6651-1(c)(1) (2000).

Footnote 20:

     Boyle, 469 U.S. at 248 n.6 (citation omitted).

Footnote 21:

     149 F.3d 1249 (10th Cir. 1998).

Footnote 22:

     See id. at 1252.

Footnote 23:

     See id.

Footnote 24:

     See id.

Footnote 25:

     See id.

Footnote 26:

     See id.

Footnote 27:

     See id. at 1253.

Footnote 28:


Footnote 29:

     Id. at 1255.

Footnote 30:


Footnote 31:

     See United States v. Boyle, 469 U.S. 241, 248 n.6 (1985)
(noting that the principle underlying the reasonable-cause
exception is "that a taxpayer should not be penalized for
circumstances beyond his control"); Valen Mfg. Co. v. United
States, 90 F.3d 1190, 1193 (6th Cir. 1996); Conklin Bros. of Santa
Rosa, Inc. v. United States, 986 F.2d 315, 318-19 (9th Cir. 1983)
(holding that corporate taxpayers were not disabled from meeting
tax filing deadline even though corporate employees responsible for
such filings secretly missed deadlines without management's
knowledge, despite corporation's prudence and care in supervising
its employees, the situation was ultimately within its control, and
thus did not constitute reasonable cause); In re Hudson Oil Co.,
Inc., 91 B.R. 932, 950 (Bankr. D. Kan. 1988) (finding reasonable
cause because it was "physically impossible" for the newly-
appointed trustee to complete a return within three weeks); Tabbi
v. Commissioner, 70 T.C.M. (CCH) 836, 838, 850 (1995) (finding
reasonable cause where the taxpayers' son was terminally ill and
the taxpayers spent four continuous months in the hospital around
the time their tax return was due).

Footnote 32:

     Craddock, 149 F.3d at 1255-56.

Footnote 33:

     91 B.R. 932 (Bankr. D. Kan. 1988).

Footnote 34:

     See id. at 950-51.

Footnote 35:

     Id. at 950.

Footnote 36:


Footnote 37:

     See Dustin v. Commissioner, 467 F.2d 47, 50 (9th Cir. 1972)
(holding that the taxpayer "could have been expected in the
exercise of 'ordinary business care and prudence . . . not [to]
take on such a load that he could not fulfill his own legal
obligations within the required time'"); see also Craddock, 149
F.3d at 1255.

Footnote 38:

     See Oliver v. Commissioner, 73 T.C.M. (CCH) 2035, 2051 (1997);
Merriam v. Commissioner, 70 T.C.M. (CCH) 627, 635-36 (1995), aff'd,
107 F.3d 877 (9th Cir. 1997); Edgar v. Commissioner, 56 T.C. 717,
762-63 (1971).

Footnote 39:

     See Craddock, 149 F.3d at 1255-56.

Footnote 40:

     See id.

Footnote 41:

     United States v. Boyle, 469 U.S. 241, 249 (1985) (footnote

Footnote 42:

     Craddock, 149 F.3d at 1257 (quoting Logan Lumber Co. v.
Commissioner, 365 F.2d 846, 854 (5th Cir. 1966)).