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(1) "Reasonable cause" for waiver of penalty and interest is construed in favor of the collection of the penalty and interest.

(2) The exercise of ordinary business care and prudence must be determined by the facts of each case. The existence of "reasonable cause" will be determined on a case-by-case basis at the discretion of the department.

(3) Examples of reasonable cause for failure by a taxpayer to file a tax return or report, pay a tax on the date required by statute, or reply to a deficiency notice from the department include, but are not limited to:

(a) where it can be substantiated that the return or reply was mailed (whether or not the envelope bore sufficient postage) or electronically filed in time to reach the department in the normal course of business, within the legal period (if the due date is a Saturday, Sunday, or holiday, the following business day is within the legal period);

(b) where it can be substantiated that the delay or failure was due to erroneous information given the taxpayer by an employee of the department according to the provisions provided in the taxpayer bill of rights found in 15-1-222, MCA;

(c) where the delay was caused by death or extended serious illness of the taxpayer;

(d) where the delinquency or delay was due to destruction by fire or other casualty of the taxpayer's place of business or business records; or

(e) where a taxpayer is unable, for reasons beyond the taxpayer's control, to obtain the records necessary to determine the amount of tax due.

(4) The examples stated in (3) are illustrations only. Other reasonable causes may exist for failure to properly and timely file the tax statement or return, pay the tax, or reply to a deficiency notice. Each request for waiver will be considered on a case-by-case basis using the following criteria:

(a) the taxpayer's reasons address the penalty and interest that was assessed or the date a reply was due;

(b) the length of time between the event cited as a reason and the filing, payment, or reply date negate the event's effect;

(c) the event that caused the taxpayer's noncompliance or increased liability could have reasonably been anticipated;

(d) the taxpayer has provided sufficient detail (dates, relationships) to determine ordinary business care and prudence was exercised;

(e) the taxpayer documented all pertinent facts; and

(f) the taxpayer could have requested an extension or filed an amended return.

(5) The following are examples which do not constitute reasonable cause and do demonstrate neglect:

(a) forgetfulness or inadvertence on the part of a taxpayer, a taxpayer's employee, a taxpayer's agent, or the taxpayer's professional tax preparer;

(b) failure to file or reply because of advice by a professional tax preparer, attorney, or accountant;

(c) religious, political, or philosophical opposition to the tax;

(d) the advent of new tax laws, regulations, or administrative requirements that create complex problems and significantly delay the taxpayer in preparing returns;

(e) inability of a professional tax preparer to secure competent help in sufficient time to cope with the workload;

(f) a failure to secure the proper forms; or

(g) the taxpayer started to prepare the return or reply in sufficient time, but found that because of complicated issues the taxpayer was unable to finish the return or reply.

(6) The examples stated in (5) are for illustrations only. Other circumstances may exist which do not constitute reasonable cause.

(7) Ignorance of the law does not constitute "reasonable cause."

(8) Inability to pay a tax does not constitute reasonable cause for failure to file a tax return or statement on time.


History: 15-1-201, 15-30-2620, 15-31-501, 15-35-122, 15-53-155, 15-60-104, 15-65-102, MCA; IMP, 15-1-206, 15-1-216, 15-30-2641, 15-31-502, 15-35-105, 15-37-108, 15-38-107, 15-53-155, 15-59-106, 15-60-208, 15-61-205, 15-65-115, MCA; NEW, 1985 MAR p. 113, Eff. 2/1/85; AMD, 2007 MAR p. 509, Eff. 4/27/07; AMD, 2015 MAR p. 763, Eff. 6/12/15; AMD and TRANS, from ARM 42.3.105, 2016 MAR p. 2073, Eff. 11/11/16.

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