Could a taxpayer retain its 2013 R&D spending B&O tax credit after an employee filed the wrong survey and the required Washington survey was late?

Plain-English summary

A computer-systems and software business claimed Washington's 2013 B&O tax credit for qualified R&D spending. The Department reminded it five days before the annual survey's April 30, 2014 deadline, but the business did not request an extension and did not file the Washington survey until September 11.

The taxpayer said an employee mistakenly filed a federal Business R&D Survey with the U.S. Census Bureau and believed that filing satisfied Washington's requirement. Washington held that employee mistakes and misunderstandings are expressly outside the rule's definition of circumstances beyond the taxpayer's control.

The taxpayer also did not qualify for the separate one-time 90-day extension because it had not filed a timely written extension request and submitted the survey after that period had expired. Under the governing statute, a claimed credit becomes immediately due when the required annual survey is not timely filed.

Result: the Department properly assessed the previously claimed 2013 credit, and the petition was denied.

What this means for you

Businesses claiming R&D incentives

Treat the annual survey as a separate eligibility requirement, not an administrative afterthought. Calendar it independently from federal surveys and tax returns.

Tax departments and advisers

Confirm the agency, form, filing system, and deadline before submission. An employee's wrong-form filing generally will not support a circumstances-beyond-control extension.

Taxpayers needing more time

Request any available extension in writing before the deadline and verify the statutory extension period; a late request cannot retroactively protect the credit.

Common questions

Q: Did filing a federal R&D survey satisfy Washington's requirement?

A: No. The required annual survey had to be filed with the Washington Department of Revenue.

Q: Was the employee's mistake beyond the taxpayer's control?

A: No. The rule specifically excludes employee mistakes and taxpayer misunderstandings from qualifying circumstances.

Q: Could the taxpayer use the one-time 90-day extension?

A: No. It did not make a timely written request and filed after the 90-day period.

Q: What happened to the credit?

A: The amount claimed for the prior calendar year became due, and the Department assessed that amount with interest.

Citations and references

• RCW 82.04.4452 (qualified R&D spending credit)
• RCW 82.32.585 (annual survey and credit consequence)
• RCW 82.32.590 (survey filing extensions)
• WAC 458-20-228 (circumstances beyond the taxpayer's control)
• WAC 458-20-268 (annual survey requirement)

Source

• Landing page: Washington Tax Decisions ZIP files
• Original PDF: 34WTD583.pdf
• Source archive: Volume 34 ZIP (member 34 WTD 583.pdf)

Original ruling text

Det. No. 15-0153, 34 WTD 583 (December 31, 2015)

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Cite as Det. No. 15-0153, 34 WTD 583 (2015)

BEFORE THE APPEALS DIVISION
DEPARTMENT OF REVENUE
STATE OF WASHINGTON
In the Matter of the Petition for Correction of )
Assessment of
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...
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DETERMINATION
No. 15-0153
Registration No. . . .

RULE 228; RCW 82.04.4452; RCW 82.32.590: BUSINESS AND
OCCUPATION TAX – TAX CREDIT FOR QUALIFIED RESEARCH AND
DEVELOPMENT SPENDING – ANNUAL SURVEY REQUIREMENT –
CRITERIA FOR EXTENSION OF FILING DEADLINE. Failure to timely file with the Department the annual survey required to qualify for a research and development (R&D) spending business and occupation (B&O) tax credit results in loss of the credit. Employee mistake is not a circumstance beyond the control of the taxpayer qualifying for an extension of time to file the survey. Headnotes are provided as a convenience for the reader and are not in any way a part of the decision or in any way to be used in construing or interpreting this Determination. Eckholm, A.L.J. – A taxpayer seeks waiver of an assessment of business and occupation (B&O) tax issued in the amount of the taxpayer’s previously asserted credit for research and development (R&D) spending after the taxpayer failed to timely file the required annual survey. The taxpayer claims the late survey filing was the result of [its] employee[‘s] mistake. The taxpayer’s petition is denied.1 ISSUE Whether the taxpayer qualifies for an extension of the due date to file the annual survey for the RCW 82.04.4452 B&O tax credit for R&D spending, as provided by RCW 82.32.590 and WAC 458-20-228. FINDINGS OF FACT
[Taxpayer] is in the business of designing computer systems and software. In 2013, the taxpayer took a credit for its R&D spending against B&O taxes due as provided for by RCW 82.04.4452. On April 25, 2014, a Department of Revenue (Department) representative contacted the taxpayer with a reminder that the annual survey, required by RCW 82.04.4452, was due to be filed by April 30, 2014. The taxpayer did not request an extension of the due date and filed the annual 1

Identifying details regarding the taxpayer and the assessment have been redacted pursuant to RCW 82.32.410.

Det. No. 15-0153, 34 WTD 583 (December 31, 2015)

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survey on September 11, 2014. As a result, the Department issued an assessment against the taxpayer for the amount of the previously taken credit, and interest, in the amount of $ . . . . The taxpayer appealed the assessment seeking waiver of the assessment based on its employee’s mistake in filing the wrong form. The taxpayer indicated that it mistakenly filed the Business R&D Survey with the U.S. Census Bureau believing that such filing met the RCW 82.04.4452 annual survey filing requirement. ANALYSIS RCW 82.04.4452 authorizes a B&O tax credit for qualified R&D spending. To claim the credit, a person must file a complete annual survey with the Department as required by RCW 82.32.585. RCW 82.04.4452(6). The annual survey must be filed by April 30th of the year following any calendar year in which a person becomes eligible to claim the credit. RCW 82.32.585(1)(a)(i); see also WAC 458-20-268(3). RCW 82.32.590 provides two exceptions to the annual survey filing deadline: (1) the Department must extend the time for filing the survey if the failure to file the survey by the due date was the result of “circumstances beyond the control of the taxpayer,” as described by WAC 458-20-228(9) (Rule 228(9)) (RCW 82.32.590(1)-(2)); and (2) a taxpayer is entitled to a one-time 90-day extension of the deadline to file an annual survey where the taxpayer files a timely written request for extension and the taxpayer was timely in filing prior annual surveys, beginning in 2010 (RCW 82.32.590(3)). “Circumstances beyond the control of the taxpayer” are generally those that are immediate, unexpected, or in the nature of an emergency, which prevent the taxpayer from the reasonable opportunity to obtain an extension of the due date or otherwise timely file. Rule 228(9)(a). Examples include: an act of fraud by a taxpayer’s employee; death or serious illness of the taxpayer, family member, or accountant; or the destruction of business records by fire or other casualties. Rule 228(9)(a)(ii)(C), (E) and (F). Rule 228 also provides specific examples considered not to be circumstances beyond the control of the taxpayer, including where the late filing resulted from a taxpayer’s misunderstanding or lack of knowledge of a tax liability, and where late filing resulted from mistakes on the part of employees or other persons contracted with the taxpayer. Rule 228(9)(a)(iii)(B), (E). Here, in regards to the first exception for late survey filing, the taxpayer’s employee’s mistake in failing to timely file the annual survey was not a circumstance beyond the control of the taxpayer that would qualify the taxpayer for an extension of time to file the survey under RCW 82.32.590(1). Rule 228(9)(a)(iii)(B), (E). In regards to the second exception for late survey filing, the taxpayer did not file a request for extension and filed the annual survey well after the 90-day extension period, on September 11, 2014; therefore, the taxpayer is not entitled to an extension under RCW 82.32.590(3). The penalty for claiming the credit under RCW 82.04.4452 but failing to timely file a complete annual survey is that the amount of credit claimed for the previous calendar year is immediately due. RCW 82.32.585(6)(a). The taxpayer failed to file the annual survey required for its claimed 2013 credit by the April 30, 2014 due date; therefore, the Department correctly assessed the taxpayer the amount of its claimed credit for 2013. The taxpayer’s petition is denied.

Det. No. 15-0153, 34 WTD 583 (December 31, 2015)

DECISION AND DISPOSITION
The taxpayer’s petition is denied.
Dated this 11th day of June, 2015.

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