(a)(1) After a final return pursuant to the provisions of this chapter is filed, the commissioner shall cause the same to be examined and may make such further audit or investigation or reaudit as the commissioner deems necessary, and if the commissioner determines that there is a deficiency with respect to the payment of any tax due under this chapter, the commissioner shall assess or reassess the additional taxes, penalties and interest due to this state, give notice of such assessment or reassessment to the taxpayer and make demand upon the taxpayer for payment. Not later than sixty days after the mailing of such notice, the taxpayer shall pay to the commissioner, in cash or by check, draft or money order drawn to the order of the commissioner, the amount of the deficiency. Such amount shall bear interest at the rate of one per cent per month or fraction thereof from the date when the original tax became due and payable.

(2) (A) When it appears that any part of the deficiency for which a deficiency assessment is made is due to negligence or intentional disregard of the provisions of this chapter or regulations adopted thereunder, there shall be imposed a penalty equal to ten per cent of the amount of such deficiency assessment. When it appears that any part of the deficiency for which a deficiency assessment is made is due to fraud or intent to evade the provisions of this chapter or regulations adopted thereunder, there shall be imposed a penalty equal to twenty-five per cent of the amount of such deficiency assessment.

(B) (i) For audits of returns commencing on or after January 1, 2006, and prior to January 1, 2018, when it appears that any part of the deficiency for which a deficiency assessment is made is due to failure to disclose a listed transaction, as defined in Section 6707A of the Internal Revenue Code of 1986, or any subsequent corresponding internal revenue code of the United States, as amended from time to time, on the taxpayer's federal tax return, there shall be imposed a penalty equal to seventy-five per cent of the amount of such deficiency assessment.

(ii) For audits of returns commencing on or after January 1, 2018, when it appears that any part of the deficiency for which a deficiency assessment is made is due to failure to disclose a reportable transaction, as defined in said Section 6707A, on the taxpayer's federal tax return, there shall be imposed a penalty equal to seventy-five per cent of the amount of such deficiency assessment.

(3) No taxpayer shall be subject to more than one penalty under this section in relation to the same tax period.

(4) Any decision rendered by any federal court holding that a taxpayer has filed a fraudulent return with the Director of Internal Revenue shall subject the taxpayer to the twenty-five per cent penalty imposed by this subsection without the necessity of further proof thereof, except when it can be shown that the return to the state so differed from the return to the federal government as to afford a reasonable presumption that the attempt to defraud did not extend to the state.

(b) A notice of deficiency shall set forth the reason for the proposed assessment. The notice shall be mailed to the taxpayer at his last-known address. In the case of a joint return, the notice of deficiency may be a single joint notice except that if the commissioner is notified by either spouse that separate residences have been established he shall mail joint notices to each spouse. If the taxpayer is deceased or under a legal disability, a notice of deficiency may be mailed to his last-known address unless the commissioner has received notice of the existence of a fiduciary relationship with respect to such taxpayer.

(June Sp. Sess. P.A. 91-3, S. 79, 168; P.A. 95-26, S. 40, 52; P.A. 99-121, S. 23, 28; P.A. 05-116, S. 3; 05-260, S. 8; P.A. 18-26, S. 5.)

History: June Sp. Sess. P.A. 91-3, S. 79, effective August 22, 1991, and applicable to taxable years of taxpayers commencing on or after January 1, 1991; P.A. 95-26 amended Subsec. (a) to lower interest rate from 1.25% to 1%, effective July 1, 1995, and applicable to taxes due and owing on or after July 1, 1995, whether or not those taxes first became due before said date; P.A. 99-121 amended Subsec. (a) to make technical changes and to provide that 25% penalty applies where federal court held taxpayer filed a fraudulent federal income tax return, effective June 3, 1999; P.A. 05-116 amended Subsec. (a) by dividing it into Subdivs. (1) to (4), made technical changes in Subdiv. (1) and amended Subdiv. (2) to add a penalty for failure to disclose a listed transaction, effective June 24, 2005, and applicable to taxable years commencing on or after January 1, 2005; P.A. 05-260 amended Subsec. (a)(2) to allow the 75% penalty for failure to report listed transactions to apply to returns audited on or after January 1, 2006, effective July 13, 2005; P.A. 18-26 amended Subsec. (a)(2) to designate existing provisions re deficiency due to negligence or intentional disregard as Subpara. (A) and designate existing provision re audits or returns commencing on or after January 1, 2001, as Subpara. (B)(i) and amending same to add “and prior to January 1, 2018,” and make a technical change, and add Subpara. (B)(ii) re audits or returns commencing on or after January 1, 2018, effective May 29, 2018.

See Sec. 12-30c re penalty on promoter of abusive tax shelters.