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Getting Harassed by the Utah Tax Man?

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  • Getting Harassed by the Utah Tax Man?

    Moderator's Note 3/28/2014:
    The taxpayer has prevailed! Please see post #50:

    Original post:

    It has come to my attention that several people have recently received requests for information and subsequent notices of audit adjustments from the Utah State Tax Commission for clean fuel vehicle credits claimed as early as tax year 2007.

    This has been the topic of recent discussion on this forum as well:

    The requests for information typically require submitting the following:
    1) A copy of the letter from the auditing division with your response.
    2) A complete copy of your [Tax Year] Federal Income tax return, including all schedules, attachments, W-2’s, 1099’s and K-1’s.
    3) Your daytime telephone number
    4) A completed [Tax Year] form TC-40V “Clean Fuel Vehicle Tax Credit” that has been signed and approved by the Division of Air Quality, Utah Department of Environmental Quality.
    5) If the vehicle is an OEM alternative fuel vehicle, please provide a copy of the Manufacturer’s Statement of Origin or equivalent manufacturer’s documentation and any other documentation used to calculate the credit.
    6) If the vehicle is a conversion, please provide:
    a. Name of the conversion equipment manufacturer
    b. Conversion equipment model number
    c. Date of Conversion
    d. Name, address, and phone number of the person that converted the vehicle
    e. Any other documentation used to calculate the credit.
    7) A copy of the purchase order, customer invoice, or receipt that includes the vehicle identification number (VIN).
    8) For carryover credits, the TC-40V from the year it was originally approved.

    And provide the following warning: Failure to provide the requested information or failure to provide adequate verification will result in the items claimed on your [Tax Year] Utah Individual Income tax return being adjusted and additional tax assessed.

    In summary, the Utah State Tax Commission requests copies of paperwork originally submitted and approved by the Department of Environmental Quality plus Federal Income tax returns.

    The notices of adjustments by the auditing department typically show a reduction in allowable [Tax Year] Clean Fuel Vehicle Credit with associated taxes and interest due. The notices include zero information on the basis for which the allowable credit was reduced. To obtain the calculations used for credit reduction, one must contact the auditor listed and, in writing, request a copy of the auditor’s notes. Some auditors are more responsive than others.

    The basis of credit reductions I am aware of (for pre-2009 credits, or post-2008 carryovers from pre-2009 original tax years) are:
    1) [Tax Year] TC-40V not approved by Department of Environmental Quality
    2) Lower OEM incremental cost as determined by Auditor rather than as documented/calculated by Taxpayer.
    3) Reduction of allowable credit to 50% of a used OEM vehicle purchase price as determined through Taxpayer-submitted documentation or state sales tax records.

    The 3rd basis of reduction of limiting allowable credit based on purchase price is inconsistent with Utah Code Section 59-7-605 and 59-10-1009 effective in 2008 (same as 2007) which defines maximum allowable credit as 50% of the incremental cost of OEM vehicle less clean fuel grants received; purchase price only entered into calculations of maximum allowable credit for conversion equipment. This is also reflected in TC-40V Rev 12/07 and TC-40V Rev 7/08. OEM vehicle incremental cost is defined as the difference between the cost of a new vehicle and the cost of the same model without the clean fuel system.

    For convenience, I have attached copies of pre-2009 TC-40V (no longer available on the Utah Tax Commission Website). I have also attached the 02/09 version for comparison (after the Utah Code was updated).

    Initially, it may seem that there may be some confusion resulting from Utah Code changes authorized by 2008 General Session HB0106S01 to change the maximum allowable credit for OEM natural gas vehicles (in the absence of any clean fuel grants) from the lessor of 50% of the OEM incremental cost or $3000 to the lessor of 35% of the purchase price or $2500; these changes to how Clean Fuel Vehicle Credits were calculated for OEM vehicles were effective January 1, 2009. See and (see lines 215-235 in particular).

    Upon further investigation, there seems to be some case law established through calendar year 2012 decisions of Utah Tax Commission administrative judges to add an additional criterion of 50% of the purchase price to tax year 2007 and 2008 Clean Fuel Vehicle Credits, even though the legislative body had not imposed such a criterion. Details of these decisions can be found at the following (also attached for archival purposes):

    Note: you can search “TC-40V” on the following website’s Google Custom Search box to find additional decisions related to Clean Fuel Vehicle Credits:

    I feel that the request for information on credits claimed 5 or more years ago with associated redetermination of pre-2009 credits based on an upper limit of 50% of purchase price is uncalled for and a clear abuse of governmental powers and may even enter into discriminatory harassment.

    Has anyone else seen this type of harassment from the Utah Tax Man? Anyone personally affected? What are your thoughts?
    Attached Files
    Last edited by John Mitton; 03-28-2014, 08:38 AM.

  • #2
    Re: Getting Harassed by the Utah Tax Man?

    Thank you, Luke for the excellent research into this important issue facing Utah NGV owners. January 1, 2009 was the change-over pursuant to HB 106 to a more simplified method of calculating the credit (35% of the purchase price up to $2500) as opposed to the old method (50% of the incremental cost up to $3000). The Utah DEQ provides information here, and references and where the incremental costs for many NGV's can be documented:

    The pre-2009 forms TC-40V which Luke posted above should provide a taxpayer what is needed to go to bat with the auditor. What really irks me is that the DEQ already was provided this information to begin with, yet the Tax Commission is out there now harrassing taxpayers to dig this up again, 4 or 5 years later, and, worse, the administrative judges at the Tax Commission have chosen to add an additional criterion of 50% of the purchase price to tax year 2007 and 2008 Clean Fuel Vehicle Credits, even though the legislative body had not imposed such a criterion. This is classic "legislating from the bench."

    Do we have any attorneys here at CNGchat who might want to take this on? We might be able to pass around the hat and crowd-source some legal fees to assist.
    Last edited by John Mitton; 03-29-2013, 08:20 AM.


    • #3
      Re: Getting Harassed by the Utah Tax Man?

      Bad new boys!

      I been audited myself and things look bad for me since I can't provide bill of sale. Here is the email link to give you a rough idea of how persistent they are on getting that!

      Hi Johanna,
      I received couple audit forms for my two CNG vehicles I have. I returned the information requested with confirmation from USPS.
      Yesterday I received two bills for $3024.18 and $1781.18.
      1st bill Clean Fuel Vehicle credit Previous: $3869, Revised $265, Net Change: $3604
      2nd bill Clean Fuel Vehicle credit Previous:$1700, Revised $0, Net Change:$1700
      I have made numerous attempts to call you: 3/27/13@2pm, 3/27/13@3:35pm, 3/28/13@8:15am. Can you please call me back? The stress this audit has caused my wife and I are placing us over the edge and are at a point of break down!
      1. Can you please let me know what is the result of the audit? I must have sent in about 60 pages of taxes, TC-40V form, Registrations...
      2. The calculated value for the vehicles on the TC-40V are $2967 and $2537.
      3. Can you please explain the reason for the adjusted values? Tax credit has not been taken out on those vehicles at the time of purchase. The vehicles came from out of state, but were registered in Utah without claiming the credit.
      Thank you,

      We did review the information that you sent in. Attached to the email is the calculation for how the credit was figured. For a car purchased in 2008 a credit is allowed for 50% of the Lesser of either the purchase price of the vehicle or the incremental cost of the vehicle. Both TC-40Vs that were submitted claimed the incremental cost. However the purchase price of the vehicles that was reported for sales tax purposes was much lower than the incremental cost so we allowed a credit for 50% of the purchase price and not the incremental cost. Also attached is Appeal 10-2493 that explains the position taken by the tax commission on this matter. If you do disagree with this assessment you may file a Petition for Redetermination by April 25, 2013 as is explained to you in the Notice of Deficiency and Audit Change. If you have further questions please let me know.

      Hi Johanna,
      I am confused about the purchase price? Is in TC-40V rev 7/12 state that but not in years previous to 2009 is this as stated on the website Am I not reading this correctly?
      On the TC-40V Rev 7/08, form I have line 3 is Incremental cost or cost of conversion equipment. Incremental cost is described in that web link and shown in RED below.
      Is it possible that this statement does not apply in this case? "purchased in 2008 a credit is allowed for 50% of the Lesser of either the purchase price of the vehicle or the incremental cost of the vehicle"
      Purchase Price should be replaced to Incremental cost, as stated on the TC-40V Rev 7/08, the ones that I have signed by DEQ?

      Clean Fuel Vehicle Tax Credit
      Rules for Vehicles Purchased Before January 1, 2009
      Original Equipment Manufacturer (OEM) Clean Fuel Vehicles
      A taxpayer may claim a nonrefundable tax credit of fifty percent of the incremental cost* of a new vehicle minus any grant received, up to $3,000 per vehicle registered in Utah if:
      • it is fueled by propane, natural gas, or electricity;
      • it is fueled by another fuel determined by the Air Quality Board to be as effective as the above listed fuels; or,
      • it meets the clean fuel vehicle standards in the Clean Air Act; and,
      • a previous owner did not take the same credit.
      * Incremental cost is the difference between the cost of a new clean fuel vehicle and the cost of the same model without the clean fuel system.

      The official position of the tax commission is that the credit is for 50% of the Lesser of the purchase price of the incremental cost. If you read through the appeal decision I attached to the last email it explains the reasoning behind the commissions position. Again if you disagree with this position you are welcome to file a Petition for Redetermination.
      As for verification on the purchase price; theoretically the price reported for sales tax purposes should have been the actual cost to purchase the car so if you did pay more then what was reported for sales tax purposes the burden of proof is on the taxpayer. If you don't have the original documentation you could look into possibly contacting the seller to get documentation from them as well as finding cancelled checks to the seller or credit card statements. Any additional costs to repair the car after purchase do not qualify for the credit.

      Hello Johanna,
      Can you please review lines 3 of the TC-40v Rev 7/12 and TC-40v Rev 7/08.
      I believe that this statement "The official position of the tax commission is that the credit is for 50% of the Lesser of the purchase price of the incremental cost.", is correct for vehicles purchased after 2008. I don't see anywhere on the Rev 7/08 form where it states the 50% of the purchase price. The TC-40V form was revised to Rev 7/12 to state "3. Vehicle purchase price or cost of conversion equipment", of witch I can see your position on that statement, but we are dealing with Rev 7/08 are we not?
      The TC-40V form Rev7/08 states "3. Incremental Cost* of vehicle or cost of the conversion equipment"
      For vehicles purchased prior to 2009 the website stated "A taxpayer may claim a nonrefundable tax credit of fifty percent of the incremental cost* of a new vehicle minus any grant received, up to $3,000 per vehicle registered in Utah" where incremental cost is defined as "the difference between the cost of a new clean fuel vehicle and the cost of the same model without the clean fuel system." . I don't see where it states that the incremental cost is purchase price.
      That is why I am confused about the purchase price of the vehicles, the TC-40V Rev 7/08 forms do not state purchase price, only Incremental Cost*! This is the reason I don't understand why I am asked to prove the purchase price of the vehicles, when prior to 2009 the Clean Fuel Vehicle Tax Credit was given on increment cost* or conversion cost!

      This is why I have provided you with the Appeal document. It does not matter that the instructions did not clearly state incremental or purchase price. If the purchase price was lower than the incremental cost we will not allow the full incremental cost. That decision has been held up in appeal in the tax commissions favor. This position is in regards to any vehicle purchased in 2008. If you do not agree you are welcome to file a Petition for Redetermination.

      Two quick items:
      1st - the reason for this audit is that the amount on the TC-40v that I have in my possession signed and approved by DEQ is not VALID?
      2nd - being asked to provide bill of sale on vehicles purchased 5 years ago. The bill of sale was on the back of the title. State of Utah keeps those documents upon registration. So this is a catch 22. State of Utah tax commission wants me to provide a bill of sale that was kept by State of Utah DMV.
      I feel discriminated against, because of my last name, and ask for an investigation regarding this audit by a neutral party. It looks like, the Tax Commission is invalidating approved amounts by the Division of Air quality.
      Since when is a vehicle sold for free in America? How come my amounts were moved to $0, when as explained the bill of sale was on the Vehicle Title?
      Please let me know what I need to do from here on out?
      Thank you,
      Honest Utah Tax Payer since 1982 when I came to USA.

      I understand your confusion. The Division of Air Quality verifies that the car itself qualifies for the credit. They do not verify or approve the actual amount of the credit claimed on the TC-40V. We have asked you for a Bill of Sale to verify the amount that was paid to purchase each car. If you do not have a Bill of Sale there are other ways to verify the price of the vehicles. (ie bank statements)
      Again I do understand your frustration. If you still disagree with the audit assessment you may file a petition for redetermination by April 25, 2013. I have attached a copy of the petition to this email for your convenience.
      Last edited by dpostelnicu; 04-01-2013, 10:20 PM.


      • #4
        Re: Getting Harassed by the Utah Tax Man?

        and we wonder why we cant get anything done in the usa?


        • #5
          Re: Getting Harassed by the Utah Tax Man?

          Statute of limitations that typically apply for filed tax returns is 3 years. Once 3 years has passed from the original filing date, those old returns are tough luck for state of Utah. They didn't act quick enough. Thus, 2008 tax year was due 4/15/09 so statute ran out 4/15/12. Now, for 2009 tax year they can still "getcha" with an audit IF before 4/15/13.

          I'd suggest that you contact your tax preparer to assist in fighting these "audits" beyond the statute of limitations (ie 2008 for sure).

          As for the draconian interpretation that a Bill of Sale is "required" to prove the purchase price of a vehicle, that sounds illegal as DMV (department of vehicles) likely use a variety of documents (ie invoice, cancelled check, etc) to establishing purchase price when they assess sales tax when obtaining tags in Utah. Thus, that information is likely in another dept of Utah anyway, and tax division is just being pissy and not wanting to rely on other department records. If Utah is denying credits "in masse" for these missing Bill of Sale docs, then maybe an attorney in SLC would like to know about that!! Worst case scenario, the prior owner could be contacted to sign a re-constructed Bill of Sale.


          • #6
            Re: Getting Harassed by the Utah Tax Man?

            Good point KS.

            Utah Tax statute of limitation in 3 years:
   (detail pasted below):

            The Tax Commission may only begin an audit of a Utah individual income tax return within three years of the later of the due date or the date filed, unless a substantial error is identified or fraud is involved.
            Last edited by Luke; 04-02-2013, 06:27 PM.


            • #7
              Re: Getting Harassed by the Utah Tax Man?

              I am sooo tired of this audit thing. It has caused me so much stress and time. It makes me very angry. I really feel like state tax commission is abusing their power. Anybody interested in the idea of chipping in some money to hire an attoney to fight for this?


              • #8
                Re: Getting Harassed by the Utah Tax Man?

                I just got a letter today (after the audit letter asking for all the information for 2009 and 2010) saying that I owe $2000+ in back taxes and interest. I called the State auditor, and he said it was because the 2008 credit was adjusted to be 50% of the purchase price, rather than the 50% of incremental cost. DAH!

                This is infuriating! It says right on the Clean Fuels website that the incremental cost is NOT the amount you paid for the vehicle.


                I feel like they are running roughshod over everyone to squeeze out more tax revenue. I'm no attorney, but it doesn't feel right to me.
                Last edited by utkatana; 04-04-2013, 02:35 PM.


                • #9
                  Re: Getting Harassed by the Utah Tax Man?

                  Been thinking a bit more about the way these audits have been handled and decided to see what information the tax commission website has regarding the audit and appeal process.

         details a supposed audit process that does not match my experience or that of others I have talked with.

                  This process should include the following:
                  1) an opening conference where, "during the conference, the taxpayer is told about the Utah Taxpayer Bill of Rights and receives an explanation of the audit process. The scope of the audit will be explained, including which types of taxes will be examined, which time periods will be covered, and which types of records will be reviewed during the audit."
                  2) a division conference (optional, as requested by taxpayer) where the auditor's supervision can be questioned.
                  3) a preliminary notice which may contain a tax assessment for tax underpayments. Note: this is not a final assessment.
                  4) a statutory notice which follows the completion of an audit, is a legal and binding assessment of the taxpayer's tax liability.

                  The website also details the appeals process, etc.

                  In my case I never had an opening conference, and was never apprised of the Utah Taxpayer Bill of Rights ( - a concise resource regarding our rights as taxpayers that I only discovered a few days ago); I only received a request for the same information that I had already provided to and had approved by the Department of Environmental Quality five years earlier. After complying with this request for information, I received a final notice of tax due with no explanation of basis on which the Auditing Division calculated the reduction. The letter claimed my appeal rights needed to be secured in writing which was odd considering I had no information from them to rebut. Luckily, I had an auditor that was able to provide me with his notes in a timely fashion so that I could draft my appeal (some auditors are very slow to respond; mine responded within an hour). The auditor reduced my allowable credit primarily by adding 50% of the purchase price as an additional criterion to a vehicle I claimed a credit on in 2008. Being fully aware of the law change effective in 2009 to replace 50% of the incremental cost with 35% of the purchase price on credits for used OEM vehicles, I figured that the auditor must be new and not fully aware of the laws effective in 2007 and 2008 when I purchased my OEM CNG vehicles. I drafted my appeal response accordingly.

                  It was at this time that I talked with a few of my friends and family that had also received requests for information from the auditing division. I could not find a single person that purchased and claimed a Clean Fuel Vehicle Credit for one or more used OEM vehicle(s) in 2007 or 2008 that had not received a request for information from the Tax Commission. At this point, I figured there must be some discussion on It was at this time that I saw the post by member "utahaudit" describing a similar experience to mine, but a year earlier. I also saw several that had recent, similar encounters with the Audit Division.

                  At this point, I knew I needed to conduct research to find the basis for which the Administrative Law Judge added the "50% of purchase price" criterion in opposition to what the state legislators and governor included in the state code. Not only did I find that the Administrative Law Judge was likely biased (worked for the State Tax Commission), but also had weak argument on 5-year after-the-fact change of criterion. This legislation from the bench really appalled me.

                  This was the genesis of this post. I wanted to document what I had found through research as an aid to others similarly positioned with the Tax Commission.

                  I have learned a lot of things through this post. I had no idea about the statue of limitations, etc. and expanded my research on the topic.

                  A few have suggested some next steps. The next step I would suggest is to talk with your family, friends, neighbors, associates and even those at the CNG pump that may have purchased an OEM CNG vehicle and claimed a Utah State Clean Fuel Vehicle Credit in 2007 and/or 2008. Direct them to this forum/post such that we can learn from our collective experiences and provide proper response to our unfair treatment.


                  • #10
                    Re: Getting Harassed by the Utah Tax Man?

                    Several CNG vehicle owners affected by the additional 50% of purchase price criterion for pre-2009 OEM vehicles have decided to hire a tax attorney to go to bat with the Auditing Division. The cost of representation is not feasible for an individual, but is feasible if enough people come together under common representation.

                    If you are interested in participating, would like additional information or have additional information that may benefit us as we proceed, send me a PM so that we can keep you apprised of our progress.

                    Furthermore, don’t ignore Auditing Division information requests and preserve your right to appeal:

                    1) Be certain to comply with Auditing Division requests for information by stated deadlines

                    a. They will request much of the same information you likely already sent for approval to the Division of Environmental Quality (DEQ). Note: has many resources documenting OEM incremental costs if you have misplaced your files.

                    2) Be certain to secure your right to appeal by stated deadlines if/when you receive a notice of audit change unless you agree with the change and want to limit your appeal rights.



                    • #11
                      Re: Getting Harassed by the Utah Tax Man?

                      Layer or not I don't see a way past this In this document looks like the judge is agreeing with the TAX Com. "A reasonable interpretation of this statutory language is that the
                      Taxpayer’s credit is limited to 50% of the amount he paid in 2008, the tax year in which he took the credit.
                      The Division’s audit assessment should be sustained."

                      Looks like the Judge is working for the Tax Com. also! The Judge is allowing the Tax Com. to go by the 50% of purchase price and not the incremental cost!


                      • #12


                        • #13
                          Re: Getting Harassed by the Utah Tax Man?

                          Statute does not expire until 3 years after the last year the credit it rolled too. If you claimed and used a credit in 2008 the statute is expired as long as your not assessed on or before 4/15/2013

                          If you rolled the credit forward the stature is not expired untll three years after the last year the credit is applied to.

                          Does not apply to most but keep in mind. It would be VERY unusual for the tax commission to audit an expired statute return.


                          • #14
                            Re: Getting Harassed by the Utah Tax Man?


                            Thanks for your reply. Seems like you have done some great work on this issue. I'd like to talk to you and exchange some information that may help us be collectively successful. Applying the purchase price criterion to pre-2009 credits by the Auditing Division is wrong.

                            We are in the process of pursuing legal counsel/advise and with your participation we'll likely have enough that it is feasible to pay the legal fees for professional representation at hearings as needed. I have been contacted by the individual whose initial hearing appeal decision is being used as a guiding decision by the Auditing Division as well as several others in a similar battle at various stages of the audit/appeal process. There are also other efforts underway to increase awareness through local media coverage on this issue. I have also contacted local representatives (Lee Perry and Ronda Menlove) and have left a voicemail/email with our senator (Peter Knudsen) to appraise them of this issue.

                            Please give me a call so we can discuss. I sent you a private message with my contact information.

                            Last edited by Luke; 06-07-2013, 12:07 PM.


                            • #15
                              Re: Getting Harassed by the Utah Tax Man?

                              So I sent in my Petition for Redetermination regarding my 2008 CNG vehicle credit, and (surprise, surprise) the State Tax Commission replied today with a 3-page letter, basically reiterating their blatant disregard for the plain language of the statute in favor of the construed interpretation of the statute, directly contradicting the very case law they quote in their defense of their argument.

                              In today's letter, they quote the 2008 statute (50% of incremental cost of OEM vehicle) and in the same paragraph, quote the 2009 statute (lesser of 35% of vehicle cost or $2500) as applying in my case.

                              I'm guessing that without some pressure from outside sources, or some legal representation, the Tax Commission is going to usurp their governmental might against everyone like us here on this forum that they can, and do whatever they want just to get a little extra tax money from us.

                              Would it be any help if I were to contact my State Representative & Senator as well? I really appreciate those of you like Luke and Warlord who have contacted local media and elected officials. I'll do my best to do my part. This stinks to high heavens of injustice and inequity.