Colorado Reportable and Listed Transaction Disclosure

In today's Blog, I address the timing of taxpayer disclosure, highlighting the upcoming July 1, 2010 deadline for tax returns filed after June 1, 2009.


Overview

On April 2, 2009, Colorado adopted House Bill 09-1093, which require taxpayers to disclose participation in "reportable' and "listed transactions'. taxpayers subject to these disclosure provisions include corporations, individuals, estates, trusts, partnerships, S Corporations and other entities required to file an income tax return under Col. Rev. Sta. Sec. 39-22-601.

The new law also requires "material ad visors" to disclose reportable and listed transactions and maintain a list of persons advised with respect to such transactions. Significant taxpayers and material advisor penalties are imposed for failure to comply with these requirements.

Definition

Colorado Listed Transaction

For Colorado purposes a "listed transactions" also includes a "transaction" between a captive real estate investment trust and its more than 50% beneficial owner, and a transaction between a captive regulated investment company and its more than 50% beneficial owner. Pursuant to Colo. Code Reg. sec. 39-22-652(2)(b), these transactions are referred to as "Colorado Listed Transactions' where the relevant tax returns "reflect a Colorado tax benefit".

Taxpayer Disclosure Requirement
Disclosure Timing

Under the general rule, for each tax period in which a taxpayer participates in a Federal Transaction or a Colorado Listed Transactions, including participation for any prior period that is still open for assessment under the statute of limitations, the taxpayer is required to disclose that participation with its next filed tax return. For any return filed after June 1, 2009, a taxpayer should disclose with its return participation in any Federal Transaction or a Colorado Listed Transaction, including any participation for prior periods still open for assessment. For any return made after June 1, 2009, disclosure will be considered timely so long as that disclosure is made by July 1, 2010.

Taxpayer Penalties

A taxpayer who fails to disclose a reportable transaction is subject to a penlaty of up to $15,000. A taxpayer who failes to disclsoe a listed transaction is subject toa penalty of up to $50,000. these penalties are in additin to any other penalties that may be imposed, but may be wavied, reduced or compromised by the Colorado Department of Revneu upon showing of reasonable cause.