Many are the reasons - we didn't say excuses, now did we? - advanced by North Carolina business interests who think a penalty that's used to boost compliance with state tax law should be thrown overboard.
They argue - we didn't say whine - that the penalty is unfair because the underlying law is unclear. They say companies that calculated their tax liabilities in good faith still can be targeted by overzealous enforcers. They say the state needs tax policies that are business-friendly, given the stressed-out economy and the importance of maintaining jobs.
What about the tax-evaders whom the penalty is designed to deter? Certainly the business lobbyists and their legislative allies don't condone any such tax cheating, and they'd be the first to say so.
Still, the mindset among some seems similar to that in old-time stock car racing, when bending the rules to see what a driver could get away with was looked upon as just part of the sport, and there was no shame, just inconvenience, in being caught.
The state of North Carolina should not be in the position of tolerating that kind of gamesmanship. It's not fair to the many honest taxpayers who pay every cent they owe with no attempt to finagle. And the state simply can't afford to let taxes rightfully due and payable go uncollected. Here is an instance where legislators should leave well enough alone.
The disputed penalty typically comes into play when companies with multistate operations try to hide behind the door, as it were, when North Carolina tax collectors come calling. Ken Lay, secretary of revenue, says the penalty has the potential to shake loose $100 million in taxes. That's because companies aren't as inclined to lowball or delay their tax payments.
So does the penalty amount to a form of extortion? Not if it's levied only in cases where companies clearly were trying to pull a fast one. The department has the leeway to waive penalties, and shouldn't hesitate to do so in situations where an underpayment raises no suspicion of improper intent.
Multistate companies owe income taxes to North Carolina based on measures of their presence in the state. But it may be possible for a company trying to lower its tax liability to stack the deck in its favor. If the state suspects a dodge, it can order a consolidated tax return reflecting all of the company's operations.
If auditors then determine that taxes to North Carolina were underpaid by at least 25 percent, they can assess penalties up to 25 percent of what was due. Without the penalty, unpaid taxes and interest still could be collected, but there would be less of an incentive for corporate taxpayers to comply from the get-go.
The penalty's fate will be decided as the House and Senate negotiate a final version of the state budget. The Senate, where business interests traditionally have had an inside track, wants the penalty to go away, while the House-passed budget would retain it.
It's tempting for legislators to ingratiate themselves with business allies, whose campaign contributions are as welcome as the jobs they provide to constituents. But tax enforcement policies that are both fair and rigorous are in the state's best interest. This penalty encourages companies to honor their responsibilities under the law. Those that do so should never have to pay it.
