(1) Unless other-wise specified by statute or these rules, hardship means economic hardship. "Economic hardship" means the financial inability of the taxpayer to pay a tax when the tax is due. Economic hardship alone is not reasonable cause for failure to file a tax return or report when that return or report is due by law. Economic hardship will be considered as reasonable cause for abatement or waiver of a penalty and/or interest only when the taxpayer demonstrates the economic hardship was due to acts which were beyond the taxpayer's control and were not capable of being anticipated or provided for by an ordinary and prudent person.

(2) Examples of economic hardship which may constitute reasonable cause for waiver or abatement of penalties and interest include:

(a) inability to pay the tax because of an act of God, natural disaster, or emergency as declared by the governor or president;

(b) inability to pay the tax because property and assets were seized by a foreign government;

(c) inability to pay because of seizure of property and assets by a court of law when the court action was not due to acts by the taxpayer;

(d) inability to pay because the taxpayer's assets are temporarily impounded or frozen because of a bank failure;

(e) catastrophic medical expenses.

(3) The examples given in subsection (2) are for illustra-tion only. Other circumstances may exist which constitute eco-nomic hardship sufficient to waive or abate penalty and/or interest.

(4) Examples of economic hardship which do not constitute reasonable cause for waiver or abatement of penalty and interest include:

(a) inability to pay because of a divorce settlement or maintenance action;

(b) inability to pay because of fire or other loss which the taxpayer could have insured against; or

(c) lack of funds because of insufficient planning or foresight.

(5) The examples given in subsection (4) are for illustration only. Other circumstances may exist which do not constitute economic hardship sufficient to waive or abate penalty or interest.

(6) Economic hardship will be considered as reasonable cause for waiver or abatement of penalties and/or interest on the penalty only when the taxpayer has tendered full payment of the tax and interest on the tax. If the taxpayer pays the tax on a time payment plan, the decision on whether or not the penalty and/or interest on the penalty will be abated or waived will not be made until after the taxpayer has completed full payment of the tax and accrued interest on the tax.