Final answer:
The negligence penalty applies when underpayment is caused by intentional disregard of rules and regulations with the intent to defraud.
Step-by-step explanation:
In this question, the subject is Law and the grade is College.
The statement is referring to the negligence penalty, which is a legal concept. The negligence penalty typically applies in legal cases where someone fails to exercise reasonable care, causing harm or damage to another party. In order for the negligence penalty to apply, the underpayment must be the result of intentional disregard of rules and regulations with the intent to defraud.
For example, if someone intentionally underpays their taxes by falsifying information or intentionally evading tax regulations, the negligence penalty may apply if it can be proven that the underpayment was a result of intentional disregard and intent to defraud.