In an effort to increase state revenue, many states are offering amnesty programs to taxpayers. The amnesty programs are designed to collect delinquent taxes owed by a corporate or individual taxpayer while waiving penalties as high as 50% of the tax due. Depending on the state, delinquent taxpayers will be exempted during a certain period in which they can come forward about their tax transgressions and pay the due amount without any repercussions. In recent months, the states of Alabama, Kansas, Maryland, Missouri, New Hemisphere and Oklahoma disclosed details about their 2015/2016 amnesty programs.
Alabama has enacted the Alabama Tax Delinquency Amnesty Act of 2016 requiring the Department of Revenue to establish a tax amnesty program to be held in 2016 for at least a two month period prior to August 31, 2016. With certain exceptions, the program will apply to all taxes administered by the Department. Effective September 21, 2015, the Department is waiving one-half of the interest and all of the penalties associated with tax periods for which amnesty is applied for approved amnesty applications (L. 2015, S20 Act 555).
Taxpayers who are considered ineligible will not be granted amnesty. A taxpayer is classified ineligible under the below circumstances.
- The taxpayer has been contacted by the Department.
- The taxpayer is a part of any criminal investigation or criminal litigations in any court of the United States or Alabama pending on the effective date of the Act for nonpayment, delinquency, or fraud in relation to any state tax imposed by Alabama law and administered by the Department.
- Any taxpayer who delivers or discloses any false or fraudulent application, document, return, or other statement to the Department — in connection with an amnesty application— will be ineligible for amnesty and will be subject to the greater of the fraud penalty under Ala. Code § 40-2A-11(d),or a penalty of $10,000.
A standard look-back period will apply for all tax types eligible for amnesty. The “look-back period” is considered the last three full tax years (36 months) of tax returns which are delinquent. If the taxpayer has collected any tax without remitting such tax to the Department, the look-back period will be extended to include all periods, back to the point of collection. An agreement will only apply to the specific tax and the tax period for which amnesty is granted.
The State of Kansas is conducting an amnesty program for state taxes that will run from September 1, 2015 to October 15, 2015. During this period, amnesty from the assessment or payment of all penalties and interest with respect to unpaid taxes or taxes due and owing for tax periods ending on or before December 31, 2013 will apply if the liability is paid in full within the amnesty period. For eligible taxes and tax periods, amnesty will apply to the underreporting of tax liabilities, the nonpayment of taxes and the non-reporting of tax liabilities.
The 2015 Maryland Tax Amnesty program occurs from September 1, 2015 to October 30, 2015. The program, effective June 1, 2015, waives certain civil and criminal penalties and interest relating to state and local income, withholding, sales and use, and admissions and amusement taxes. The waiver of penalties and interest applies to the non-reporting, underreporting, and nonpayment of tax liabilities [L. 2015 Chapter 50 §1; 2015 Tax Amnesty, 06/18/2015].
The Missouri Department of Revenue has provided a list of Frequently Asked Questions regarding the 2015 Tax Amnesty Program that is being conducted from September 1, 2015, to November 30, 2015. The amnesty applies only to tax liabilities due on or before December 31, 2014, but it does not extend to any taxpayer who at the time of payment is a party to any pending civil, criminal, or bankruptcy proceeding; a criminal investigation by the DOR; or the delinquencies consist solely of lien fees and returned check charges.
The New Hampshire Legislature enacted H2, the FY 2016-17 budget bill, which provides a tax amnesty from December 1, 2015 through February 15, 2016. The bill provides tax amnesty and business disclosure programs. The legislation also establishes a voluntary disclosure program, increases the research and development credit cap and authorizes the Department of Revenue Administration to contract with the Multistate Tax Commission to perform audits.
The Oklahoma Tax Commission (OTC) is offering an amnesty program from September 14, 2015 to November 15, 2015. The program will allow taxpayers to report past due personal income tax returns and pay their obligations without penalty or interest. During this period, any taxpayer who has an outstanding tax obligation, under-reported tax liability or has not filed a return will only be charged the tax due. The tax owed must have been accumulated prior to January 1, 2015. If you have already established a liability with the OTC, the OTC would have sent out a statement of account in mid-August, which gave information on balances owed and how to pay them, as well as how to set up a payout plan if necessary. [Okla. Stat.68 §216.3; Informational Notice, Oklahoma Tax Commission, 07/21/2015].
The above amnesty programs are designed to allow negligent taxpayers to come forward while generating extra revenue for the states listed. Please keep in mind that states are approving and implementing amnesty programs on an ongoing basis. Even if a company or individual is ineligible for an amnesty program or the state at issue is not offering a formal amnesty program, some states may allow taxpayers to come forward through a voluntary disclosure program.
For questions on this article and the state amnesty programs listed, contact Faith Gorman, State and Local Tax Director, at [email protected].