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A majority of states have had tax amnesty programs during the past several years. Amnesty programs generally allow a business to achieve state tax compliance while paying taxes for only a limited number of past years (as opposed to all possible years). As an additional benefit, amnesty programs generally waive all or a portion of the taxpayer’s penalties and/or provide relief from all or a portion of the interest owed on past due taxes.

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In all, such programs are a great benefit for taxpayers who are not in full compliance with state tax law. However, most amnesty programs are available for a limited period of time. Furthermore, if your business is already under a tax audit, it is often too late to apply for participation in a state’s amnesty program – your business is either stuck with the results of the audit or, if you decide to fight the proposed audit adjustments, the outcome of litigation or negotiation.

While a majority of states have had amnesty programs in the past, it is our understanding that only a few states are planning upcoming programs. As such, tax amnesty programs are few and far between. Fortunately, businesses may benefit from tax amnesty programs that have been announced in Massachusetts and Louisiana.

Upcoming Massachusetts amnesty program

Massachusetts legislators established an upcoming tax amnesty program under its fiscal year 2015 budget bill. According to the Massachusetts Department of Revenue (the Department), the tax amnesty program will take place in September and October 2014. The Department is set to send out tax amnesty notices on September 2, 2014, to taxpayers who qualify. If you or your business qualifies, you or your business will pay only the tax and interest due and the state will waive the unpaid penalties for the period stated. This amnesty program only applies to assessments that were on the books prior to July 1, 2014. However, the amnesty program covers a wide array of state taxes, including:
  • Boat and recreational sales tax;
  • Gasoline excise tax;
  • Individual income tax;
  • Materialman sales tax; and
  • Various withholding taxes, such as income, performer, pass-through entity, and lottery annuity.

Additional information on Massachusetts’ tax amnesty program will be issued here by the Department.

 

Upcoming Louisiana amnesty program
Louisiana lawmakers amended a previous enacted tax amnesty law to sweeten the deal for the state’s planned tax amnesty windows in 2014 and 2015 (the original amnesty law applicable to such years was previously covered). The window of eligibility for 2014 will run from Oct. 15, 2014, through Nov. 14, 2014, and cover tax balances due prior to Jan. 1, 2014. This amnesty program covers most state taxes except for:
  • Motor fuel taxes;
  • Prepaid 411 sales tax;
  • Oil Field Restoration Taxes (Oil and Gas);
  • Inspection and Supervision Fee; and
  • Penalties for failure to submit information reports that are not based on an underpayment of tax.

Under the 2014 Louisiana Tax Amnesty program, qualifying taxpayers will receive relief from all penalties and half of the interest owed. The 2015 program is generally the same as the 2014 program but will provide qualifying taxpayers with relief from only 33 percent of the penalties and 17 percent of the interest. No specific dates have been set for the 2015 program. The enabling law also prohibits the Department of Revenue from implementing further amnesty programs before Jan. 1, 2025.

Note that qualifying taxpayers under audit, garnishment or bank account levy may participate in the state’s amnesty program. For more information on the amnesty program, see the 2014 Louisiana Tax Amnesty Fact Sheet.

 

The benefits of pursuing amnesty

Over the past several years, McDonald Hopkins’ Multistate Tax Practice Group has helped numerous clients walk through various tax amnesty programs in various states and obtain favorable results. Even if your business does not have potential state tax liability in a state with an upcoming amnesty program, most states offer voluntary disclosure programs which are a viable alternative to amnesty. These voluntary disclosure programs usually have many of the benefits associated with the amnesty programs.

Assuming your business has potential state tax exposure, the benefits of pursuing amnesty or voluntary disclosure are numerous compared to the risks associated with not complying with the law. Among the general benefits are:
  • Paying tax for a limited number of open tax years;
  • Minimal business disruptions;
  • Significantly lower professional services fees (as compared to costs associated with handling the audit and appeal associated therewith);
  • State waiver of all or a portion of penalties and/or interest;
  • Possibility of participating in tax payment programs (if offered); and
  • Relief from the uncertainty of noncompliance.

Please contact us if you would like to discuss the ability of your business to take advantage of the above mentioned amnesty programs or one or more voluntary disclosure programs.
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