States often offer amnesty to taxpayers as a way of raising a significant amount of revenue in a short period of time. Since 1982, according to records kept by the Federation of Tax Administrators, there have been 121 amnesty periods established by 46 states, the District of Columbia and New York City. Three-quarters of those jurisdictions have conducted programs more than once. Massachusetts will add one more to the list as a result of recent legislation.
To address a projected budget shortfall for fiscal year
2015, legislation signed by Massachusetts Gov. Charles Baker (R) directs the
Commissioner of Revenue to establish an amnesty program for corporate excise
taxpayers (H.B. 52,
enacted Feb. 13, 2015). The
commissioner also received authority to include in the program other types of
taxes and to determine the look-back period for unfiled returns.
The legislation requires a waiver of all penalties related to late filing of returns or late payment of taxes, including estimated taxes, without a showing of reasonable cause or absence of willful neglect. To be eligible for the penalty waiver, taxpayers must (i) file returns and make payments, as required, and (ii) if required to file annual reports with the Secretary of State, provide a certificate of good standing to the commissioner.
The Massachusetts program is to run for a 60-day period during the current fiscal year, and participating taxpayers must make all required payments no later than June 30, 2015. The legislation does not permit a waiver of interest.
Massachusetts established an amnesty period, from September 1 through October 31, 2014, to encourage payment of delinquent tax obligations, but did not include the corporate excise tax in that program.
Activity in other states includes the third part of Louisiana’s program, which will take place for a one-month period sometime this year, following two-month and one-month amnesty periods in 2013 and 2014, respectively. Taxpayers waiting until 2015 to come forward, however, will not receive as generous a deal as taxpayers did in the prior years. Only 33 percent of penalties and 17 percent of interest will be waived, compared with 100 percent of penalties and 50 percent of interest in 2013 and 2014.
A bill introduced in Indiana (H.B. 1349) would authorize an amnesty program, for a two-month period before January 1, 2017, to cover unpaid taxes for tax years ending before 2013. Both penalties and interest would be waived, but a taxpayer that failed to pay its tax liability by the due date established by the program would be subject to a doubling of penalties.
Similarly, the New Hampshire legislature is considering a bill (S.B. 220-FN-A) that would establish an amnesty period from May 1 through July 15, 2015, including a waiver of all penalties and interest in excess of 50 percent of the applicable interest rate.
How well do amnesty programs work? New Jersey’s Treasury Department attributed a portion of strong cash collections in December 2014 to a “tax payment initiative” conducted last fall. Over the course of November and December, the department reported, more than 26,000 individuals and business entities participated and paid approximately $75 million in back taxes.
A fiscal note accompanying the proposed legislation in New Hampshire notes that two previous amnesty programs brought in $13.5 million and $14.9 million, respectively. The state is hoping an appropriation of $50,000 to fund the 2015 program will result in similar collections.
In contrast to New Jersey’s program, Massachusetts reported only $57 million from 61,000 participants in its amnesty program last fall. No doubt, the commonwealth is hoping for more revenue by extending this year’s program to the corporate excise tax and requiring that businesses come into compliance with required filings with the Secretary of State.
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