Individual Income Tax Insights: 2015 State Tax Amnesty Update

A handful of states have either enacted or are considering legislation that creates tax amnesty programs for a limited period of time in 2015. Tax amnesty programs offer qualified taxpayers leniency with regard to the penalties assessed based on their outstanding tax liability. Generally, under such programs, if the taxpayer is able to pay their tax liability in full within a specific time period, the associated penalties, and sometimes interest, will be waived.

Maryland Governor Hogan signed Senate Bill 763 on April 14, declaring a tax amnesty period from Sept. 1, 2015, through Oct. 30, 2015.  This period of amnesty applies to Maryland state and local income tax, withholding, sales and use, and admissions and amusement taxes. Maryland not only offers to waive all civil penalties associated with the outstanding tax liability but will also waive half of the total interest imposed. The waiver of interest, however, does not apply to interest accrued after Oct. 30, 2015.

To qualify for this tax amnesty program, a taxpayer must have failed to file a return or pay the assessed tax prior to Jan. 1, 2015. Further, any taxpayer to whom amnesty was granted between 1999 and 2014 will not qualify for the program offered this year.

Arizona Governor Ducey signed into law Senate Bill 1471 March 12, establishing a tax amnesty program, referred to as a tax recovery program, from Sept. 1, 2015, through Oct. 31, 2015.  Taxpayers filing annually may be eligible to apply for the tax amnesty program for any taxable period ending before Jan. 1, 2014. For all other taxpayers, the applicable tax period must end before Feb. 1, 2015. If amnesty is granted, an abatement or waiver of all civil penalties and interest for tax liabilities during the applicable tax period will be applied.

Massachusetts’ tax amnesty period is soon coming to a close, running from March 16, 2015, through May 15, 2015. Participating taxpayers must have an unpaid or self-assessed tax liability by Jan. 1, 2015, that includes corporate excise tax, estate tax, fiduciary income tax or individual use tax on motor vehicles. If eligible taxpayers submit full payment of all unpaid tax liability and interest, amnesty will be granted as to all unpaid penalties associated with the outstanding tax liability.

Missouri House Bill 384 was delivered to Governor Nixon for his signature on April 14, 2015. Once signed, the tax amnesty period will be established from Sept. 1, 2015, through Nov. 30, 2015. Eligible taxpayers who have paid in full all outstanding tax liabilities by Nov. 30, 2015, will be granted amnesty from all penalties, additions to tax, and interest unpaid by Sept. 1, 2015, associated with the tax liability. Amnesty applies only to outstanding tax liabilities prior to Jan. 1, 2015.

Unlike Maryland and Massachusetts, eligible taxpayers for the tax amnesty program in Missouri must have filed a tax return for each taxable period for which amnesty is sought.

Tax amnesty legislation is currently pending in Indiana, New Hampshire and South Carolina.

Generally, tax amnesty programs are only available for a total of 60 days and are not usually offered annually. It’s important for taxpayers to keep an eye out for these programs and act swiftly to apply and prove eligibility. With typically only two months to do so, time is not on your side.

Continue the discussion on Bloomberg BNA’s State Tax Group on LinkedIn: Should states utilize tax amnesty programs more often to encourage delinquent taxpayers to settle their outstanding tax liabilities?

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