Individual Tax Insights: Amnesty on the Horizon in Louisiana and Massachusetts


In the past month, Louisiana and Massachusetts passed legislation for tax amnesty programs, which give eligible taxpayers a “fresh start” by greatly reducing or eliminating penalties and/or interest on past due tax liabilities if payments are made through the program. By the end of the 2015, no two states will have embraced tax amnesty programs more often in the previous 20 years than Louisiana (six) and Massachusetts (five). But neither of these states have collected as much as New Jersey and New York have during their amnesty periods.

Louisiana’s new law modifies existing law by extending the 100 percent waiver of penalties and interest from the 2013 amnesty program to the 2014 program and increasing the waivers for the 2015 program to 33 percent of penalties and 17 percent of interest. The new law also allows taxpayers to make payments under the amnesty program by installment agreements, which were previously prohibited.

In Massachusetts, the FY 2015 budget includes a provision to establish a two-month amnesty period, which will waive all penalties for taxpayers who take advantage of the program.  Taxpayers who utilize the program may not take advantage of another amnesty program for 10 years.  The Commissioner of the Department of Revenue announced that the program will run between September and October of this year and will include individual income tax, general sales and use tax, withholding tax, and a variety of other specific sales and excise taxes.  Massachusetts’s last amnesty program to include income taxes was in 2009.

The chart below compares various amnesty programs since 2002, including the four most successful states by collections over that time, New Jersey, New York, Louisiana, and Illinois, as well as Massachusetts.  The Federation of Tax Administrators and Bloomberg BNAcollected the information on the amnesty programs and the United States Census Bureau compiled the tax revenue collected by state governments. 

State

Amnesty Program Collections (in millions)

Avg. Annual Total Tax Revenue Between FY 2009-2013 (in billions)

Avg. Annual Total Tax Revenue Rank (among all states)

Collections v. Avg. Annual Total Tax Revnue

New Jersey

1,002

27.37

7

3.66%

New York

988

68.34

2

1.45%

Louisiana

932

9.21

25

10.12%

Illinois

846

32.12

5

2.63%

Massachusetts

172

21.72

11

0.79%

*Continue the discussion on Bloomberg BNA's State Tax Group on LinkedIn: Are amnesty programs effective tax policy?

For more information about tax amnesty programs, check out Bloomberg BNA’s Individual Income Tax Navigator by signing up for a free trialof the Bloomberg BNA Premier State Tax Library today.

By: William Olver

Follow BBNA on Twitter at: @BBNATax.