United States

Arizona enacts tax amnesty

Eligible taxpayers receive complete waiver of interest and penalties

TAX ALERT  | 

On May 10, 2016, Arizona enacted 2016 HB 2708, which provides for a ‘tax recovery’ period, or tax amnesty, from Sept. 1, 2016, through Oct. 31, 2016. Similar legislation was enacted last year and an amnesty was held over the same two months.

Pursuant to HB 2708, the amnesty applies to any tax or surcharge administered or collected by the Arizona Department of Revenue including income tax, transaction privilege tax, telecommunication services excise tax, county excise taxes and any other privilege excise tax administered by the department of revenue, except withholding tax or luxury tax which are specifically excluded from the amnesty. Eligible periods for annual filers are any taxable period ending before Jan. 1, 2014, and for all other taxpayers, any taxable period ending before Feb. 1, 2015–the same periods permitted under the 2015 amnesty.

To qualify for the amnesty, a taxpayer will be required to submit an application using a form to be promulgated by the department, with which the taxpayer will be required to remit the amount of tax due. The tax liability must be paid in full during the recovery period ending Oct. 31, 2016, or the taxpayer may pay at least one third of the tax due by Oct. 31 in each of the next three consecutive years beginning with the first third due by Oct. 31, 2016.

Additionally, a taxpayer is disqualified from the program if:

  • The taxpayer is a party to any criminal investigation or to any criminal administrative proceeding or criminal litigation that is pending on Jan. 1, 2016, in any court of the United States or of Arizona for failure to file or failure to pay, or for fraud with respect to, any tax imposed by any law of Arizona that is required to be collected by the department.
  • The taxpayer was the subject of a past tax-related criminal investigation, indictment or prosecution that resulted in a conviction, a guilty plea or a plea of no contest.
  • The taxpayer has been convicted of a crime relating to any period or assessment of a tax that is the basis of the penalty or interest with respect to which amnesty is sought.
  • The taxpayer is a party to a closing agreement with the department for the tax periods included in the amnesty application.
  • The taxpayer’s tax liability due is the subject of an audit being conducted by the department.

A taxpayer granted amnesty will receive waiver of civil penalties and interest, and may not be subject to administrative, civil or criminal action for failure to comply with its tax requirements for the taxable periods covered by its amnesty application.

Taxpayers should note that the amnesty application waives all administrative and judicial rights of appeal that may be available to the taxpayer. The Arizona Board of Tax Appeals and any court shall dismiss each any action or proceeding before that body on receiving a notification from the director that recovery has been granted for the taxable period for that taxable. If any audit determination is not final, the taxpayer must withdraw from the proceeding or litigation before recovery is granted. However, administrative and judicial rights are preserved with respect to any additional tax assessed in a subsequent department audit.

The 2015 amnesty program generated more than $46 million, or more than three times original projections. SB 2708 provides Arizona taxpayers a second chance to review the amnesty terms in light of their business activities and compliance history, and determine whether they can benefit from participating in this amnesty program. The department should be providing additional guidance and the required application form in the coming months.

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