United States

Pennsylvania DOR issues 2017 tax amnesty program guidance

Participants receive waiver of penalties and half the interest

TAX ALERT  | 

Earlier this year, Pennsylvania Gov. Wolf signed the Commonwealth’s annual budget bill providing for numerous tax changes. Included in that bill was authority for the Pennsylvania Department of Revenue (DOR) to administer a tax amnesty program to occur before the end of the fiscal year. On Sept. 9, 2016, the DOR issued its initial guidelines for participation in the program.

The 2017 tax amnesty program will run for a 60-day period from April 21, 2017, through June 19, 2017. Qualifying participants will receive waiver of all penalties and half of the interest due on eligible delinquencies. Eligible tax periods for the program are those where a delinquency exists as of Dec. 31, 2015, whether the delinquency is known or unknown to the department.

Most taxes that are administered by the DOR are eligible for amnesty, including sales and use, income and franchise, gross receipts, personal income, public utility realty tax and the bank shares tax. However, the program does not apply to unemployment compensation or taxes administered by other state or local governments, or the IRS.

Unpaid taxes due after Dec. 31, 2015, are not eligible for the program, but any non-filed or under-reported taxed due after Dec. 31, 2015, must be filed by the end of the amnesty period to participate in the program.

The Commonwealth is also offering a limited look-back period for reporting and paying taxes that are unknown to the DOR and the taxpayer has not been contacted about the taxes. Accordingly, unknown delinquencies are limited to those occurring from Jan. 1, 2011, through Dec. 31, 2015, and must be filed and paid before the close of the amnesty period.

Ineligible taxpayers

Taxpayers that participated in Pennsylvania’s 2010 tax amnesty program are ineligible to participate in the 2017 program. However, taxpayers who participated in the 1996 tax amnesty program are eligible for the 2017 program.

Taxpayers currently under criminal investigation for a violation of any tax law, have been named as a defendant in a criminal complaint alleging a violation of any tax law prior to April 21, 2017, or are defendants in a pending criminal action for an alleged tax law violation are not eligible for the program. Taxpayers in bankruptcy, or who have previously received a discharge determination of Pennsylvania tax liabilities through a bankruptcy proceeding, are also not eligible unless permission is granted by the bankruptcy court.

Taxpayers currently under an administrative or judicial appeal may be included in the tax amnesty program if the appeal is withdrawn before amnesty is granted. Taxpayers only need to withdraw appeals of liabilities for which the taxpayer is applying for amnesty.

Failure to participate

Taxpayers should take note that if they are eligible for tax amnesty and choose not to participate, a 5 percent non-participation penalty will be added to any balance due and may subject taxpayers to other enforcement actions.

Takeaways

The Commonwealth is offering a very attractive amnesty program, waiving all penalties and half of the interest, for those taxpayers with eligible delinquencies occurring before Dec. 31, 2015. Taxpayers with known delinquencies will receive notices from the department by email prior to the start of the program. However, taxpayers should be aware that while noncompliance may result in a 5 percent noncompliance penalty, taxpayers who do participate forfeit all future appeal rights for liabilities paid through the tax amnesty program. Additionally, the Commonwealth’s voluntary disclosure program will remain active during the amnesty period. Taxpayers should consult with their tax advisors to determine whether they qualify for tax amnesty and whether participation in the program is the most beneficial path for compliance.

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