United States

Oklahoma enacts tax amnesty program

Program period runs from Sept 1, 2017, through Nov. 30, 2017

TAX ALERT  | 

On May 24, 2017, Oklahoma Gov. Mary Fallin signed House Bill 2380, providing for a tax amnesty program titled the Voluntary Disclosure Initiative (VDI) to run from Sept. 1, 2017, through Nov. 30, 2017. The VDI program offers complete waiver of interest and penalty to qualifying participants.

Taxes eligible for the VDI include the mixed beverage tax, gasoline taxes, sales and use tax, income tax and withholding tax. Eligible taxpayers must (1) not have outstanding tax liabilities besides those reported under the VDI program, (2) not have been contacted by the Oklahoma Tax Commission (OTC), (3) have no collected and unremitted tax (such as sales and use tax or payroll tax) at the time of an application, and (4) not have been a participant in an Oklahoma voluntary disclosure agreement (VDA) within the preceding three years for the type of tax owed. The program limits the period for which additional taxes may be assessed to three years for annually-filed taxes or to 36 months for non-annual filers.

House Bill 2380 also provides that taxpayers who meet the eligibility qualifications above, but that currently have collected and unreported taxes, may enter into a modified VDA. Taxpayers filing under a modified agreement will not have automatic interest waiver, but interest waiver may still be granted at the discretion of the OTC. Additionally, for purposes of the modified voluntary disclosure, the period for which taxes must be reported and remitted or assessed is extended beyond the three-year or 36-month period provided in the VDI program to include all periods in which tax was collected and unremitted.

Separate to the new VDI program, House Bill 2380 also provides for the OTC to launch a program to educate businesses on state tax compliance responsibilities and identify and register businesses selling tangible personal property in the state without a permit. The program establishes teams of OTC employees to visit nonresidential retail businesses to check for required permits and licenses, review the accuracy and validity of those licenses, and determine whether the businesses are reporting and remitting applicable taxes.

Takeaways

Oklahoma’s last tax amnesty program occurred during a similar period in 2015. Currently, the state offers a VDA program that offers waiver of half the interest and full waiver of penalty to eligible taxpayers. Under the VDA, interest and penalty waived in excess of $10,000 must file for a District Court approval to activate such a waiver. The new VDI program offers a number of advantages over the VDA program, including a more limited look-back period, complete waiver of interest and penalty, and provides no requirement for District Court approval of large waivers.

The fiscal notes of the bill expect a positive revenue impact of $10.2 million dollars of sales tax collections and $4.4 million in income tax collections, for a total of $14.6 million. It is anticipated that the OTC will promulgate additional rules for entering the program at a later date. Interested taxpayers should speak to their tax advisors about the qualifications for entering into the program.

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