Keep an eye on state tax amnesties in Maryland, Missouri and Indiana
New state amnesty programs relieve interest, penalties and debts
TAX ALERT |
Maryland, Missouri and Indiana have enacted legislation to establish a new round of state tax amnesty programs. These broadly applicable programs are aimed at quickly raising near-term revenue in exchange for waiver of penalties, interest and additions to tax. Summary details of these programs are as follows:
On April 14, 2015, Maryland Gov. Larry Hogan signed Senate Bill 763, establishing a tax amnesty program that grants relief from all civil penalties and 50 percent of interest resulting from delinquent Maryland state and local individual or corporate income taxes, withholding taxes, sales and use taxes, or admissions and amusement taxes. The tax amnesty period will run from Sept. 1, 2015, through Oct. 30, 2015.
Qualifying taxpayers must complete one of the following during the amnesty period:
- File a delinquent return and pay the tax, including one-half of any interest, due under the return
- Pay the tax, plus one-half of any interest, due on a previously filed return
- With respect to delinquent tax due under a return filed during the amnesty period or under a previously filed return, enter into an agreement with the Comptroller to pay the tax, including 50 percent of any interest, in accordance with the terms and schedule established in the agreement
To qualify to participate in the program, a taxpayer must have outstanding filing or payment obligations due or payable on or before Dec. 31, 2014, and must not have been granted any other amnesty from Maryland between 1999 and 2014, or been eligible to participate in the July 1, 2004, through Nov. 1, 2004, settlement period.
On April 27, 2015, Missouri Gov. Jay Nixon signed House Bill No. 384, establishing both a tax amnesty program and an offset program.
The amnesty program will grant relief from the assessment or payment of all penalties, additions to tax, and interest in respect to unpaid taxes or taxes due on or before Dec. 31, 2014, and will run from Sept. 1, 2015, through Nov. 30, 2015. To take advantage of the amnesty program, participants must apply for amnesty and pay the unpaid taxes in full within the amnesty period. All participants must comply in good faith with Missouri tax laws for eight years following the amnesty agreement‒failure to do so will result in reinstatement of all penalties, additions to tax, and interest previously waived under the amnesty agreement. Further, no tax paid under the amnesty program will be eligible for refund or credit and taxpayers granted amnesty will not be eligible for future amnesty of the same tax type.
On May 7, 2015, Indiana Gov. Mike Pence signed the State Biennial Budget Bill, under which, the Indiana Department of Revenue (DOR) will be required to establish a tax amnesty program for taxpayers with an unpaid tax liability for a listed tax that was due and payable for a tax period ending before Jan. 1, 2013. Listed taxes include corporate income and sales and use taxes. The program will be limited to an eight-week period to be determined by the Indiana DOR that may end no later than Jan. 1, 2017. Under the amnesty program, the department will waive all applicable interest, penalties and other fees that would otherwise be applicable. Taxpayers that participated in any previous Indiana amnesty programs or that failed to add back state income taxes in computing Indiana gross income will not be eligible to participate in this amnesty program.
Any taxpayer that has outstanding filing or payment obligations with Maryland, Missouri or Indiana may be able to use these amnesty programs to bring their account into compliance beneficial waivers of penalties, interest and additions to tax. Before making the decision to participate, taxpayers should take into consideration multiple factors, including any former participation in a given state's amnesty programs including voluntary disclosure agreements, state filing history, state risk exposure, and all conditions set forth by the amnesty program. Taxpayers should also consider any administrative policies that may preclude them from taking part in other programs in the future, such as Voluntary Disclosure Agreements, if they did not participate in the state's amnesty program. Lastly, taxpayers should consider whether the benefits of other programs, such as voluntary disclosure, outweigh the benefits of these amnesty programs. Some taxpayers may benefit more from a limited look-back period than from a waiver of interest.