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Insights & Alerts
July 13, 2010

State Tax Update

As states seek to accelerate cash receipts, many are implementing amnesty programs. Following is a brief summary of several amnesty programs currently in effect. The specifics of the New Mexico program are set forth as an example of how these programs typically work. Also remember, many states continue to utilize a voluntary disclosure process.

New Mexico Amnesty Program

The New Mexico Taxation and Revenue Department is currently running an amnesty program through September 30, 2010, targeting individuals and businesses for unreported state taxes. Qualifying taxpayers who enter into an Amnesty Agreement will not be assessed penalties, and could avoid interest charges if they pay the tax liability within 180 calendar days of assessment.

Procedurally, the taxpayer must submit a completed application and agreement to the New Mexico Taxation and Revenue Department (“Department”). Once the Department and the taxpayer sign the agreement, the Secretary will assign a Department reviewer to assist the taxpayer with the amnesty process. The reviewer’s functions include; the issuance of a letter (Section 7-9-43 NMSA 1978) , assisting the taxpayer in determining the necessary information and documents required to generate an assessment, assist in formatting the amnesty work papers for submission and review and approval of completed work papers. The reviewer may also require the taxpayer to provide source documents, non-taxable transaction certificates, tax returns, or other accounting records to determine the correct amount of tax due.

The Amnesty Agreement must include the following components to be considered complete and binding:

  • Cover unreported taxes due prior to January 1, 2010.
  • Bear the signatures of the taxpayer and the Secretary while containing a declaration that all statements in the application and agreement are true and correct.
  • Specify the report period(s) covered under amnesty.
  • Specify the type of receipts or transactions and tax program(s) under amnesty.
  • Specify the amnesty issues.
  • Specify the procedures and records used in performing the review.
  • Specify the amnesty’s beginning date.
  • Specify the date when the taxpayer will present required documents to the Department.
  • Include a waiver of limitations on assessments for the report period(s) under amnesty provided that the Department’s standard audit procedures require a waiver.

After the taxpayer submits all required documentation, the Secretary has the discretion to accept, modify or terminate the amnesty agreement. Any intentional misrepresentation of facts nullifies the Agreement.
For additional assistance call 1-888-668-2979, or visit www.taxrelief.newmexico.gov

Other States Currently Running Amnesty Programs

Maine – Maine’s Amnesty Program runs from September 1, 2010, to November 30, 2010. This program will give taxpayers the opportunity to receive interest and penalty waivers when they pay their delinquent tax debt. This program covers both undeclared taxes as well as tax issues subject to pending administrative or judicial proceedings.

For further information visit www.maine.gov/revenue/Compliance/trri_10.htm

Nevada – Nevada’s Amnesty Program runs from July 1, 2010 to September 30, 2010 benefiting individuals and businesses. Since Nevada does not have an individual or corporate income tax, this amnesty program will be most beneficial to companies with sales/use tax liabilities or individuals who have purchased large assets and owe sales tax on those purchases.

For more information call 1-866-962-3707 or visit http://tax.state.nv.us/amnesty.htm

Florida – Florida’s Amnesty Program runs from July 1, 2010 to September 30, 2010 benefiting individuals and businesses. Taxes covered under the program are: communications services tax, corporate income and emergency excise tax, documentary stamp tax, estate tax, government leasehold intangible personal property taxes, gross receipts tax on utility services, insurance premium taxes, surcharges, motor fuel taxes (including local option taxes) and sales and use tax (including discretionary sales surtaxes). Periods covered by amnesty includes all periods where the tax, interest and penalty were due before July 1, 2010. Unemployment tax and Miami-Dade County Lake Belt Fees are not eligible for amnesty.

For more information visit http://dor.myflorida.com/dor/amnesty/

Tennessee – Tennessee continues to actively promote its Voluntary Disclosure Program which targets businesses which have not filed tax returns or those not registered with the applicable county clerk and/or city official. All penalties will be waived if there’s voluntary registration and the filing of three years’ back taxes with interest. Businesses that do not voluntarily come forward to register and file returns and are contacted by the state will pay from six to ten years of back taxes, interest and penalties of up to 25% on any tax due. Taxes covered under the program are; franchise, sales and use and excise taxes. This program is scheduled to run so long as the state finds it to be productive.

For further information contact Discovery Unit at (615) 741-8319.

Kentucky – EXPEDITED RESOLUTION PROGRAM –(not amnesty). A taxpayer who has received a notice of tax due (tax bill), that as of January 19, 2010, has been properly protested under KRS 131.110, and which has not been the subject of a final ruling letter or the subject of collections action is eligible. The taxpayer may pay 100 percent of the tax due on eligible bills and be absolved from owing penalty and interest on those bills. Payment of 100 percent of the tax due on eligible bills must be made by the close of business on July 30, 2010 in order to qualify.

For additional information visit www.revenue.ky.gov/hot+topics/eprp.htm

As states increase their compliance enforcement, taking advantage of available amnesty and voluntary disclosure programs is an essential part of state and local tax planning.

Contact your MarcumRachlin tax professional to learn how these programs many benefit you and your business.

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