United States: Texas Comptroller’s Amnesty Program Begins June 12, 2012

The Texas Comptroller's Office has officially announced a new amnesty program set to run from June 12 through August 17, 2012.¹ Under the Project Fresh Start amnesty program, the state will waive penalties and interest associated with delinquent tax reports and underreported tax liabilities which are paid by eligible participants during the amnesty period. Only reports that were originally due before April 1, 2012 are eligible for the limited-time amnesty.

Eligible Taxpayers

Taxpayers eligible for amnesty include those who: (1) did not file a required return or report; (2) underreported or omitted any tax liability on a previously filed report; or (3) are doing business in the state, but have failed to register for a permit to report and remit Texas taxes. The amnesty program does not apply to underpaid tax returns (tax that was reported on a return but not actually paid).

Tax Types Included

The amnesty program is available for all state and local taxes and fees administered by the Comptroller's office, including sales and use tax, local option taxes, franchise tax and motor fuels tax. Taxes and fees which are not eligible for amnesty include Public Utility Commission gross receipts assessments, unclaimed property, and any taxes which are not administered by the Comptroller's office (e.g. property taxes). Furthermore, the amnesty applies to International Fuel Tax Agreement (IFTA) taxes, but such amnesty only covers taxes due to Texas, as shown on the IFTA tax report supplement.

Limitations

Amnesty will not apply to filing periods which are currently under audit or examination or for periods where the Comptroller has given notice of a pending audit or examination. In addition, taxpayers who have signed a settlement agreement or voluntary disclosure agreement (VDA) before the start of the program are not eligible for amnesty. Penalties and interest will only be waived if the reported tax liability is paid in full during the amnesty period. Installment payment plans will not be made available.

Procedures for Amnesty

In order to participate, taxpayers must file all applicable reports associated with the tax liabilities they are seeking to pay under amnesty. Taxpayers who need to apply for a Texas tax permit will also be required to submit the applicable questionnaire or application. All original reports, amended reports, applications, and questionnaires must be filed in paper format (not electronically), and must clearly display the word "Amnesty" at the top of the form.

As the amnesty program does not permit electronic payment, all payments must be made by check or money order, even if the taxpayer would otherwise be required to pay electronically. Participants are also instructed to include their Texas taxpayer number or Federal Employer Identification number along with the word "Amnesty" on their payment to ensure accurate processing. All questionnaires, applications, reports, and payments must be mailed in a postmarked envelope by August 17, 2012 to qualify for amnesty. The Comptroller has advised that all amnesty filings and payments be submitted to the following address:

An additional post-amnesty penalty will not be imposed on taxpayers who do not participate in the amnesty program, although penalties and interest will continue to accrue during and after the amnesty period.

Comparison to Texas VDAs

Taxpayers who have failed to report their Texas taxes need to carefully consider whether to participate in the taxpayer amnesty program or alternatively, enter into the Texas VDA program. For taxpayers who have not been contacted by the Comptroller, either program could provide substantial benefits to such taxpayers, including the waiver of statutory penalties and interest. However, the amnesty program and VDA differ in a few significant areas.

A notable difference that supports the use of VDAs over the offered amnesty program arises in the length of lookback periods. Under a VDA, liabilities due to the failure to collect taxes or file the applicable reports are limited to reports due four years from the initial taxpayer contact date.² According to a representative at the Comptroller's office, the taxpayer amnesty program does not include a limited lookback provision.

On the other hand, the amnesty program appears to be an administratively simpler program in which to participate than the VDA. The taxpayer must provide a significant amount of information to the Comptroller prior to acceptance in the VDA program by the Deputy Comptroller, including a nexus questionnaire.³ Further, the taxpayer and Comptroller must agree to the terms of the VDA, a process that likely will take more time to complete than participating under the amnesty program, if the proper tax filings and payment are made.

Commentary

The Comptroller's stated goal in implementing the amnesty program is to give businesses the opportunity to "wipe the slate clean" in Texas. While amnesty does offer a unique opportunity, some taxpayers may find it more advantageous to enter into a VDA to address their prior years' tax liabilities. Before participating in this summer's amnesty program, taxpayers should consider whether or not they would be better served entering into a VDA. Project Fresh Start and the Texas VDA program may be an effective means by which to resolve uncertain tax positions subject to ASC 740-10 and ASC 450 (previously, FIN 48 and FAS 5, respectively).

Footnotes

1 Press Release, Texas Comptroller of Public Accounts, March 15, 2012; Project Fresh Start, Texas Taxpayer Amnesty Program 2012, FAQ, Texas Comptroller of Public Accounts. For additional information, see www.freshstart.texas.gov.

2 Publication 96-576, Texas Comptroller of Public Accounts, March 2007.

3 Id.

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