Executive Summary

The Pennsylvania Department of Revenue ("DOR") has issued guidelines for the Tax Amnesty Program (the "Program") created in Pennsylvania's 2009-2010 budget. The Program, which goes into effect April 26, 2010 and ends June 18, 2010 (the "Amnesty Period"), provides relief from tax, interest and penalties. The Philadelphia Department of Revenue has also announced an amnesty program covering almost all City and School District taxes. The City program, which will run from May 3 to June 25, 2010, provides interest and penalty relief.

The Pennsylvania Tax Amnesty Program

The Pennsylvania Program provides taxpayers with amnesty from certain "unknown" and "known" liabilities arising from an eligible tax delinquency that exists as of June 30, 2009. Eligible taxes include, among several others, Capital Stock/Foreign Franchise Tax ("CSFT"), Bank Shares Tax, Corporate Net Income Tax ("CNIT"), Employer Withholding, Personal Income Tax, Realty Transfer Tax and Sales and Use Tax.

An "unknown" liability is defined to include a liability for an eligible tax for which: (1) no return or report has been made, no payment has been made, and the taxpayer has not been contacted by the DOR concerning the unfiled return or unpaid tax; or (2) a report or return was filed, the tax was underreported and the taxpayer has not been contacted by the DOR concerning the underreporting. A "known" liability is defined as a delinquency known to the DOR, including those for which there is an active administrative or judicial appeal.

The benefits of participation in the Program include: (1) "unknown" liabilities—relief from liability for taxes due prior to July 1, 2004 and abatement of all penalties and 50% of interest on tax returns due prior to June 30, 2009; and (2) "known" liabilities-abatement of all penalties and 50% of interest on tax returns due prior to June 30, 2009.

Participation in the Program requires compliance with the "Participation Requirements," which may include filing returns and paying any tax and interest due by the end of the Amnesty Period. A 5% non-participation penalty will apply to all unpaid tax and interest not paid in full during the Pennsylvania Program's Amnesty Period.

The Philadelphia Tax Amnesty Program

The Philadelphia program, which begins and ends one week later than the Pennsylvania Program, will provide relief from 50% of accrued interest, and all penalties. It applies to taxes due between February 1986 and June 2009, but is not available to a taxpayer that is named in a criminal tax case or that previously participated in a Philadelphia tax amnesty program. This program requires the filing of all delinquent returns going back to 1986.

Blank Rome Observations

  • For taxpayers with pre-2004 liabilities unknown to the DOR, the Pennsylvania Program presents an opportunity to come into compliance with Pennsylvania tax obligations at a very reasonable cost. For pre-2004 tax years, a taxpayer will not have to file returns or pay any tax, interest or penalties, and can receive abatement of all penalties and half the interest on taxes due for 2004-2008 by paying the tax and half the interest. The Philadelphia program does not provide for any tax abatement and requires the filing of all delinquent returns going back to 1986.
  • Both Pennsylvania and Philadelphia have voluntary disclosure programs, although the DOR has announced that the Pennsylvania voluntary disclosure program will be suspended during the amnesty period. The benefits of voluntary disclosure should be reviewed and compared with the benefits of participating in the Amnesty programs.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.