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Massachusetts Limited Amnesty Program for Taxpayers with Existing Business Tax Liabilities Begins April 1, 2010

SALT Alert:  On March 12, 2010, the Massachusetts Department of Revenue (“the Department”) issued Technical Information Release (“TIR”) 10-5, Limited Amnesty For Taxpayers With Existing Business Tax Liabilities, in which the Department announced the details of a limited amnesty program which goes into effect today, April 1, 2010. This two month limited amnesty program will run for 60 days, and thus is set to expire on June 1, 2010. Similar to general amnesty programs that have been in effect in other states, the Massachusetts limited amnesty program grants a waiver of all applicable penalties to “Eligible Taxpayers” who pay the full amnesty liability by the close of the amnesty period. However, unlike other general amnesty programs, participation in Massachusetts’ limited amnesty program is available only to specific “Eligible Taxpayers” who are offered the opportunity to participate in the amnesty program.

Definition of an Eligible Taxpayer, Eligible Tax Type and Excluded Taxpayers
Under the provisions of the amnesty, and as described in the TIR, an “Eligible Taxpayer” is a taxpayer who has been issued a “Tax Amnesty Notice”, and (1) has an unpaid and previously self-assessed tax liability for an “Eligible Tax Type”, (2) has previously been assessed a tax liability for an “Eligible Tax Type” and is properly disputing the unpaid liability, or (3) is delinquent in paying the liability.

The Amnesty Program applies to liabilities of "Eligible Tax Types" for taxable periods ending on or before December 31, 2009. The TIR lists several categories of business and trustee type taxes as “Eligible Tax Types”. Of those business tax liabilities that meet the definition of an “Eligible Tax Type”, the most significant include sales & use tax, sales tax on telecommunications, materialman sales tax, meals tax, withholding income tax and pass-through withholding tax. Noticeably absent from the definition of an "Eligible Tax Type" is the Massachusetts corporate excise tax (the tax on corporate income). Thus, taxpayers with outstanding corporate excise tax (income tax) assessments are prohibited from participating in the current amnesty.

Also specifically excluded from participating in the amnesty are taxpayers who were the subject of tax-related criminal investigations or prosecutions prior to the start date of the amnesty period. Additionally, taxpayers who have reached a settlement through the Department’s Litigation Bureau, Office of Appeals or Offer-in-Settlement Unit, and who have a signed settlement agreement, are not eligible for the tax amnesty for the periods covered by the amnesty. Further taxpayers who have paid all tax and interest due relating to any outstanding assessment but who, at the start of the Amnesty Period, still owe or are properly disputing penalties with regard to that assessment are not eligible for the tax periods covered by the assessment.

As stated above, eligible taxpayers will be offered the opportunity to participate upon receipt of an Amnesty Tax Notice. The Department’s Press Release of March 26, 2010, which further elaborates on the amnesty, indicates that nearly 36,000 taxpayers are expected to receive the amnesty tax offer. The offer will include a taxpayer specific Amnesty Tax Coupon which will include the dollar amount of the Amnesty Balance Due. In accordance with the amnesty provisions, this Amnesty Balance Due should include only the tax and interest with respect to previously filed returns or assessments. Excluded from the Amnesty Balance Due are all potentially applicable penalties, as well as that portion of interest that was previously assessed on any penalty. In order to comply with the provisions of the amnesty, eligible taxpayers are required to pay the full amount of the Amnesty Balance Due, even if the taxpayer does not agree with balance as shown on the Amnesty Tax Coupon. Failure to pay the full amount may subject the taxpayer to an additional amnesty penalty of up to $500, which will be added to and become part of any outstanding balance which remains unpaid after the close of the amnesty period. Payment of the full Amnesty Balance Due will not constitute a forfeiture of statutory rights of appeal or an admission of liability for the disputed assessment. The Department’s website discusses various methods for remitting payment, including electronically through the Department’s Web Services for Business application.

Sylvia's Summation
For the second time in a two year period, the Massachusetts Legislature has granted the Commissioner authority to establish and administer a two month amnesty to encourage the payment of delinquent tax obligations to the Commonwealth. A similar limited amnesty program was in effected in the Spring of 2009 for individual taxpayers who received a similar amnesty tax offer. Yet, to date, the Commissioner has not granted amnesty to perhaps the most significant taxpayer group in the Commonwealth, taxpayers with outstanding corporate excise tax assessments.

For eligible taxpayers who receive the amnesty offer, the amnesty provides an opportunity to become current on their outstanding eligible tax type liabilities and receive the benefit of complete penalty waiver while retaining their statutory rights of appeal.

For more information, see Massachusetts Department of Revenue Technical Information Release 10-5, issued March 12, 2010, the Department’s Press Release dated March 26, 2010, and the Department's Amnesty Frequently Asked Questions (FAQ's)