Arizona Enacts Tax Amnesty Legislation to Provide a Waiver of Penalties and Interest

On March 12, 2015, Arizona enacted 2015 Senate Bill 1471, which establishes a tax recovery (amnesty) program that will run from September 1, 2015 through October 31, 2015. The program applies to all taxes administered by the Arizona Department of Revenue (except luxury tax and withholding tax). Taxpayers that apply and subsequently comply with the Department’s requirements for participation may receive a waiver of civil penalties and interest for tax liabilities that have been or could have been assessed during the applicable liability period. The applicable liability period is any taxable period ending before January 1, 2014 (for annual filers) and any taxable period ending before February 1, 2015 (for all other filers). Taxpayers that apply waive their rights to appeal liabilities paid during the recovery program. Certain taxpayers are not allowed to participate, including but not limited to, those that are under criminal investigation or those that have entered into a closing agreement with the Department for tax periods included in the recovery application. Please contact attorney Stephen McFarlane of the McFarlane tax resolution law firm at (480) 991-0323 with questions on the Arizona tax recovery amnesty program.

More … Pursuant to this legislation, the amnesty will apply to income tax, transaction privilege tax, telecommunication services excise tax, county excise taxes and any other privilege excise tax administered by the department of revenue (including city transaction privilege tax for those cities whose taxes are administered by the department), severance tax, use tax, tax on water use, jet fuel excise and use tax, car rental surcharge, and hotel tax, but will not apply to withholding tax or luxury tax. The covered amnesty period for annual filers will be any taxable period within the statute of limitations ending before Jan. 1, 2014. The covered amnesty period for all other filers will be any taxable period ending before Feb. 1, 2015. The amnesty will apply to both unestablished liabilities and liabilities that have been established and assessed in relation to the applicable covered period.

To qualify for the amnesty, a taxpayer will be required to submit an application using a form to be promulgated by the department, with which the taxpayer will be required to remit the amount of tax due. Additionally, a taxpayer must attest that:

• The taxpayer is not a party to any criminal investigation or to any criminal administrative proceeding or criminal litigation that is pending on Jan. 1, 2015, in any court of the United States or of Arizona for failure to file or failure to pay, or for fraud with respect to, any tax imposed by any law of Arizona that is required to be collected by the department.
• The taxpayer was not the subject of a past tax-related criminal investigation, indictment or prosecution that resulted in a conviction, a guilty plea or a plea of no contest.
• The taxpayer has not been convicted of a crime relating to any period or assessment of a tax that is the basis of the penalty or interest with respect to which amnesty is sought.
• The taxpayer is not a party to a closing agreement with the department for the tax periods included in the amnesty application.
• The taxpayer’s application for amnesty includes an amount of unpaid tax (the statute is not clear if taxpayers are required to include the entire amount of tax when submitting their application).

A taxpayer granted amnesty will receive waiver of civil penalties and interest, and may not be subject to administrative, civil or criminal action for failure to comply with its tax requirements for the taxable periods covered by its amnesty application.