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Alabama tax amnesty program begins July 1

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Mark Arrigo
Atlanta
T +1 678 515 2320

Randy Holloway
Atlanta
T +1 404 704 0140

Veronica Caputo
Atlanta
T +1 404 704 0185

Brad Brown
Atlanta
T +1 404 704 0133

Stephen Mergenthal
Atlanta
T +1 404 475 0031

Tom Coley

Charlotte
T +1 704 632 6827
On March 6, 2018, Alabama Gov. Kay Ivey signed legislation, the Alabama Tax Delinquency Amnesty Act of 2018, which directs the Alabama Department of Revenue to conduct a tax amnesty program from July 1, 2018, through Sept. 30, 2018.1 If the amnesty application is approved during the amnesty period, and if all returns, supporting documentation and full payment are received by Nov. 15, 2018, the Department will waive all interest and all penalties associated with the tax periods for which amnesty is applied.2

Taxes Included in Program The tax amnesty program applies to most of the taxes administered by the Department (including individual income, corporate income / franchise, and sales and use taxes), but does not apply to motor fuel, motor vehicle and property taxes.3 Taxes due prior to January 1, 2017, as well as taxes for taxable periods that began before Jan. 1, 2017, are eligible for amnesty.4 A standard three-year or 36-month “look-back period” applies to all tax types eligible for amnesty.5 A limited look-back period will apply separately to each tax type.6 If the taxpayer has collected any tax without remitting the tax to the Department, the look-back period will be extended to include all periods, back to the point of collection.7

Qualifying Taxpayers To be eligible for the tax amnesty, the taxpayer must not have been contacted by the Department within the last two years.8 Also, amnesty will not be granted to taxpayers who are parties to any criminal investigation or criminal litigation in any Alabama or U.S. court that was pending on March 6, 2018 (the effective date of the tax amnesty act) for nonpayment, delinquency or fraud in relation to any state tax imposed by Alabama and administered by the Department.9 A taxpayer who delivers or discloses any false or fraudulent application, document, return or other statement to the Department in connection with an amnesty application is ineligible for amnesty and will be subject to a statutory fraud penalty or penalty of $10,000, whichever is greater.10 Finally, taxpayers are not eligible for amnesty if they have been issued a final assessment in which the appeal period has ended, have entered into a voluntary disclosure agreement with the Department prior to Dec. 31, 2017, or participated in the Alabama Tax Delinquency Amnesty Act of 2016 for the same tax type.11

Operation of Program Amnesty will only be granted to eligible taxpayers who apply for amnesty during the prescribed period and pay all of the tax due with the required returns and documentation by Nov. 15, 2018.12 Participants in the program must electronically submit the amnesty application to the Department.13 No installment agreements are allowed for taxes that are approved for amnesty.14 The amnesty law provides that participation in the amnesty program is conditioned on the agreement of the taxpayer that the right to protest or initiate an administrative or judicial proceeding is barred.15 However, the agreement only applies to the specific tax and the tax period for which amnesty is granted. A taxpayer who files an amnesty application retains all administrative and judicial rights of appeal for any additional taxes assessed by the Department.16 For tax periods beginning on or after Jan. 1, 2017, and before Dec. 31, 2024, taxpayers who participate in the program and later fail to comply with any payment or filing provision are subject to a statutory negligence penalty or a penalty of $100, which is greater.17 Finally, if a deficiency assessment for a period for which amnesty was taken is issued by the Commissioner, a post-amnesty cost of collection of up to 20% of such deficiency may be imposed by the Commissioner. This penalty may be waived if the deficiency was not due to negligence, intentional disregard of the Department’s regulations and rules, or fraud.18

Commentary Following a similar tax amnesty program in 201619, this is the second tax amnesty program that Alabama has offered in recent years. As noted above, taxpayers are not eligible to participate in the upcoming amnesty program if they were granted amnesty for the same tax type in 2016. Taxpayers who believe they owe any Alabama state taxes are advised to consider participating in this program to avoid civil penalties and interest due. The amnesty program is available to corporations and individuals for a wide variety of Alabama taxes. Because the amnesty program provisions in the legislation are fairly general, we expect the state to provide additional guidance concerning the administration of the program.


 
1 Act 153 (H.B. 137), Laws 2018.
2 H.B. 137, § 7(a).
3 H.B. 137, § 3(b).
4 H.B. 137, § 4(a).
5 H.B. 137, § 2(5).
6 H.B. 137, § 5.
7 Id.
8 H.B. 137, §§ 2(2); 4(c).
9 H.B. 137, § 6(1).
10 H.B. 137, §§ 6(2); 8(a)(2).
11 H.B. 137, § 6(3)-(5).
12 H.B. 137, § 7(a). An eligible taxpayer must include the current-year return with the amnesty returns filed for the eligible tax type. Penalties for failure to timely file a return and failure to timely pay will be waived. However, waiver of interest does not apply to current-year returns.
13 H.B. 137, § 4(c).
14 H.B. 137, § 7(a)(1).
15 H.B. 137, § 4(b), (d).
16 Id.
17 H.B. 137, § 8(a)(1).
18 H.B. 137, § 8(b).
19 Act 555 (S.B. 20), Laws 2015.




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