Louisiana Governor Bobby Jindal has signed legislation1 amending the Tax Delinquency Amnesty Act of 20132 as applicable to taxpayers participating in the program during 2014 and 2015. The adopted changes allow more generous benefits than originally offered to these taxpayers, including the availability of installment payment agreements as well as increased waiver amounts of interest and penalties related to the taxes paid under amnesty. The Louisiana Department of Revenue has announced that the 2014 tax amnesty program will be held from October 15 through November 14, 2014. 3

Background

In 2013, Louisiana enacted a tax amnesty program required to be held for a period of at least two months during 2013, at least one month during the second half of 2014, and at least one month during the second half of 2015.4 The amnesty applies to all taxes administered by the Louisiana Department of Revenue except motor fuel taxes and excludes penalties for failure to submit information reports that are not based on an underpayment of tax. As originally enacted, the benefits of participating in the amnesty program substantially differed based on the year of amnesty participation. Specifically, the program terms allowed for a waiver of one-half of the interest and all of the penalties associated with the tax for 2013 participants, no interest and 15 percent of the associated penalties for 2014 participants, and no interest and 10 percent of the associated penalties for 2015 participants.5

To participate during 2013, eligible taxpayers were required to submit an application form developed by the Secretary of the Department for use during the prescribed amnesty period (September 23 through November 22, 2013) and pay all tax, fees and costs (if applicable), and any interest due upon filing the application.6 No installment agreements were permitted. Additionally, the amnesty agreement prohibited a taxpayer from protesting or initiating any administrative or judicial proceeding for the specific tax and period for which amnesty was granted.

Due to the success of the 2013 program from a revenue perspective,7 there was significant support to adopt changes to the 2014 and 2015 amnesty program terms in order to foster compliance and enhance revenue for the state.

2014 and 2015 Amnesty Program Overview

As amended by the recent legislation, the Tax Delinquency Amnesty Program now provides for the following terms for amnesty applications approved during the prescribed periods:

  • 2014: The Secretary will waive half of the interest and all penalties associated with the tax.8
  • 2015: The Secretary will waive 17 percent of the interest and 33 percent of the penalties associated with the tax.9

As originally provided, an amnesty application must still include a written waiver of all rights, restrictions and delays for assessing, collecting or protesting taxes and interest due.10 Upon conclusion of the amnesty period in 2015, the Department may not implement a new amnesty program prior to January 1, 2025.11

Taxes Eligible for Amnesty

The Tax Delinquency Amnesty Act is available to a variety of taxpayers and applies to all types of Louisiana taxes, except for motor fuels taxes. The following taxes are eligible for the amnesty program:

  • For both the 2014 and 2015 programs, taxes for taxable periods that began before January 1, 2014;12
  • For the 2014 program, taxes due prior to January 1, 2014 for which the Department has issued an individual or business a proposed assessment, notice of assessment, bill, notice, or demand for payment not later than May 31, 2014;13
  • For the 2015 program, taxes due prior to January 1, 2015 for which the Department has issued an individual or business a proposed assessment, notice of assessment, bill, notice, or demand for payment not later than May 31, 2015;14 and
  • For both the 2014 and 2015 programs, taxes for which the taxpayer and the Department have entered into an agreement to interrupt the running of prescription pursuant to La. Rev. Stat. Sec. 47:1580 and such agreement suspends the running of prescription until December 31, 2014.15

A taxpayer who disputes a portion of the amount of a delinquent tax assessed by the Department may now be eligible to apply for amnesty if the taxpayer remits a complete one-time payment of that portion of the tax that is not in dispute (compromise amount), plus applicable interest and penalties prior to the end of the amnesty period during which the taxpayer applies.16 The Department will then have 30 days to determine if the taxpayer should be granted amnesty based on the compromise amount paid. If the Department approves the compromise amount paid by the taxpayer, the taxpayer will be granted amnesty. If the Department rejects the compromise amount, amnesty will not be granted and the taxpayer will be responsible for the full amount of the delinquent tax, penalties, interest, and fees due prior to the application for amnesty.17 Tax credits will not be accepted as payment of tax, interest, penalties or fees related to the amnesty program.18

Installment Payment Plans Permitted

The enacted legislation now permits qualifying taxpayers participating in the amnesty program to enter into an installment agreement with the Department whereby continuation in the amnesty program is dependent upon complete and timely payment of all installment payments via automated electronic draft.19 Qualifying taxpayers must provide a down payment of no less than 20 percent of the total amount of delinquent tax, penalty, interest, and fees owed and must pay the remainder due in fixed, equal installments over a six-month period.20 All installment payments for the 2014 program are due by May 1, 201521 and for the 2015 program are due by May 1, 2016.22 Failure to make the required payments pursuant to an installment agreement by these due dates will result in the related amnesty agreement being voided by the Department, at which time all delinquent tax, penalties, and interest would become due.23 Taxpayers involved in field audits or litigation are not eligible for installment agreements.24

A taxpayer who is approved to participate in the amnesty program and is currently a party to an installment agreement with the Department may be eligible to participate in an installment agreement under the amnesty program.25

The Department has the authority to engage a third party to perform collection services with respect to installment payments due, as well as promulgate related rules and regulations to implement these changes.26

Matters Under Examination and in Litigation

Certain provisions of the originally enacted amnesty program addressing taxpayers involved in field audits or litigation that participate in an amnesty program remain effective. Specifically:

  • Taxpayers involved in field audits or litigation must include all issues and eligible periods in the amnesty application and agree to the Department's interpretation of the law on all such issues.27 Taxpayers participating in amnesty during 2013 will also agree to abide by the Department's legal interpretations approved under amnesty for all taxable periods beginning in 2014, 2015 and 2016.28 The treatment of taxes for tax years beginning during 2013 (including the 2013 calendar tax year) appears unaddressed. Taxpayers participating in amnesty during 2014 or 2015 similarly must agree to abide by the Department's interpretations for the three taxable years subsequent to the year in which the amnesty agreement is reached. Failure to abide by the Department's interpretation of law for these periods will subject the taxpayer to the negligence penalty.29
  • Taxpayers involved in litigation that elect to participate in the amnesty program must agree to pay applicable attorney fees and their own costs of litigation.30
  • Taxpayers who have paid under protest and filed suit will, upon amnesty approval, have their payment released from escrow and applied in accordance with the grant of amnesty.31
  • Taxpayers with existing liens on their property32 and taxpayers on whom the Department has initiated proceedings against under the assessment and distraint procedure33 are eligible for amnesty, but must pay any and all lien fees associated with the tax periods for which they have applied for amnesty.34
  • Taxpayers who are parties to any criminal investigation or criminal litigation in any federal or Louisiana court for non-payment, delinquency or fraud in relation to any Louisiana state tax are ineligible for the amnesty program.35

Post-Amnesty Penalties

The new law allows for the assessment of "double penalties" by the Department in certain instances.36 Specifically, these penalties may be applied if a final judgment is rendered against a taxpayer by a court or if the taxpayer has exhausted all statutory rights to protest taxes owed to the state 90 days prior to either the 2014 or the 2015 amnesty periods, and the same taxpayer fails to submit an amnesty application before the end of the applicable amnesty period 90 days prior to which the final judgment was rendered or to which the taxpayer's rights to protest taxes have been exhausted.37

The originally enacted post-amnesty cost of collection penalty remains in effect. Specifically, a post-amnesty cost of collection penalty of up to 20 percent may be applied by regulation to deficiency assessments "for a period for which amnesty was taken."38

Commentary

Louisiana originally implemented the Amnesty Act of 2013 (the third amnesty program offered by the state since 2001) to offset a projected $200 million budget shortfall. The amendments to the Tax Delinquency Amnesty Act reflect the relative success of the 2013 program and delinquent taxpayers that failed to take advantage of the 2013 program should strongly consider participating in the current program to resolve any deficiencies with the state before the program expires.

The Department continues to retain revenue collected under amnesty to cover program and administrative expenses,39 but for fiscal year 2014-2015, additional amounts of up to $100 million will be credited to the general fund.40 The next $4 million is appropriated to be used for regional economic development or workforce development,41 with any further amounts credited to the general fund.42

In determining whether or not to participate in the amnesty, taxpayers will need to consider the potential application of the post-amnesty penalty enacted in 2013, which remains unaltered, as well as the potential application of double penalties. These penalty provisions will likely lead to controversy and possibly litigation. Taxpayers that decide to participate should carefully complete amnesty applications, considering tax periods, issues and amounts to include or exclude from the amnesty program. Once the 2015 amnesty program comes to an end, the legislature has established its intent that no new amnesty program will be implemented before 2025.

There is no mention in the law of the tax amnesty impacting Louisiana's Voluntary Disclosure Program. That program allows in certain instances for a four-year lookback period (current year plus prior three years) and the waiver of delinquent penalties.43

Footnotes

1 Act 822 (H.B. 663), effective Aug. 1, 2014.

2 Act 421 (H.B. 456), effective June 21, 2013.

3 Press Release, Louisiana Department of Revenue, Aug. 12, 2014.

4 Id. See GT SALT Alert: Louisiana Enacts Three-Period Tax Amnesty Program.

5 H.B. 456, § 3(G).

6 Id.

7 Approximately $432 million was collected during 2013, according to "Focus on the FISC," Dec. 2013, published by the Louisiana Legislative Fiscal Office.

8 H.B. 663, § 3(G)(1).

9 Id.

10 H.B. 456, § 3(I). The protest provisions are in LA. REV. STAT. ANN. §§ 47:1562-47:1565 and 47:1576.73.

11 H.B. 663, § 3(N).

12 H.B. 663, § 3(C)(2).

13 H.B. 663, § 3(C)(4).

14 H.B. 663, § 3(C)(5).

15 H.B. 663, § 3(C)(3).

16 H.B. 663, § 3(G)(2).

17 Id.

18 H.B. 663, § 3(G)(1).

19 H.B. 663, § 3(M)(1), (2).

20 Id.

21 H.B. 663, § 3(M)(2).

22 H.B. 663, § 3(M)(3).

23 H.B. 663, § 3(M)(3)(a).

24 H.B. 663, § 3(G)(1).

25 H.B. 663, § 3(M)(3)(b).

26 H.B. 663, § 3(M)(4), (5).

27 H.B. 456, § 3(E)(1).

28 The law does not address whether the taxpayer would be bound by the Department's legal interpretations if such interpretations change in post-amnesty tax years.

29 Negligence penalties are imposed under LA. REV. STAT. ANN. § 47:1604.1.

30 H.B. 456, § 3(E)(2). LA. REV. STAT. ANN. § 47:1512 provides for the Secretary to employ private counsel who may be paid "reasonable expenses," not to exceed 10 percent of the taxes, penalties and interest at issue.

31 H.B. 456, § 3(E)(3). Taxpayers must pay under protest and file suit under LA. REV. STAT. ANN. § 47:1576.

32 This applies to taxpayers with movable or immovable liens on their property under LA. REV. STAT. ANN. § 47:1577.

33 LA. REV. STAT. ANN. §§ 47:1569-47:1573 provide the assessment and distraint procedure.

34 H.B. 456, § 3(F).

35 H.B. 456, § 3(H). Also, a taxpayer that delivers or discloses any false or fraudulent application, document, return or other statement to the Department in connection with an amnesty application is not eligible to receive amnesty and is subject to the greater of the fraud penalty under LA. REV. STAT. ANN. § 47:1604 or $10,000.

36 H.B. 663, § 3(G)(1). Note that the term "double penalties" is not defined.

37 Id.

38 H.B. 456, § 3(K). The Department is authorized to impose the cost of collection penalty "only with respect to the difference between the amount shown on the amnesty application and the correct amount of tax due." Though not explicitly stated, it would appear that the amnesty cost of collection penalty would not apply in the case where a person or entity does not participate in the amnesty program and the Department later makes an assessment for tax years that would have been eligible for amnesty relief.

39 H.B. 663, § 4(A).

40 H.B. 663, § 4(B)(1)(b).

41 H.B. 663, § 4(B)(1)(b)(ii).

42 H.B. 663, § 4(B)(1)(b)(iii).

43 Voluntary Disclosure Agreement, Louisiana Department of Revenue, July 1, 2011.

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.