United States: Arizona Enacts Tax Amnesty Program To Begin September 1, 2015

Arizona has enacted legislation requiring the Director of the Department of Revenue to establish a tax amnesty program, termed a "tax recovery program," to be held from September 1 to October 31, 2015.¹ The tax amnesty program applies to any tax or surcharge administered or collected by the Department, as well as certain enumerated taxes, except luxury tax and withholding tax.² If the taxpayer complies with the amnesty program requirements, the Director will abate or waive all the civil penalties and interest for the tax liabilities that have been or could be assessed for any taxable period during the applicable liability period without the need for the taxpayer to show reasonable cause or the absence of willful neglect.³

Operation of Program

The tax amnesty provisions offer relief during the applicable liability period.⁴ For taxpayers filing annually, the liability period is any taxable period ending before January 1, 2014. For all other taxpayers, the liability period is any taxable period ending before February 1, 2015.⁵

To qualify for the amnesty program, a taxpayer must submit a timely filed, complete and correct application during the amnesty period.⁶ The application must be on the form provided by the Department that requires the applicant to identify the tax, the qualifying taxable period and the tax liability for which recovery is sought.⁷ The taxpayer must include any returns and reports, including amended returns and reports, for the tax and taxable periods. If the application is based on an established and unpaid tax liability, the application must include a copy of the latest applicable billing notice or any other documentation required by the Department.⁸ Also, the application must include payment of the tax due.⁹

An application constitutes an express and absolute waiver of all available administrative and judicial rights of appeal that have not run or otherwise expired as of the date of the application.¹⁰ The Arizona Board of Tax Appeals and any court must dismiss each such action or proceeding before it upon receiving a notification from the Director that amnesty has been granted for the taxable period for that taxpayer. However, a taxpayer that files an application retains all administrative and judicial rights of appeal with respect to any additional tax assessed in a subsequent audit by the Department.¹¹

If a taxpayer submits an application and complies with all of the requirements, the Department may not file an administrative, civil or criminal action for failure to comply with the tax requirements for the taxable period covered by the application.¹² A grant of amnesty does not entitle a taxpayer to a refund or credit of any amount previously paid.¹³

Taxpayers Not Eligible for Amnesty

A taxpayer does not qualify for the tax amnesty program if the taxpayer is a party to any criminal investigation, administrative proceeding or litigation that is pending on January 1, 2015 in any federal or Arizona court for failure to file or pay, or for fraud with respect to, any tax imposed by Arizona law and required to be collected by the Department.¹⁴ Also, a taxpayer does not qualify for the program if the taxpayer has been the subject of a past tax-related criminal investigation, indictment or prosecution that resulted in a conviction, guilty plea or plea of no contest. Amnesty is not available to a taxpayer that has 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 recovery is sought. Further, amnesty does not apply to a taxpayer that is a party to a closing agreement with the Department for the tax periods included in the application or the taxpayer submits an application that does not include any amount of unpaid tax.¹⁵

Commentary

Taxpayers who believe they owe any Arizona state taxes are advised to consider participating in this amnesty program as a means to avoid civil penalties and interest. The amnesty program is available to corporations as well as individuals for a wide variety of Arizona taxes. The legislation contains the general provisions of the amnesty program, but the Department is expected to release more detailed guidelines before the program begins in September. Arizona most recently held a tax amnesty program during May 2009.¹⁶

Footnotes

1. Ch. 10 (S.B. 1471), Laws 2015.

2. Under S.B. 1471, § 19.O.2, the specifically enumerated taxes are: ARIZ. REV. STAT. § 5-839 (Tourism and Sports Authority car rental surcharge); ARIZ. REV. STAT. § 5-840 (Tourism and Sports Authority tax on hotels); ARIZ. REV. STAT. § 48-4022 (County Jail District excise tax); ARIZ. REV. STAT. § 48-4234 (Stadium District car rental surcharge); and ARIZ. REV. STAT. § 48-5805 (Public Health Services District transaction privilege tax and property tax).

3. S.B. 1471, § 19.B.

4. Id.

5. Id.

6. S.B. 1471, § 19.D, F.3.

7. S.B. 1471, § 19.F.1.

8. S.B. 1471, § 19.F.2.

9. S.B. 1471, § 19.F.4.

10. S.B. 1471, § 19.G.

11. Id.

12. S.B. 1471, § 19.H. "Tax requirement" means (i) timely filing a complete and correct tax return or report required by law and (ii) timely paying a tax liability. S.B. 1471, § 19.O.3.

13. S.B. 1471, § 19.I.

14. S.B. 1471, § 19.E.

15. Id.

16. S.B. 1003, Laws 2009, First Special Session.

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