United States: State & Local Tax Alert - April 21, 2015

Maryland Enacts Tax Amnesty Program to Begin September 1, 2015

Maryland has enacted legislation requiring the Maryland Comptroller to establish a tax amnesty program to be held from September 1 to October 30, 2015.1 The tax amnesty program applies to state and local income tax, withholding taxes, sales and use taxes, and admissions and amusement taxes.2 If the taxpayer complies with the amnesty program requirements, the Comptroller will waive all civil penalties (except previously assessed fraud penalties) and one-half of the interest imposed against the taxpayer.3

Operation of Program

The Comptroller's waiver of penalties and one-half of the interest applies to the nonreporting, underreporting and nonpayment of tax liability.4 Taxpayers are eligible to participate in the amnesty program if they failed to file a return or pay the tax by December 31, 2014.5

To receive the benefits of the program, the taxpayer must do the following during the amnesty period: (i) file a delinquent return and pay the tax, including one-half of any interest, due under the return; or (ii) pay the tax, plus one-half of the interest, due on a previously filed return.6 With respect to delinquent tax due under a return filed during the amnesty period or under a previously filed return, a taxpayer may receive amnesty if it pays the tax and one-half of the interest pursuant to a payment agreement (see below). In general, a taxpayer may not be charged with a criminal tax offense arising out of any return filed and tax paid during the amnesty period or pursuant to a payment agreement if the taxpayer satisfies the amnesty program requirements.7

Payment Agreements

The Comptroller is authorized to enter into an agreement with a taxpayer to grant amnesty for taxes that are not paid in full during the amnesty period but the taxpayer agrees to pay according to the established terms and schedule.8 While the Comptroller is free to set most of the terms and schedule of this agreement, full payment of the delinquent tax plus one-half of the interest must be made by December 31, 2016.9 The waiver of civil penalties and interest is void if the taxpayer fails to make the payments strictly in accordance with the terms and schedule established in the agreement.10 The waiver of one-half of the interest does not apply to interest accruing on unpaid taxes for periods after October 30, 2015.11


The amnesty program does not apply to (i) any taxpayer that was granted amnesty under previous Maryland tax amnesty programs held between calendar years 1999 through 2014; and (ii) any taxpayer eligible for the July 1, 2004 through November 1, 2004 intangible holding company settlement period (relating to issues determined in Crown Cork & Seal)12 for tax periods prior to tax year 2003.13 Also, the amnesty from criminal charges does not apply to (i) any criminal charges pending in Maryland courts; or (ii) any criminal charges under investigation by an office with the constitutional authority to prosecute a person for violating criminal laws.14 Except as provided above, the Comptroller is not authorized to waive any interest charges or previously assessed fraud penalties.15


Taxpayers who believe they owe any Maryland taxes should consider participating in this amnesty program as a means to avoid the imposition of civil penalties and one-half of the interest at a later date. While the legislation contains the general provisions of the amnesty program, the Comptroller is expected to release more detailed guidelines before the program begins in September.

This Maryland tax compliance initiative is the latest of a series of tax compliance programs, including general tax amnesty programs in 1987, 2001 and 2009.16 The 2015 amnesty program will be available to corporations as well as individuals for a wide variety of taxes. Unlike the amnesty programs administered in most states, Maryland allows taxpayers to use a payment plan. Note that taxpayers that have participated in Maryland amnesty programs since 1999 are ineligible to participate in the program. Also, any taxpayers that were eligible for the intangible holding company settlement period in 2004 cannot receive amnesty. Apparently, this limitation applies whether or not the taxpayer actually participated in that amnesty program, and is in line with the stance taken by the Comptroller in Crown Cork & Seal, as well as a series of more recent high-profile tax controversies with companies that utilized intangible holding companies in Maryland in the 1990s and early-2000s.


1 Ch. 50 (S.B. 763), Laws 2015, effective June 1, 2015.

2 S.B. 763, § 1(b).

3 S.B. 763, § 2(a)(1).

4 S.B. 763, § 1(c).

5 S.B. 763, § 2(a)(1).

6 Id.

7 S.B. 763, § 2(b)(1).

8 S.B. 763, § 2(a)(2)(i).

9 S.B. 763, § 2(a)(2)(iii).

10 S.B. 763, § 2(a)(2)(iv).

11 Id.

12 Under Ch. 557 (S.B. 187), Laws 2004, a settlement period applied to the Maryland corporate income tax based on issues that were decided by the Maryland Court of Appeals in Comptroller of the Treasury v. SYL, Inc. and Comptroller of the Treasury v. Crown Cork & Seal Co. (Delaware), Inc., 825 A.2d 399 (Md. 2003). In these combined cases, corporate subsidiaries licensed trademarks to parent companies that did business in Maryland. The Court held that the subsidiaries had nexus with Maryland even though they did not do business in the state or own property in the state. During the settlement period, a taxpayer was able to elect whether to have additional income tax calculated as though otherwise deductible payments were added back to the paying taxpayer's federal taxable income, or as though the receiving taxpayer were subject to the Maryland corporate income tax.

13 S.B. 763, § 2(a)(3).

14 S.B. 763, § 2(b)(2). An office with constitutional authority to prosecute a person for violating criminal laws includes the Office of the Attorney General of Maryland, the Office of the State Prosecutor, and the Office of the State's Attorney for any Maryland political subdivision. However, the term does not include the Office of Comptroller. S.B. 763, § 2(b)(3).

15 S.B. 763, § 2(c).

16 Fiscal and Policy Note for S.B. 763, Maryland Department of Legislative Services, revised March 25, 2015. According to the Fiscal and Policy Note, these initiatives include: (i) tax clearance requirements for vehicle registration and driver's license renewals; (ii) an income tax refund intercept program including reciprocal agreements with the IRS and other states; (iii) tax clearance requirements for virtually all business licenses; (iv) a federal vendor offset program; (v) direct salary attachment for all taxes; (vi) new or enhanced withholding from direct payments including gambling winnings, lump-sum distributions, and nonresident realty sales; and (vii) limiting withholding exemptions under certain circumstances.

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.

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