The Texas Comptroller of Public Accounts (the “Comptroller”) will initiate the Texas Tax Amnesty Program (the “Program”) this week. The Program will run from May 1, 2018 to June 29, 2018 and covers all state and local taxes and fees administered by the Comptroller, including Texas franchise tax and sales/use taxes. The Program applies to all tax reports originally due before January 1, 2018, and is designed to allow participants to “wipe the slate clean” by filing all past due reports or by amending reports that underreported taxes. Program participants benefit from a 100% waiver of both penalties and interest. This is the first Texas amnesty program since 2012, when an earlier amnesty program ran from June 12, 2012 through August 17, 2012.
On June 12, 2017, Texas Governor Greg Abbott signed legislation requiring the Comptroller to “establish, for a limited duration, a tax amnesty program […] designed to encourage a voluntary reporting by delinquent taxpayers who do not hold a permit, or are otherwise not registered for a tax or fee administered by the Comptroller, or those permitted taxpayers that may have underreported or owe additional taxes or fees.” Tex. Sen. 1, 85th Leg. (eff. Sept. 1, 2017). However, the Program does not apply to filing periods that are: (i) under audit or identified for audit; (ii) the subject of a settlement agreement or a voluntary disclosure agreement; or (iii) the subject of litigation or have been certified to the Office of the Attorney General for review. The Program also does not apply to unclaimed property reports/payments, local motor vehicle taxes, and other types of taxes not directly administered by the Comptroller.
Failure to participate in the program could result in assessment of taxes, fees, penalties, and interest to the extent a taxpayer is later discovered through audit. Fortunately, there are no additional penalties specifically designed to punish taxpayers for not participating in the Program — that is, this is not a “carrot and stick” type amnesty program infamously observed in other states (e.g., the 2010 Illinois amnesty program where failure to pay certain tax liabilities resulted in the doubling of penalties and interest).
From a practical standpoint, the Program does not expressly include a limited lookback period for potential liabilities. For those taxpayers with historical or longer-term compliance issues, contacting the Comptroller’s Business Activity Research Team for a voluntary disclosure agreement may be an alternative course of action, as such agreements typically provide a limited four year lookback period. Like the amnesty program, a Texas voluntary disclosure agreement also typically waives both penalties and interest, which makes it one of the more generous standing voluntary disclosure programs in the country.
Taxpayers with potential outstanding Texas tax liabilities are encouraged to carefully review their state tax compliance obligations and, if necessary, take advantage of the program that best fits their particular situation.