Arizona Enacts Tax Recovery Program (Amnesty)!

According to recent legislation (SB1616) enacted by the Governor of Arizona, the director of the department of revenue shall establish a tax recovery program or "Amnesty" program from September 1 through October 1, 2011.

All taxes administered or collected by the department of revenue on behalf of the state of Arizona or a county in Arizona are eligible for amnesty, except estate tax and ad valorem property taxes.

Benefits of Amnesty Program

If a taxpayer complies with the requirements of the amnesty program, the director will abate or waive all or part of the civil penalties and impose interest at a reduced rate for tax liabilities that have been or could be assessed or imposed for any taxable period during the applicable liability period without the need for the taxpayer to show reasonable cause or the absence of wilful neglect.

For the purposes of the amnesty program, "liability period" means:

  • For taxpayers filing annually, any taxable period beginning from and after December 31, 2003 and ending before January 1, 2010.
  • For taxpayers having a 52-53 week tax year, any taxable period beginning from and after January 14, 2004 and ending before January 1, 2010.
  • For all other taxpayers, any taxable period beginning from and after December 31, 2004 and ending before January 1, 2010.

Requirements of Amnesty Program

To qualify for recovery, the taxpayer must:

  • Submit a complete and correct application as provided by subsection F of this section during the recovery period.
  • Pay the tax, plus any interest due pursuant to this section on or before October 1, 2011.

The director may grant recovery only for the taxable periods and tax liabilities identified in the application and only if the taxpayer satisfies all of the recovery conditions and requirements prescribed by this section.

Taxpayers NOT Eligible for Amnesty

A taxpayer does not qualify for recovery under the Amnesty Program if:

  • an audit determination has become final with respect to the taxable period for which recovery is sought.
  • the taxpayer is a party to any criminal investigation or to any criminal administrative proceeding or criminal litigation that is pending on January 1, 2011 in any court of the United States or of this state for failure to file or failure to pay, or for fraud with respect to, any tax imposed by any law of this state and required to be collected by the department.
  • The taxpayer has been the subject of a past tax-related criminal investigation, indictment or prosecution if the investigation, indictment or prosecution resulted in a conviction, a guilty plea or a plea of no contest.
  • The taxpayer 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.
  • The taxpayer is a party to a closing agreement with the department for the tax periods included in the recovery application.

Application Requirements

An application for recovery:

  • Must be on an application form furnished by the department that requires the applicant to identify the tax, the qualifying taxable period and the tax liability for which recovery is sought and to furnish other information prescribed by the director. The taxpayer shall include any returns and reports, including amended returns and reports, for the tax and taxable periods. Any return or report filed under the program is subject to verification as provided by law. A taxpayer who has insufficient information to file a full income tax return may file a gross income return and compute the tax pursuant to established rate brackets based on average tax rates for the applicable taxable years.
  • Must be filed with the department as prescribed by the director during the recovery period.

Waiver of Rights To Appeal

An application for recovery constitutes an express and absolute waiver of all administrative and judicial rights of appeal available at that time that have not run or otherwise expired as of the date of application.

The state board of tax appeals and any court shall dismiss each such action or proceeding before that body on receiving a notification from the director that recovery has been granted for the taxable period for that taxpayer. If the audit determination is not final, the taxpayer must withdraw from the proceeding or litigation before recovery is granted.

A taxpayer that files an application for recovery retains all administrative and judicial rights of appeal with respect to any additional tax assessed in a subsequent audit by the department.

This blog

Brian Strahle is the owner of LEVERAGE SALT, LLC where he provides state and local tax technical services to accounting firms, law firms and tax research organizations across the United States.  He also writes a weekly column in Tax Analysts State Tax Notes entitled, "The SALT Effect."  For more info, visit his website: www.leveragestateandlocaltax.com

You can reach Brian at strahle@leveragesalt.com.

Connect with Brian on LinkedIn. Follow Brian on Twitter. Join the Leverage | SALT LinkedIn Group, connect and contribute with your colleagues!  

Because state and local taxes are deceptively simple and endlessly complicated.

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