The Alabama Tax Delinquency Amnesty Act of 2018 is effective as of March 6, 2018. Alabama taxpayers will need to act quickly, however, as the amnesty program will be held only for a period of time beginning July 1, 2018, and ending September 30, 2018. While property taxes, motor fuel taxes, and motor vehicle taxes are excluded from the amnesty program, all other taxes do qualify for the program if the taxes: (1) were due prior to January 1, 2017, and (2) were for taxable periods that began before January 1, 2017.
To enter the program, applicants must waive any rights to protest or initiate a proceeding, administrative or judicial, for the taxes that fall under the amnesty program. If approved, the amnesty cannot be applied outside the narrow scope of the agreement. The agreement applies only for the specific tax and the specific period.
How does the Alabama Tax Delinquency Amnesty Act of 2018 work? It contains a three-year look-back period, which is applied separately to each type of tax. Please note, if there is tax collected but not remitted, the look-back period extends back as far as point of collection. It is vital that a company evaluate its records and determine if tax was collected from customers and not remitted to the state before applying for this amnesty.
While taxpayers may still get stuck with a large bill from the Department for the three-year look-back period, the amnesty program does waive all interest and penalties associated with the tax periods that fall under the amnesty. It is important to note, however, that penalties may still be imposed in certain cases, such when there was a failure to comply with the amnesty provisions or false/fraudulent information was provided.
How does a taxpayer qualify for the amnesty program? Taxpayers must not be party to a criminal investigation or criminal litigation for any state tax imposed by Alabama and administered by the department. Furthermore, taxpayers cannot have submitted a false or fraudulent application, document, return, or other statement to the department in connection with the amnesty program. Amnesty may not be granted if the taxpayer has been issued a final assessment where the appeal period has expired or if the taxpayer has previously entered into a voluntary disclosure agreement with the Alabama Department of Revenue.
How can a taxpayer apply? Taxpayers must submit an application electronically to the Department within the applicable time period. All supporting documentation and full payment of the tax due must be provided by November 15, 2018. Notably, no payment plans are available for taxes that qualify for amnesty. Finally, applicants must also include the current year return with the amnesty returns.
The Alabama Tax Delinquency Amnesty Act of 2018 provides a unique opportunity for taxpayers who may not have been collecting and remitting previously to get back on track with minimal exposure to their business. Interestingly, the amnesty program goes into effect immediately after the anticipated result of Wayfair should be made available. South Dakota v. Wayfair, Inc. is the case currently under review by the Supreme Court of the United States to determine whether remote sellers have substantial nexus with states requiring them to collect and remit tax. Perhaps in anticipation of a favorable ruling that will expand the definition of nexus and allow Alabama to collect tax from companies currently outside their jurisdictional reach, the Department has put this amnesty program in place. Only time and the Wayfair case will tell who may need to apply for this amnesty, but it is clear that those who will need to apply will only have a short window to act.
Jeanette Moffa is an attorney who concentrates on state and local taxes at Moffa, Sutton, & Donnini, P.A. She is also an adjunct professor and assistant editor to the American Bar Association’s The Sales and Use Tax Deskbook. She can be reached at 954-800-4138 or JeanetteMoffa@FloridaSalesTax.com.