State of Alabama Enacts Three-Month Amnesty Program

By Tim Clancy

The Alabama Tax Delinquency Amnesty Act of 2018 was signed into law by Governor Kay Ivey on March 6, 2018, and will go into effect for the dates July 1, 2018 through September 30, 2018. Some key components of the program include the following:
 
  • All taxes administered by the Alabama Department of Revenue ("Department") are eligible, except for motor fuel, motor vehicle, and property taxes.
  • Eligibility is for taxes due prior to January 1, 2017 and taxes for taxable years prior to January 1, 2017.
  • There is a three-year, or 36-month, "look-back" period for eligible taxes.
  • The Department shall waive all interest and penalties associated with the tax periods and types for which amnesty is granted.
 
Amnesty Applications
An eligible taxpayer can submit an amnesty application electronically and will be subject to the following additional requirements:
 
  • Taxpayers will submit all applicable returns, supporting documentation and tax payment in full by November 15, 2018.
  • Inclusion of the current year Alabama tax return with the above documents. Penalties for current year returns are waived, however, there is no waiver of interest for current year returns.
  • No interest shall be paid by the state for tax years in which amnesty is granted if a refund is due after a change to the federal tax return by the Internal Revenue Service.
  • If the taxpayer fails to fulfill the responsibilities of the amnesty program, the agreement shall be null and void.
 
Ineligible Taxpayers
The amnesty program is not available to any of the following taxpayers:
 
  • Any taxpayer that has been contacted by the Department in the last two years.
  • Any taxpayer who has entered into a voluntary disclosure agreement with the Department before December 31, 2017.
  • Any taxpayer granted amnesty during the Alabama Tax Delinquency Act of 2016.
  • A taxpayer who is involved in a criminal investigation or litigation in a court of the United States or Alabama.
  • A taxpayer who has delivered or disclosed a false or fraudulent application, document or return to the Department in connection with the amnesty program.
 Additional Facts
Filing an application for amnesty will make the taxpayer ineligible for a refund, creditor claims against the state. However, a credit that arises from an adjustment made by the Internal Revenue Service will be valid if the taxpayer notifies the Department in writing within sixty days of receipt of the adjustment. Taxpayers that are granted amnesty and later fail to comply with any filing requirement of payment due to the state, will be subject to underpayment negligence penalties. Additionally, any taxpayer that discloses a false or fraudulent application, document or return in connection with the amnesty program will be subject to a civil penalty of at least $10,000 in relation to the fraud.
 
Considerations
Many states have introduced amnesty programs, or permit other forms of voluntary disclosures, so taxpayers can obtain “good standing” status with the state. Typically, most programs offer the abatement of penalties, however, interest is still typically assessed on the taxes due. Under the Alabama amnesty program, both penalties and interest are abated which can significantly reduce  the amount due to the state.  Taxpayers who believe they meet the above criteria, and potentially have delinquent tax liabilities in the state of Alabama, should consult with their tax advisors for further discussions regarding the Alabama Tax Amnesty Program.
 
For more information please contact either:
 
Tim Clancy   
State and Local Tax Practice Leader Windham Brannon, P.C.
678 510 2804
tclancy@windhambrannon.com
 
Andrew Jones
State and Local Tax
Windham Brannon, P.C.
678 510 2882
ajones@windhambrannon.com