[5]Oregon Provides Short Window for Taxpayer Amnesty; Those That Don’t Comply Get the Stick
Written by Morgan Smith
Miller Nash [6]
Oregon and Washington Law Firm
Taxpayers having a tax deficiency and flying under the radar of the Oregon Department of Revenue were given a break when Governor Kulongoski signed Senate Bill 880 on July 15, 2009. The new law created a voluntary tax amnesty program for Oregon individuals and corporations with tax deficiencies resulting from unfiled or underpaid tax returns. The program’s goal is to provide incentives to delinquent taxpayers to move forward, resolve their outstanding tax obligations, and provide for future compliance with state tax laws. Eligible taxes include corporate income and excise tax, personal income tax, inheritance tax, and Lane and Tri-Met Transit District self-employment taxes for all tax years prior to 2008.
The program encourages taxpayers to file overdue or amended returns by waiving any applicable penalties (including criminal penalties) and half of any interest owed. But amnesty is available only to taxpayers who self-report an underpayment and not to those who have already received a tax deficiency notice or have been assessed a tax. The Department sent approximately 40,000 letters to certain individuals and corporations to inform them that they could be subject to penalties for not filing or underreporting a return. These notices are not deficiency notices; instead, they invite the recipients to participate in the amnesty program.
The window of opportunity for taking advantage of the program is very short and taxpayers must act quickly to participate. Applications must be filed between October 1, 2009, and November 19, 2009. If a taxpayer’s application is accepted by the Department, the taxpayer has 60 days from the end of the program to file or amend each applicable return and pay any overdue tax plus half the accrued interest. If the application was filed on time but the return and payment are not received by January 19, 2010, the taxpayer is not eligible for amnesty, and all penalties and interest are reinstated.
Taxpayers meeting the filing deadline but who cannot afford to pay the full amount owed before January 19, 2010, may apply for an installment payment plan. If the Department agrees to accept installment payments, the deadline for having the entire amount paid to the Department is May 31, 2011.
The Department has also implemented stiff penalties for taxpayers who were eligible for amnesty but failed to take advantage of or properly comply with the program. The additional penalty is equal to 25 percent of the total amount of unpaid tax that is outstanding at the time the Department issues a deficiency notice for any tax year that was eligible for amnesty. Furthermore, a failure to comply with the terms of any amnesty payment plan for reasons other than “reasonable causes” will result in the unpaid tax, accrued interest, and applicable penalties becoming immediately due and payable.
For taxpayers who have not filed or had readily apparent errors, the additional penalty creates a significant incentive to participate. A taxpayer who has taken a controversial position on a return that may trigger Department scrutiny, however, has a much more difficult decision to make. If the taxpayer does not participate in the amnesty program and has taken a position that is later determined to be improper, the taxpayer is hammered with an additional 25 percent penalty. On the other hand, if the taxpayer participates in the amnesty program, disclosing the tax position and paying additional taxes and interest, and the position is later found to be justified, the taxpayer cannot later claim a refund—no refunds are permitted under the amnesty program. Given the tight time frame for acceptance into the program and the significant penalties associated with noncompliance, time is of the essence in revisiting prior returns and understanding potential liabilities.
Written by Morgan Smith
Miller Nash [6]
Oregon and Washington Law Firm