Hot on the heels of the success of New Jersey’s tax amnesty program, Pennsylvania has decided to give it a whirl.
The amnesty program will kick off April 26 and run 54 days, ending on June 10, 2010. During that time, taxpayers have the opportunity to come clean and pay up. In return, all penalties and half the interest will be waived for businesses and people who pay up. This is a little bit different from Pennsylvania’s last stab at amnesty, fourteen years ago, when penalties were waived but interest was payable in full.
The program is bigger than individual income tax. It also includes: Agriculture Cooperative Tax; Bank and Trust Company Shares Tax; Capital Stock or Foreign Franchise Tax; Cigarette Tax; Corporate Net Income Tax; Electric Cooperative Tax; Employer Withholding Tax; Fuel Use Tax, except taxes, interest and penalties collected under the International Fuel Tax Agreement owed to other states or provinces are not eligible for the Amnesty Program; Gross Premiums Tax; Hotel Occupancy Tax, including Local Hotel Occupancy Tax for Philadelphia and Allegheny County; International Fuel Tax Agreement (IFTA); Inheritance and Estate Tax; Interstate Bus Compact Tax; Liquid Fuels Tax; Loans Tax; Marine Underwriting Profits Tax; Malt Beverage Tax; Motor Carriers Road Tax; Motor Vehicle Carriers Gross Receipts Tax; Mutual Thrift Institutions Tax; Oil Company Franchise Tax; Parimutuel Wagering and Admissions Tax; Personal Income Tax; Public Utility Realty Tax; Realty Transfer Tax; Sales and Use Tax, including Local Sales and Use Tax for Philadelphia and Allegheny County; Surplus Lines Tax; Unauthorized Insurance Tax; and Gross Receipts Tax.
Are you thinking what I’m thinking?? We have a boatload of taxes in Pennsylvania.
To force encourage compliance in the program, a 5% non-participation penalty will be imposed on all un-paid tax, penalty and interest not paid in full during the amnesty period. Those folks who are in appeals or under payment plans will be exempt from the “extra” penalty.
And getting your affairs sorted out isn’t a done deal after this year: taxpayers who become delinquent again within a couple of years will likely have to repay the previously forgiven penalty and interest. It’s the Commonwealth’s way of reminding you to stay compliant.
For what I’m sure are obvious reasons, you can’t participate if you’ve been charged with a tax crime or named as a defendant in a criminal tax investigation. And if you opt in this time, you’re barred from future amnesty plans.
(If you’re dying to read all of the additional details, you can read the text of the statute here.)
Although there was initial opposition to the program when it was first contemplated, a huge hole in the budget helped smooth things over. The program is expected to raise an additional $190 million. A nice chunk of change, though nowhere near the $745 million that NJ raked in.
As you may know from the blog, I’m a big fan of regulated and thoughtful amnesty programs. In some cases, penalties may sometimes be more than the actual tax due in the first place – not even counting interest. Many taxpayers get overwhelmed and even though they may want to set things right, they just don’t know where to start. Amnesty programs can be an easy, non-threatening way to start fresh. A limited, monitored and infrequent amnesty program means that taxpayers pay what they owe (remember, taxpayers still have to pay their taxes) and the taxman gets his money so that we don’t have to raise taxes to make up shortfalls in the budget. It’s a win-win.
I understand the argument against it, though I don’t buy it. I don’t think it actually encourages people to cheat. Trust me, I’ve met a lot of unabashed tax cheats in my line of work – and the people who want to game the system are going to, one way or the other. But the vast majority of people who get into tax trouble and walk through my door don’t want to cheat. They want to make it right and move on. That’s where amnesty works.
Why make it hard to do the right thing? I think Pennsylvania made a smart move here – and I hope it pays off.