Issue: Under what circumstances may the Commissioner require a taxpayer to deposit security pursuant to M.G.L. c. 62C, § 32(e)(4) in order to delay payment of a tax?

Directive: Security may be required in connection with an assessment under M.G.L. c. 62C, § 28 or 29. The Commissioner may also notify a taxpayer of the requirement to deposit security if at any time he determines consistent with the provisions of M.G.L. c. 62C, § 32(e)(4) and the written guidelines set out herein that:

1. the collection of the tax will be jeopardized by delay;

2. the past tax return filing or payment history of the taxpayer raises doubt as to the collection of the tax if delayed, or;

3. any application for abatement or petition is frivolous and has been filed primarily to avoid prompt payment of the tax.

Discussion: Pursuant to M.G.L. c. 62C, § 32(e)(4), the Commissioner may require any taxpayer wishing to delay payment of a tax to deposit security equal to the unpaid amount that remains in dispute, including any interest and penalties that have accrued or may accrue. This provision applies where the portion of the tax in dispute, excluding interest and penalties that have accrued after assessment, exceeds $5,000 in the aggregate for all tax periods involved. A taxpayer will be informed of such requirement by written notice either hand delivered or sent by certified or registered mail. [1] If a taxpayer fails to provide security following written notice, the tax at issue will be required to be paid within 30 days after written notice for security was given.

Technical Information Release 99-18 provided that "security must be posted by an entity with an amount of tax in dispute that seeks a certificate of good standing." [2] The TIR also stated that additional written guidelines dealing with the security requirement would be issued. The guidelines in this TIR are being published in accordance with M.G.L. c. 62C, § 32(e)(4) and TIR 99-18. The provisions of TIR 99-18 are reaffirmed in full. The examples set forth below are not comprehensive and do not preclude the Commissioner, in his discretion, from requiring a taxpayer to deposit security in other circumstances.

Examples of circumstances where security may be required because collection of the tax may be jeopardized by delay include, but are not limited to, jeopardy assessments pursuant to M.G.L. c. 62C, § 29, a taxpayer's continued non-filing and/or non-payment with respect to ongoing tax obligations, a taxpayer's failure to explain the legal, accounting or other basis of an appeal or failure to pay undisputed amounts of tax, a taxpayer's sale or other disposition of assets in an apparent attempt to delay or avoid the payment of a tax, a taxpayer's formation of a successor entity to carry on its business in an apparent attempt to delay or avoid an unpaid tax obligation of its predecessor, or any other circumstances where the time period for the Commissioner to involuntarily collect an assessed tax is not tolled under M.G.L. c. 62C, § 32(e)(1).

Circumstances when the past filing history of a taxpayer may give rise to doubt as to the collectability of the tax if delayed include, but are not limited to, a taxpayer's history of substantial and continual non-compliance with filing and/or payment requirements, lack of cooperation with the Department where necessary to resolve outstanding tax obligations and situations where a taxpayer charged with the duty to collect and remit trustee taxes to the Commonwealth fails to remit taxes collected.

Examples of an application for abatement or petition that is frivolous and has been filed primarily to avoid prompt payment of the tax include, but are not limited to, a petition or appeal that is defective on its face or filed after the applicable filing deadline, a taxpayer's failure to comply with requests for discovery after being ordered to do so by the Appellate Tax Board or a court of competent jurisdiction, abatement applications or abatement requests that clearly have no merit in established law or rulings and that are apparently designed to delay payment of the tax. Among others, so-called "tax protesters" who dispute the well-settled applicability of the personal income tax to items of gross income would be subject to the security requirement under these guidelines.

/s/Alan LeBovidge
Alan LeBovidge
Commissioner of Revenue

AL:MTF:dbs

November 20, 2006

DD 06-6



[1] In instances where written notice is made by hand delivery, the Department will follow-up with notification by certified or registered mail. However, the date of notice will be the date of the hand delivery.

[2] A foreign corporation seeking to withdraw from doing business in the Commonwealth or a domestic corporation seeking to voluntarily dissolve must likewise post security where there is an amount of tax in dispute.