This Technical Information Release explains the so-called repeal of the "pay to play" provisions of the tax laws, under which taxpayers were required to pay amounts in dispute while appealing assessments. See "An Act Making Appropriations for the Fiscal Year 2000" ("Act"), St. 1999, c. 127, § 83. Although the Act was signed into law on November 16, 1999, the repeal of the pay to play provisions has an effective date of July 1, 1999. In anticipation of difficulties that would be experienced by taxpayers and the Department of Revenue (Department) from retroactive implementation of the repeal, the Department implemented the new law on July 1, 1999 by issuing TIR 99-11. This TIR 99-18 supersedes TIR 99-11, which is hereby revoked as a result of changes to the proposed Act upon which TIR 99-11 was based.
II. Prior Law
Under G.L. c. 62C, § 32, as in effect prior to the effective date of the Act, taxes were due and payable at the time the tax return was due, determined without regard to any extension. Id. Any amount of tax not paid before the statutory due date accrued interest; in addition, penalties were assessed under G.L. c. 62C, § 33. In effect, the taxpayer was required to pay the amount assessed, even if that amount was subject to dispute, because collection activities would otherwise commence. In addition, both interest and penalties would continue to accrue on unpaid amounts, including amounts subject to dispute.
III. The Amendment
In general, under new subsection (e) of G. L. c. 62C, § 32, a taxpayer is not required to pay, and the Department may not involuntarily collect, certain taxes (1) if the taxpayer is contesting the amount of tax due at the Departmental level under G.L. c. 62C, § 37, or at the Appellate Tax Board (ATB) or probate court under G.L. c. 62C, § 39. The taxpayer may also delay paying any amount determined not to be due by the ATB or probate court if there is an appeal taken from that decision. These provisions apply only to an assessment or portion thereof that is in dispute. An undisputed assessment or portion thereof must be paid, and may be collected in accordance with current law. (2)
In the case of so-called trustee taxes due under G.L. c. 62B (withholding) and G.L. cc. 64G through 64I (rooms occupancy, sales, etc.), the trustee need not pay a disputed tax, and this amount will not be collected involuntarily by the Department, provided that the trustee did not withhold or collect the disputed tax from an employee or purchaser, respectively. However, trustee taxes that a trustee has withheld from an employee or collected from a purchaser must be remitted to the Department, even if the trustee disputes the tax.
Any amount of tax in dispute must be paid at the earliest of: (1) the thirtieth day following the date of a decision in favor of the Commissioner with respect to the disputed tax by the ATB or the probate court; (2) the date of withdrawal of any petition with respect to the disputed tax filed with the ATB or the probate court; (3) the date on which any right of appeal from a refusal or deemed refusal by the Commissioner to grant an abatement of such tax expires without any such appeal having been filed; or (4) in the case of a deficiency assessment but not a deemed assessment under paragraph (a) of section 26, the ninetieth day after the date on which the Commissioner gives notice of such assessment under section 31 or 31A if the taxpayer has not applied to the Commissioner for an abatement of tax.
The statute of limitations on collections set forth in G. L. c. 62C, § 65 is suspended during the period that collection of the tax is stayed under the amendment. Interest and penalties other than the penalty provided under subsection (c) of section 33, however, will continue to accrue on the unpaid disputed tax amount even though collection activity has been stayed. Taxpayers may avoid the accrual of interest and applicable penalties by voluntarily paying the amount in dispute. Under these circumstances, as under current law, if the taxpayer prevails ultimately in the administrative appeal process or in court proceedings, the voluntary payment will be refunded with statutory interest.
Under certain circumstances, taxpayers will be required to post security in a form satisfactory to the Commissioner if they wish to delay payment of the tax. In general, the Commissioner may require security, in accordance with written guidelines: (3) (1) when collection of the tax will be jeopardized by delay, (2) when the past tax return filing or payment history of the taxpayer raises doubt as to the collection of the tax if delayed, or (3) when any application for abatement or petition is frivolous and has been filed primarily to avoid prompt payment of the tax. The Commissioner must notify the taxpayer in writing by certified or registered mail of the security requirement, and the taxpayer may appeal the requirement to the ATB within 30 days of the date of the Commissioner's notice. The right of appeal does not extend to cases where security is required pursuant to assessments under G.L. c. 62C, §§ 28 and 29.
Frederick A. Laskey
Commissioner of Revenue
December 17, 1999
1. The Act includes taxes "imposed by chapters 62, 63, 64A to 64F, inclusive, 64J to 65C, inclusive, and by section 21 of chapter 138" and "trustee taxes imposed by chapter 62B and by chapters 64G to 64I, inclusive" provided that "the trustee taxes were not withheld by the employer or collected by the vendor." St. 1999, c. 127, § 83.
2. Amounts of tax, interest, and penalties in dispute but collected by the Department prior to July 1, 1999, are not subject to the new rules. The Department will not refund these amounts pending resolution of the disputes in question.
3. The Commissioner will issue additional written guidelines dealing with the security requirement. As announced in TIR 99-11 and restated in this TIR, security must be posted by any entity with an amount of tax in dispute that seeks a certificate of good standing.