To encourage the voluntary disclosure and payment of delinquent tax obligations to the Commonwealth, section 11 of chapter 429 of the Acts of 2002, authorizes the Commissioner of Revenue to offer a two-month extension of the amnesty program on substantially the same terms as the amnesty administered between the dates of October 1, 2002 and December 2, 2002. See TIR 02-14. The extended amnesty period will begin on January 1, 2003 and end on February 28, 2003. As discussed below, the two primary modifications from the prior amnesty program are 1) a limited look-back period for unpaid use tax liabilities and 2) payment by installment method for certain taxpayers. See Sections III(A)(4) and III(B)(1) below. Amnesty applications submitted under the prior two-month amnesty program during calendar year 2002 are not eligible for consideration under the Extended Amnesty Program discussed in this TIR.
Under the legislation which authorized both the initial amnesty program [St. 2002, c. 184, §182] and its continuation for the extended amnesty period, if an eligible taxpayer with annual return filing obligations ("Annual Filer") files all required returns for all taxable years beginning before January 1, 2001 and pays the full amount of tax and interest due for all such taxable years and properly and timely files a Request for Extended Amnesty, the Commissioner is authorized to waive all unpaid penalties imposed for failure to timely file a return,[ 1] failure to file a proper return,[ 2] failure to timely pay a tax liability,[ 3] and failure to pay the proper amount of any required estimated tax payments[ 4] for such taxable years. Such Annual Filer must also file a return and pay the full amount of tax liability due for any taxable year beginning on or after January 1, 2001 whose due date for filing is prior to the start of the extended amnesty period.
For eligible taxpayers whose filing responsibilities are for periods other than on an annual basis ("Other Filers"), the Commissioner will waive unpaid penalties, as described above, for any such taxpayer who files all required returns and pays the full amount of tax and interest due for all taxable periods ending on or before August 31, 2002, and properly and timely files a Request for Extended Amnesty. However, in the case of unpaid use tax liabilities, the phrase "all required returns" means those returns required to be filed within the limited look-back period, as determined by the Commissioner. See Section III(A)(4) below.
For subsequent tax periods not eligible for amnesty, both annual filers and other filers are still required to file returns and pay tax when due. Otherwise, amnesty will be denied.
When an eligible taxpayer either: (i) pays the full outstanding balance of tax and interest with respect to previously filed returns or assessments or (ii) files proper and accurate returns and pays the tax and interest due for all periods described above, the Commissioner will forego the assessment of penalties (and only that interest directly attributable to those penalties) as to that taxpayer for those tax periods. [St. 2002, c. 184, § 182.]
Penalties that have been assessed, or that could be assessed by the Commissioner against a taxpayer for liabilities relating to the following tax types are not eligible for waiver under the Extended Amnesty Program:
- Motor fuel and special fuels taxes paid under the International Fuel Tax Agreement under G.L. c. 64F, § 5A; and
- Local option room occupancy excise under G.L. c. 64G, § 3A.
The Commissioner does not have the sole authority to waive penalties assessed against liabilities for these tax types. Therefore, any such penalties are not available for waiver under the Extended Amnesty Program. [St. 2002, c. 184, § 182.]
II. Amnesty Period
The Commissioner has established the extended amnesty period to begin on January 1, 2003 and to end on February 28, 2003.
III. Participation in Extended Amnesty Program
The Commissioner will grant amnesty to any eligible taxpayer who properly completes and files a Request for Extended Amnesty along with all required tax return(s) and payment of the tax and interest in full. Any return(s) submitted during the extended amnesty period must be properly and accurately completed and must be accompanied with a check or money order for the required amount of tax and interest in full.
A. Eligibility Requirements
1. Eligible Taxpayers
The Extended Amnesty Program is open to all taxpayers that have not already filed a Request for Amnesty during the prior amnesty period and that:
- have failed to file one or more Massachusetts tax returns, including, but not limited to, tax returns for personal income tax, withholding, corporate excise, sales and use tax, sales tax on meals, estate tax, inheritance tax;
- have underreported taxable income and/or receipts;
- have overstated deductions;
- have filed an incorrect or insufficient Massachusetts tax return; or
- are delinquent in paying a past state tax obligation.
Taxpayers who are currently in bankruptcy should consult with their legal counsel to determine whether they may be eligible for the Extended Amnesty Program. Bankruptcy counsel may consult with the Department to determine amnesty eligibility on a case by case basis.
Taxpayers may file combined returns of income, allowed under G.L. c. 63, § 32B, for all eligible tax years, notwithstanding the expiration of procedures for electing such filing under 830 CMR 63.32B.1(4). However, taxpayers may not file returns for inclusion as part of a combined group for any taxable period where the combined group has previously filed a combined return. All other provisions under 830 CMR 63.32B.1 remain in effect.
Taxpayers may apply for alternative apportionment, under G.L. c. 63, § 42, for all eligible tax years, notwithstanding the expiration of time for such application under 830 CMR 63.42.1(3). All other provisions under 830 CMR 63.42.1 remain in effect.
2. Who is Not Eligible
The Commissioner will not grant amnesty under the Extended Amnesty Program to any taxpayer for any tax periods for which the taxpayer is either: (i) the subject of an on-going tax-related criminal investigation or prosecution or (ii) has been the subject of a past tax-related criminal investigation, indictment, or prosecution if that investigation, indictment, or prosecution resulted in a conviction or in any plea by which the taxpayer admitted guilt or chose not to contest the charges. The Commissioner will consider, but need not approve, an application for amnesty by a taxpayer for tax periods as to which the taxpayer has been the subject of a past tax-related criminal investigation, indictment, or prosecution if that investigation, indictment, or prosecution resulted in a not guilty finding or if the investigation, indictment, or prosecution was discontinued without either a trial or plea bargain.
Taxpayers who have signed a settlement agreement with the Commissioner are not eligible to seek amnesty for the tax periods covered by the settlement agreement including, without limitation, any settlement reached through the Department's Litigation Bureau, Office of Appeals (formerly Office of Dispute Resolution) or Offer-in-Settlement Unit.
Taxpayers that have paid all tax and interest due relating to any outstanding assessment but that, at the start of the extended amnesty period, still owe penalties with regard to that assessment are not eligible to seek amnesty for the tax period(s) covered by the assessment. Taxpayers that, as of the start of the Extended Amnesty Program, have requested the waiver of penalties by way of an abatement application or an appeal to the Appellate Tax Board and that have paid all tax and interest but have not paid the penalties due, will not qualify for amnesty with respect to those penalty amounts.
3. Tax Periods
- Annual Filers with tax liabilities for taxable years beginning before January 1, 2001 are eligible to request amnesty.
- Other Filers with tax liabilities for tax periods ending on or before August 31, 2002, are eligible to request amnesty.
- If a taxpayer is eligible for amnesty under more than one tax type, the taxpayer must file proper and accurate returns for all tax types and all periods and pay all taxes and interest due for all tax types and tax periods. The Commissioner will not waive penalties attributable to any one filing period for one tax type if the taxpayer has outstanding liabilities for other periods or for other tax types.
4. Look-Back Rule for Taxpayers with Unpaid Use Tax Liabilities
Under section 11 of chapter 429 of the Acts of 2002, the Legislature granted the Commissioner the discretion to observe a limited look-back period for that portion of an amnesty request that involves an unpaid use tax liability. For individual filers who have made purchases for personal use, the Commissioner has determined that a limited look-back period, for purposes of the Extended Amnesty Program only, shall be the four most recent tax years (i.e. 1998-2001). For all other filers, the Commissioner has determined that the limited look-back period, for purposes of the Extended Amnesty Program only, shall be the six most recent tax years (i.e. 1996-2001). However, depending upon the facts and circumstances of each case disclosed to the Commissioner as part of the taxpayer's Request for Extended Amnesty, the Commissioner may consider whether further adjustment to this look-back period is warranted.
Taxpayers seeking a waiver of tax, interest and penalties for periods prior to any look-back period must pay the full amount of unpaid use tax plus interest due for all periods within the look-back period by February 28, 2003.
5. Responsible Persons
A responsible person, as defined under G.L. c. 62C, § 31A, is any person who is or was under a duty to pay over taxes imposed on a corporation or partnership by G.L. chs. 62B, 64G, 64H, or 64I. A responsible person is eligible to participate in the Extended Amnesty Program as long as such person pays the full amount of tax and interest due for all eligible tax periods and properly and timely files a Request for Extended Amnesty. The Commissioner will consider such payment as satisfaction of the responsible person's personal liability. As provided in Section 12(b) of the Department's Responsible Person's regulation, 830 CMR 62C.31A.1, such payment will not satisfy the liability of the corporation or partnership or any other responsible person until one of the following conditions is satisfied:
- the responsible person waives his or her rights to appeal the assessment of tax and interest or otherwise to claim relief from such assessment;
- the period available for the responsible person to appeal the assessment or otherwise to claim relief from the assessment, through abatement or otherwise, has expired without the responsible person filing such an appeal or seeking such relief; or
- the responsible person's appeal or other claim for relief from the assessment results in part or all of the assessment being abated and the Commissioner does not take an appeal from that decision. In the case of a partial abatement of the assessment, the liability of the taxpayer or the liability of any responsible person is satisfied only to the extent of such partial abatement and only if the Commissioner does not appeal the decision.
For further information concerning responsible persons, refer to the remaining provisions of 830 CMR 62C.31A.1.
6. Taxpayers Under Current Payment Agreements
Taxpayers who have entered into a Payment Agreement with the Department prior to the start of either the initial amnesty period or the extended amnesty period are eligible to participate in the Extended Amnesty Program. The Commissioner will waive eligible penalties associated with any remaining installment payments due under the Payment Agreement, as long as the taxpayer pays the remaining amount of tax and interest due in full, and properly and timely files a Request for Extended Amnesty. The Commissioner will not waive any penalties associated with the tax liability covered by the Payment Agreement that have already been paid with past installment payments made in accordance with the provisions of the Payment Agreement.
7. Appeals Pending
Any taxpayer who has an appeal pending with respect to an assessment made by the Commissioner is eligible for participation in the Extended Amnesty Program if the taxpayer pays all taxes and interest owed in full, and properly and timely files a Request for Extended Amnesty. Payment of the outstanding liability does not constitute a forfeiture of statutory rights of appeal or an admission of liability for the disputed assessment. For those taxpayers that have, prior to the start of the Extended Amnesty Program, postponed the payment of an assessment of tax, interest and penalty under G.L. c. 62C, § 32(e), a written waiver of all rights under this section to further delay the payment of the tax and interest portions of the assessment must be made to participate in the Extended Amnesty Program. [St. 2002, c. 184, § 182.] This waiver is to be made on the Request for Extended Amnesty, properly and timely filed, accompanied by all required returns and full payment of the tax and interest assessed.
B. Payment Requirements
1. Payment In a Lump Sum or by Installments
Except as noted below for certain taxpayers having outstanding liabilities of $25,000 or less, all taxpayers must make a full payment of all taxes and interest due for all tax types and tax periods, as discussed in Section III (A)(3) of this TIR, to be eligible for consideration under the Extended Amnesty Program. All payments made by taxpayers under the Extended Amnesty Program must be in the form of a check or money order made payable to the Commonwealth of Massachusetts. Presentation of a check that is not duly paid because of insufficient funds will result in an automatic denial of amnesty.
The legislation which authorized the extended amnesty period [St. 2002, c. 429, § 11] has added a special rule for taxpayers whose aggregate unpaid liabilities, i.e. tax, interest and penalties, amount to $25,000 or less. For those taxpayers that have not applied for amnesty in the prior amnesty period in 2002 and who have such an outstanding liability, payment of the full outstanding balance may be made in installments so long as a down payment of at least twenty percent (20%) of the portion of the liability that consists of tax and interest is paid along with the filing of the Request for Extended Amnesty and so long as the entire unpaid liability, inclusive of interest that will continue to accrue during the installment periods, is fully paid and is received by the Commissioner by June 16, 2003. Taxpayers that desire to pay such an outstanding liability will be required to submit a written proposal outlining a payment schedule and installment amounts to pay their liability in full by June 16, 2003. That proposal must be filed with the taxpayer's Request for Extended Amnesty. Such proposal should include the number of installments, the amount of each installment, and the due dates for each installment. The Department will respond to that proposal with specific calculations of the amounts of the installment payments necessary to pay off the liability in full by June 16, 2003, and will send the taxpayer a formal installment payment agreement for execution and prompt return to the Department. Failure by the taxpayer to return the installment payment agreement to the Department by February 28, 2003, or by any later date specified by the Department will result in an automatic denial of amnesty.
In the event the taxpayer fails to pay the full outstanding liability on or before June 16, 2003, no payments received by that date will be refunded and all payments received will be applied to the taxpayer's outstanding liability. Amnesty will not be granted to such taxpayers and all penalties will be required to be paid by the taxpayer.
Any taxpayer who enters into an amnesty installment payment agreement with the Commissioner and who fails to timely pay any of the installment payments or who fails to file subsequent tax returns and pay tax when due will have their amnesty installment payment agreement revoked, and immediate payment of the remaining unpaid liability covered by the agreement will be required. Failure to immediately pay the remaining liability due will result in an automatic denial of amnesty for periods covered by the agreement and all penalties will be required to be paid by the taxpayer.
2. Interest Calculator
If a taxpayer cannot precisely determine the total amount of interest due, the taxpayer shall estimate the amount in good faith, and pay the estimated amount with the Request for Extended Amnesty. The Commissioner will notify the taxpayer of any balance due. Any balance determined by the Commissioner to be due must be paid within 15 days from the date of the notice or amnesty will not be granted. For further assistance in the computation of interest, taxpayers should utilize the Interest Calculator located on the Department's Amnesty website at www.mass.gov/dor or refer to the Interest, Penalties, and Application of Payments regulation, 830 CMR 62C.33.1.
3. Due Date
The request for amnesty will be regarded as timely if the Request for Extended Amnesty, along with all properly and accurately completed return(s) and the required payment(s) and, if applicable, any installment payment agreement proposal, are received by the appropriate office of the Department of Revenue as designated on the Request for Extended Amnesty by 5:00 p.m. Eastern Standard Time, on or before February 28, 2003. In addition, if an application is delivered by U.S. mail (or a recognized commercial delivery service) to the appropriate office after February 28, 2003, the request for amnesty will be considered timely if the date of the U.S. postmark (or other substantiating date mark) is not later than February 28, 2003.
- A Notice of Assessment, dated March 1, 2000, was issued for the 1997 taxable year to Taxpayer, a calendar year resident individual. Taxpayer has not applied for amnesty during the prior amnesty program in 2002. As of the start of the extended amnesty period, Taxpayer has paid all tax and interest assessed in full. However, Taxpayer has not paid any amount assessed that represents penalties. Taxpayer is not eligible to seek amnesty for the 1997 taxable year because no amount of the outstanding assessment balance represents tax.
- Taxpayer is a foreign corporation doing business in Massachusetts as the operator of a retail store selling, among other items, taxable tangible personal property. The Taxpayer was unaware of the prior Amnesty Program and did not apply. A Notice of Assessment, dated February 5, 2001, was issued for the tax periods April 1 through May 31, 1998. As of the start of the extended amnesty period, the outstanding balance of tax and interest on that assessment is $5,000. In addition, Taxpayer has not filed returns nor remitted tax due for the tax periods June 1 through July 31, 2000, but is otherwise current in its tax filing and payment obligations in 2000 through 2002. Taxpayer is eligible to seek amnesty for any penalties associated with both the 1998 and 2000 tax periods provided Taxpayer pays the outstanding assessment balance due of $5,000, files accurate and properly completed tax returns for the 2000 tax periods, pays the full amount of any tax and interest due for the 2000 tax periods, and submits a properly completed Request for Extended Amnesty, postmarked on or before February 28, 2003 and addressed to the appropriate office of the Department.
- A calendar year nonresident individual with Massachusetts source income has failed to file required returns for the 1997 through 1999 taxable years. Taxpayer's Request for Extended Amnesty, together with the required payment and tax returns is timely received by the Department on February 11, 2003 by the appropriate office of the Department. Upon review of Taxpayer's request, the Department finds that Taxpayer's 1999 return is incomplete. The Department sends Taxpayer a notice informing Taxpayer that the request for amnesty is incomplete and that Taxpayer must properly complete the 1999 tax return and return it to the Department, postmarked not later than February 28, 2003. Taxpayer does not complete the 1999 return and return it to the Department within the time specified in the notice. As a result, Taxpayer's request for amnesty is automatically denied. Taxpayer is not granted amnesty for the 1999 tax year, nor is amnesty granted for the 1997 and 1998 taxable years.
- An individual resident taxpayer was unable to timely file a Request for Amnesty under the prior amnesty period which ended on December 2, 2002 due to her inability to pay the full amount of outstanding income tax liabilities corresponding to her tax due returns filed for calendar years 1997 through 2000. The taxpayer has no other outstanding state tax obligations. The total of the income tax liability, with all interest and penalties, amounted to $23,500 as of December 15, 2002. Of that amount, $5,500 represented penalties that could be waived under the Extended Amnesty Program. The taxpayer is in the process of refinancing her residential mortgage and will receive net proceeds from that transaction in the amount of $12,000 during the month of January, 2003 which she intends to use to reduce her state tax liability. The Department, at the request of both the taxpayer and the mortgage lender, is willing to subordinate its filed lien notice to the new first mortgage to be given by the taxpayer to her lender. The taxpayer will be able to pay the balance of the liability from other funds that will become available to her in March and May, 2003. The taxpayer completes and timely files a Request for Extended Amnesty and submits with it the down payment of $12,000 together with an installment payment agreement proposal to pay off the $6,000 balance. Upon receipt of these materials from the taxpayer, the Department calculates the amount of additional interest that will accrue on the declining balance if the remaining payments are made on the due dates shown on the installment payment agreement proposal and sends notice of the amounts necessary to satisfy the balance of the liability by way of the installments due on March 15 and May 15, 2003. Upon receipt of the two installments from the taxpayer when due, the taxpayer's request for amnesty will be granted and the $5,500 of penalties are waived and the lien notice released.
- A resident individual taxpayer has received a Notice of Failure to File from the Department concerning his lack of filing use tax returns for purchases of two valuable pieces of artwork imported from Europe, one in 1997 and the other in 2000, both of which were placed and maintained in the taxpayer's Massachusetts residence. Taxpayer has records which show his original purchase price of these two acquisitions. The taxpayer has a good tax compliance record with respect to filing of returns and payment of his tax obligations. The taxpayer was unaware that such purchases of imported artwork were subject to the state's use tax. The Commissioner, in the exercise of his statutory discretion, has determined that for the Extended Amnesty Program a four year look-back period applies with respect to unpaid use tax liabilities owed by individual filers who made purchases for personal use. Thus, the Commissioner will grant amnesty to the taxpayer and waive all penalties associated with the 1997 and 2000 purchases upon the taxpayer's timely filing of the 2000 use tax return, the payment of the use tax and interest due upon the 2000 purchase, and the filing of a Request for Extended Amnesty, all by February 28, 2003. No return or payment of tax for the 1997 purchase is required, as the liability is outside the four year look-back period.
- An individual taxpayer's outstanding total liability of $24,000 consists of unpaid use tax of $6,000 ($1,000 of which is penalty) and unpaid income tax of $18,000 ($3,000 of which is penalty). Since the taxpayer is unable to make full payment by February 28, 2003, his application for amnesty includes an installment payment agreement proposal. In order to meet the amnesty payment requirements for unpaid use tax and installment payment agreements, the taxpayer must pay with his Request for Extended Amnesty by February 28, 2003, the greater of the full amount of the unpaid use tax obligation (excluding the penalty) or 20% of the portion of the outstanding income tax liability that consists of tax and interest. On these facts, the taxpayer must pay at least $5,000, which covers the use tax obligation.
IV. Scope of Amnesty
A. Penalty Amnesty
If a taxpayer qualifies for amnesty, the Commissioner will waive all penalties which could be assessed for the failure of the taxpayer:
1. to timely file any proper return for any tax types and for any tax periods under G.L. c. 62C, §§ 30, 33, 34;
2. to file proper returns which report the full amount of the taxpayer's liability for any tax types and for any tax periods under G.L. c. 62C, § 28;
3. to timely pay any tax liability under G.L. c. 62C, §§ 33, 35 and/or G.L. c. 62B, § 7; or
4. to pay the proper amount of any required estimated payment toward a tax liability under G.L. c. 62B, § 14, G.L. c. 62C, § 45A, and/or G.L. c. 63B, § 3.
For Annual Filers, the above penalties will be waived for taxable years beginning before January 1, 2001. For Other Filers, the Commissioner will waive these same penalties for taxable periods ending on or before August 31, 2002. In either case, interest cannot be waived.
B. Criminal Investigation and Prosecution
If a taxpayer is granted amnesty by the Commissioner, the Commissioner will not initiate criminal investigation of that taxpayer nor refer the taxpayer's case to the Department of the Attorney General or to the Massachusetts District Attorneys for criminal prosecution for the tax and tax period(s) covered by the grant of amnesty.
V. Verification and Assessment
Any tax return filed under the Extended Amnesty Program is subject to verification and assessment as provided by statute. G.L. c. 62C, § 26(b). If the taxpayer files a false or fraudulent or otherwise improper tax return or attempts in any manner to defeat or evade a tax under the Extended Amnesty Program, the Commissioner may rescind the grant of amnesty and subject the taxpayer to applicable civil penalties and criminal prosecution. If a taxpayer's request for amnesty is denied, all payments and returns submitted to the Commissioner will be considered to be voluntary and payments will not be refunded. Any such payments will be applied to the taxpayer's tax account(s) in accordance with the provisions of 830 CMR 62C.33.1.
Participation in the Extended Amnesty Program and payment of the tax and interest does not constitute a forfeiture of statutory rights of appeal or an admission of liability for the assessment.
No return or document filed with the Commissioner under the Extended Amnesty Program will be subject to disclosure except as may be permitted in G.L. c. 62C, § 21 and § 22.
VIII. Information and Forms
Request For Extended Amnesty forms, information and related returns are available on the Department's website at www.mass.gov/dor or by calling the Department's Taxpayer Service Division at (617) 887-6367 or toll free in state at 1-800-392-6089. Request for Extended Amnesty forms and other information can also be obtained through the Department's Fax on Demand system. Please call (617) 887-1900 from the handset on your fax machine for a complete menu of available documents. To call for a Request for Extended Amnesty application, the retrieval number is 425.
1. See G.L. c. 62C, §§ 30, 33, 34. [ return to text]
2. See G.L. c. 62C, § 28. [ return to text]
3. See G.L. c. 62C, §§ 33, 35; G.L. c. 62B, § 7. [ return to text]
4. See G.L. c. 62B, § 14; G.L. c. 62C, § 45A; G.L. c. 63B, § 3. [ return to text]
Commissioner of Revenue
December 31, 2002