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Washington B&O Amnesty: Does It Stink?

The Washington legislature has enacted the state’s first-ever amnesty program. The legislation (L. 2010, SB6892) all

January 27, 2011

The Washington legislature has enacted the state’s first-ever amnesty program. The legislation (L. 2010, SB6892) allows the Department of Revenue to waive most interest and penalties on delinquent state and local sales and use tax, state business and occupation (B&O) taxes, and state public utility taxes. The amnesty program began on February 1, 2011, and will end on April 30, 2011.  Washington expects the program to generate $24.4 million for the state and $3.9 million for local governments.

Although a taxpayer participating in the program could potentially avoid paying all penalties and interest associated with a delinquent tax liability, there are multiple opportunities for taxpayers to disqualify themselves. Despite having until April 30, 2011, to remit full payment to the Department for all tax liabilities for which amnesty has been requested, taxpayers must submit an Amnesty Application and all outstanding tax returns for which amnesty applies, by April 18, 2011. In addition, a taxpayer will lose the waiver of penalties and interest if it does not timely file tax returns and pay in full tax liabilities (for any tax administered by the Department) that become due during the amnesty period. If the waiver requested is associated with an invoice that has been previously sent to the taxpayer, the taxpayer must pay the invoice in full (less penalties and interest eligible for waiver), including taxes not eligible for amnesty. 

Taxpayers that have ever been assessed an evasion penalty or a penalty for misuse of a reseller permit are ineligible to participate in the amnesty program. In addition, a taxpayer that has never been a defendant in a criminal prosecution (a conviction is not required) for an offense involving failure to collect or pay the correct amount of tax is disqualified from participating in the program. Taxpayers that are in bankruptcy are also generally not allowed to participate in the program. 

By virtue of participating in the program, taxpayers waive the right to seek a refund for any amounts paid under amnesty. Further, all liabilities reported through the amnesty program are potentially subject to audit and additional assessment of taxes, penalties, and interest for any amount the Department determines to be underpaid. However, as is generally the rule with any assessment in Washington, the Department is limited to a four-year look back period for any assessments it issues. The Washingtonamnesty program could be beneficial to many delinquent taxpayers, especially those that have been considering the state’s voluntary disclosure program, which only waives penalties. However, the added benefit of avoiding interest must be weighed against the loss of refund and appeal rights, which remain available with the voluntary disclosure program. Taxpayers that are eligible and choose to participate in the amnesty program should be mindful of these differences and pay close attention to the requirements to maintain their eligibility for amnesty. Choosing the wrong route could stink!

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