At a Glance…

Pennsylvania’s tax amnesty program begins April 21, 2017. Taxpayers that are considering amnesty should remember that Pennsylvania’s voluntary disclosure agreement (“VDA”) program for non-filers remains open during the amnesty period. Any taxpayer eligible for Pennsylvania’s VDA program should carefully consider the benefits and risks of the VDA program before choosing amnesty. Many taxpayers will find that the VDA program terms are actually more beneficial.

***

Pennsylvania’s tax amnesty program is set to begin April 21 and run through June 19, 2017. The program allows eligible taxpayers to come forward, settle outstanding liabilities, and receive the benefit of penalty abatement, as well as an abatement of half of the statutory interest owed. For non-filers seeking to come forward under the amnesty, there is also a limited look-back period.

While the amnesty program provides many benefits, the Department’s VDA program may offer better terms for taxpayers that are eligible. Specifically, the VDA program typically offers non-filers a shorter look-back period than the look-back offered by the amnesty program. For example, a remote seller that has not previously collected Pennsylvania tax or filed Pennsylvania returns, and that wants to concede nexus, may find that the look-back period under the VDA program is several years shorter than the look-back under amnesty. The benefits of the more limited VDA look-back can, in many cases, exceed the benefit of reduced interest under amnesty.

The following chart illustrates a few other key differences (and some similarities) between the amnesty and VDA programs for corporate net income tax (similar considerations apply for other tax types):

 

Amnesty Program

VDA Program

Years required to be filed (assumes calendar year filer)

2010-current

2012 – current

Will all penalties be waived?

2010-2014 only

Yes, including 5% amnesty nonparticipation penalty

Will interest be waived?

2010-2014 only (1/2 of interest is waived)

No

Returns/Payments Due

By June 19th, 2017

Within 90 Days of fully executed VDA

Can refund claim be filed?

No

No

Does DOR reserve right to audit/assess

Yes

Yes

Eligible for future amnesty programs?

No

Yes

Because the VDA program will continue to operate during amnesty, taxpayers that are eligible for both programs can weigh the benefits and risks of both programs, and choose the one that is best suited for the company. If you are a non-filer considering coming forward under Pennsylvania’s amnesty program, make sure that you compare the benefits with Pennsylvania’s VDA program. You may find that the standard VDA program terms provide greater relief.