On September 1, Kansas will kick off its third tax amnesty program since 1984. Kansas enacted the amnesty program as part of Senate Bill 572, which the Kansas legislature passed on May 27, 2010. The program will run from September 1, 2010, to October 15, 2010. Unlike some other states’ amnesty programs, Kansas’s amnesty program allows eligible, participating taxpayers to receive abatement of both penalties and interest. However, in return, taxpayers must give up all refund claims related to amounts paid under the program. For taxpayers that have accrued significant penalties or interest on past due claims, but may have reasonable positions with respect to such unpaid claims, participating in the Kansas program may not be advisable.
In order to participate in the Kansas amnesty program, taxpayers must meet the following requirements:
- have delinquent tax liabilities for tax periods ending on or before December 31, 2008—whether as a filer or non-filer;
- the liabilities must relate to a privilege, estate, income (corporate and personal), withholding, tobacco, retailer’s sales, compensating use, local sales and use, liquor, mineral severance, homestead, or franchise tax;
- pay all past due taxes in full during the amnesty period;
- not have received notice of the commencement of an audit, or be currently undergoing an audit, or have already received a notice of assessment, or are in litigation relating to the tax liability; and
- not be in bankruptcy or involved in a criminal investigation.
Taxpayers that have Kansas tax liabilities but have not filed returns can participate in the program. However, because there is no limitation on the lookback period that would limit the liability of a non-filer, the program may not be attractive. Often a state’s voluntary disclosure program can be a better option than a state’s amnesty program for these taxpayers.
Finally, taxpayers that choose to participate in Kansas’s amnesty program will be required to relinquish all appeal rights and will not be able to pursue a refund claim for taxes paid under the amnesty program.
More and more states have recently enacted amnesty programs to bandage budget deficits and shore-up revenue shortfalls. However, these amnesty programs’ penalties and harsh refund prohibitions greatly reduce the attractiveness of these programs, and may significantly decrease participation.