Ohio’s budget bill for 2012-2013, Am. Sub. H.B. 153, contains both general tax amnesty and special consumer’s use tax amnesty provisions. The use tax amnesty, especially, looks attractive with the promise of no penalty or interest, the availability of a payment plan for up to 7 years, and an absolute bar against the assessment or collection of tax for periods prior to January 1, 2008. However, details are beginning to leak out and a number of taxpayers who thought they might qualify for amnesty may be in for a rude awakening.
In addition to the general tax amnesty provisions found in uncodified section 757.40 of the bill, uncodified section 757.42 provided a special amnesty program for use tax consumers. A “consumer use tax amnesty program” is to be independent of the general amnesty program. The amnesty period runs from October 1, 2011, through May 1, 2013.
Consumers who pay the full amount of tax owed for periods after January 1, 2009, shall have all delinquent tax owed for periods prior to January 1, 2009, plus all penalty and interest waived or abated. Any consumer who does not take advantage of the program may be assessed tax, plus penalty and interest, owed for periods beginning January 1, 2008. In addition, taxpayers may enter into payment plans for up to 7 years to pay any delinquent taxes.
Taxes for which a notice of assessment or audit has been issued, for which a bill had been issued, or which related to a tax period that ends after the effective date of the bill, or for which an audit has been or is being conducted, do not qualify. Use tax sellers, but not use tax consumers, may qualify for amnesty under this provision.
Division (E) of the section states that a consumer against which an assessment has been issued on or before the effective date of the law is not eligible for the amnesty. Division (F) of the section provides that if a consumer registered for use tax on or before June 1, 2011, is not eligible to have penalty or interest waived. Participants in the amnesty are not subject to additional civil or criminal penalties.
In addition, R.C. 5703.58(B) was amended to provide that the tax commissioner could not make any assessment for use tax, or any penalty, interest, or additional charge, if the tax was due before January 1, 2008. This provision appears to mirror the bar found in Division (C) of the amnesty section.
These provisions seem fairly straight-forward. However, some questions have arisen about the use tax amnesty program, such that the taxpayer-friendly veneer of the program seems to be chipping away, exposing a much more restrictive program. Three issues, in particular, have come to light.
It appears that the provisions of both R.C. 5703.58(B) and section 757.42(C) rather plainly state that taxes may not be assessed for periods prior to January 1, 2008. However, there are signs the Department has taken the position that the prohibition only applies of a taxpayer had never registered for use tax purposes, or had never been assessed.
Thus, a taxpayer that may have been audited and assessed for use tax purposes 20 years ago is ineligible for amnesty under this interpretation. In addition, a taxpayer that had previously signed a waiver of the 4-year statute of limitations set forth in R.C. 5741.11 is subject to tax for periods prior to January 1, 2008.
Finally, the department has instructed its auditors that holders of direct payment permits cannot qualify for use tax amnesty because holders of such a permit have registered and are paying use taxes.
A consumer use taxpayer that is ineligible for amnesty under this program may nevertheless qualify for relief under the Department’s voluntary disclosure program. The upshot of the positions that appear to be taken by the Department is that consumer use taxpayers who had registered for tax purposes, but that may have a liability, are the only major taxpayers who may not qualify for tax amnesty under either the general, or use tax, amnesty provisions.