Massachusetts Enacts Tax Amnesty Program, Further Delays FAS 109 Deduction, And Increases Earned Income Credit

On July 17, Massachusetts Governor Charlie Baker signed the state's budget bill for the upcoming 2016 fiscal year.1 The legislation includes a 60-day tax amnesty program that the Commissioner of Revenue must conduct by June 30, 2016.2 The budget passed by the legislature included a provision that increased the earned income tax credit (EITC), but this provision was contingent on the repeal of the so-called FAS 1093 deduction.4 Governor Baker returned this provision with recommendations for amendment.5 On August 5, Governor Baker approved legislation that increases the EITC and delays implementation of the FAS 109 deduction for a fifth time.6 In addition to postponing the FAS 109 deduction for five more years, the legislation extends the period during which the deduction may be claimed from seven years to 30 years.

Tax Amnesty Program

The legislation authorizes the Commissioner of Revenue to establish a tax amnesty program which will allow taxpayers to settle outstanding tax liabilities without penalty.7 The Commissioner may offer tax amnesty to taxpayers who have failed to file required returns due for any tax period beginning before January 1, 2014.8 Specifically, penalties will be waived without any need for the taxpayer to demonstrate reasonable cause or the absence of willful neglect for the failure of the taxpayer to: (i) timely file any proper return for any tax type and for any tax period; (ii) timely pay any tax liability; or (iii) pay the proper amount of any required estimated payment toward a tax liability.9 The waiver of a taxpayer's liability applies if the taxpayer, prior to the expiration of the amnesty period, files proper returns and pays the full amount of tax shown on the taxpayer's returns or upon the Commissioner's assessments with all interest due.10

Scope and Timing of Program

The scope of the tax amnesty program, including the tax types and periods covered, will be determined by the Commissioner.11 The legislation requires the tax amnesty program to include a limited look-back period for unfiled returns not to exceed three years.12 The tax amnesty program must be conducted for a period of 60 days and conclude by June 30, 2016.13 The Commissioner is directed to determine the exact period during which the amnesty will occur. If a taxpayer fails to pay the full liability by June 30, 2016, the Commissioner must retain any payments and apply them against the outstanding liability.

Limitations

The tax amnesty program will...

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