Topic:
INTEREST; REVENUE SERVICES DEPARTMENT; STATE BUDGETS; TAXATION (GENERAL);
Location:
TAXATION;

OLR Research Report


BACKGROUNDER: STATE TAX AMNESTIES

INTRODUCTION

Tax amnesties let people pay back taxes, usually with interest but without financial or criminal penalties, for a limited period typically lasting from six weeks to five months. Connecticut has had three tax amnesty programs since 1990. A fourth was proposed but not enacted in 2008. As part of her FY 09 deficit mitigation plan, the governor has proposed an amnesty for Spring 2009.

Many states have used tax amnesties to increase revenue. Forty-two states in addition to Connecticut implemented a total of 80 tax amnesty programs between November 1982 and June 2007, according to a survey by the Federation of Tax Administrators (FTA). Supplemental research shows that, since the FTA last updated its survey, four states have carried out amnesty programs, one in the second half of 2007 and the other three in 2008. Of the four, Nevada's and Oklahoma's amnesty programs are in effect or just ending as of the date of this report.

CONNECTICUT TAX AMNESTY PROGRAMS

Connecticut has offered three tax amnesties, in 1990, 1995, and 2002. The first two ran from September 1 to November 30 and the third from September 1 to December 2. The 1990 amnesty generated $54 million in revenue; the 1995 amnesty, $46.2 million; and the 2002 amnesty, $109 million. Revenue from a tax amnesty is one-time revenue.

Though some states limit their amnesties to particular taxes, Connecticut's three amnesties applied to all state taxes. According to a December 10, 2002 Department of Revenue Services (DRS) press release, preliminary collection numbers for the 2002 tax amnesty broke down by tax as follows:

● Income tax: $19.8 million

● Sales and use tax: $57.2 million

● Corporation tax: $16.4 million

● Gross earnings tax: $1.1 million

● Gift tax: $1 million

● Miscellaneous other taxes: $8.6 million

The laws governing the three programs were virtually identical (see CGS 12-35g). Taxpayers were required to pay all taxes owed with interest, but the regular interest rate was reduced by 25% for the duration of the amnesty, from 1% to 0.75% per month. In return for payment, the state waived penalties and criminal prosecution. Installment payments were allowed. Taxpayers who had been notified that they were being audited or who were involved in pending litigation for failure to pay taxes or tax fraud could not participate. DRS was allowed to use a portion of the revenue received ($2.0 million in 2002) to administer the program.

The tax amnesty program proposed in several amendments in the 2008 session was identical to the 2002 program. It was to run from August 1 to October 31, 2008. The Office of Fiscal Analysis estimated that the 2008 proposal would net $35 million for the General Fund in FY 09.

In her recently issued Deficit Mitigation Plan for the Fiscal Year 2008-2009 (October 21, 2008), the governor is proposing a tax amnesty program to run from May 1 to June 25, 2009. Though no draft legislation is currently available, the governor's description of the proposed program appears identical to the three past Connecticut tax amnesties. The governor's plan projects the amnesty to net $40 million in General Fund revenue for FY 09.

TAX AMNESTIES IN OTHER STATES

Amnesties Already Concluded

The table below lists state tax amnesty programs offered between November 1982 and the present, according to the Federation of Tax Administrators (FTA) and research by this office.

Table 1: State Tax Amnesty Programs

November 1982 to Present

State

Year

Revenue

(Millions)

Alabama

1984

$3.2

Arizona

1982-83

6.0

2002

Not available

2003

73.0

Arkansas

1987

1.7

2004

Not available

California

1984-85

197.0

2005

Not available

Colorado

1985

6.4

2003

18.4

Connecticut

1990

54.0

1995

46.2

2002

109.0

Florida

1987

13.0

1988

8.4

2003

80.0

Georgia

1992

51.3

Idaho

1983

0.3

Illinois

1984

160.5

2003

532.0

2008

4.0

Indiana

2005

255.0

Iowa

1986

35.1

2007

26.5

Kansas

1984

0.6

2003

53.7

Kentucky

1988

100.0

2002

100.0

State

Year

Revenue

(Millions)

Louisiana

1985

1.2

1987

0.3

1998

1.3

2001

173.1

Maine

1990

29.0

2003

37.6

Maryland

1987

34.6

2001

39.2

Massachusetts

1983-84

86.5

2002

96.1

2003

11.2

Michigan

1986

109.8

2002

Not available

Minnesota

1984

12.1

Mississippi

1986

1.0

2004

7.9

Missouri

1983

0.9

2002

76.4

2003

20.0

Nebraska

2004

7.5

Nevada

2002

7.3

New Hampshire

1997-98

13.5

2001-02

13.5

New Jersey

1987

186.5

1996

359.0

2002

276.9

New Mexico

1985

13.6

1999

45.0

New York

1985-86

401.3

1996-97

253.4

2002-03

582.7

2005-06

349.0

North Carolina

1989

37.6

North Dakota

1983

0.2

2003-04

6.9

Ohio

2001-02

48.5

2006

63.0

Oklahoma

1984

13.9

Pennsylvania

1995-96

Not available

Rhode Island

1986-87

0.7

1996

7.9

2006

6.5

South Carolina

1985

7.1

 

2002

66.2

State

Year

Revenue

(Millions)

South Dakota

1999

0.5

Texas

1984

0.5

2004

Not available

2007

Not available

Vermont

1990

1.0

Virginia

1990

32.2

2003

98.3

West Virginia

1986

15.9

2004

10.4

Wisconsin

1985

27.3

1998

30.9

Amnesties Currently In Effect

Nevada. Nevada's amnesty began on July 1 and runs through October 28, 2008. It was originally set to expire on September 30 but was extended by one month. The amnesty applies to the sales and use taxes, modified business tax, and business license fees. (Nevada has no state income tax.) So far, state officials estimate the state's revenue gain from the program at $26.3 million.

Oklahoma. Oklahoma has an amnesty running from September 15 to November 14, 2002. The preliminary revenue estimate for the program is $34.7 million.

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