Section 9.15. Tax amnesty administration and implementation issues

(a) Definitions. The following words and terms, when used in this section, have the following meanings, unless the context clearly indicates otherwise:

Amnesty period—The time period of 90 consecutive days beginning on Friday, October 13, 1995, and ending on Wednesday, January 10, 1996.

Eligible liability—An eligible tax liability, eligible interest liability and an eligible penalty liability.

Program—Tax Amnesty Program.

(b) Nonparticipation penalty.

(1) Scope. The nonparticipation penalty applies to those eligible taxpayers that fail to participate in the Program. Section 6.21(b) (relating to nonparticipation penalty) addresses three general circumstances under which the Department will not impose the nonparticipation penalty. However, many specific questions have been received concerning what effect, if any, the timing of assessments or appeals would have on the application of the nonparticipation penalty. Paragraphs (2)—(6), inclusive, address concerns taxpayers have raised.

(2) Ineligible taxpayers. The nonparticipation penalty will not be imposed upon a taxpayer that is not eligible to participate in the Program under § 6.3(b) (relating to eligible taxpayers).

Example: Prior to the amnesty period, Taxpayer became the subject of a criminal investigation for failing to file and pay sales and use tax. Taxpayer is not eligible to participate in the Program and, thus, the nonparticipation penalty will not apply to this taxpayer.

(3) Corporation tax accounts. Payment of eligible liabilities may be made by the use of any available credit that a taxpayer may have in its corporation tax account. The Department will give a taxpayer the opportunity to request that an eligible liability be offset by such a credit before the nonparticipation penalty is imposed.

Example: Taxpayer has a settled 1990 Capital Stock Tax credit of $10,000 and an unpaid settled 1991 Capital Stock Tax liability of $600. Taxpayer may use its settled credit to pay its 1991 Capital Stock Tax liability under the Program and avoid the imposition of the nonparticipation penalty.

(4) Effect of successful appeal of eligible liability. An administrative or judicial decision that reduces or refunds an eligible liability that was not the subject of a valid appeal under paragraph (6) or was not paid on or before the last day of the amnesty period does not automatically relieve the taxpayer of liability for a nonparticipation penalty. A separate petition to appeal the imposition of the nonparticipation penalty shall be filed.

Example: Taxpayer does not pay an eligible liability during the amnesty period. The nonparticipation penalty is imposed. Subsequently, Taxpayer pays the eligible liability and files a Petition for Refund for the eligible liability. The refund of the eligible liability is granted. The nonparticipation penalty, however, will not be abated automatically.

(5) Post amnesty period increase in eligible liability. Except in cases where there is evidence of fraud or the appeal is not valid under paragraph (6), the nonparticipation penalty will not be imposed upon a taxpayer in any of the following situations:

(i) After the amnesty period, the taxpayer receives an assessment, a determination of additional tax, a settlement notice or resettlement notice establishing an eligible liability, based on an audit, or otherwise, and one of the following occurs:

(A) The tax return or tax report for the eligible liability was timely filed and payment of the reported eligible liability was made on or before January 10, 1996.

(B) The eligible liability was timely reported on a tax amnesty return and payment was timely made. See § § 6.1, 6.5 and 6.6 (relating to definitions; tax amnesty return; and payment).

(ii) After the amnesty period, the taxpayer receives a Federal Report of Change that increases its taxable income and, consequently, its liability for an eligible tax. See section 406 of the TRC (72 P. S. § 7406).

(iii) During the amnesty period, the taxpayer receives an assessment, determination of additional tax due, a settlement notice, or a resettlement notice for an eligible liability, but is not required to file an appeal of the assessment, determination, settlement or resettlement until after the amnesty period, if one of the following conditions are met:

(A) The taxpayer subsequently files a timely and valid administrative or judicial appeal for that particular eligible liability.

(B) The taxpayer subsequently pays the eligible liability on or before the date when an appeal of the assessment, determination, settlement notice or resettlement notice is required to be filed.

(6) Timely and valid appeals.

(i) The nonparticipation penalty will not be imposed upon a taxpayer that on or before the last day of the amnesty period, files a timely and valid administrative or judicial appeal contesting an eligible liability. An appeal is not valid if the Department determines that the appeal is filed in bad faith. An appeal is filed in bad faith when, the appeal has no basis in law or fact, or was undertaken solely to delay the collection of a tax. An appeal is presumptively in bad faith if it is barred by res judicata or time, or was filed with a tribunal that did not have proper jurisdiction to hear the appeal.

(ii) The nonparticipation penalty will not be imposed upon a taxpayer in either of the following situations:

(A) Before the end of the amnesty period, the taxpayer receives an adverse decision in a valid administrative or judicial appeal of an eligible liability, but is not required to file a further appeal of the adverse decision until after the amnesty period.

(B) On or before the last day of the amnesty period, the taxpayer files a timely and valid administrative or judicial appeal contesting an eligible liability and subsequently either withdraws the appeal or does not further appeal an adverse decision.

(c) Prospective continued compliance. The continued compliance requirement as provided in § 6.10 (relating to continued compliance requirement) is intended to apply to those taxes that are to be reported, filed and paid after the amnesty period. Taxes that are to be filed, reported and paid prior to the last day of the amnesty period would not be considered in determining whether a taxpayer that had an eligible penalty liability abated under the Program was in continuing compliance so as to avoid a reinstatement of the eligible penalty liability.

(d) Report all eligible liabilities. To participate in the Program, a taxpayer shall report on a tax amnesty return and make payment in accordance therewith all eligible liabilities that are not the subject of a valid and timely administrative or judicial appeal. See § 6.4 (relating to participation requirements) and § § 6.5 and 6.6.

Example: Taxpayer has an eligible liability for corporate tax as well as an eligible liability for sales and use tax. Taxpayer has filed a valid and timely appeal of the eligible liability for corporate tax on or before the end of the amnesty period. Taxpayer may participate in the Program with respect to the eligible liability for sales and use tax.

Example: Taxpayer has an eligible liability for corporate tax and an eligible liability for sales and use tax. Taxpayer has not filed an appeal for either eligible liability on or before the end of the amnesty period. Taxpayer may not participate in the Program unless it participates with respect to both eligible liabilities.

(e) Partial withdrawal of appeals. When a taxpayer has been assessed both eligible and noneligible liabilities, because the assessment relates to periods both before and after December 31, 1993, the taxpayer may participate in the Program with respect to the eligible liability and still appeal the assessment of the noneligible liability. Except as provided in subsection (d), a taxpayer may not participate in the Program by paying an eligible liability associated with less than all of the issues in an assessment while continuing an appeal on any other issue in the assessment. In this latter case, the appeal must either be withdrawn in its entirety before an eligible penalty liability can be abated under the Program or continued in its entirety.

(f) Interest on additions to tax. An addition to tax for underpayment of estimated tax is defined as an eligible penalty liability under § 6.1 that the Department may abate under the Program.

Example: Taxpayer has an outstanding liability for 1992 Capital Stock Tax and an outstanding $1,000 in addition to tax for underpayment of Estimated 1992 Capital Stock Tax on which interest has been settled in the amount of $100. Taxpayer elects to participate in the Program and pays the 1992 Capital Stock Tax liability. The $1,000 addition to tax will be abated and the $100 interest will not be due because the associated eligible penalty liability, the $1,000 addition to tax, was abated.

(g) Refund based on Federal Report of Change. A resettlement under section 406(b) of the TRC (72 P. S. § 7406(b)) based on a Federal Report of Change that decreases an eligible liability paid by a taxpayer participating in the Program during the amnesty period will be a basis for allowing the taxpayer a refund or a credit.

(h) Amended returns. To participate in the amnesty program, a taxpayer shall file amended tax returns or amended tax reports for all years in which the taxpayer underreported eligible liability. An amended tax return or amended tax report that reduces an eligible liability will not be accepted under the Program.

The provisions of this § 9.15 adopted December 8, 1995, effective December 9, 1995, 25 Pa.B. 5620.