27th Annual Tuesday & Wednesday, January 23‐24, 2018 Hya� Regency Columbus, Columbus, Ohio Workshop RR Ohio Tax VDAs, Amnesty Programs, Offers in Compromise and Back Channel Efforts - The Best Tool to Move Forward Is? Wednesday, January 24, 2018 2:00 p.m. to 3:00 p.m.
Biographical Information Mark F. Sommer, Member Frost Brown Todd LLC, 400 West Market Street, Suite 3200, Louisville, KY 40202 (502) 779-8150; Fax: (502) 581-1087 msommer@fbtlaw.com Mark F. Sommer, Esq., is a Partner of the Firm and tax attorney resident in the Louisville office of the law firm of Frost Brown Todd LLC, where he leads the Firm’s Tax Teams. Now in his 28th year of private practice, Mark's comprehensive practice focuses on controversy, litigation and planning relating to tax matters, primarily state and local tax matters and incentives. Mark is a Fellow in the American College of Tax Counsel, one of only four from the Commonwealth of Kentucky and also is a recognized “Super Lawyer” in Kentucky. Mark has also been recognized as one of the Best Lawyers in America for twenty years in Tax Law and in Litigation & Controversy – Tax and was recognized by State Tax Notes as one of its “Persons of the Year” in 2013. Mr. Sommer has written extensively in the area of state and local taxation and is a frequent speaker and lecturer on state and local tax matters. Mr. Sommer obtained his JD from the University of Cincinnati, College of Law and his BSBA from Xavier University. Mark E. Holcomb, Of Counsel, Dean Mead 215 S. Monroe Street, Suite 815, Tallahassee, FL 850-999-4100 mholcomb@deanmead.com Mr. Holcomb offers clients 32 years of experience practicing in state and local taxation. He represents clients before the Florida Department of Revenue and local taxing authorities, and in litigation at the trial and appellate levels. Mr. Holcomb advises clients on a broad range of state and local taxes, including corporate income and franchise tax, sales and use tax, documentary stamp tax, communication services tax, insurance premium tax, ad valorem tax and motor fuels tax, in tax controversy work and in planning opportunities. Nicole Randall, Attorney, Office of Chief Counsel, Appeals Management Ohio Department of Taxation 30 East Broad Street, 22 nd Floor, Columbus, OH 43215 614-387-2988 nicole.randall@tax.state.oh.us Nicole began her career with the Department of Taxation in September 2016. She is an Attorney in the Appeals Management Division. She works primarily with settlements and problem resolutions with attorneys, CPAs, taxpayers, and the Ohio Attorney General’s Office on certified assessments. Prior to joining the Department of Taxation, Nicole was an Assistant Attorney General for over nine years in the Collections Enforcement section where she represented various state clients. She received her B.A. from Capital University and her J.D. from Capital University Law School.
27 th Annual Ohio Tax Conference January 23‐24, 2018 VDAs, Amnesty Programs, Offers in Compromise and Back Channel Efforts – And The Best Tool to Move Forward Is? Mark E. Holcomb, Esq. Nicole Randall, Esq. Mark F. Sommer, Esq. Of Counsel Appeals Management Member Dean Mead & Dunbar Ohio Dept. of Taxation Frost Brown Todd LLC Tallahassee, FL Columbus, OH Louisville, KY 1
Agenda • Overview of state voluntary disclosure and amnesty programs Typical terms Current and recent amnesty programs Pros/cons and strategies for each • Offers in Compromise • Back Channel Efforts • Evaluating when to use which 2
Introduction • Voluntary tax compliance system State collection and enforcement costs • Incentivize and enable taxpayers to report/resolve outstanding liabilities • Allow taxpayers to: Reduce or eliminate tax exposure Achieve certainty in tax compliance, and also financial accounting 3
Voluntary Disclosures • Opportunity to self‐disclose and pay previously unpaid or underpaid tax liabilities and deficiency interest • Formal and informal programs E.g. , Fla. Stat. § 213.21(7) www.floridarevenue.com/dor/taxes/voluntary_dis closure https://revenue.ky.gov/Collections/Pages/Volunta ry‐Disclosure.aspx • Exception: NM – managed audit only 4
Voluntary Disclosures • Typical terms and conditions No prior contact by state How specific must contact be? (hard vs. soft contact) Limited look‐back period (3 to 5 years) Full Penalty waiver Oftentimes bars criminal liability File prior returns or spreadsheet under oath Promise prospective compliance 5
Voluntary Disclosures • MTC Voluntary Disclosure Program “Faster, more efficient and less costly than approaching each state separately” http://www.mtc.gov/Nexus‐Program/Multistate‐ Voluntary‐Disclosure‐Program • Sales, use, income and franchise taxes • States excluded: AK, CA, IL, IN, ME, MS, NV, NY, OH, PA, RI, VA, WY 6
Voluntary Disclosures • MTC Voluntary Disclosure Program Detailed procedures Timeline ‐ ~4 months on average Confidentiality Application with good faith estimate Look‐back period of 3 ‐ 5 yrs. Min. tax liability $500 per state File returns & pay tax + interest due 7
Voluntary Disclosures • MTC Online Marketplace Seller VDA Initiative http://www.mtc.gov/The‐Commission/News/Report‐on‐the‐National‐ Nexus‐Program‐Online‐Marke Inventory or other nexus‐creating activities of marketplace provider/facilitator 24 states and D.C. participated Applications filed w/ MTC between 8/17/17 – 11/1/17 Register and begin collecting/remitting tax by 12/1/17 Prospective compliance (generally) except for specific states and D.C. 8
Voluntary Disclosures • Florida Alternative Certified Audit Program Registered taxpayer No DOR audit notice Engage DOR‐certified auditor DOR‐approved audit plan Full penalty waiver Interest waiver First $25,000 25% of excess over $25,000 9
Amnesty Programs • Resolve tax liabilities known and unknown to state • State may notify taxpayers with known liabilities • Carrot and stick approach Significant penalties may be imposed for failing to participate 10
Amnesty Programs • Common terms and conditions Limited taxes and periods Eligibility may be restricted Civil and criminal penalty waiver Interest compromise (usually) File returns/pay liability within limited timeframe Limited/no ability to compromise tax due Refund of payments usually barred 11
Amnesty Programs • Current/upcoming amnesty programs OH: 1/1/18 – 2/15/18 CT: 10/31/17 – 11/30/18 RI: 12/1/17 – 2/15/18 TX: 5/1/18 – 6/29/18 • Historic amnesty programs MTC lists amnesty programs since 2009 [www.mtc.gov/nexus‐program/state‐tax‐ amnesties] FTA lists amnesty programs since 1982 [www.taxadmin.org] 12
Amnesty Programs • OH amnesty program (1/1/18 – 2/15/18) Major state taxes administered by DOT Taxes due and payable as of 5/1/17 Does not include any tax for which assessment, audit notice or billing issued Waive penalties + ½ interest due Immunity from criminal or civil liability 13
Amnesty Programs • CT amnesty program (10/31/17 – 11/30/18) Major state taxes administered by DRS Unreported liabilities due before 1/1/17 3‐yr. look‐back period (unless tax collected but not remitted) Pay liability in full when apply online Keep confirmation page and source documents – no notice from DRS if approved Waive most penalties + ½ interest No criminal liability 14
Amnesty Programs • RI amnesty program (12/1/17 – 2/15/18) All RI state taxes and fees For tax periods prior to 1/1/17 Penalty waiver + 25% interest reduction (13.5% in lieu of 18%) No criminal or civil prosecution 15
Amnesty Programs • TX amnesty program (5/1/18 – 6/29/18) For sales and use tax, whether registered or not Taxes due for periods prior to 1/1/18 Only previously unreported liabilities Excludes periods under audit, IFTA taxes, PUC gross receipts taxes, motor vehicle taxes, unclaimed property No penalties or interest 16
Pros and Cons of Voluntary Disclosures and Amnesty Programs VDAs Amnesties • Only unknown liabilities • Known/unknown liabilities • Available any time • Limited time period • Open eligibility • Targeted eligibility • Only non‐filers? • Open to filers/non‐filers • Risk is audit • Carrot and stick • May allow additional • Terms set for all compromises participants • Usually administrative • Usually statutorily discretion authorized 17
Pros and Cons of Voluntary Disclosures and Amnesty Programs VDAs Amnesties • May not waive all • Generally available penalties for taxes unless already in collected but not criminal system remitted • May include specified • May not include locally locally administered administered taxes taxes ( e.g. , AZ) • Negotiate prospective • Generally have to pay only? past tax and interest for defined period 18
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