Your Sins Are Forgiven: The Texas Tax Amnesty Program and Voluntary Disclosure Agreements

Share this Article
Facebook Icon LinkedIn Icon Twitter Icon
Jason B. Freeman

Jason B. Freeman

Managing Member

214.984.3410
jason@freemanlaw.com

Mr. Freeman is the founding member of Freeman Law, PLLC. He is a dual-credentialed attorney-CPA, author, law professor, and trial attorney.

Mr. Freeman has been named by Chambers & Partners as among the leading tax and litigation attorneys in the United States and to U.S. News and World Report’s Best Lawyers in America list. He is a former recipient of the American Bar Association’s “On the Rise – Top 40 Young Lawyers” in America award. Mr. Freeman was named the “Leading Tax Controversy Litigation Attorney of the Year” for the State of Texas for 2019 and 2020 by AI.

Mr. Freeman has been recognized multiple times by D Magazine , a D Magazine Partner service, as one of the Best Lawyers in Dallas, and as a Super Lawyer by Super Lawyers, a Thomson Reuters service. He has previously been recognized by Super Lawyers as a Top 100 Up-And-Coming Attorney in Texas.

Mr. Freeman currently serves as the chairman of the Texas Society of CPAs (TXCPA). He is a former chairman of the Dallas Society of CPAs (TXCPA-Dallas). Mr. Freeman also served multiple terms as the President of the North Texas chapter of the American Academy of Attorney-CPAs. He has been previously recognized as the Young CPA of the Year in the State of Texas (an award given to only one CPA in the state of Texas under 40).

What is the Texas Amnesty Program?

Former Supreme Court Justice Hugo Black once said, “The United States has a system of taxation by confession.” That statement is true at the federal level as well as the state level. In fact, the Texas government relies on its citizens to “confess” their franchise tax, sales and use tax, and other tax obligations through required reports and payments. However, as the world continues to turn, taxpayers fall behind in their reporting and payment obligations, resulting in potential penalties and interest. The Texas Comptroller has instituted the Texas Tax Amnesty Program to help taxpayers obtain a clean slate. Nevertheless, is it a taxpayer’s best option?

The Texas Tax Amnesty Program

The Texas Comptroller enacted the Texas Sales Tax Amnesty Program based on Senate Bill No. 1, which was passed in 2017. According to Section 17.11 of the bill, the program is “designed to encourage a voluntary reporting by delinquent taxpayers who do not hold a permit, or are otherwise not registered for a tax or fee administered by the Comptroller, or those permitted taxpayers that may have underreported or owe additional taxes or fees.”

Moreover, according to the Texas Comptroller:

Tax amnesty applies to periods before Jan. 1, 2018, and only includes liabilities that have not been previously reported to the Comptroller’s office. If a taxpayer has been notified that a period or periods are scheduled for an audit review, or if they are already under audit review, then those periods are not eligible for amnesty. It does not apply to accounts which have been certified to the Office of the Attorney General, accounts which are presently in litigation, or accounts that have been reduced to judgment. Additionally, the amnesty doesn’t apply to local motor vehicle tax, IFTA taxes, PUC gross receipts assessments, or unclaimed property payments.[1]

Those taxpayers that participate in the program may file an original report, an amended report, or a tax application without paying any penalties and interest. As a result, taxpayers will only be responsible for their required filings and corresponding tax payments. The program will run from May 1, 2018, through June 29, 2018.

Voluntary Disclosure Agreements

The Texas Comptroller also offers a different opportunity to encourage taxpayer compliance, namely Voluntary Disclosure Agreements (VDAs). VDAs are helpful for taxpayers who want to become compliant in Texas but (1) may have multiple years of non-compliance, and/or (2) do not want to initially reveal their identity.

Regarding VDAs, the Texas Comptroller adheres to the following guidelines:

Taxpayers who wish to obtain a VDA may have a representative submit an anonymous application to the state to initiate the process. Once the agreement has been approved, taxpayers must file the appropriate reports and pay the voluntarily disclosed taxes without paying penalties and interest.

Conclusion

Businesses who have fallen behind in their Texas tax responsibilities should consider their options. While both options outlined above offer penalty and interest waivers and require that taxpayers have not been previously contacted for audit or investigation, there are key differences. First, the Texas Tax Amnesty Program will only run for two months, while VDAs may be obtained on an ongoing basis. Second, taxpayers who participate in the amnesty program must be transparent with their identity from the start. On the other hand, businesses may initiate the VDA process anonymously through an appointed representative. Finally, for taxpayers who have been non-compliant for over four years, the look-back period of each program cannot be minimized. The amnesty program does not appear to have a limitation, while VDAs are limited to the last four years (assuming taxes have not been previously collected).

[1]Tax Amnesty, Texas Comptroller of Public Accounts(Apr. 21, 2018), https://comptroller.texas.gov/tax-amnesty/.

[2]Voluntary Disclosure Agreements (96-576),Texas Comptroller of Public Accounts(last visited Apr. 21, 2018), https://comptroller.texas.gov/taxes/audit/vda.php.

 

State and Local Tax Services

Freeman Law works with tax clients across all industries, including manufacturing, services, technology, oil and gas, financial services, and real estate. State and local tax laws and rules are complex and vary from state to state. As states confront budgetary deficits due to declining tax revenues and increased government spending, tax authorities aggressively enforce state tax laws to recapture lost revenues.

At Freeman Law, our experienced attorneys regularly guide our clients through complex state and local tax issues—issues that are frequently changing as states seek to keep pace with technology and the evolution of business. Staying ahead requires sophisticated legal counsel dedicated to understanding the complex state tax issues that confront businesses and individuals. Schedule a consultation or call (214) 984-3410 to discuss your Local & State tax concerns and questions.

 

State Local Tax