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Kentucky Enacts 2012 Tax Amnesty Program


During its just concluded 2012 Regular Session, the Kentucky General Assembly passed House Bill 499 (“HB 499”) which created a Tax Amnesty Program (“Amnesty Program”). In April, the Governor signed HB 499 into law.

The Kentucky Department of Revenue (“Department”) will conduct the Kentucky Amnesty Program sometime between July 1, 2012 and June 30, 2013, which will run at least sixty (60) days, but no more than one hundred twenty (120) days. The Amnesty Program will provide a window of opportunity for some taxpayers to resolve qualifying Kentucky tax liabilities for taxable periods ending or transactions occurring after December 1, 2001, and prior to October 1, 2011.

One benefit of this new Amnesty Program is that a taxpayer may be eligible for a waiver of all penalties (both civil and criminal) and fees assessed for the taxable years or periods for which the tax amnesty is requested and granted; another is a waiver of half of the interest accrued on the tax liability involved in the amnesty.

But, the Amnesty Program contains more than just “carrots.” There are “sticks” too. The Kentucky Amnesty Program permits the Department to impose additional interest, penalties, and “cost-of-collection fees” (of up to 50%) if a taxpayer does not disclose an amnesty-eligible tax liability during amnesty.

The Tax Amnesty Program is available to any taxpayer owing taxes, penalties, fees, or interest for all Kentucky taxes except for certain ad valorem taxes on real property, personal property, motor vehicles and motor boats, and penalties related to certain cigarette tax-related violations. A taxpayer is eligible for the Amnesty Program despite being under audit by the Department, or being the prize recipient of an assessment, notice or demand for payment by the Department. The Amnesty Program, however, does not apply to a taxpayer under criminal investigation or involved in criminal litigation with the Kentucky or federal government that is pending on the day of the taxpayer’s application for tax amnesty.

To be a taxpayer eligible for the Amnesty Program, the taxpayer must file an application with the Department, file all returns and/or amended returns for tax periods which have not been filed or were underreported, pay all tax owed in full, and timely file all returns and make all payments due for three years following the Amnesty Program. In the case of severe hardship, HB 499 offers an option for an installment agreement – though all tax must be paid by May 31, 2013. Amnesty payments generally cannot be refunded.

HB 499 authorizes the Department to invalidate any amnesty received by the taxpayer for failure to: (1) timely file any tax return or pay any tax and interest due for any period between December 31, 2001, and October 1, 2011; or, (2) timely file any tax return or pay any tax for up to three years following the date amnesty was granted to the taxpayer. Under HB 499, if a taxpayer fails to fulfill any of these obligations, then any civil penalties, fees and interest that were waived through the Amnesty Program will be reinstated, subject to immediate collection by the Department, and not subject to protest.

As HB 499 was recently signed into law, the Department has yet to release any administrative or public guidance regarding implementation of the program. So, details of the Amnesty Program are developing.

If you have questions about this topic or any other legal issue, please contact any member of the firm's State and Local Tax Team.

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