June 12, 2020

The Ohio House of Representatives has unanimously approved a new tax amnesty proposal (HB 609), would raise revenues for the state and provide relief for taxpayers while Ohio’s economy recovers from the COVID-19 pandemic. This program, which is now under review by the Ohio Senate’s Ways and Means Committee, presents opportunities for our clients to minimize the costs of unreported and underreported tax liabilities.

Tax amnesty programs relieve taxpayers who owe past-due taxes and fees while raising revenue for the taxing authority. This creates a win-win situation. Without such programs, taxpayers who owe must pay penalties and accrued interest.

In economic downturns, tax planning is critical to ensure the long-term health of a business. Therefore, it’s important that our clients avail themselves of voluntary disclosure programs and tax amnesty programs offered by federal, state, and local taxing authorities to minimize the impact of delinquent or unpaid tax liabilities.

Details of the bill are as follows:

The Amnesty

The tax amnesty bill would establish an amnesty period during which taxpayers with unreported or underreported taxes could discharge their tax debts by paying the delinquent tax without paying the penalties and interest (the “amnesty”). The three-month, temporary amnesty period would run from January 1, 2021, to March 31, 2021.

Under this proposal, the Tax Commissioner must waive penalties and accrued interest if an eligible taxpayer pays the full amount of included taxes or fees during the amnesty period. The tax amnesty bill also authorizes the Commissioner to require a taxpayer to file returns or reports, including amended returns or reports.

In addition to the waiver of penalties and interest, the taxpayer would be immune from criminal prosecution or any civil action concerning the taxes paid. Further, no assessment may be issued against the taxpayer for that tax or fee.

Covered Taxes under the Proposed Tax Amnesty Bill

The amnesty only applies to covered taxes and fees and does not apply to local taxes.  Covered taxes include:

• Ohio income tax
• Commercial activity tax
• State sales and use taxes
• Financial institutions tax
• Public utility excise taxes
• Kilowatt hour tax
• MCF (natural gas) excise tax
• Insurance premium taxes
• Cigarette/tobacco/vaping excise taxes
• Alcoholic beverage taxes
• Motor fuel excise tax
• Fuel use tax
• Petroleum activity tax
• Casino wagering tax
• Severance taxes
• Wireless 9-1-1 charges
• Tire fees
• Horse racing taxes

The amnesty does not apply to school district income taxes or county and transit authority sales and use taxes. Further, the amnesty only applies to unreported or underreported taxes that were due and payable as of the bill’s effective date. It does not apply to any taxes if the Ohio Department of Taxation has issued a notice of assessment or audit, issued a bill, or if an audit has been conducted or is pending.

Past Tax Amnesty Programs

Ohio has conducted several general tax amnesty programs in the past. Ohio’s most recent tax amnesty program, conducted from January 1, 2018, through February 15, 2018, raised $14.3 million for Ohio’s coffers while it decreased the cost of compliance for taxpayers with delinquent or unreported taxes. Ohio also conducted tax amnesties in 2002, 2006, and 2012.

Utilizing tax amnesty and voluntary disclosure programs is one of several strategies to minimize the impact of falling behind on tax obligations, and Walter | Haverfield’s attorneys are monitoring all such opportunities. Let our attorneys apply their experience, passion, and attention to detail to help develop the best strategies to minimize the impact of tax liabilities.

To read more about this topic, click here for a Law 360 article titled “Ohio Oks Tax Amnesty To Boost Pandemic Recovery”

Vince Nardone is Partner-in-Charge of Walter | Haverfield’s Columbus office. He serves as a business advisor to owners and executives of closely-held businesses, counseling them on business planning, tax planning and controversy, cash-flow analysis, succession planning, and legal issues that may arise in business operations.

Mike Sorice is a law clerk in the Columbus, Ohio office of Walter | Haverfield. He recently graduated from the Ohio State University Moritz College of Law.