(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.
