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Maryland Tax Amnesty Proposal

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On May 7, 2009, Governor Martin O’Malley signed into law a bill declaring a tax amnesty period from September 1, 2009 to October 30, 2009. During this period all civil penalties (except previously assessed fraud penalties) and one-half of accrued interest will be waived for taxpayers who have failed to report or pay a tax liability. Additionally, subject to exceptions, taxpayers are not exposed to criminal tax charges arising out of any returns filed or taxes paid during the period. The amnesty applies to income, withholding, sales and use, and admissions and amusement taxes.

To be eligible, a taxpayer must have failed to file a required return and/or pay an imposed tax on or before December 31, 2008. Additionally, during the designated amnesty period, the taxpayer must file any outstanding returns and pay the tax liability plus one-half of any interest or enter into an installment payment agreement. With respect to taxes due on previously filed returns, the taxpayer need only pay the tax liability plus one-half of any interest or enter into an installment payment agreement.

During the amnesty period, the Comptroller may enter into an installment agreement that provides for incremental payments that satisfy the amnesty balance in full by December 31, 2010. Over the duration of the payment agreement, interest will accrue at a regular rate’ commencing October 30, 2009. If a taxpayer fails to abide by the agreement, the waiver of criminal liability, civil penalties and one-half of any interest will be void.

In general, the amnesty program does not apply to any taxpayer with more than 500 employees in the United States or any taxpayer granted amnesty under the 2001 Maryland Tax Amnesty Program with respect to taxes subject to that amnesty program.

1 Per Administrative Release 14 the annual interest rate for unpaid taxes is 13%.

The Comptroller has yet to announce any specific plans on how and when the application process for the amnesty program will be implemented. Nonetheless, the requisite
application/instructions for partaking in the program are expected to be posted on in mid August.