State and Local Tax Alert - June 2017

June 2017

Oklahoma Establishes Voluntary Disclosure Initiative, Modifies VDA Program, and Establishes New Enforcement Division


Summary

During the month of May, Oklahoma enacted several bills related to amnesty programs and voluntary disclosure agreements.  H.B. 2380 establishes a “Voluntary Disclosure Initiative” for all Oklahoma tax types, with a waiver of penalties and interest, between September 1, 2017 and November 30, 2017.  H.B. 2252 amends Oklahoma’s voluntary disclosure agreement program.  H.B. 1427 creates an “Out-of-State Tax Collections Enforcement Division.”
 

Details

Voluntary Disclosure Initiative
 
On May 24, 2017, H.B. 2380 was signed into law by the Oklahoma Governor.  The enacted legislation authorizes the Oklahoma Tax Commission to establish a “Voluntary Disclosure Initiative,” i.e., an amnesty program, for the following eligible taxes: mixed beverage tax, gasoline and diesel tax, gross production and petroleum excise tax, sales and use taxes, corporate and personal income taxes, and personal withholding tax.
 
Eligible taxpayers are entitled to a waiver of penalties, interest, and other collection fees due on eligible taxes if the taxpayer voluntarily files delinquent tax returns and pays the taxes due during the disclosure initiative.  The time period to participate in the Voluntary Disclosure Initiative is limited to the period beginning September 1, 2017, and ending November 30, 2017.
 
To be eligible to participate in the Voluntary Disclosure Initiative, taxpayers must meet all the following requirements:
 
  1. The taxpayer must not have outstanding tax liabilities, other than those reported pursuant to this initiative;
  2. The taxpayer must not have been contacted by the Oklahoma Tax Commission, or a third party acting on behalf of the Commission, with respect to the taxpayer’s potential or actual obligation to file a return or make a payment to the state;
  3. The taxpayer must not have collected taxes from others, such as sales and use taxes or payroll taxes, and not reported those taxes; and
  4. The taxpayer must not have, within the previous three years, entered into a voluntary disclosure agreement for the tax type owed.
 
If the taxpayer meets the eligibility requirements listed above, then the look-back period will be limited to three years for annually filed returns and 36 months for taxes that do not have an annual filing frequency.
 
If the taxpayer does not meet the third requirement (e.g., taxpayer has collected sales taxes, however did not remit them to the state), but meets the other eligibility requirements, then it may enter into a “modified voluntary disclosure agreement.”  Under the terms of the modified VDA, the taxpayer will receive the same benefits as listed above, except for the waiver of interest, unless optionally granted at the discretion of the Tax Commission.  Additionally, the period for which taxes must be reported and remitted will be extended to include all periods in which tax has been collected but not remitted.
 
Amendments for Voluntary Disclosure Agreements
 
On May 19, 2017, H.B. 2252 was signed into law by the Oklahoma Governor, and it becomes effective November 1, 2017.  This legislation amends Oklahoma’s voluntary disclosure agreement provisions, under 68 O.S. § 220.  To be eligible to enter into a voluntary disclosure agreement, the taxpayer must meet the same four requirements (above) for eligibility to participate in the “Voluntary Disclosure Initiative.”
 
If the Tax Commission agrees with the proposed terms of the VDA, then penalties will be waived and 50 percent of interest will be waived.  The look-back period will be limited to three years for annually filed returns and 36 months for taxes that do not have an annual filing frequency.
 
As with the Voluntary Disclosure Initiative, if the taxpayer does not meet the third requirement, but meets the other eligibility requirements, then the taxpayer may enter into a “modified” VDA.  Under the modified VDA, interest will not be waived and the look-back period will be extended to tax periods where tax was collected, but not remitted.
 
Out-of-State Collections Enforcement Division
 
On May 10, 2017, H.B. 1427, “Out-of-State Tax Collections Enforcement Act of 2017,” was signed into law by the Oklahoma Governor, and it becomes effective November 1, 2017.  The legislation authorizes the Oklahoma Tax Commission to establish an “Out-of-State Tax Collections Enforcement Division.”  The purpose is to enhance (1) sales and use tax collections related to sales involving residents of Oklahoma and out-of-state vendors with nexus in Oklahoma, and (2) collections of any other unpaid taxes by out-of-state individuals, firms, or corporations.  It also allows the Tax Commission to contract with out-of-state private auditors or audit firms.
 

BDO Insights

  • Oklahoma’s voluntary disclosure initiative presents a great opportunity for a taxpayer to come into compliance with their Oklahoma taxes, and reduce related accounting reserves, if any, without having to pay penalties or interest.
  • The Tax Commission publishes a list on its website of its top 100 delinquent taxpayers, including the name, address, tax type, and delinquency amount of each such taxpayer.  Thus, this tax amnesty may also present a taxpayer having a large tax delinquency with the opportunity to come into compliance with their Oklahoma taxes at a much lower cost and avoid tarnishing their reputation by appearing on this list or even remove their name from the list.
  • The amnesty program is expected to increase revenue by $14.6 million in 2018, comprised of $10.2 million related to sales taxes and $4.4 million related to withholding taxes.
 

For more information, please contact one of the following regional practice leaders:
 
West:   Atlantic:
Rocky Cummings
Tax Partner

 
  Jeremy Migliara
Tax Managing Director

 
Paul McGovern
Tax Managing Director
  Jonathan Liss
Tax Managing Director

 
Northeast:   Central:
Janet Bernier 
Tax Partner

 
  Angela Acosta
Tax Managing Director

 
Matthew Dyment
Tax Principal

 
  Nick Boegel
Tax Managing Director

 


Southeast:
  Joe Carr
Tax Partner

 
Scott Smith
Tax Managing Director
 
  Mariano Sori
Tax Partner

 
Tony Manners
Tax Managing Director
 
  Richard Spengler
Tax Managing Director

 







 
 

Southwest:
Gene Heatly
Tax Managing Director

Tom Smith
Tax Partner