Tax Law Insights

The South Carolina General Assembly approved a law on June 4, 2015 allowing the South Carolina Department of Revenue to offer an amnesty program to taxpayers in the state who have not filed tax returns and/or owe state taxes. The law becomes effective on the Governor's signature. Adoption of the law was advocated by the Department of Revenue.

The new law, South Carolina Code Section 12-47-397, is designed to encourage voluntary compliance and payment of taxes owed to the State. The law authorizes the South Carolina Department of Revenue to establish an amnesty program and to designate the period of time for the program, provided it gives the General Assembly at least 60 days prior notice of the commencement of the program. Under the proposed amnesty program:

• The Department of Revenue at its discretion shall waive penalties and interest owed by a taxpayer, or a portion of them, where the taxpayer voluntarily files delinquent tax returns and pays all taxes owed.
• Amnesty may also be granted to a taxpayer who files an amended return to correct an incorrect or insufficient original return and pays all taxes owed.
• The Department of Revenue may grant amnesty to a taxpayer that has filed his or her returns with the state, but has not paid the required taxes dues, and is able to fully pay the taxes owed now, and during an "extended amnesty period", beginning on the date of the close of the amnesty program/period and running for a period of time as determined in the discretion of the Department of Revenue. The Department of Revenue and the taxpayer may also enter into an installment agreement to fully pay the taxes owed, provided the agreement is established during the time in which the amnesty program is open.
• If a taxpayer is granted amnesty, the Department of Revenue shall not initiate a criminal investigation or refer the taxpayer to the Office of the Attorney General for criminal prosecution for the tax or tax periods covered by the granting of the amnesty.
• However, if a state criminal investigation or prosecution of a taxpayer is pending, amnesty is not available under the program.
• The Department of Revenue shall not waive penalties and interest for one filing period if the taxpayer has taxes due for any other tax period.
• A taxpayer who has an appeal pending with the Department of Revenue and is contesting taxes, penalties and interest owed may still participate in the amnesty program, but the taxes must be paid, with penalties and interest presumably being subject to waiver in whole or in part. Payment of taxes by a taxpayer with an appeal pending will not constitute "a forfeiture of appeal or an admission of liability for the disputed assessment."
• Finally, if amnesty is granted by the Department of Revenue under the program, the Department of Revenue is still given the right to review and rescind any amnesty granted, on the basis of mutual mistake, fraud or a misrepresentation by the taxpayer, and can prosecute a taxpayer criminally for filing false or fraudulent returns under the program.

McNair Tax Insight:

SCDOR is now given the statutory authority to propose an amnesty program for those who have not filed tax returns or paid their taxes to the state. South Carolina has not had a tax amnesty program for well over a decade. The new law gives the Department of Revenue discretion concerning the tax periods subject to amnesty and the amounts of penalties and interest that may be waived. Many other states have successfully adopted amnesty programs recently, including Massachusetts, Louisiana, and Washington. It is hoped that the South Carolina Department of Revenue will announce the terms and conditions of the amnesty program soon.