Tax amnesty program changes in the mix

The first round of the state’s latest tax amnesty program produced $366 million after legislators dangled huge incentives in front of taxpayers with disputed or delinquent taxes. Now the game is on to turn the next two phases into moneymakers.

Legislators are likely to make tweaks in the upcoming legislative session in order to squeeze out as much money as possible for the state budget. Ideas on the table are designed to appeal to individuals as well as corporations.

“The second year of amnesty is not much of an incentive to anyone. We’re looking at ‘Do we need to do something?’” House Ways and Means Chairman Joel Robideaux said.

Gov. Bobby Jindal said in a prepared statement that he is open to discussing ideas with Robideaux. “We’re happy to look into these issues,” the governor said.

Desperate for cash to pay health care bills in the current budget year, legislators made the first year of the program very attractive. Over the span of two months last year, taxpayers settled outstanding tax bills at half the interest and zero penalties. Most of the payments came from corporations eager to resolve disputed audits or litigation with the state.

The program continues to run another two years, but the incentives get decreasingly attractive.

As it stands now, taxpayers would get a 15 percent break on penalties if they settled their tax disputes with the state in 2014. In 2015 — the final year of the amnesty program — the incentive shrinks to a 10 percent penalty waiver. All interest would need to be paid this year and in 2015.

Tweaks up for consideration include a short-term installment plan and modest incentive increase. Taxpayers might get six months to submit payment. The penalty waiver might grow a little. The changes would be made in the legislative session that starts next month.

“We still have some conversations to have with the legislative leadership,” state Department of Revenue Secretary Tim Barfield said Friday.

Another problem legislators may want to address: Some corporations submitted unused tax credits instead of cash to settle their tax liabilities. The loophole produced $67 million in returned tax credits.

Barfield said the Jindal administration is open to any reasonable changes to the amnesty program.

Legislators hit upon the amnesty program last year as a way to generate $200 million for the state’s health care budget. Before the program started, delinquent tax billings totaled $1.4 billion, and $1.1 billion was tied up in litigation or disputed audits.

The program produced nearly $450 million, but not all of that was cash. Nearly $70 million materialized through returned tax credits. The state’s health care bills were paid, and a little cash was left over.

Next year’s $25 billion state operating budget relies on $295 million in amnesty dollars, including $173 million in unspent money generated by last year’s amnesty round. Another $100 million needs to be generated the second year of the amnesty program.

More than $20 million stems from returned tax credits.

The upcoming second phase of the amnesty program needs to be a success for next year’s Medicaid budget. The Jindal administration is counting on $262 million to pay doctors, hospitals and others who provide health care for the poor.

Robideaux, R-Lafayette, said one idea for changing the amnesty program is to allow people to pay their tax bills in three installments. He said they might get three to six months instead of having to pay the full amount in one fell swoop.

The idea is based on anecdotal feedback that taxpayers delinquent with tax bills would be more prone to take part if they had added time to clear their debts. “We would probably get more participation,” Barfield said.

To appeal to corporations, the amount of penalties forgiven could be increased. “I’m against giving folks the same level (offered last year), but we might make it a little more enticing,” Robideaux said.