Connecticut's Tax Amnesty Program in Late Spring

Connecticut’s lawmakers recently passed a state tax amnesty program that will run from May 1 to June 25, 2009. On November 25, 2008, Gov. M. Jodi Rell signed the law into effect after state lawmakers passed the bill during a one-day special session on November 24, 2008.

Section 8 of Public Act No. 08-1 contains the amnesty provisions that allow taxpayers to apply for amnesty from civil and criminal penalties for taxable periods ending on or before November 30, 2008 if either (i) the taxpayer did not file a required tax return and the State of Connecticut Department of Revenue Services (“DRS”) has not filed one on behalf of the taxpayer, or (ii) the taxpayer filed a return that did not report his or her full tax and the DRS has not examined the return.

As of early 2009, the DRS has not yet published the amnesty application. Amnesty applicants will need to list the outstanding taxes and tax periods on the application, and as long as the application is filed during the amnesty period and the taxpayer pays all taxes owed for those periods and pays interest at a discounted rate of 75% of the normal 1% per month rate, the DRS must waive otherwise applicable civil penalties and refrain from seeking criminal prosecution for those periods.

If an applicant files an amnesty application during the tax amnesty period but fails to pay all amounts due for the affected taxable periods, any amnesty granted shall be invalid. Amnesty shall not be granted to any taxpayer who (i) has received notice from the DRS that an audit examination is being conducted in relation to the affected taxable period, or (ii) is a party to a criminal investigation or to any civil or criminal litigation that is pending on the effective date of the provision (presumably November 25, 2008), in any court of the United States or the State of Connecticut for failure to file or failure to pay, or for fraud in relation to any tax imposed by any Connecticut law and payable to the DRS.

Even more interestingly, a separate law was passed (Spec. Session 08-2) that allows Connecticut cities and towns to establish one-time amnesty programs for persons owing taxes, assessments, fees, fines (including those for alleged violations of municipal ordinances), or other payments to the municipality. Towns will need to run their programs by December 31, 2009, and the individual programs can not exceed 90 days in length. The legislation allows for full or partial forgiveness of interest, penalties, fines, costs, or other fees. Municipalities may exclude people who do not meet eligibility criteria that the municipality sets and may set other terms that are considered necessary to conduct the program effectively and efficiently.