California’s Amnesty Program a Win-Win

As a firm that is often contacted when companies are faced with costly state tax, penalty, and interest assessments, MAXIMUS strongly advocates the use of state amnesty programs or Voluntary Disclosure Agreements (VDAs) when they are available and when it makes sense. Taking part in programs of this type represents a positive, pro-active step that companies can take if they find they have failed to properly collect state taxes. In many cases, states offering these programs will reduce or waive penalties and/or interest on delinquent taxes and may also reduce the length of the look-back period for the company in question. In return, states are able to collect delinquent taxes and bring companies into compliance, insuring future revenue.

According to Forbes’ Robert W. Wood, California’s VCI2 program has enjoyed exactly this type of success. The program allowed companies that had underreported income tax liabilities to amend their returns for 2010 and previous years in order to receive a penalty waiver. The program has raised a total of $350 million for the state of California and we assume that several companies in danger of receiving large penalty assessments are now in the clear and in compliance with their California state tax reporting.

Many states offer similar programs, for lots of different tax types. If you believe you may have unreported or underreported state tax liabilities, it may be time for you to look into such programs. MAXIMUS has assisted many clients with this process, in several different states. Please contact us if you’d like more information.

Texas Supreme Court Upholds Franchise Tax

An update for those following the various cases challenging the Texas franchise tax which are now making their way through the Texas court system:

According to the Austin American-Statesman, the Texas Supreme Court ruled on Monday in the case brought by Boerne-based Allcat Claims Service LP. The court’s decision was that the state’s franchise tax does not violate the Texas constitution, which maintains that the state may not institute a personal income tax without voter approval. (Allcat had claimed that the franchise tax levied on the business reduced the income of the business’s individual partners and thus constituted an income tax).

Another challenge to the franchise tax was filed by Nestle USA Inc. and will not be affected by the court’s Monday decision. We will continue to follow these developments with interest.