The state is planning a "tax amnesty" this fall to allow delinquent taxpayers to pay back what they owe with only half the usual interest — and to help the government recover some much-needed revenue.
Those who are behind on their taxes will have a relatively short window — Sept. 1 to Oct. 30 — to apply and be enrolled in the program. It applies to a variety of overdue taxes, including personal and fiduciary income tax, corporate income tax, sales and use tax, employer withholding tax, and admissions and amusement tax.
"It gives an opportunity for people to catch up who weren't aware that they were delinquent until recently," said Dan Thrailkill, manager of the tax department at Baltimore-based accounting firm Ellin and Tucker. "I think you're going to find it in all walks of life. It's going to be business owners, individuals. I think it's going to be people who were unaware they had sales-and-use tax issues."
Comptroller Peter Franchot, who runs the amnesty program, did not support having one this year. He said tax amnesties should be held once every 10 to 12 years; the last one was in 2009.
"The problem from the comptroller perspective is that we're rewarding behavior that's not what everybody else does, which is pay their taxes on time," Franchot said. "In an odd way, it's rewarding bad behavior."
Franchot said he was "sympathetic" to the General Assembly, which approved the amnesty unanimously while trying to close a $400 million budget shortfall.
"Everything gets stretched pretty thin, but hopefully they'll find other sources of tax revenue," Franchot said. "Once you open up the cookie jar and put your hand in, it gets a lot easier."
Under the program, taxpayers would be charged 6.5 percent in annual interest, half the usual penalty. The state will waive other civil penalties, except those for fraud.
Delinquent taxpayers cannot be charged criminally unless they were already under investigation or had charges pending.
Those who took advantage of amnesty programs in 2001 and 2009 are not eligible.
The program is expected to boost the state's general fund revenues by at least $18 million in the 2016 fiscal year, and local revenues by at least $4.5 million. The state has budgeted $11.4 million in expected revenue in this fiscal year and another $2.6 million in revenue in the next fiscal year, according to aides to Gov. Larry Hogan.
Delinquent taxpayers owe the state about $800 million, according to Franchot's office. The comptroller has recovered about $4 billion in back taxes over the last eight years through enforcement actions like barring delinquent taxpayers from obtaining vehicle registrations and driver license renewals.
Franchot said the $18 million anticipated to be collected by the state was a low estimate. Each of the last three amnesties — in 1987, 2001 and 2009 — drew at least $33.5 million.
About 18,000 taxpayers participated in the 2001 amnesty, which netted $39.5 million. Some 7,100 participated in 2009, which netted $38.9 million.
David S. Rosen, the director of tax services at Owings Mills-based accounting firm Rosen Sapperstein and Friedlander, said it might make sense for some delinquent taxpayers to wait until the amnesty period to pay.
"I was talking to a client earlier today who was sitting on a $50,000 sales-and-use tax [liability]," Rosen said. "In that particular case, it could be a savings of many thousands of dollars."
Rosen said it isn't uncommon for some taxpayers — including those dealing with errors made by the state — to run up unpaid taxes at some point.
"The ones who would benefit the most are those who have serious tax liabilities for prior years that have been accruing at a 13 percent compounded rate for however long they've been accruing," he said. "Those taxpayers would benefit dramatically."
Officials plan to make the tax amnesty application form available online at www.marylandtaxes.com by Aug. 28. Taxpayers can request a paper form by calling 1-800-MDTAXES. A participant may pay the outstanding debt in full or pay 10 percent and set up a payment plan.