New Jersey Division of Taxation Offers New Amnesty Initiative

New Jersey is currently offering taxpayers the opportunity to resolve outstanding tax liabilities for the tax periods 2005 - 2013. The opportunity is limited and all payments must be made no later than November 17, 2014.  In exchange for resolving their outstanding liabilities, New Jersey will waive most penalties and all collection costs and recovery fees for participating taxpayers.

This initiative is a result of the State’s more than $1.5 billion budget shortfall for the prior fiscal year that ended June 30, 2014.  Also, recent downgrades by the bond rating agencies and the casino closures have created additional pressure to the State’s cash flow and tax revenue for the current fiscal year.  The combination of these issues plus more than $90 billion of unfunded pension obligations has pushed New Jersey to find ways to generate cash. 

Most taxpayers with outstanding liabilities have received or will shortly receive notices in the mail that outline their reduced schedule of liabilities including the abated penalties, collection costs and recovery fees. Taxpayers who respond to these notices and pay the full amount due by November 17, 2014 will execute a closing agreement that resolves the outstanding liabilities and prohibits New Jersey from taking further civil, criminal and/or audit action. The closing agreement will also likely close the taxpayer’s ability to seek any refunds for the applicable taxes and tax years.  Failure to respond to the notice and participate in the Initiative will result in the Division of Taxation assessing all penalties, collection costs and recovery fees, and pursuing additional collection activity. 

Although there is no indication the Division of Taxation will be more receptive to settling open controversies other taxpayers may have, it appears the opportunity may exist to approach the Division of Taxation to negotiate a taxpayer friendly resolution to ASC 740 and/or FAS 5 reserves.

Additional details regarding the amnesty program:

1. Only “assessed” liabilities for the tax periods 2005-2013 are eligible for the program. 
   a. While delinquent/unfiled tax returns and related liabilities may be eligible under this program, these un-assessed liabilities must first be converted into assessed liabilities by filing the applicable returns.  Further, such returns must be filed in time to be processed by the Division in order for them to assess the amounts due.  Any such amounts due must also still be paid by November 17, 2014.  Accordingly, in order to take advantage of this program, it is advised to file any such outstanding returns as soon as possible.  
2. While any outstanding amounts must be paid by November 17, 2014, and this is a hard deadline for payment, it is still unclear whether all closing agreements need to be executed by this date.  It appears that payment by this date is a pre-requisite to the closing agreement.  

Please contact your tax professional if you have any questions.