On July 29, 2024, Massachusetts Gov. Healey signed into effect the Fiscal Year 2025 Budget Bill (Bill) passed by the 193rd General Court of the Commonwealth of Massachusetts. The Bill makes appropriations for the fiscal year July 1, 2024 – June 30, 2025, and specifically authorizes the Massachusetts Commisioner of Revenue (Commissioner) to establish a tax amnesty program (Amnesty).

In September, the Massachusetts Department of Revenue (DOR) announced the dates of the amnesty program: Nov. 1, 2024 – Dec. 30, 2024. Participating taxpayers must file/pay all returns, tax, and interest due under the program no later than Dec. 30, 2024. Taxpayers should note the last day of the program is not the last day of the calendar year.

Tax amnesties in general

Amnesties are delinquent tax disclosure programs offered by federal and state governments to increase revenue collections. They are temporary in nature, and often offer reduced/abated penalties to taxpayers who elect to participate. In contrast to voluntary disclosure agreements, taxpayers already known to the tax authority often may participate in an amnesty program.

To encourage taxpayer participation, tax authorities may levy additional penalties on taxpayers with tax deficiencies discovered after the expiration of the amnesty program. Additionally, taxpayers who elect to participate may also be barred from participating in another amnesty program for a specified period.

Massachusetts’ 2025 Amnesty

As authorized by Section 225 of the Bill and administered by the DOR, Amnesty will:

1. Apply to “eligible” taxpayers, i.e., individuals and businesses who:

• Have unfiled returns, underreported obligations, or existing tax obligators; or
• Are currently under audit for periods with returns due by Dec. 31, 2024; or
• Have pending Resolution Cases; or
• Have pending Appellate Tax Board Cases; or
• Have open Collection Cases.

2. Not apply to ineligible taxpayers, i.e., taxpayers who:

• Received amnesty relief in 2015 or 2016 for the same tax type and period;
• Are requesting a waiver of penalties related to a tax that was already paid;
• Are requesting a refund of tax or a credit for an overpayment;
• Are now or have been under tax-related criminal investigation or prosecution or filed a false or fraudulent return, statement, or fraudulent amnesty return;
  Are in active bankruptcy.

3. Apply to “eligible” taxes reportable on returns originally due on/before Dec. 31, 2024.

• The full list of tax types eligible for penalty waiver can be found on Massachusetts’ website. It includes significant income and non-income tax types such as:

• Personal income tax;
• Corporate excise tax;
• Pass-through entity composite, withholding and entity taxes;
• Sales/use tax.

4. Allow eligible taxpayers to request a waiver of Commissioner-assessed penalties owed on eligible tax outstanding without demonstrating reasonable cause, or absence of willful neglect. 

• Waiver applies to penalties assessed due to the taxpayer’s failure to:

• Timely file a return; or
• Timely pay a tax liability; or
• Pay the proper estimated payment.

• Note: the penalty waiver does not apply to all penalties. Non-eligible penalties include:

• Inconsistent positions taken on a return without proper disclosure; 
• Sale, or offers for sale, of an automated sales supression device; 
• Taxpayers who are, or have been, the subject of a tax-related criminal investigation or prosecution, or those that have filed false or fraudulent documents; 
• Penalties that the Commissioner would not have the sole authority to waive (e.g., fuel taxes under the International Fuel Tax Agreement).

5. Limit the the look-back period to three years, i.e., returns originally due from Jan. 1, 2022 – Dec. 31, 2024, for “eligible non-filers.”

• An “eligible non-filer” is an eligible taxpayer reporting an eligible tax type under Amnesty who has not previously filed a return or otherwise reported the tax being disclosed under Amnesty, nor have they been contacted by the DOR about such. 

6. Be effective for a 60-day period, within which taxpayers must file outstanding returns and pay delinquent tax and interest. This period is Nov. 1, 2024 – Dec. 30, 2024.

7. Prevent participating taxpayers from participating in future tax amnesty programs for 10 consecutive years, starting in calendar year 2024.

The DOR also provided a FAQ on its website with additional filing information.

What does CohnReznick think?

Taxpayers with material tax exposure in Massachusetts should consider participating in Amnesty and plan cash and filing requirements well in advance of the due date. In particular, taxpayers ineligible to participate in a Massachusetts voluntary disclosure program would benefit from Amnesty. While such taxpayers may be ineligible for a limited lookback period, they may still benefit from the penalty waiver. Such taxpayers should weigh the cost of coming forward against potential financial statement benefits and future risk.