Brief(1)
S.B. 47 would increase the Department of Revenue's flexibility in taxpayer account administration. Specifically, the bill would expand the Secretary's authority to abate final income tax liability, increase the limit for charge-off of individual income tax accounts receivable, provide a hearing where corporate officers are held liable for the corporation's sales and excise tax liability, and eliminate the Division of Collections within the Department.
While current law permits the Secretary to abate a final income tax liability only when the taxpayer is insolvent, this bill would expand that authority to cases where the Secretary finds "serious doubt as to either the collectability of the tax due or the taxpayer's liability." The bill also requires the Secretary to maintain records of all abatements of $5,000 or more, including the name of the taxpayer and the reason for abatement. An annual report with this information is then required to be submitted to the Secretary of State, the Legislative Division of Post Audit, and the Attorney General and also be made available for public inspection upon written request.
S.B. 47 would allow accounts receivable for less than $100 which have been delinquent for more than five years to be abated if the director finds them to be uncollectible after all reasonable efforts have been made. The current law regarding charge-off of individual income tax accounts receivable places a limit of $25 and a waiting period of seven years on charge-off and has been in effect since 1969.
The bill would also modify the current law providing certain circumstances where corporate officers, in addition to the corporation itself, are responsible for the corporation's sales and excise tax liability. Specifically, the bill would allow the Department to provide a direct review of a determination that the required circumstances were met to hold the officer liable without requiring the officer to first pay the tax and seek a refund. The Department's current practice is to require that the corporate officer pay the debt, seek a refund, and if denied, appeal that denial.
A House Committee amendment would clarify that individuals responsible for the collection or payment of certain sales or other excise taxes could only be held personally liable for willful failure to collect such taxes.
Finally, the bill would eliminate the Division of Collections from the internal structure of the Department of Revenue. The functions of the Division of Collections have been carried out by the Division of Taxation for six years and this would continue under S.B. 47.
Background
This legislation was requested by the Department of Revenue, who was the only conferee at the Senate Committee hearing on this bill. A technical adjustment was made to the bill by the Senate Committee.
The Department reports that passage of S.B. 47 would have no measurable fiscal effect.
The House Committee amendment was prepared by the Department of Revenue after discussion of personal liability issues.
1. *Supplemental notes are prepared by the Legislative Research Department and do not express legislative intent. The supplemental note and fiscal note for this bill may be accessed on the Internet at http://www.ink.org/public/legislative/bill_search.html.