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PA Bulletin, Doc. No. 09-2246



Amnesty Revenue Estimate

[39 Pa.B. 6913]
[Saturday, December 5, 2009]

 Act 48 of 2009, signed into law on October 9, 2009, established the Tax Amnesty Program for Fiscal Year (FY) 2009-2010. Per section 2912-F (b) of Act 48, the Department of Revenue (Department) was responsible to submit for publication, a separate amnesty revenue estimate for revenue generated by this program from the following sources:

 (i) The General Fund;

 (ii) The Motor License Fund;

 (iii) The Liquid Fuels Tax Fund; and

 (iv) The methodology used to develop the estimate.

 The revenue estimates and methodology for those estimates are as follows:

Fiscal Impact of Tax Amnesty Program
Act 48 of 2009
$ Millions $
Average Collections/Overall Tax Collections Ratio 1.10%
Current PA Collections—FY 2009-2010 Governor's Budget $27,668
Base Amnesty Revenue Estimate $304.6
Adjustment For Accounts Receivable Prior to 6/2009 $291.1
Adjustment For Limited Lookback Period 17%
Gross Amnesty Revenue Estimate $341.1
FISCAL YEAR 2009-10 2010-11
Total Potential Amnesty Revenue Estimate $341.1
Potential Decrease in Delinquent Collections1/ ($132.9) ($57.1)
Administrative Costs2/ ($16.8)
Net Amnesty Revenue Estimate $191.4 ($57.1)
General Fund Amnesty Revenue Estimate $190.0 ($57.1)
Motor License Fund Amnesty Revenue Estimate $1.4
Liquid Fuels Tax Fund Amnesty Revenue Estimate3/ $0.04
Budget Stabilization Reserve Fund Threshold
Gross Amnesty Revenue Estimate $341.1
Motor License Fund and Liquid Fuel Tax Amnesty Revenue Estimate ($1.4)
Amnesty Revenue Estimate $339.7
Less Administrative Costs
Budget Stabilization Reserve Fund Threshold $403.6

1There was a decrease in collections during the FY of the 1995-1996 amnesty program and the subsequent year. This estimate represents the ratio of the decrease to the total amnesty collections during the FY and the following year.

2The cost of the program include additional equipment and staffing, reimbursements of collection agency and lien fees, advertising, and contracted system development.

3Liquid Fuels Tax Fund—One-half cent per gallon of the 12¢ excise tax collected for liquid fuels and fuels shall be paid into the Liquid Fuels Tax Fund. The money paid into that fund is allocated to the counties. Estimate is ratio of Liquid Fuels Tax Fund collections to unrestricted Liquid Fuels Tax collections for FY 2008-2009.

 The Department estimated that a total of $341.1 million will be collected through the proposed tax amnesty period with net collections of $191.4 million for FY 2009-2010. This estimate was based on the following assumptions:

 1. Abatement for all periods delinquent as of June 2009.

 2. A 5-year ''limited lookback'' period for unknown liabilities.

 The estimate was calculated by applying the average percentage of collections from other amnesty programs to the estimate of General Fund revenues plus Liquid Fuels tax revenue for 2009-2010. The ratio of tax amnesty collections to overall tax collections was calculated from other programs that provided 50% interest abatement in MidAtlantic States in the past 10 years. Amnesty programs in New Jersey, New York, Ohio, West Virginia, Maine and Virginia collected an average of 1.1% of their overall tax collections at the time of their programs. Applying that percentage to the estimated General Fund and Liquid Fuels revenue yields a figure of $304.6 million as potential amnesty collections.

 The states used to produce the ratio of tax collections from amnesty provided for amnesty abatement on periods that were delinquent immediately before the start of the amnesty period. In this program, as in this Commonwealth's previous program, there is a period prior to the start of the program that is not eligible for amnesty abatement. In this case, only taxes that are delinquent as of June 30, 2009, are eligible. Therefore, the percentage of the Department's accounts receivable taxes that were estimated to be eligible at the start of the amnesty period, approximately 96%, were then applied to the $304.6 million, yielding a figure of $291.1 million.

 Those who report and pay taxes that are unknown to the Department during the amnesty period may qualify for a limited filing period of 5 years. This is known as the ''limited lookback'' provision. Additional collections are anticipated due to the limited lookback period for unknown liabilities in Act 48. Under the 1995 Pennsylvania amnesty program, if taxpayers disclosed tax subjectivity or liabilities previously unknown to the Department, the taxpayer was required to file all taxes periods due regardless of the age of the liability.

 To estimate the impact of the limited lookback provision, the collections by the Pennsylvania Voluntary Disclosure Program were analyzed. Voluntary Disclosure is an ongoing program that was created for individuals and businesses that have not met their tax obligations because they were not aware of them. In return for coming forward voluntarily, filing their tax returns, and clearing their tax debts, taxpayers are only responsible for the payment of tax and interest. Prior to 2000, Voluntary Disclosure required filing of all corporate returns with no limited lookback. In the 3 years subsequent to the implementation of a limited lookback, corporate tax collections increased by 44.5%. In the previous tax amnesty program in FY 1995-1996, corporation tax collections represented 37% of the overall revenue. It is assumed that corporate tax collections will be increased by approximately 17% (44% increase in revenue times 37% share of corporate taxes) for this program as a result of the limited lookback provision.

 In the previous tax amnesty program in FY 1995-1996, there was a decrease in regular delinquent collections in the current FY and following year. It was assumed that there will also be a proportionate drop in delinquent collections for this program. The estimated drop in delinquent collections was calculated by measuring the delinquent taxes collected in the FY 1994-1995 against delinquent collections made outside the program in the FY 1995-1996 and 1996-1997.

 This estimate also acknowledges that there will be administrative costs, approximately $16.8 million, associated with the program.

 Act 48 provides that ''revenue generated by this article in excess of 125% of the amnesty revenue estimates under subsection (b)(1)(i) and the cost of administration of this article shall be deposited into the budget stabilization reserve fund.'' Under this language, the threshold for a transfer to the Budget Stabilization Reserve Fund is calculated on gross General Fund amnesty revenue, less administrative costs. This figure is estimated to be $403.6 million.


 (Editor's Note: For a Statement of Policy relating to this document, see 39 Pa.B. 6872 (December 5, 2009).)

[Pa.B. Doc. No. 09-2246. Filed for public inspection December 4, 2009, 9:00 a.m.]

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