AUGUSTA, Maine — In an effort to collect some of the hundreds of millions of dollars owed the state in back taxes, a tax amnesty program will begin Tuesday in which Mainers who owe back taxes to the state can get a break.
The program runs from Sept. 1 through the end of November as part of the current state budget.
“This is aimed at currently identified tax debts,” Jerome Gerard, acting executive director of Maine Revenue Services, said. “We think it will help reduce the tax receivables we have, and it is a good deal for the taxpayers.”
The program was conceived as part of the budget to collect some of the more than $250 million in overdue taxes, penalties and interest owed the state by more than 70,000 taxpayers, according to Maine Revenue Services. That number includes both individuals and businesses that have some tax liability.
The program waives 90 percent of the penalties owed, while requiring all of the tax and interest that is owed to be paid within the 90-day window. The plan is aimed at amounts that are growing during a recession that is making it difficult for businesses and individuals to pay what they owe on time. The program is projected to bring in $9 million to help balance the $5.8 billion, two-year state budget.
Not all legislators are happy with the plan, however.
“I am not sure it’s going to work,” said Sen. Joe Perry, D-Bangor, co-chairman of the Legislature’s Taxation Committee. “People are hurting out there and this is not as good a deal as the amnesty program we had in 2003.”
He said the amnesty program was a creation of Maine Revenue Services and the Appropriations Committee as a way to help find additional resources to fund the state budget. He said the 2003 program waived all penalties and half the interest owed and brought in $37 million.
“Potentially this will get a lot of old debt off the books, primarily penalty money, maybe people that have already settled their tax debt,” he said. “I don’t think it will bring in a lot of money.”
Perry said that when members of the Taxation Committee brought up the idea of a tax amnesty earlier in the session, revenue services officials expressed concern about its effectiveness so soon after the previous amnesty.
“That’s why I think it will have a real problem meeting the target,” Perry said.
Sen. Richard Nass, R-Acton, the GOP senator on the panel, has served on both Taxation and the Appropriations committees and said running another amnesty six years after having conducted a similar program with less forgiveness of liabilities will not get a lot of people excited about paying the taxes they owe.
“We just did one of these, and what we have always been told before by the experts is that you do this too often and you are going to end up with people waiting for the next program to come down the pike,” he said.
He agreed with Perry that the Taxation Committee was informed about the program, but not consulted about how it should be structured. He said the Appropriations Committee relied on revenue services to develop the program.
“I certainly hope it works because we need to get some of these overdue taxes in that are owed the state,” he said, “but I don’t think this is going to do it.”
The amnesty program does not extend to matters already referred to the attorney general for prosecution nor to matters already in court for collection. It also requires the tax liability to be paid in full by the end of November.
Gerard said the program is not the only initiative by the state to collect overdue taxes. Provisions in the state budget allow additional computer searches, with all financial institutions in the state being queried electronically whether they have accounts for a particular taxpayer that owes taxes.
In the past, MRS had to send letters requesting that information and that was limited to banks and other financial institutions within 25 miles or so of where the taxpayer lived.
Gerard said the data mining project will bring in at least $7 million in additional tax revenue in the second year of the budget. He said the effort will use information the agency has access to, but not in a form easily searched. For example, he said, if a person owns property in Maine and has a professional license of some type, it is likely they should be filing a tax return.