Final Push for Tax Amnesty and Voluntary Disclosure Program Legislation

by Mike Nelson

The WSCPA Team has been working on legislation that would implement a temporary tax amnesty period later this year and codify the Voluntary Disclosure Program (VDP). 

House Bill (HB) 2615 was passed out of the House Finance Committee and currently sits in the House Appropriations Committee. Senate Bill (SB) 6348 sits in the Senate Ways and Means Committee. 

A temporary tax amnesty program was created in 2010 to be opened in early 2011. According to a Washington State Department of Revenue (DOR) report, in 2012 the program brought in 1,200% more than anticipated when it generated nearly $346 million for the state and local governments. 

Given the many changes to tax policies during the last 15 years, including changes to economic nexus, and nearly increase by three times in general tax policies since 2011, there are many companies now which have outstanding tax liabilities that could provide much needed revenue to the state.

The current estimate from DOR is that HB 2615 would bring in about $54 million via the amnesty program if it were opened this year, but also result in the loss of $68 million in decreased penalties and interest within the next two years. Just as in 2010 when DOR underestimated the potential collection amount, this is a low estimate in terms of revenue funds that the amnesty program could generate and an overestimate of future costs.  

The concern that an amnesty program would mean the loss of future revenue, in the form of decreased collection of penalties and interest, is not consistent with the experience of the previous program. The DOR estimates that approximately 91% of the revenue generated through the amnesty program would have been identified and collected through normal enforcement activities within the next three years. In 2010, DOR estimated they would capture 90% of the revenues from registered entities within three years. Even if DOR were able to find through audit and enforcement every cent of owed taxes, an amnesty program likely would still generate more money. According to the DOR report of the last program, $91 million in penalties were waived, resulting in a net positive of $255 million for the state and local governments, despite some penalties and interest being waived.  

The prior program also generated about $5 million a year in ongoing taxes from newly registered entities. DOR estimates that this time that number would be less than half or roughly $2 million a year in ongoing tax revenues. Some of these unregistered entities can currently use the VDP that DOR administers. DOR estimates that unregistered entities coming forward currently brings in around $60 million a year. The idea that in 2026 only about $5 million would be generated from these unregistered companies is not consistent with the existing VDP program that DOR offers.  

As the state faces a budget cash flow crunch between the current fiscal biennium and next biennium starting July 1 2027, this would be a great time for the legislature to enact a new amnesty program. 

The legislation includes the codification of the VDP in order to incorporate the existing DOR program into statute, while expanding it to allow affiliated groups to not be automatically excluded from the program. 

There are some amendments for either HB 2615 or SB 6348 that would expand which taxpayers would be eligible for the amnesty program based on comments that DOR shared with the House Finance Committee for the hearing on HB 2615. These amendments would increase revenues collected for the amnesty program and VDP while limiting the estimated lost revenues. 

If you or your clients would benefit from the amnesty or codified VDP, consider sending your legislators a note by clicking the buttons below.

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