House File 2341 - Introduced HOUSE FILE 2341 BY ISENHART A BILL FOR An Act relating to the payment of penalties and interest for 1 failure to pay sales and use taxes and including effective 2 date and retroactive applicability provisions. 3 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA: 4 TLSB 5042HH (4) 83 tw/sc

H.F. 2341 Section 1. Section 421.27, Code 2009, is amended by adding 1 the following new subsections: 2 NEW SUBSECTION . 1A. Waiver of penalty and interest for 3 failure to file sales or use tax return or deposit form. 4 a. The penalty described in subsection 1, if assessed 5 against a taxpayer, and any interest assessed pursuant to 6 section 423.40 may be waived by the department if all of the 7 following conditions are met: 8 (1) The taxpayer is a purchaser of tangible personal 9 property or services which are subject to the sales and use 10 taxes imposed under chapter 423. 11 (2) The purchaser is subject to the penalties and interest 12 pursuant to section 423.40 as a result of a failure to file a 13 sales or use tax return pursuant to section 423.37. 14 (3) The return the purchaser failed to file was required 15 because of the failure of another taxpayer to pay or collect 16 the taxes due under chapter 423. 17 (4) The purchaser did not know of the other taxpayer’s 18 failure to pay or collect the taxes due under chapter 423. 19 b. A waiver granted to a purchaser under this subsection 20 does not apply to the taxpayer described in subparagraph (3). 21 NEW SUBSECTION . 2A. Waiver of penalty and interest for 22 failure to timely pay the tax shown due, or the tax required to 23 be shown due, with the filing of a return or deposit form. 24 a. The penalty described in subsection 2, if assessed 25 against a taxpayer, and any interest assessed pursuant to 26 section 423.40 may be waived by the department if all of the 27 following conditions are met: 28 (1) The taxpayer is a purchaser of tangible personal 29 property or services which are subject to the sales and use 30 taxes imposed under chapter 423. 31 (2) The purchaser is subject to the penalties and interest 32 pursuant to section 423.40 as a result of a failure to pay the 33 amount shown due or required to be shown due on a sales or use 34 tax return pursuant to section 423.37. 35 -1- LSB 5042HH (4) 83 tw/sc 1/ 3

H.F. 2341 (3) The failure to pay the amount shown due or required to 1 be shown due was the result of the failure of another taxpayer 2 to pay or collect the taxes due under chapter 423. 3 (4) The purchaser did not know of the other taxpayer’s 4 failure to pay or collect the taxes due under chapter 423. 5 b. A waiver granted to a purchaser under this subsection 6 does not apply to the taxpayer described in subparagraph (3). 7 Sec. 2. REFUNDS. Refunds of interest or penalties which 8 arise from claims resulting from the enactment of section 9 421.27, subsections 1A and 2A, in this Act, for the assessment 10 of interest or penalties occurring between January 1, 2009, 11 and the effective date of this Act, shall be limited to fifty 12 thousand dollars in the aggregate and shall not be allowed 13 unless refund claims are filed prior to October 1, 2010, 14 notwithstanding any other provision of law. If the amount 15 of claims totals more than fifty thousand dollars in the 16 aggregate, the department of revenue and finance shall prorate 17 the fifty thousand dollars among all claimants in relation to 18 the amounts of the claimants’ valid claims. 19 Sec. 3. EFFECTIVE UPON ENACTMENT AND RETROACTIVE 20 APPLICABILITY. This Act, being deemed of immediate importance, 21 takes effect upon enactment and applies retroactively to 22 January 1, 2009, for the assessment of interest or penalties 23 on or after that date. 24 EXPLANATION 25 This bill relates to penalties for failure to file sales or 26 use tax returns or to pay the amount of sales or use tax due or 27 required to be shown due. 28 Currently, a taxpayer who fails to file a return is subject 29 to a 10 percent penalty and a taxpayer who fails to pay or 30 pays the wrong amount is subject to a 5 percent penalty. 31 The department does not currently have the ability to waive 32 these penalties or the interest on them. The bill gives the 33 department limited discretionary authority to grant a waiver of 34 the penalties and interest if all of the following conditions 35 -2- LSB 5042HH (4) 83 tw/sc 2/ 3

H.F. 2341 are met: (1) the taxpayer is a purchaser of tangible personal 1 property or services which are subject to the sales and use 2 taxes imposed under chapter 423; (2) the purchaser is subject 3 to the penalties and interest pursuant to section 423.40 as a 4 result of either a failure to file or to pay the amount shown 5 due or required to be shown due on a sales or use tax return 6 pursuant to section 423.37; (3) the failure to file or to pay 7 was the result of the failure of another taxpayer to pay or 8 collect the taxes due under chapter 423; (4) the purchaser did 9 not know of the other taxpayer’s failure to pay or collect the 10 taxes due under chapter 423. 11 -3- LSB 5042HH (4) 83 tw/sc 3/ 3