House File 57 - Introduced HOUSE FILE 57 BY ISENHART A BILL FOR An Act providing for the discretionary waiver of use tax 1 penalties and interest and including effective date and 2 retroactive applicability provisions. 3 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA: 4 TLSB 1120YH (3) 84 tw/sc

H.F. 57 Section 1. Section 421.27, Code 2011, 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, or a portion 5 thereof, if assessed against a taxpayer, and any interest 6 assessed pursuant to section 423.40, or a portion thereof, may 7 be waived by the department if all of the following conditions 8 are met: 9 (1) The taxpayer is a purchaser of tangible personal 10 property or services which are subject to the sales and use 11 taxes imposed under chapter 423. 12 (2) The purchaser is subject to the penalties and interest 13 pursuant to section 423.40 as a result of a failure to file a 14 sales or use tax return pursuant to section 423.37. 15 (3) The return the purchaser failed to file was required 16 because of the failure of another taxpayer to pay or collect 17 the taxes due under chapter 423. 18 (4) The purchaser did not know of the other taxpayer’s 19 failure to pay or collect the taxes due under chapter 423. 20 b. A waiver granted to a purchaser under this subsection 21 does not apply to the taxpayer described in paragraph “a” , 22 subparagraph (3). 23 NEW SUBSECTION . 2A. Waiver of penalty and interest for 24 failure to timely pay the tax shown due, or the tax required to 25 be shown due, with the filing of a return or deposit form. 26 a. The penalty described in subsection 2, or a portion 27 thereof, if assessed against a taxpayer, and any interest 28 assessed pursuant to section 423.40, or a portion thereof, may 29 be waived by the department if all of the following conditions 30 are met: 31 (1) The taxpayer is a purchaser of tangible personal 32 property or services which are subject to the sales and use 33 taxes imposed under chapter 423. 34 (2) The purchaser is subject to the penalties and interest 35 -1- LSB 1120YH (3) 84 tw/sc 1/ 3

H.F. 57 pursuant to section 423.40 as a result of a failure to pay the 1 amount shown due or required to be shown due on a sales or use 2 tax return pursuant to section 423.37. 3 (3) The failure to pay the amount shown due or required to 4 be shown due was the result of the failure of another taxpayer 5 to pay or collect the taxes due under chapter 423. 6 (4) The purchaser did not know of the other taxpayer’s 7 failure to pay or collect the taxes due under chapter 423. 8 b. A waiver granted to a purchaser under this subsection 9 does not apply to the taxpayer described in paragraph “a” , 10 subparagraph (3). 11 Sec. 2. REFUNDS. Refunds of interest or penalties which 12 arise from claims resulting from the enactment of this Act, 13 for the assessment of interest or penalties occurring between 14 January 1, 2009, and the effective date of this Act, shall be 15 limited to fifty thousand dollars in the aggregate and shall 16 not be allowed unless refund claims are filed prior to October 17 1, 2011, notwithstanding any other provision of law. If the 18 amount of claims totals more than fifty thousand dollars in the 19 aggregate, the department of revenue and finance shall prorate 20 the fifty thousand dollars among all claimants in relation to 21 the amounts of the claimants’ valid claims. 22 Sec. 3. EFFECTIVE UPON ENACTMENT AND RETROACTIVE 23 APPLICABILITY. This Act, being deemed of immediate importance, 24 takes effect upon enactment and applies retroactively to 25 January 1, 2009, for the assessment of interest or penalties 26 on or after that date. 27 EXPLANATION 28 This bill relates to the assessment of penalties and 29 interest for failure to comply with the sales and use tax laws 30 in certain circumstances. 31 Currently, if a person fails to file a return or deposit 32 form with the department of revenue when required to do so or 33 fails to timely pay the taxes due, the department shall assess 34 a penalty under Code section 421.27. The department can only 35 -2- LSB 1120YH (3) 84 tw/sc 2/ 3

H.F. 57 waive the penalty if certain statutory conditions are met. 1 The bill gives the department the discretion to waive the 2 penalty, and any applicable interest pursuant to Code section 3 423.40, for certain taxpayers who fail to file the required 4 returns or to timely pay the taxes due. Specifically, because 5 the use tax, if owed, is due until it is paid, under certain 6 circumstances, it may be owed by a subsequent purchaser of 7 tangible personal property because of a prior purchaser’s 8 failure to pay it. The bill allows the department to waive 9 the penalty for both a failure to file a return and a failure 10 to timely pay the taxes due if the taxpayer is a subsequent 11 purchaser who was unaware of a prior purchaser’s failure to pay 12 the tax. 13 The bill allows refunds of past penalties and interest 14 but limits them to $50,000 in the aggregate and to claims 15 for refund filed prior to October 1, 2011. If the amount of 16 such claims is in excess of that amount, the department is to 17 prorate the refunds. 18 The bill is effective upon enactment and applies 19 retroactively to January 1, 2009, for the assessment of 20 interest or penalties on or after that date. 21 -3- LSB 1120YH (3) 84 tw/sc 3/ 3