HOUSE FILE 57

BY  ISENHART

A BILL FOR

An Act providing for the discretionary waiver of use tax penalties and interest and including effective date and retroactive applicability provisions.
BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:

   Section 1.  Section 421.27, Code 2011, is amended by adding the following new subsections:
   NEW SUBSECTION.  1A.  Waiver of penalty and interest for failure to file sales or use tax return or deposit form.
   a.  The penalty described in subsection 1, or a portion thereof, if assessed against a taxpayer, and any interest assessed pursuant to section 423.40, or a portion thereof, may be waived by the department if all of the following conditions are met:
   (1)  The taxpayer is a purchaser of tangible personal property or services which are subject to the sales and use taxes imposed under chapter 423.  
   (2)  The purchaser is subject to the penalties and interest pursuant to section 423.40 as a result of a failure to file a sales or use tax return pursuant to section 423.37.
   (3)  The return the purchaser failed to file was required because of the failure of another taxpayer to pay or collect the taxes due under chapter 423.
   (4)  The purchaser did not know of the other taxpayer’s failure to pay or collect the taxes due under chapter 423.
   b.  A waiver granted to a purchaser under this subsection does not apply to the taxpayer described in paragraph “a”, subparagraph (3).
   NEW SUBSECTION.  2A.  Waiver of penalty and interest for failure to timely pay the tax shown due, or the tax required to be shown due, with the filing of a return or deposit form.
   a.  The penalty described in subsection 2, or a portion thereof, if assessed against a taxpayer, and any interest assessed pursuant to section 423.40, or a portion thereof, may be waived by the department if all of the following conditions are met:
   (1)  The taxpayer is a purchaser of tangible personal property or services which are subject to the sales and use taxes imposed under chapter 423.  
   (2)  The purchaser is subject to the penalties and interest pursuant to section 423.40 as a result of a failure to pay the amount shown due or required to be shown due on a sales or use tax return pursuant to section 423.37.
   (3)  The failure to pay the amount shown due or required to be shown due was the result of the failure of another taxpayer to pay or collect the taxes due under chapter 423.
   (4)  The purchaser did not know of the other taxpayer’s failure to pay or collect the taxes due under chapter 423.
   b.  A waiver granted to a purchaser under this subsection does not apply to the taxpayer described in paragraph “a”, subparagraph (3).
   Sec. 2.  REFUNDS.  Refunds of interest or penalties which arise from claims resulting from the enactment of this Act, for the assessment of interest or penalties occurring between January 1, 2009, and the effective date of this Act, shall be limited to fifty thousand dollars in the aggregate and shall not be allowed unless refund claims are filed prior to October 1, 2011, notwithstanding any other provision of law. If the amount of claims totals more than fifty thousand dollars in the aggregate, the department of revenue and finance shall prorate the fifty thousand dollars among all claimants in relation to the amounts of the claimants’ valid claims.
   Sec. 3.  EFFECTIVE UPON ENACTMENT AND RETROACTIVE APPLICABILITY.  This Act, being deemed of immediate importance, takes effect upon enactment and applies retroactively to January 1, 2009, for the assessment of interest or penalties on or after that date.
EXPLANATION
   This bill relates to the assessment of penalties and interest for failure to comply with the sales and use tax laws in certain circumstances. 
   Currently, if a person fails to file a return or deposit form with the department of revenue when required to do so or fails to timely pay the taxes due, the department shall assess a penalty under Code section 421.27. The department can only waive the penalty if certain statutory conditions are met. 
   The bill gives the department the discretion to waive the penalty, and any applicable interest pursuant to Code section 423.40, for certain taxpayers who fail to file the required returns or to timely pay the taxes due. Specifically, because the use tax, if owed, is due until it is paid, under certain circumstances, it may be owed by a subsequent purchaser of tangible personal property because of a prior purchaser’s failure to pay it. The bill allows the department to waive the penalty for both a failure to file a return and a failure to timely pay the taxes due if the taxpayer is a subsequent purchaser who was unaware of a prior purchaser’s failure to pay the tax.
   The bill allows refunds of past penalties and interest but limits them to $50,000 in the aggregate and to claims for refund filed prior to October 1, 2011. If the amount of such claims is in excess of that amount, the department is to prorate the refunds. 
   The bill is effective upon enactment and applies retroactively to January 1, 2009, for the assessment of interest or penalties on or after that date.