Va. puts a happy face on tax amnesty program

The state is giving tax delayers and tax avoiders a chance to pay up without penalty.

The state is even putting a smiley face literally on a tax amnesty program that it hopes will add $41 million to its cash-strapped coffers.

Previous amnesty programs in 1991 and 2003 were threatening, Janie E. Bowen, the state tax commissioner told members of the House Appropriations Committee today.

The first amnesty program had a guillotine as its symbol, the second featured a foam-rubber character chasing a person down the street, she said. The first amnesty program raised $32 million. The 2003 effort pulled in $98.3 million, more than double what the state expected.

The upcoming 60-day amnesty period will have the logo "Get Square on Back Taxes." It shows a square with a smiling face.

Bowen explained that the state wanted to take "a kinder, gentler" approach because so many people are hurting from the recession. Some people might be behind on their tax payments because they can't afford them, she said.

She said the program will begin soon -- but the dates are confidential so some people won't use a known date as an excuse to negotiate before the amnesty period begins.

Under the program, outstanding liabilities and unfiled returns at least 90 days old are eligible. All the penalties will be forgiven and 50 percent of the interest forgiven. Amnesty will be granted on a tax bill-by-tax bill basis, Bowen continued.

Those eligible liabilities not satisfied through amnesty will receive an additional 20 percent penalty.

Bowen said the $41 million collection estimate is based on a percentage of the money owed, but she called it "sort of a spin the dial" projection.

The tax department also has stepped up its tax compliance by adding 55 employees, including 29 auditors, Bowen said. By 2012 it hopes to take in an additional $80 million through the tougher compliance measures, she said.

On another matter, Del. Clarence E. "Bud" Phillips, D-Dickenson County, said he would fight efforts by the Kaine administration to reduce the state employees' retirement contribution to the Virginia Retirement System.

Good benefits offered by the state to employees are a reason why Virginia is considered one of the best-managed states, he said.

"The governor is wrong if he looks at that," Phillips said.

Gov. Timothy M. Kaine is proposing to save $104 million in the budget by suspending the state's 5 percent contribution of the employees share to state employee and teacher retirement benefits for the last quarter of fiscal 2010. He has suggested that the state may consider continuing this practice, noting that most states require employees to put their own money into retirement systems.

In response to a question, Secretary of Finance Richard D. Brown said Kaine is not considering tax increases to keep the budget in balance.

"He has directed me to look at spending," Brown said. The state faces a $1.3 billion budget shortfall. Kaine has proposed a variety of spending cuts to balance the budget. Brown said the state will be under budget pressures for several years.