On the heels of a very successful program that ended less than a year ago, the Arizona legislature has required the Arizona Department of Revenue (ADOR) to establish and administer a second “tax recovery program” that can help qualifying taxpayers favorably resolve certain outstanding tax liabilities. This year’s program is generous considering that qualifying taxpayers can avoid all interest charges (a rare occurrence) and all penalties, and may elect to pay their tax liability over a two-year period. Interested taxpayers should take note of the limited window of opportunity – the deadline for applying is October 31, 2016. A summary of key components of the program is provided below.

Key Components of the Tax Recovery Program

• Timing: Applications for the program will be accepted from September 1 through October 31, 2016
• Covered Jurisdictions and Tax Types: The program covers state individual income and corporate income taxes; and state, county and “program city” transaction privilege and use taxes:
  • A “program city” is a city or town that used ADOR for tax administration purposes for the time period at issue
  • Currently, all cities and towns in Arizona are program cities, except Apache Junction, Avondale, Chandler, Douglas, Flagstaff, Glendale, Mesa, Nogales, Peoria, Phoenix, Prescott, Scottsdale, Tempe and Tucson
• Covered Tax Periods: The program applies to the following periods:
  • Any tax period before January 1, 2014 for annual filers
  • Any tax period before February 1, 2015 for all taxpayers filing more frequently than annually
• Eligible Taxpayers: Most individual and business taxpayers may apply, including nonresidents, seasonal residents, out-of-state businesses, unlicensed businesses (required to become licensed), taxpayers with current Arizona tax liabilities (regardless of whether they have previously filed) and taxpayers who underreported their tax liabilities in the covered periods
• Taxpayer Benefits: For the covered tax periods, the program provides:
  • Abatement/waiver of all civil penalties and interest
  • Ability to elect a two-year payment plan
  • Protection from any administrative, civil or criminal action arising from noncompliance with tax provisions
• Application and Payment Requirements: To qualify, taxpayers must:
  • Application: File their completed tax recovery application along with completed tax recovery tax returns for all applicable periods by October 31, 2016, and
  • Payment Election: Elect to pay, and actually pay, the full outstanding liability in one of two ways:
    • Pay the full amount of outstanding tax liability when they file their tax recovery application, or
    • Pay no less than 33% of outstanding tax liability when they file their tax recovery application; pay no less than an additional 33% of the original outstanding tax liability no later than October 31, 2017; and pay any remaining tax liability no later than October 31, 2018
• Limitations: Taxpayers accepted into the program:
  • Waive all appeal rights for the covered periods
  • Will not be entitled to any refunds or credits for the covered periods
  • Will jeopardize the program benefits if their full tax liability has not been paid on or before October 31, 2018
  • Will continue to be subject to audit by ADOR for the covered periods
• Exclusions: Excluded from the program are:
  • Taxpayers undergoing audits that have not yet been finalized
  • Taxpayers who are parties to an Arizona tax-related criminal proceeding as of January 1, 2016 or who have been convicted of or pled guilty/no-contest to any tax-related crimes
  • Taxpayers who are under criminal investigation or are party to any criminal litigation or proceeding in state or federal court (includes administrative hearing)
  • Taxpayers in closing agreements with ADOR for the covered periods

More information can be obtained through the following links:

https://www.azdor.gov/TaxRecovery.aspxhttps://www.azdor.gov/Portals/0/TaxRecovery/11250_instructions.pdfhttp://www.azleg.gov/legtext/52leg/2r/laws/0125.pdf

• ADOR Tax Recovery Program webpage:
• Tax Recovery Application instructions (ADOR):
• ADOR Tax Recovery Program webpage: