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News Release

March 14, 2002  -  Columbus, Ohio  - Taft Approves Tax Compromise Program

COLUMBUS – Ohio Gov. Bob Taft today signed into law a measure advocated by Ohio Tax Commissioner Thomas M. Zaino that clarifies when the state can accept a compromise settlement on a delinquent state tax debt.

Amended H.B. 396 creates standards for a state "Offers in Compromise" program. It is modeled after a similar program offered by the IRS. The bill was sponsored by Representative Bob Latta, R-Bowling Green.

"This law is another, and an important step toward our goal of modernizing the tax statutes," Zaino said.

Under previous Ohio law, the Ohio Department of Taxation (ODT) and the Ohio Attorney General (AG) could "adjust any claim in such a manner as is equitable." Zaino said the term "equitable" was ambiguous. The AG is the collection agent for delinquent state taxes.

The new law spells out situations when the state can consider compromises: i.e., if doubts exist that the tax liability is correct; if it is doubtful the taxpayer could ever pay the amount of tax owed; or if an exceptional circumstance exists.

Representative Latta says the Offers in Compromise program will directly involve a relatively small group of taxpayers, but will make a big difference to those who do participate, "I have taxpayers in my district who, through circumstances they couldn’t control, got behind on their taxes. It’s important that the state has the ability to compromise. This law improves our tax system."

With the new law a taxpayer may settle a tax debt for less than the outstanding amount if the taxpayer is current in other tax payments, and if ODT and the AG agree. Payment plans are accepted. The ODT or AG also can reject the offer.

The compromise agreement becomes void if the taxpayer defaults under the payment plan, or if the agreement was obtained by fraud or misrepresentation of a material fact. Only those delinquent tax claims sent to the AG for collection qualify for the Offers in Compromise program.

Zaino said the IRS program has been highly successful in collecting revenue that might otherwise never be collected. After straightening the situation out with these taxpayers, the IRS reports taxpayers in its program usually continue as responsible taxpayers.

Zaino said the new guidelines for the Offers in Compromise program are good because they offer the taxpayers a way to resolve a tax debt and move on. It also allows them to continue to be positive contributors to Ohio on a go-forward basis.

The new law also will be easier than the old one for the state to administer and for tax practitioners to understand. "This is a positive program for the state and all taxpayers," Zaino concluded.

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(For more information, contact Gary Gudmundson, ODT Communications Director, at (614) 644-6903.)