Voluntary Disclosure

The Voluntary Disclosure Program may be used by the Office of State Tax Commissioner to report previous periods of North Dakota-source income and to settle outstanding tax, penalty, and interest liabilities, but it must also ensure future tax compliance by the taxpayer. The look-back period can be up to 3 calendar years. The look-back period does not include the current tax year if the original or extended due date (if applicable) has not yet passed.

Each tax type request is considered separately. If approved, you will receive a copy of the voluntary disclosure agreement to be completed and returned to the Office of State Tax Commissioner within 60 days of receipt. Once the voluntary disclosure agreement is received by the Office of State Tax Commissioner, you have 30 days to provide any requested information, registration, returns and schedules. An extension may be requested if additional time is needed.

Disclosure statement should include the following:

• Entity type that is applying for participation and a description of activities

• Approximate date activities started in North Dakota and the number of years the taxpayer has been doing business in North Dakota

• List of years the taxpayer owned or leased property or equipment in North Dakota

• Length of time (include years) taxpayer had employees or representatives in North Dakota

• Type of tax or taxes to be included in the voluntary disclosure agreement

• Estimate of the tax liability for the period covered by the proposed voluntary disclosure agreement

• Explanation for the failure to register or file and pay the taxes for past activities

• Statement of whether North Dakota sales or use taxes were collected

• Statement that the taxpayer has not been previously contacted by the Tax Commissioner or by the Multistate Tax Commission

• Taxpayer’s proposed voluntary disclosure agreement period

You or your representative may initially contact the Office of State Tax Commissioner on an anonymous basis. Anonymity of the taxpayer can be maintained until the voluntary disclosure agreement is executed by the taxpayer and the Office of State Tax Commissioner.

You or your representative must provide a written disclosure statement to:

Office of State Tax Commissioner

600 E. Boulevard Ave., Dept. 127

Bismarck, ND 58505-0599

If you wish to submit digitally or use spreadsheets, please reach out to the below individuals for instruction on where to email information.

• Income Tax – 701-328-1881

• Sales & Use Tax – 701-328-3007

• Withholding Tax – 701-328-2209

A taxpayer that has a tax liability in more than one state may consider applying for multistate voluntary disclosure through the Multistate Tax Commission.

For more information about this voluntary disclosure program and the application process go to www.mtc.gov/Nexus-Program/Multistate-voluntary-Disclosure-Program.

Water’s Edge

A taxpayer can use the Water’s Edge filing method in calculating tax for a lookback period. The first year of lookback is considered year 1 of the 5-year Water’s Edge election.

If a taxpayer incurred Net Operating Losses (NOL) in the years prior to the lookback period, these NOLs cannot be carried forward into the years of the lookback period. The lookback period is considered the starting point for North Dakota activity.

Disregarded Entity

If a taxpayer owns a Disregarded Entity (DRE) that previously filed in the state when it was not a DRE, the taxpayer is eligible for the Voluntary Disclosure Program for income tax. For income tax purposes, the owner of the DRE is considered the taxpayer and is eligible to participate since they have not previously filed in the state.

In the instance of a DRE of a taxpayer that is filing or has previously filed with the state, but did not include their activity in their return, the taxpayer is not eligible for the Voluntary Disclosure Program. For income tax purposes, the parent is considered the taxpayer and the DRE is not eligible because they are or have previously filed in the state.

C Corporation

If a C Corporation owns an interest in a partnership and the partnership would like to apply for the Voluntary Disclosure Program, each owner of the partnership is required to apply for separate Voluntary Disclosures if a partner is not eligible to be included in the composite return. Partnerships and other passthrough entities must file a composite return for all eligible owners.

Qualified Subchapter S Corporation

A Qualified Subchapter S Corporation (QSSS) is not eligible for the Voluntary Disclosure Program if the parent company files income tax in North Dakota. A QSSS is included in the parent’s return and is considered to have filed under the parent.

Affiliates

If a member of an affiliated group does not know if any affiliates file in North Dakota, they are eligible for the Voluntary Disclosure Program. The protection only applies to a specific applicant and its DREs, not to any other taxpayer. The applicant must provide a list of all affiliates to be included in the agreement.

In the instance of a member of an affiliate group who is aware that one of the affiliates already files in North Dakota, the member is still eligible for the Voluntary Disclosure Program. The applicant must provide a list of all affiliates that are to be included in the request. Any affiliate who has previously filed in North Dakota is not eligible.