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Senate bill would drop $500 penalty imposed on some composite returns; NFIB backs repeal
Summary
Senate Bill 259 seeks to eliminate a $500 fee that the Department of Revenue has assessed to composite filers who failed to list partners with zero tax liability. Senator Baldwin and the NFIB said the fee was often charged to small pass‑through businesses in error; the committee discussed a drafting fix so penalties remain for filers who should have reported.
Senate Bill 259 would repeal a $500 fee imposed on corporations and pass‑through entities filing composite returns who did not list all members; Senator Baldwin said the fee surged into practice recently and resulted in collections that largely represented fee revenue rather than unpaid tax liabilities. "It was an unhealthy penalty that really didn't make a lot of sense to the business," Baldwin said.
Natalie Carroll (NFIB) described constituent cases in which small business owners and their CPAs unknowingly failed to report out‑of‑state partners and were later assessed the $500 fee; she said the fiscal impact statement showed millions collected and urged the committee to repeal the burden on small businesses. Baldwin said he would correct drafting to ensure penalties remain for those who failed to report actual tax liabilities, but that the intent is to waive the fee where a $0 balance exists.
The committee heard the testimony and signaled support for a drafting correction that would preserve enforcement against noncompliance while removing the unexpected penalty placed on small businesses with no tax due.
