BILL NUMBER: AB 1043	CHAPTERED  07/22/03

	CHAPTER  87
	FILED WITH SECRETARY OF STATE  JULY 22, 2003
	APPROVED BY GOVERNOR  JULY 21, 2003
	PASSED THE SENATE  JULY 7, 2003
	PASSED THE ASSEMBLY  MAY 22, 2003
	AMENDED IN ASSEMBLY  APRIL 1, 2003

INTRODUCED BY   Assembly Member Liu

                        FEBRUARY 20, 2003

   An act to add and repeal Article 2.5 (commencing with Section
7076) of Chapter 8 of Part 1 of Division 2 of the Revenue and
Taxation Code, relating to taxation.


	LEGISLATIVE COUNSEL'S DIGEST


   AB 1043, Liu.  State Board of Equalization:  managed audit
program.
   The Sales and Use Tax Law authorizes the State Board of
Equalization, or its authorized representative, to examine the books,
papers, records, and equipment of any person selling tangible
personal property at retail and any person liable for the use tax to
verify the accuracy of any return made under that law.
   This bill would establish, until January 1, 2009, the managed
audit program, as specified, and allow a taxpayer to participate in
the program if that taxpayer meets certain criteria.  This bill
would, if the board identifies an underpayment of tax during any
audit under the program, require the taxpayer to pay interest on that
underpayment at a rate that is 1/2 the rate of interest that would
otherwise be charged for the underpayment.  This bill would also
require the board to report to the Legislature, on or before January
1, 2008, regarding the managed audit program, as specified.


THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:


  SECTION 1.  Article 2.5 (commencing with Section 7076) is added to
Chapter 8 of Part 1 of Division 2 of the Revenue and Taxation Code,
to read:

      Article 2.5.  Managed Audit Program

   7076.  (a) The State Board of Equalization shall determine which
taxpayer's accounts are eligible for the managed audit program in a
manner that is consistent with the efficient use of its auditing
resources and the maximum effectiveness of the program.
   (b) A taxpayer is not required to participate in the managed audit
program.
   7076.1.  A taxpayer's account is eligible for the managed audit
program only if the taxpayer meets all of the following criteria:
   (a) The taxpayer's business involves few or no statutory
exemptions.
   (b) The taxpayer's business involves a single or small number of
clearly defined taxability issues.
   (c) The taxpayer is taxed pursuant to this part and agrees to
participate in the managed audit program.
   (d) The taxpayer has the resources to comply with the managed
audit instructions provided by the board.
   7076.2.  (a) If the board selects a taxpayer's account for a
managed audit, all of the following apply:
   (1) The board shall identify all of the following:
   (A) The audit period covered by the managed audit.
   (B) The types of transactions covered by the managed audit.
   (C) The specific procedures that the taxpayer is to follow in
determining any liability.
   (D) The records to be reviewed by the taxpayer.
   (E) The manner in which the types of transactions are to be
scheduled for review.
   (F) The time period for completion of the managed audit.
   (G) The time period for the payment of the liability and interest.

   (H) Any other criteria that the board may require for completion
of the managed audit.
   (2) The taxpayer shall:
   (A) Examine its books, records, and equipment to determine if it
has any unreported tax liability for the audit period.
   (B) Make available to the board for verification all computations,
books, records, and equipment examined pursuant to subparagraph (A).

   (b) The information provided by the taxpayer pursuant to paragraph
(2) of subdivision (a) is the same information that is required for
the completion of any other audit that the board may conduct.
   7076.3.  Nothing in this article limits the board's authority to
examine the books, papers, records, and equipment of a taxpayer under
Section 7054.
   7076.4.  Upon completion of the managed audit and verification by
the board, interest on any unpaid liability shall be computed at
one-half the rate that would otherwise be imposed for liabilities
covered by the audit period.  Payment of the liabilities and interest
shall be made within the time period specified by the board.  If the
requirements for the managed audit are not satisfied, the board may
proceed to examine the records of the taxpayer in a manner to be
determined by the board under law.
   7076.5.  This article is repealed on January 1, 2009.
  SEC. 2.  On or before January 1, 2008, the board shall report to
the Legislature regarding the managed audit program as of June 30,
2007, which report shall contain all of the following:
   (a) The amount of taxes, penalties, and interest payments
collected from taxpayers that participated in the managed audit
program.
   (b) The amount of interest that was forgiven as a result of the
managed audit program.
   (c) The amount of taxes, penalties, and interest payments that was
collected as a result of redirecting the board's auditing resources
away from taxpayers participating in the managed audit program toward
audits of other taxpayers with outstanding sales and use tax
liabilities.
   (d) Board recommendations for improving the success of the managed
audit program.