BILL NUMBER: ABX8 8 AMENDED
BILL TEXT
AMENDED IN SENATE FEBRUARY 17, 2010
INTRODUCED BY Committee on Budget (Evans (Chair), Arambula, Beall,
Blumenfield, Brownley, Carter, Chesbro, De La Torre, Feuer,
Hernandez, Hill, Huffman, Monning, Ruskin, and Swanson)
JANUARY 15, 2010
An act relating to the Budget Act of 2009.
An act to amend Sections 31 and 7145.5 of the Business and
Professions Code, and to amend Sections 6203, 19116, 19504, and 19777
of, to add Sections 18407.5, 19265, 19266, 19560.5, 19571, and
19777.1 to, and to repeal and amend Section 19755 of, the Revenue and
Taxation Code, relating to taxation.
LEGISLATIVE COUNSEL'S DIGEST
AB 8, as amended, Committee on Budget. Budget Act of
2009. Franchise Tax Board: State Board of
Equalization: administration.
(1) The Personal Income Tax Law and the Corporation Tax Law impose
taxes on, or measured by, income. Existing law allows a tax return
or return information filed under those laws to be disclosed in a
judicial or administrative proceeding pertaining to tax
administration under certain circumstances. Existing law requires
every board, as defined under the Business and Professions Code, and
the Department of Insurance to, upon request of the Franchise Tax
Board, furnish to the Franchise Tax Board certain information with
respect to every licensee.
This bill would require a state governmental licensing entity, as
defined, issuing professional or occupational licenses, certificates,
registrations, or permits to provide to the Franchise Tax Board the
name and social security number or federal taxpayer identification
number of each individual licensee of that entity. The bill would
require the Franchise Tax Board, if an individual licensee fails to
pay taxes for which a notice of state tax lien has been recorded, as
specified, to send a notice of suspension to the licensee. The bill
would provide that the license of a licensee who fails to satisfy the
unpaid taxes by a certain date shall be automatically suspended,
except as specified, and would require the Franchise Tax Board to
mail a notice of suspension to the applicable state governmental
licensing entity and to the licensee, and would provide that the
suspension be canceled upon compliance with the tax obligation. The
bill would require the Franchise Tax Board to meet certain
requirements and would make related changes.
(2) The Sales and Use Tax Law imposes a tax on retailers measured
by the gross receipts from the sale of tangible personal property
sold at retail in this state, or on the storage, use, or other
consumption in this state of tangible personal property purchased
from a retailer for storage, use or other consumption in this state,
measured by sales price. That law defines a "retailer engaged in
business in this state" to include retailers that engage in specified
activities in this state and requires every retailer engaged in
business in this state and making sales of tangible personal property
for storage, use, or other consumption in this state to register
with the State Board of Equalization and to collect the tax from the
purchaser and remit it to the board.
This bill would include in the definition of a "retailer engaged
in business in this state" any retailer entering into agreements
under which a person in this state, for a commission or other
consideration, directly or indirectly refers potential purchasers,
whether by a link or an Internet Web site or otherwise, to the
retailer, provided the total cumulative sales price from all sales by
the retailer to purchasers in this state that are referred pursuant
to these agreements is in excess of $10,000 within the preceding 12
months, except as specified.
(3) The Franchise Tax Board administers the Personal Income Tax
Law and the Corporation Tax Law. Existing law authorizes persons that
are required to withhold taxes from recipients of income to require
the recipients of the income to provide that person with the
recipient's name and address.
This bill would require the recipient of income to also provide
the person paying the income with the recipient's social security
number or other taxpayer identification number if requested by the
person paying the income.
(4) Existing laws require the Franchise Tax Board to administer
specified taxes and collect those taxes from delinquent tax debtors.
This bill would require the board, in coordination with financial
institutions doing business in this state, to operate a Financial
Institution Record Match System utilizing automated data exchanges to
the maximum extent feasible in order to allow the board to match its
list of delinquent tax debtors with the lists provided by the
financial institutions. The bill would authorize the board to
disclose specified taxpayer information for purposes of data
matching, to institute civil proceedings to enforce specified
provisions of the bill, and would impose specified penalties on
financial institutions for failure to provide records in connection
with the match system, as provided. This bill would provide that the
specified use of certain data is a misdemeanor.
(5) Existing law imposes various taxes and fees, and certain
penalties in connection with tax avoidance and abusive tax shelters,
including reportable transactions.
This bill would expand the definition of reportable transactions
to include abusive tax avoidance transactions, as defined, and
transactions of interest, as defined. This bill would also make
technical, nonsubstantive changes to conform to this reference.
(6) The California Constitution requires the state to reimburse
local agencies and school districts for certain costs mandated by the
state. Statutory provisions establish procedures for making that
reimbursement.
This bill would provide that no reimbursement is required by this
act for a specified reason.
(7) The California Constitution authorizes the Governor to declare
a fiscal emergency and to call the Legislature into special session
for that purpose. The Governor issued a proclamation declaring a
fiscal emergency, and calling a special session for this purpose, on
January 8, 2010.
This bill would state that it addresses the fiscal emergency
declared by the Governor by proclamation issued on January 8, 2010,
pursuant to the California Constitution.
This bill would express the intent of the Legislature to enact
statutory changes relating to the Budget Act of 2009.
The California Constitution authorizes the Governor to declare a
fiscal emergency and to call the Legislature into special session for
that purpose. The Governor issued a proclamation declaring a fiscal
emergency, and calling a special session for this purpose, on January
8, 2010.
This bill would state that it addresses the fiscal emergency
declared by the Governor by proclamation issued on January 8, 2010,
pursuant to the California Constitution.
Vote: majority. Appropriation: no. Fiscal committee: no
yes . State-mandated local program: no
yes .
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. Section 31 of the Business
and Professions Code is amended to read:
31. (a) As used in this section, "board" means any entity listed
in Section 101, the entities referred to in Sections 1000 and 3600,
the State Bar, the Department of Real Estate, and any other state
agency that issues a license, certificate, or registration
authorizing a person to engage in a business or profession.
(b) Each applicant for the issuance or renewal of a license,
certificate, registration, or other means to engage in a business or
profession regulated by a board who is not in compliance with a
judgment or order for support shall be subject to Section
11350.6 17520 of the Welfare and
Institutions Family Code.
(c) "Compliance with a judgment or order for support," has the
meaning given in paragraph (4) of subdivision (a) of Section
11350.6 17520 of the Welfare and
Institutions Family Code.
(d) Each licensee who has not paid any applicable state income
tax, including interest, penalties, and other fees, shall be subject
to Section 19265 of the Revenue and Taxation Code.
SEC. 2. Section 7145.5 of the Business
and Professions Code is amended to read:
7145.5. (a) The registrar may refuse to issue, reinstate,
reactivate, or renew a license or may suspend a license for the
failure of a licensee to resolve all outstanding final liabilities,
which include taxes, additions to tax, penalties, interest, and any
fees that may be assessed by the board, the Department of Industrial
Relations, the Employment Development Department, or the Franchise
Tax Board.
(1) Until the debts covered by this section are satisfied, the
qualifying person and any other personnel of record named on a
license that has been suspended under this section shall be
prohibited from serving in any capacity that is subject to licensure
under this chapter, but shall be permitted to act in the capacity of
a nonsupervising bona fide employee.
(2) The license of any other renewable licensed entity with any of
the same personnel of record that have been assessed an outstanding
liability covered by this section shall be suspended until the debt
has been satisfied or until the same personnel of record disassociate
themselves from the renewable licensed entity.
(b) The refusal to issue a license or the suspension of a license
as provided by this section shall be applicable only if the registrar
has mailed a notice preliminary to the refusal or suspension that
indicates that the license will be refused or suspended by a date
certain. This preliminary notice shall be mailed to the licensee at
least 60 days before the date certain.
(c) (1) In the case of outstanding final
liabilities assessed by the Franchise Tax Board, this section shall
be operative within 60 days after the Contractors' State License
Board has provided the Franchise Tax Board with the information
required under Section 30, relating to licensing information that
includes the federal employee identification number or social
security number.
(d)
(2) All versions of the application for contractors'
licenses shall include, as part of the application, an authorization
by the applicant, in the form and manner mutually agreeable to the
Franchise Tax Board and the board, for the Franchise Tax Board to
disclose the tax information that is required for the registrar to
administer this section. The Franchise Tax Board may from time to
time audit these authorizations.
(d) This section shall not be interpreted to conflict with the
suspension of a license pursuant to Section 19265 of the Revenue and
Taxation Code.
SEC. 3. Section 6203 of the Revenue and
Taxation Code is amended to read:
6203. (a) Except as provided by Sections 6292 and 6293, every
retailer engaged in business in this state and making sales of
tangible personal property for storage, use, or other consumption in
this state, not exempted under Chapter 3.5 (commencing with Section
6271) or Chapter 4 (commencing with Section 6351), shall, at the time
of making the sales or, if the storage, use, or other consumption of
the tangible personal property is not then taxable hereunder, at the
time the storage, use, or other consumption becomes taxable, collect
the tax from the purchaser and give to the purchaser a receipt
therefor in the manner and form prescribed by the board.
(b) As respects leases constituting sales of tangible personal
property, the tax shall be collected from the lessee at the time
amounts are paid by the lessee under the lease.
(c) "Retailer engaged in business in this state" as used in this
section and Section 6202 means and includes any of the following:
(1) Any retailer maintaining, occupying, or using, permanently or
temporarily, directly or indirectly, or through a subsidiary, or
agent, by whatever name called, an office, place of distribution,
sales or sample room or place, warehouse or storage place, or other
place of business.
(2) Any retailer having any representative, agent, salesperson,
canvasser, independent contractor, or solicitor operating in this
state under the authority of the retailer or its subsidiary for the
purpose of selling, delivering, installing, assembling, or the taking
of orders for any tangible personal property.
(3) As respects a lease, any retailer deriving rentals from a
lease of tangible personal property situated in this state.
(4) (A) Any retailer soliciting orders for tangible personal
property by mail if the solicitations are substantial and recurring
and if the retailer benefits from any banking, financing, debt
collection, telecommunication, or marketing activities occurring in
this state or benefits from the location in this state of authorized
installation, servicing, or repair facilities.
(B) This paragraph shall become operative upon the enactment of
any congressional act that authorizes states to compel the collection
of state sales and use taxes by out-of-state retailers.
(5) (A) Any retailer entering into an agreement or agreements
under which a person or persons in this state, for a commission or
other consideration, directly or indirectly refers potential
purchasers of tangible personal property to the retailer, whether by
a link or an Internet Web site or otherwise, provided that the total
cumulative sales price from all of the retailer's sales of tangible
personal property to purchasers in this state that are referred
pursuant to all of those agreements with a person or persons in this
state, within the preceding 12 months, is in excess of ten thousand
dollars ($10,000).
(B) This paragraph shall not apply if the retailer can demonstrate
that the person in this state with whom the retailer has an
agreement did not engage in referrals in the state on behalf of the
retailer that would satisfy the requirements of the commerce clause
of the United States Constitution.
(C) An agreement under which a retailer purchases advertisements
from a person or persons in this state, to be delivered on
television, radio, in print, on the Internet, or by any other medium,
is not an agreement described in subparagraph (A), unless the
advertisement revenue paid to the person or persons in this state
consists of commissions or other consideration that is based upon
sales of tangible personal property.
(5)
(6) Notwithstanding Section 7262, a retailer specified
in paragraph (4) above, and not specified in paragraph (1), (2), or
(3) above, is a "retailer engaged in business in this state" for the
purposes of this part and Part 1.5 (commencing with Section 7200)
only.
(d) (1) For purposes of this section, "engaged in business in this
state" does not include the taking of orders from customers in this
state through a computer telecommunications network located in this
state which is not directly or indirectly owned by the retailer when
the orders result from the electronic display of products on that
same network. The exclusion provided by this subdivision shall apply
only to a computer telecommunications network that consists
substantially of online communications services other than the
displaying and taking of orders for products.
(2) This subdivision shall become inoperative upon the operative
date of provisions of a congressional act that authorize states to
compel the collection of state sales and use taxes by out-of-state
retailers.
(e) Except as provided in this subdivision, a retailer is not a
"retailer engaged in business in this state" under paragraph (2) of
subdivision (c) if that retailer's sole physical presence in this
state is to engage in convention and trade show activities as
described in Section 513(d)(3)(A) of the Internal Revenue Code, and
if the retailer, including any of his or her representatives, agents,
salespersons, canvassers, independent contractors, or solicitors,
does not engage in those convention and trade show activities for
more than 15 days, in whole or in part, in this state during any
12-month period and did not derive more than one hundred thousand
dollars ($100,000) of net income from those activities in this state
during the prior calendar year. Notwithstanding the preceding
sentence, a retailer engaging in convention and trade show
activities, as described in Section 513(d)(3)(A) of the Internal
Revenue Code, is a "retailer engaged in business in this state," and
is liable for collection of the applicable use tax, with respect to
any sale of tangible personal property occurring at the convention
and trade show activities and with respect to any sale of tangible
personal property made pursuant to an order taken at or during those
convention and trade show activities.
(f) Any limitations created by this section upon the definition of
"retailer engaged in business in this state" shall only apply for
purposes of tax liability under this code. Nothing in this section is
intended to affect or limit, in any way, civil liability or
jurisdiction under Section 410.10 of the Code of Civil Procedure.
SEC. 4. Section 18407.5 is added to the
Revenue and Taxation Code , to read:
18407.5. (a) The term "reportable transaction," as defined in
paragraph (3) of subdivision (a) of Section 18407, shall also include
any transaction of a type that the Secretary of the Treasury under
Section 6011 of the Internal Revenue Code for federal income tax
purposes or the Franchise Tax Board under this section for California
income or franchise tax purposes determines is a transaction of
interest, and shall be reported on the return or the statement
required to be made.
(b) A transaction of interest is a transaction that is the same as
or substantially similar to one of the types of transactions that
the Franchise Tax Board has identified by notice, regulation, or
other form of published guidance as a transaction of interest. In
addition, any transaction of interest identified and published
pursuant to the preceding sentence shall be published on the Internet
Web site of the Franchise Tax Board.
(c) This section shall apply to any transaction of interest
published on or after the effective date of the act adding this
section.
SEC. 5. Section 19116 of the Revenue
and Taxation Code is amended to read:
19116. (a) In the case of an individual who files a return of tax
imposed under Part 10 (commencing with Section 17001) for a taxable
year on or before the due date for the return, including extensions,
if the Franchise Tax Board does not provide a notice to the taxpayer
specifically stating the taxpayer's liability and the basis of the
liability before the close of the notification period, the Franchise
Tax Board shall suspend the imposition of any interest, penalty,
addition to tax, or additional amount with respect to any failure
relating to the return which is computed by reference to the period
of time the failure continues to exist and which is properly
allocable to the suspension period.
(b) For purposes of this section:
(1) Except as provided in subdivision (e), "notification period"
means the 18-month period beginning on the later of either of the
following:
(A) The date on which the return is filed.
(B) The due date of the return without regard to extensions.
(2) "Suspension period" means the period beginning on the day
after the close of the notification period and ending on the date
which is 15 days after the date on which notice described in
subdivision (a) is provided by the Franchise Tax Board.
(c) This section shall be applied separately with respect to each
item or adjustment.
(d) This section shall not apply to any of the following:
(1) Any penalty imposed by Section 19131.
(2) Any penalty imposed by Section 19132.
(3) Any interest, penalty, addition to tax, or additional amount
involving fraud.
(4) Any interest, penalty, addition to tax, or additional amount
with respect to any tax liability shown on the return.
(5) Any criminal penalty.
(6) Any interest, penalty, addition to tax, or additional amount
with respect to any gross misstatement.
(7) Any interest, penalty, addition to tax, or additional amount
relating to any reportable transaction with respect to which the
requirements of Section 6664(d)(2)(A) of the Internal Revenue Code
are not met, and any listed transaction, as defined in Section 6707A
(c) of the Internal Revenue Code.
(8) Any interest, penalty, addition to tax, or additional amount
relating to any abusive tax avoidance transaction, as defined in
Section 19777, as amended by the act adding this paragraph.
(e) For taxpayers required by subdivision (a) of Section 18622 to
report a change or correction by the Commissioner of Internal Revenue
or other officer of the United States or other competent authority
the following rules shall apply:
(1) The notification period under subdivision (a) shall be either
of the following:
(A) One year from the date the notice required by Section 18622 is
filed with the Franchise Tax Board by the taxpayer or the Internal
Revenue Service, if the taxpayer or the Internal Revenue Service
reports that change or correction within six months after the final
federal determination.
(B) Two years from the date when the notice required by Section
18622 is filed with the Franchise Tax Board by the taxpayer or the
Internal Revenue Service, if after the six-month period required in
Section 18622, a taxpayer or the Internal Revenue Service reports a
change or correction.
(2) The suspension period under subdivision (a) shall mean the
period beginning on the day after the close of the notification
period under paragraph (1) and ending on the date which is 15 days
after the date on which notice described in subdivision (a) is
provided by the Franchise Tax Board.
(f) For notices sent after January 1, 2004, this section does not
apply to taxpayers with taxable income greater than two hundred
thousand dollars ($200,000) that have been contacted by the Franchise
Tax Board regarding the use of a potentially abusive tax shelter
(within the meaning of Section 19777) as
defined by Section 19777, as added by Chapter 656 of the Statutes of
2003 and amended by Section 331 of Chapter 183 of the Statutes of
2004 .
(g) This section shall apply to taxable years ending after October
10, 1999.
(h) The amendments made to this section by the act adding
this subdivision Chapter 691 of the Statutes of 2005
shall apply to notices sent after January 1, 2005.
(i) The amendments made to this section by the act adding this
subdivision shall apply to notices mailed, or amended returns filed,
on or after the effective date of the act adding this subdivision.
SEC. 6. Section 19265 is added to the
Revenue and Taxation Code , to read:
19265. (a) (1) All state governmental licensing entities issuing
professional or occupational licenses, certificates, registrations,
or permits shall provide to the Franchise Tax Board the name and
social security number or federal taxpayer identification number, as
applicable, of each licensee of that state governmental licensing
entity.
(2) If any licensee has failed to pay taxes, including any
penalties, interest, and any applicable fees, imposed under Part 10
(commencing with Section 17001), Part 11 (commencing with Section
23001), or this part, for which a notice of state tax lien has been
recorded in any county recorder's office in this state, pursuant to
Chapter 14 (commencing with Section 7150) of Division 7 of Title 1 of
the Government Code, the Franchise Tax Board shall mail a
preliminary notice of suspension to the licensee indicating that the
license will be suspended by a date certain, which shall be at least
60 days after the mailing of the preliminary notice, unless prior to
the date certain the licensee pays the unpaid taxes or enters into an
installment payment agreement, as described in Section 19008, to
satisfy the unpaid taxes. The preliminary notice shall also advise
the licensee of the opportunity to request deferral or cancellation
of a suspension pursuant to subdivision (b).
(3) If any licensee subject to paragraph (2) fails to pay the
unpaid taxes or to enter into an installment payment agreement, as
described in Section 19008, to satisfy the unpaid taxes prior to the
date certain listed in the preliminary notice of suspension, his or
her license shall be automatically suspended by operation of this
section, except as provided in subdivision (b), and the Franchise Tax
Board shall provide a notice of suspension to the applicable state
governmental licensing entity and shall mail a notice of suspension
to the licensee. The rights, powers, and privileges of any licensee
whose professional or occupational license, certificate,
registration, or permit has been suspended pursuant to this section
shall be subject to the same prohibitions, limitations, and
restrictions as if the professional or occupational license,
certificate, registration, or permit were suspended by the state
governmental licensing entity that issued the professional or
occupational license, certificate, registration, or permit.
(4) Upon compliance by the licensee with the tax obligation,
either by payment of the unpaid taxes or entry into an installment
payment agreement, as described in Section 19008, to satisfy the
unpaid taxes, a suspension pursuant to this subdivision shall be
canceled. The Franchise Tax Board shall, within 10 business days of
compliance by the licensee with the tax obligation, notify both the
state governmental licensing entity and the licensee that the unpaid
taxes have been paid or that an installment payment agreement, as
described in Section 19008, has been entered into to satisfy the
unpaid taxes and that the suspension has been canceled.
(5) If a license is not suspended, or if the suspension of a
license is canceled, based on the licensee entering into an
installment payment agreement as described in Section 19008, and the
licensee fails to comply with the terms of the installment payment
agreement, that license shall be suspended as of the date that is 30
days after the date of termination of that installment payment
agreement. If a license is suspended pursuant to this paragraph, the
Franchise Tax Board shall provide notice of suspension to the
applicable state governmental licensing entity and mail a notice of
suspension to the licensee.
(6) State governmental licensing entities shall provide to the
Franchise Tax Board the information required by this subdivision at a
time that the Franchise Tax Board may require.
(b) (1) The Franchise Tax Board may defer or cancel any suspension
authorized by this section if a licensee would experience financial
hardship. The Franchise Tax Board shall, if requested by the licensee
in writing, provide for an administrative hearing to determine if
the licensee will experience financial hardship from the suspension
of the license, certificate, registration, or permit.
(2) The request for a hearing specified in paragraph (1) shall be
made in writing within 30 days from the mailing date of the
preliminary notice described in subdivision (a).
(3) The Franchise Tax Board shall conduct a hearing within 30 days
after receipt of a request pursuant to paragraph (1), unless the
board postpones the hearing, upon a showing of good cause by the
licensee, in which case a suspension pursuant to subdivision (a)
shall be deferred until the hearing has been completed.
(4) A licensee seeking relief under this subdivision shall only be
entitled to relief described in paragraph (1) if the licensee
provides the Franchise Tax Board with financial documents that
substantiate a financial hardship, and agrees to an acceptable
payment arrangement.
(5) If the deferral of a suspension of a license under this
subdivision is no longer operative, that license shall be suspended
as of the date that is 30 days after the date the deferral is no
longer operative. If a license is suspended pursuant to this
paragraph, the Franchise Tax Board shall provide notice of suspension
to the applicable state governmental licensing entity and mail a
notice of suspension to the licensee.
(c) For purposes of this section and Section 19571, the following
definitions shall apply:
(1) "Financial hardship" means financial hardship within the
meaning of Section 19008, as determined by the Franchise Tax Board,
where suspension of a license will result in the licensee being
financially unable to pay any part of the amount described in
subdivision (a) and the licensee is unable to qualify for an
installment payment arrangement as provided for by Section 19008. In
order to establish the existence of a financial hardship, the
licensee shall submit any information, including information related
to reasonable business and personal expenses, requested by the
Franchise Tax Board for the purpose of making that determination.
(2) "License" includes a certificate, registration, or any other
authorization to engage in a profession or occupation issued by a
state governmental licensing entity.
(3) "Licensee" means an individual authorized by a license,
certificate, registration, or other authorization to engage in a
profession or occupation issued by a state governmental licensing
entity.
(4) "State governmental licensing entity" means any entity listed
in Section 101, 1000, or 19420 of the Business and Professions Code,
the office of the Attorney General, the Department of Insurance, the
State Bar of California, the Department of Real Estate, and any other
state agency, board, or commission that issues a license,
certificate, or registration authorizing an individual to engage in a
profession or occupation. "State governmental licensing entity"
shall not include the Department of Motor Vehicles.
(d) Notwithstanding any other law, a state governmental licensing
entity may, with the approval of the appropriate department director
or governing body, impose a fee on licensees whose license has been
suspended as described in subdivision (a). The fee shall not exceed
the amount necessary for the licensing entity to cover its costs in
carrying out the provisions of this section. Fees imposed pursuant to
this section shall be deposited in the fund in which other fees
imposed by the state governmental licensing entity are deposited and
shall be available to that entity upon appropriation in the annual
Budget Act.
(e) The process described in subdivision (b) shall constitute the
sole administrative remedy for contesting the suspension of a license
under this section. The procedures in the administrative
adjudication provisions of the Administrative Procedure Act (Chapter
4.5 (commencing with Section 11400) and Chapter 5 (commencing with
Section 11500) of Part 1 of Division 3 of Title 2 of the Government
Code) shall not apply to the suspension of a license pursuant to this
section.
SEC. 7. Section 19266 is added to the
Revenue and Taxation Code , to read:
19266. (a) (1) The Franchise Tax Board, in coordination with
financial institutions doing business in this state, shall operate a
Financial Institution Record Match System utilizing automated data
exchanges to the maximum extent feasible.
(2) The Franchise Tax Board shall prescribe any rules and
regulations that may be necessary or appropriate to implement this
section. These rules and regulations shall include all of the
following:
(A) A structure by which financial institutions, or their
designated data-processing agents, shall receive from the Franchise
Tax Board the file or files of delinquent debtors that the
institution shall match with its own list of accountholders to
identify delinquent tax debtor accountholders at the institution.
(B) An
option by which financial institutions without the technical ability
to process the data exchange, or without the ability to employ a
third-party data processor to process the data exchange, may forward
to the Franchise Tax Board a list of all accountholders and their
social security numbers or other taxpayer identification numbers, so
that the Franchise Tax Board shall match that list with the file or
files of delinquent tax debtors.
(C) Authority for the Franchise Tax Board to exempt a financial
institution from the requirements of this section if the Franchise
Tax Board determines that the financial institution participation
would not generate sufficient revenue to be cost effective for the
Franchise Tax Board.
(D) Authority for the Franchise Tax Board to temporarily suspend
the requirements of this section for a financial institution if the
financial institution provides the Franchise Tax Board with a written
notice from its supervisory banking authority that it is determined
to be undercapitalized, significantly undercapitalized, or critically
undercapitalized as defined by FDIC Regulation 325.103(b)(3), (4),
and (5) or NCUA Regulation 702.102. The notice provided pursuant to
this section shall be subject to the protections of Section 19542.
(b) The Financial Institution Data Record Match System shall not
be subject to any limitation set forth in Chapter 20 (commencing with
Section 7460) of Division 7 of Title 1 of the Government Code.
However, any use of the information provided pursuant to this section
for any purpose other than the collection of delinquent franchise or
income tax or other debts referred to the Franchise Tax Board for
collection, as imposed under Part 5 (commencing with Section 10701),
Part 10 (commencing with Section 17001), Part 10.2 (commencing with
Section 18401), or Part 11 (commencing with Section 23001) shall be a
violation of Section 19542.
(c) (1) To effectuate the Financial Institution Record Match
System, financial institutions subject to this section shall provide
to the Franchise Tax Board on a quarterly basis the name, record
address, and other addresses, social security number or other
taxpayer identification number, and other identifying information for
each delinquent tax debtor, as identified by the Franchise Tax Board
by name and social security number or other taxpayer identification
number, who maintains an account at the institution.
(2) The first data file created by the Franchise Tax Board for
purposes of matching tax debtor records to financial institution
accountholder records shall be limited to 600,000 tax debtor records.
The number of tax debtor records included in a subsequent data file
created by the Franchise Tax Board may be increased by no more than
600,000 tax debtor records greater than the number of tax debtor
records included in the immediately preceding data file until all
eligible tax debtor records are included in the data match file.
(d) Unless otherwise required by law, a financial institution
furnishing a report or providing information to the Franchise Tax
Board pursuant to this section shall not disclose to a depositor or
an accountholder, or a codepositor or coaccountholder, that the name,
address, social security number or other taxpayer identification
number, or other identifying information of that delinquent tax
debtor has been received from or furnished to the Franchise Tax
Board.
(e) A financial institution shall incur no obligation or liability
to any person arising from any of the following:
(1) Furnishing information to the Franchise Tax Board as required
by this section.
(2) Failing to disclose to a depositor or accountholder that the
name, address, social security number or other taxpayer
identification number, or other identifying information of that
delinquent tax debtor was included in the data exchange with the
Franchise Tax Board required by this section.
(3) Any other action taken in good faith to comply with the
requirements of this section.
(f) The Franchise Tax Board may institute civil proceedings to
enforce this section.
(g) Any financial institution that willfully fails to comply with
the rules and regulations promulgated by the Franchise Tax Board for
the administration of delinquent tax collections, unless it is shown
to the satisfaction of the Franchise Tax Board that the failure is
due to reasonable cause, shall be assessed a penalty upon notice and
demand of the Franchise Tax Board and collected in the same manner as
tax. The penalty imposed under this section shall be in an amount
equal to fifty dollars ($50) for each record not provided, but the
total imposed on that financial institution for all such failures
during any calendar year shall not exceed one hundred thousand
dollars ($100,000).
(h) For purposes of this section:
(1) "Account" means a demand deposit account, share or share draft
account, checking or negotiable withdrawal order account, savings
account, time deposit account, or money market mutual fund account,
regardless of whether the account bears interest.
(2) "Financial institution" means:
(A) A depository institution, as defined in Section 1813(c) of
Title 12 of the United States Code.
(B) An institution-affiliated party, as defined in Section 1813(u)
of Title 12 of the United States Code.
(C) A federal credit union or state credit union, as defined in
Section 1752 of Title 12 of the United States Code, including an
institution-affiliated party of a credit union, as defined in Section
1786(r) of Title 12 of the United States Code.
(D) A benefit association, insurance company, safe deposit
company, money-market fund, or similar entity authorized to do
business in this state.
(3) "Delinquent tax debtor" means any person liable for any income
or franchise tax or other debt referred to the Franchise Tax Board
for collection as imposed under Part 5 (commencing with Section
10701), Part 10 (commencing with Section 17001), Part 10.2
(commencing with Section 18401), or Part 11 (commencing with Section
23001), including tax, penalties, interest, and fees, where the tax
or debt, including the amount, if any, referred to the Franchise Tax
Board for collection remains unpaid after 30 days from demand for
payment by the Franchise Tax Board, and the person is not making
current timely installment payments on the liability under an
agreement pursuant to Section 19006.
(i) A financial institution shall be reimbursed by the Franchise
Tax Board for actual costs incurred to implement the provisions of
this section. Upon receipt of an invoice from the financial
institution, cost reimbursement by the Franchise Tax Board shall be
limited to the following:
(1) For one-time startup costs of a financial institution, no more
than two thousand five hundred dollars ($2,500).
(2) For data matching costs of a financial institution, other than
one-time startup costs, no more than two hundred fifty dollars
($250) per calendar quarter.
(j) This section shall apply with respect to persons that are
delinquent tax debtors on and after the effective date of the act
adding this section.
SEC. 8. Section 19504 of the Revenue
and Taxation Code is amended to read:
19504. (a) The Franchise Tax Board, for the purpose of
administering its duties under this part, including ascertaining the
correctness of any return; making a return where none has been made;
determining or collecting the liability of any person in respect of
any liability imposed by Part 10 (commencing with Section 17001),
Part 11 (commencing with Section 23001), or this part (or the
liability at law or in equity of any transferee in respect of that
liability); shall have the power to require by demand, that an entity
of any kind including, but not limited to, employers, persons, or
financial institutions provide information or make available for
examination or copying at a specified time and place, or both, any
book, papers, or other data which may be relevant to that purpose.
Any demand to a financial institution shall comply with the
California Right to Financial Privacy Act set forth in Chapter 20
(commencing with Section 7460) of Division 7 of Title 1 of the
Government Code. Information that may be required upon demand
includes, but is not limited to, any of the following:
(1) Addresses and telephone numbers of persons designated by the
Franchise Tax Board.
(2) Information contained on Federal Form W-2 (Wage and Tax
Statement), Federal Form W-4 (Employee's Withholding Allowance
Certificate), or State Form DE-4 (Employee's Withholding Allowance
Certificate).
(b) The Franchise Tax Board may require the attendance of the
taxpayer or of any other person having knowledge in the premises and
may take testimony and require material proof for its information and
administer oaths to carry out this part.
(c) (1) The Franchise Tax Board may issue subpoenas or subpoenas
duces tecum, which subpoenas must be signed by any member of the
Franchise Tax Board, and may be served on any person for any purpose.
(2) For taxpayers that have been contacted by the Franchise Tax
Board regarding the use of a potentially abusive tax shelter
(within the meaning of Section 19777) an abusive tax
avoidance transaction, as defined by Section 19777 as amended by the
act amending this paragraph , the subpoena may be signed by any
member of the Franchise Tax Board, the Executive Officer of the
Franchise Tax Board, or any designee.
(d) Obedience to subpoenas or subpoenas duces tecum issued in
accordance with this section may be enforced by application to the
superior court as set forth in Article 2 (commencing with Section
11180) of Chapter 2 of Part 1 of Division 3 of Title 2 of the
Government Code.
(e) When examining a return, the Franchise Tax Board shall not use
financial status or economic reality examination techniques to
determine the existence of unreported income of any taxpayer unless
the Franchise Tax Board has a reasonable indication that there is a
likelihood of unreported income. This subdivision applies to any
examination beginning on or after October 10, 1999.
(f) The amendments made to this section by the act adding this
subdivision shall apply to subpoenas issued on or after the effective
date of the act adding this subdivision.
SEC. 9. Section 19560.5 is added to the
Revenue and Taxation Code , to read:
19560.5. Notwithstanding any law to the contrary, to effectuate
the Financial Institution Record Match System prescribed under
Section 19266, the Franchise Tax Board may disclose the name and
social security number or taxpayer identification number to
designated financial institutions or their authorized processing
agent for purposes of matching debtor records to accountholder
records at the financial institution. Any use of the data provided by
the Franchise Tax Board for a purpose other than those identified by
Section 19266 is prohibited and considered a violation of Section
19542.
SEC. 10. Section 19571 is added to the
Revenue and Taxation Code , to read:
19571. (a) The Franchise Tax Board may disclose to state
governmental licensing entities information regarding suspension of a
license pursuant to Section 19265.
(b) Neither the state governmental licensing entity, nor any
officer, employee, or agent, or former officer, employee, or agent of
a state governmental licensing entity, may disclose or use any
information obtained from the Franchise Tax Board, pursuant to this
section, except to inform the public of the suspension of a license
pursuant to Section 19265.
(c) For purposes of this section, the definitions in Section 19265
shall apply.
SEC. 11. Section 19755 of the Revenue
and Taxation Code , as added by Section 13 of Chapter 654
of the Statutes of 2003, is repealed.
19755. (a) Notwithstanding Section 19057, with respect to
proposed deficiency assessments related to an abusive tax avoidance
transaction, as defined in subdivision (c) of Section 19753, a notice
of a proposed deficiency assessment may be mailed to the taxpayer
within eight years after the return was filed, or within the period
otherwise provided in Article 3 (commencing with Section 19031) of
Chapter 4 of this part, whichever expires later.
(b) This section shall apply to any return filed under this part
on or after January 1, 2000.
SEC. 12. Section 19755 of the Revenue
and Taxation Code , as added by Section 13 of Chapter 656
of the Statutes of 2003, is amended to read:
19755. (a) Notwithstanding Section 19057, with respect to
proposed deficiency assessments related to an abusive tax avoidance
transaction, as defined in subdivision (c) of Section 19753,
Section 19777, other than a gross misstatement within
the meaning of Section 6404(g)(2)(D) of the Internal Revenue Code,
a notice of a proposed deficiency assessment may be mailed to
the taxpayer within eight years after the return was filed, or within
the period otherwise provided in Article 3 (commencing with Section
19031) of Chapter 4 of this part, whichever expires later.
(b) This section shall apply to any return filed under this part
on or after January 1, 2000.
(c) The amendments made to this section by the act adding this
subdivision shall apply to taxable years beginning on or after
January 1, 2010.
SEC. 13. Section 19777 of the Revenue
and Taxation Code is amended to read:
19777. (a) If a taxpayer has been contacted by the Franchise Tax
Board regarding a reportable transaction, as defined in
Section 6707A(c)(1) of the Internal Revenue Code with respect to
which the requirements of Section 6664(d)(2)(A) of the Internal
Revenue Code are not met, any listed transaction, as defined in
Section 6707A(c)(2) of the Internal Revenue Code, or a gross
misstatement within the meaning of Section 6404(g)(2)(D) of the
Internal Revenue Code, and has a deficiency, an
abusive tax avoidance transaction, and has a deficiency attributable
to an abusive tax avoidance transaction, there shall be added
to the tax an amount equal to 100 percent of the interest payable
under Section 19101 on the portion of the deficiency
attributable to that transaction for the period beginning on
the last date prescribed by law for the payment of that tax
(determined without regard to extensions) and ending on the date the
notice of proposed assessment is mailed.
(b) For purposes of this section, "abusive tax avoidance
transaction" means any of the following:
(1) A tax shelter as defined in Section 6662(d)(2)(C) of the
Internal Revenue Code. For purposes of this chapter, Section 6662(d)
(2)(C) of the Internal Revenue Code is modified by substituting the
phrase "income or franchise tax" for "federal income tax."
(2) A reportable transaction, as defined in Section 6707A(c)(1) of
the Internal Revenue Code, with respect to which the requirements of
Section 6664(d)(2)(A) of the Internal Revenue Code are not met.
(3) A listed transaction, as defined in Section 6707A(c)(2) of the
Internal Revenue Code.
(4) A gross misstatement, within the meaning of Section 6404(g)(2)
(D) of the Internal Revenue Code.
(5) Any transaction to which Section 19774 applies.
(b)
(c) The penalty imposed by this section is in addition
to any other penalty imposed under Part 10 (commencing with Section
17001), Part 11 (commencing with Section 23001), or this part.
(d) (1) If a taxpayer files an amended return reporting an abusive
tax avoidance transaction, described in subdivision (b), after the
taxpayer is contacted by the Franchise Tax Board regarding that
abusive tax avoidance transaction but before a notice of proposed
assessment is issued under Section 19033, then the amount of the
penalty under this section shall be 50 percent of the interest
payable under Section 19101 with respect to the amount of any
additional tax reflected in the amended return attributable to that
abusive tax avoidance transaction.
(2) If a notice of proposed assessment under Section 19033, with
respect to an abusive tax avoidance transaction as described in
subdivision (a), is issued after the amended return described in
paragraph (1) is filed, the penalty imposed pursuant to subdivision
(a) shall be applicable to the additional tax reflected in the notice
of proposed assessment attributable to that abusive tax avoidance
transaction.
(e) The amendments made to this section by the act adding this
subdivision shall apply to notices mailed on or after the effective
date of the act and to amended returns filed more than 90 days after
the effective date with respect to taxable years for which the
statute of limitations for mailing a notice of proposed assessment
has not expired as of that date.
SEC. 14. Section 19777.1 is added to the
Revenue and Taxation Code , to read:
19777.1. (a) If the notice of proposed assessment of additional
tax has been sent with respect to the penalty to which Section 19777
applies, only the Chief Counsel of the Franchise Tax Board may
compromise all or any portion of that penalty.
(b) The exercise of authority under subdivision (a) shall be only
at the sole discretion of the Chief Counsel of the Franchise Tax
Board and may not be delegated.
(c) Notwithstanding any other law, any determination under this
section may not be reviewed in any administrative or judicial
proceeding.
SEC. 15. The Legislature hereby finds and declares
the following:
(a) It is the intent of the Legislature that, consistent with the
decision in Gallo v. United States District Court (9th Cir. 2003) 349
F.3d 1169, cert. den. (2004) 541 U.S. 1073, the suspension of a
professional or occupational license pursuant to Revenue and Taxation
Code Section 19265, as added by Section 7 of this act for failure to
pay delinquent taxes, is a legislative act, for which due process is
satisfied by the legislative notice and hearing procedures.
(b) To prevent financial hardship, Section 19265 of the Revenue
and Taxation Code, as added by this act, grants a delinquent taxpayer
the opportunity for an additional hearing for financial hardship
prior to the suspension of a professional or occupational license.
SEC. 16. The provisions of this measure are
severable. If any provision of this measure or its application is
held invalid, that invalidity shall not affect other provisions or
applications that can be given effect without the invalid provision
or application.
SEC. 17. No reimbursement is required by this act
pursuant to Section 6 of Article XIII B of the California
Constitution because the only costs that may be incurred by a local
agency or school district will be incurred because this act creates a
new crime or infraction, eliminates a crime or infraction, or
changes the penalty for a crime or infraction, within the meaning of
Section 17556 of the Government Code, or changes the definition of a
crime within the meaning of Section 6 of Article XIII B of the
California Constitution.
SECTION 1. It is the intent of the Legislature
to enact statutory changes relating to the Budget Act of 2009.
SEC. 2. SEC. 18. This act addresses
the fiscal emergency declared by the Governor by proclamation on
January 8, 2010, pursuant to subdivision (f) of Section 10 of Article
IV of the California Constitution.