Amended in Senate September 4, 2015

California Legislature—2015–16 Regular Session

Assembly Bill No. 567

Introduced by Assembly Member Gipson

February 24, 2015

begin delete An act to amend Section 481 of the Revenue and Taxation Code, relating to taxation. end delete begin insert An act to add Section 11362.6 to the Health and Safety Code, to amend and renumber Sections 7076, 7076.1, 7076.2, 7076.3, 7076.4, 7077, and 7078 of, to add Article 2.1 (commencing with Section 7077) to Chapter 8 of Part 1 of Division 2 of, and to add Chapter 9.2 (commencing with Section 19740) to Part 10.2 of Division 2 of, the Revenue and Taxation Code, and to add Division 11 (commencing with Section 18740) to the Unemployment Insurance Code, relating to medical cannabis. end insert

LEGISLATIVE COUNSEL’S DIGEST

AB 567, as amended, Gipson. begin delete Property taxation: change in ownership statement: confidentiality of information. end delete begin insert Medical cannabis: regulation and taxation amnesty. end insert

begin insert

(1) Existing law, the Compassionate Use Act of 1996, an initiative measure enacted by the approval of Proposition 215 at the November 5, 1996, statewide general election, authorizes the use of marijuana for medical purposes. Existing law, the Medical Marijuana Program, requires the State Department of Public Health to establish a voluntary program for the issuance of identification cards to qualified patients and primary caregivers under the Compassionate Use Act, and grants immunity from arrest for violation of specified provisions relating to the cultivation, possession, transportation, and sale of marijuana, if conditions of the act are met.

end insert begin insert

This bill would prohibit the sale, distribution, provision, or donation of medical cannabis or medical cannabis products to a qualified patient or caregiver other than at a licensed dispensing facility or through a licensed dispensing facility’s delivery service, as defined; would prohibit mobile, vehicular, or technology platforms that enable qualified patients or primary caregivers to arrange for any delivery, as defined, with a third party; and would provide that a dispensary, as defined, that employs or uses the services of any person under 21 years of age for the sale or delivery of medical cannabis or medical cannabis products is subject to suspension or revocation of certain state or local licenses. By requiring local licensing authorities to suspend or revoke local licenses, this bill would impose a state-mandated local program.

end insert begin insert

(2) Existing law imposes sales and use taxes collected and administered by the State Board of Equalization, personal income and corporation taxes collected and administered by the Franchise Tax Board, and employment taxes, as defined, collected and administered by the Employment Development Department. Existing law sets forth various penalties, including penalties for the nonpayment or late payment of those taxes, and the failure to file or intentional filing of incorrect returns. Existing law established a tax amnesty program, conducted in 2005, with respect to sales and use tax penalties, and, personal income and corporation tax penalties and fees due and payable for tax reporting periods or taxable years beginning before January 1, 2003.

end insert begin insert

This bill would require the State Board of Equalization, the Franchise Tax Board, and the Employment Development Department to administer tax penalty amnesty programs during the period beginning on April 1, 2016, through September 30, 2016, or during a timeframe before December 31, 2016, for medical cannabis-related businesses, as provided. The bill would define a medical cannabis-related business for these purposes as a person that engages in the sale of cannabis for medical purposes to qualified patients or the primary caregivers of qualified patients pursuant to the Compassionate Use Act or the Medical Marijuana Program. The bill would require a licensing authority to revoke or refuse to issue a state or local license to a medical cannabis-related business that is eligible to, but does not participate in, those programs and meets other specified conditions. By requiring local licensing authorities to revoke or refuse to issue local licenses, this bill would impose a state-mandated local program.

end insert begin insert

(3) This bill would make related findings and declarations. The bill would also make technical and conforming changes.

end insert begin insert

(4) Existing state constitutional law prohibits the Legislature from making any gift, or authorizing the making of any gift, of any public money or thing of value to any individual, municipal, or other corporation.

end insert begin insert

This bill would make certain legislative findings and declarations that amnesty programs to incentivize a specific type of business to become current with their tax obligations serve a general public purpose, and therefore are not gifts of public funds.

end insert begin insert

(5) 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.

end insert begin insert

This bill would provide that, if the Commission on State Mandates determines that the bill contains costs mandated by the state, reimbursement for those costs shall be made pursuant to these statutory provisions.

end insert begin delete

Existing law requires, upon a change in control or change in ownership of a legal entity that owns an interest in real property in this state, or when requested by the State Board of Equalization, that the person or legal entity acquiring ownership control, or the legal entity that has undergone a change in ownership, file a change in ownership statement with the board, as specified, listing all counties in which the legal entity owns real property. Existing law requires all information requested by the assessor or the board regarding change in ownership reporting or furnished in a change in ownership statement to be held secret, except as specifically provided.

end delete begin delete

This bill would provide that information requested or furnished in a change in ownership statement, with respect to a legal entity and its real property does not include the fact that a change in ownership statement has been filed with the board or that the board has issued a determination to the assessor relating to a change in ownership statement, and that the board and the assessor are not required to hold these facts secret. This bill would also provide that the disclosure by the board or the assessor that such a change in ownership statement has been filed, where the filing was prompted by information collected by the Franchise Tax Board from the property tax query on the taxpayer’s state income tax return, does not violate the confidentiality of taxpayer return information.

end delete

Vote: majority. Appropriation: no. Fiscal committee:  begin delete no end delete begin insert yes end insert . State-mandated local program:  begin delete no end delete begin insert yes end insert .

The people of the State of California do enact as follows:

begin insert

begin insert SECTION 1. end insert   

end insert begin insert

The Legislature finds and declares all of the
following:

end insert begin insert

(a) The voters of the State of California enacted the
Compassionate Use Act of 1996, which became effective on
November 6, 1996, as Section 11362.5 of the Health and Safety
Code. The act authorizes patients and their designated primary
caregivers to possess and cultivate cannabis for personal medical
use upon recommendation or approval of a physician.

end insert begin insert

(b) In 2004, the Legislature and Governor refined the
Compassionate Use Act through SB 420, which added Sections
11362.7 to 11362.83, inclusive, to the Health and Safety Code,
allows the formation of medical cultivation collectives or
cooperatives, and provides for a voluntary state identification card
system for medical cannabis patients. SB 420 also limits the amount
of medical cannabis patients are allowed to possess and cultivate.

end insert begin insert

(c) However, the sale of any cannabis still remains illegal under
federal law. At the federal level, marijuana remains classified as
a Schedule I substance under the Controlled Substances Act.
Schedule I substances are defined as drugs with no currently
accepted medical use and a high potential for abuse.

end insert begin insert

(d) In August 2013, the United States Department of Justice
issued the “Cole Memo” to federal prosecutors, which established
priorities for federal prosecution of cannabis-related activities
under the Controlled Substances Act. The memo indicated that
states with a strong regulatory framework for legalized
recreational or medical cannabis that supports those priorities
would make federal involvement in local jurisdictions less likely.

end insert begin insert

(e) In February 2014, the United States Department of the
Treasury’s Financial Crimes Enforcement Network (FinCEN)
issued guidance to financial institutions setting forth FinCEN’s
Bank Secrecy Act expectations for financial institutions choosing
to work with cannabis-related businesses.

end insert begin insert

(f) A federal spending bill passed in late 2014 prohibits the use
of United States Department of Justice funds to prevent states,
including California, that authorize the use, distribution,
possession, or cultivation of cannabis for medical use from
implementing laws related to these activities. At a minimum, this
prohibition will remain in effect for the rest of the federal fiscal
year that ends September 30, 2015. Various other federal
legislative proposals to loosen federal restrictions on the
cultivation, possession, and sale of cannabis in states where it is
legal are also pending.

end insert begin insert

(g) Despite this identified federal guidance, the uncertainty
created by state and federal differences has left cannabis-related
businesses with the fear that compliance with state tax laws could
lead to federal prosecution. Thus, many of these businesses have
been noncompliant since their inception, and would owe massive
penalties and interest if they were to come into compliance.

end insert begin insert

(h) It is the intent of the Legislature to further the public
purposes of preventing undue hardship on cannabis-related
businesses and providing a strong incentive, the relief of penalties,
for those businesses to come forward and pay the taxes and interest
that they owe. In furtherance of this intent, the Legislature hereby
enacts the Medical Cannabis Tax Amnesty Act as set forth below.

end insert

begin insert

begin insert SEC. 2. end insert   

end insert

begin insert Section 11362.6 is added to the end insert begin insert Health and Safety
Code end insert begin insert , end insert immediately following Section 11362.5 begin insert , to read: end insert

begin insert

begin insert 11362.6. end insert   

(a) Any dispensary that employs or uses the services
of any person under 21 years of age for the sale or delivery of
medical cannabis or medical cannabis products shall be subject
to suspension or revocation of the dispensary’s state or local
medical cannabis license or driver’s license issued pursuant to
Division 6 (commencing with Section 12500) of the Vehicle Code.

(b) A person shall not sell, distribute, provide, or donate medical
cannabis or medical cannabis products to a qualified patient or
caregiver other than at a licensed dispensing facility or through
a licensed dispensing facility’s delivery service.

(c) All mobile, vehicular, or technology platforms that enable
qualified patients or primary caregivers to arrange for any delivery
with a third party are prohibited.

(d) For purposes of this section, the following terms have the
following meanings:

(1) “Delivery” means the commercial transfer of medical
cannabis or medical cannabis products from a dispensary to a
primary caregiver or qualified patient.

(2) “Delivery service” means a dispensary that makes a
delivery.

(3) “Dispensary” means a physical retail establishment that
operates from a fixed location. “Dispensary” includes mobile
deliveries originating from a fixed location that makes retail sales
of medical cannabis or medical cannabis products.

(4) “Primary caregiver” has the meaning provided in Section
11362.7

(5) “Qualified patient” has the meaning provided in Section
11362.7.

end insert

begin insert

begin insert SEC. 3. end insert   

end insert

begin insert Section 7076 of the end insert begin insert Revenue and Taxation Code end insert begin insert , as
added by Section 1 of Chapter 87 of the Statutes of 2003, is
amended and renumbered to read: end insert

begin delete 7076. end delete
begin insert 7079. end insert   

(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.

begin insert

begin insert SEC. 4. end insert   

end insert

begin insert Section 7076.1 of the end insert begin insert Revenue and Taxation Code end insert begin insert is
amended and renumbered to read: end insert

begin delete 7076.1. end delete
begin insert 7079.1. end insert   

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.

begin insert

begin insert SEC. 5. end insert   

end insert

begin insert Section 7076.2 of the end insert begin insert Revenue and Taxation Code end insert begin insert is
amended and renumbered to read: end insert

begin delete 7076.2. end delete
begin insert 7079.2. end insert   

(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.

begin insert

begin insert SEC. 6. end insert   

end insert

begin insert Section 7076.3 of the end insert begin insert Revenue and Taxation Code end insert begin insert is
amended and renumbered to read: end insert

begin delete 7076.3. end delete
begin insert 7079.3. end insert   

Nothing in this article limits the board’s authority to
examine the books, papers, records, and equipment of a taxpayer
under Section 7054.

begin insert

begin insert SEC. 7. end insert   

end insert

begin insert Section 7076.4 of the end insert begin insert Revenue and Taxation Code end insert begin insert is
amended and renumbered to read: end insert

begin delete 7076.4. end delete
begin insert 7079.4. end insert   

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.

begin insert

begin insert SEC. 8. end insert   

end insert

begin insert Section 7077 of the end insert begin insert Revenue and Taxation Code end insert begin insert is
amended and renumbered to read: end insert

begin delete 7077. end delete
begin insert 7076.3. end insert   

The board shall adequately publicize the tax penalty
amnesty program so as to maximize public awareness of the
participation in the program. The board shall coordinate to the
highest degree possible its publicity efforts and other actions taken
in implementing this article with similar programs administered
by the Franchise Tax Board.

begin insert

begin insert SEC. 9. end insert   

end insert

begin insert Section 7078 of the end insert begin insert Revenue and Taxation Code end insert begin insert is
amended and renumbered to read: end insert

begin delete 7078. end delete
begin insert 7076.5. end insert   

Subdivision (b) of Section 19736, to the extent feasible
and practical, shall also apply to the board.

begin insert

begin insert SEC. 10. end insert   

end insert

begin insert Article 2.1 (commencing with Section 7077) is added
to Chapter 8 of Part 1 of Division 2 of the end insert begin insert Revenue and Taxation
Code end insert begin insert , to read: end insert

begin insert

 

Article begin insert 2.1. end insert   Medical Cannabis Tax Amnesty

 

begin insert 7077. end insert   

The board shall develop and administer a tax penalty
amnesty program for qualified taxpayers.

begin insert 7077.05. end insert   

For the purposes of this article, the following terms
have the following meanings:

(a) “Amnesty period” means the period during which the tax
penalty amnesty program is conducted, as described in Section
7077.1.

(b) “Medical cannabis-related business” means a person that
engages in the sale of cannabis for medical purposes to qualified
patients or the primary caregivers of qualified patients pursuant
to the Compassionate Use Act of 1996 (Section 11362.5 of the
Health and Safety Code) or Article 2.5 (commencing with Section
11362.7) of Chapter 6 of Division 10 of the Health and Safety
Code, commonly referred to as the Medical Marijuana Program.

(c) “Qualified taxpayer” means a seller that is a medical
cannabis-related business.

begin insert 7077.1. end insert   

The tax penalty amnesty program shall be conducted
for a six-month period beginning April 1, 2016, through September
30, 2016, inclusive, or during a timeframe ending no later than
December 1, 2016. The program shall apply to tax liabilities due
and payable for tax reporting periods beginning before January
1, 2014.

begin insert 7077.2. end insert   

(a) For any qualified taxpayer that meets the
requirements of Section 7077.3, all of the following shall apply:

(1) The board shall waive all penalties imposed by this part,
for the tax reporting periods for which tax penalty amnesty is
requested, that are owed as a result of the nonreporting or
underreporting of tax liabilities.

(2) No criminal action shall be brought against the qualified
taxpayer, for the tax reporting periods for which tax penalty
amnesty is requested, based on the nonreporting or underreporting
of tax liabilities.

(3) Paragraphs (1) and (2) do not apply to the nonpayment of
any taxes for which a notice of determination has previously been
issued.

(b) This section does not apply to violations of this part for
which, as of the first day of the amnesty period, either of the
following applies:

(1) The qualified taxpayer is on notice of a criminal investigation
by a complaint having been filed against the qualified taxpayer or
by written notice having been mailed to the qualified taxpayer that
the qualified taxpayer is under criminal investigation.

(2) A court proceeding has already been initiated.

(c) No refund or credit shall be granted of any penalty paid
prior to the time the qualified taxpayer makes a request for tax
penalty amnesty pursuant to Section 7077.3.

begin insert 7077.3. end insert   

(a) This article applies to any qualified taxpayer that
during the amnesty period files an application for tax penalty
amnesty and, within 60 days after the conclusion of the amnesty
period, does all of the following:

(1) Files completed tax returns reporting the nonreported or
underreported tax liabilities for all tax reporting periods for which
amnesty is being applied.

(2) Pays in full the taxes and interest due for each period for
which amnesty is requested, or applies for an installment
agreement under subdivision (b).

(b) The board may enter into an installment payment agreement
pursuant to paragraph (2) of subdivision (a), which shall include
interest on the outstanding amount due at the rate prescribed by
law. Failure by the qualified taxpayer to fully comply with the
terms of the agreement renders the waiver of penalties null and
void, unless the board determines that the failure was due to
reasonable causes, and the total amount of tax, interest, and all
penalties shall be immediately due and payable.

(c) If, subsequent to the amnesty period, the board issues a
notice of determination upon a return filed pursuant to subdivision
(a), the board may impose penalties, and criminal action may be
brought under this part only with respect to the difference between
the amount shown on that return and the correct amount of tax.
This action shall not invalidate any waivers granted under Section
7077.2.

(d) The application required under subdivision (a) shall be in
the form and manner specified by the board, but in no case shall
a mere payment of any taxes and interest due, in whole or in part,
for any period otherwise eligible for amnesty under this part, be
deemed to constitute an acceptable amnesty application under this
part. For purposes of the preceding sentence, the application of
a refund from one period to offset a tax liability for another period
otherwise eligible for amnesty shall not be allowed without the
filing of an amnesty application under this part.

begin insert 7077.4. end insert   

(a) (1) Notwithstanding any other law, a licensing
authority shall revoke or refuse to issue, reinstate, or renew a state
or local license of a qualified taxpayer that is eligible to participate
in the tax penalty amnesty program under this article but does not
participate in the amnesty program, and that does any of the
following:

(A) Fails to register with the board.

(B) Has a seller’s permit revoked pursuant to Section 7077.6.

(C) Reports a gross understatement of tax.

(2) Revocation or refusal to issue, reinstate, or renew a state
or local license pursuant to paragraph (1) shall not be effective
unless the licensing agency, at least 60 days before the date of
revocation or refusal, mails a notice to the qualified taxpayer that
indicates that the license will be refused or revoked by that date.

(b) For purposes of this section, the following terms have the
following meanings:

(1) “Gross understatement of tax” is a deficiency that is in
excess of 25 percent of the amount of tax reported on a qualified
taxpayer’s return filed pursuant to Article 1 (commencing with
Section 6451) of Chapter 5.

(2) “State or local license” includes a license issued for any
activity of a cannabis-related business or a driver’s license issued
pursuant to Division 6 (commencing with Section 12500) of the
Vehicle Code.

begin insert 7077.6. end insert   

The board shall refuse to issue a permit to any person
or shall revoke a seller’s permit issued under this part for any
person that is both of the following:

(a) Eligible to participate in the tax penalty amnesty program
under this article but does not participate in the amnesty program.

(b) Engaged in retail sales of medical cannabis in this state that
would have been eligible to participate in the tax penalty amnesty
program as a medical cannabis-related business.

begin insert 7077.7. end insert   

The board shall issue forms and instructions and take
other actions needed to implement this article.

begin insert 7077.8. end insert   

The board shall adequately publicize the tax penalty
amnesty program for medical cannabis-related businesses so as
to maximize public awareness of, and participation in, the program.
The board shall coordinate to the highest degree possible its
publicity efforts and other actions taken in implementing this article
with similar programs administered by the Franchise Tax Board
and the Employment Development Department.

end insert

begin insert

begin insert SEC. 11. end insert   

end insert

begin insert Chapter 9.2 (commencing with Section 19740) is
added to Part 10.2 of Division 2 of the end insert begin insert Revenue and Taxation
Code end insert begin insert , to read: end insert

begin insert

 

Chapter   begin insert 9.2. end insert Medical Cannabis Tax Amnesty

 

begin insert 19740. end insert   

The Franchise Tax Board shall develop and administer
a tax penalty amnesty program for qualified taxpayers.

begin insert 19740.5. end insert   

For the purposes of this chapter, the following terms
have the following meanings:

(a) “Amnesty period” means the period during which the tax
penalty amnesty program is conducted, as described in Section
19741.

(b) “Medical cannabis-related business” means a person that
engages in the sale of cannabis for medical purposes to qualified
patients or the primary caregivers of qualified patients pursuant
to the Compassionate Use Act of 1996 (Section 11362.5 of the
Health and Safety Code) or Article 2.5 (commencing with Section
11362.7) of Chapter 6 of Division 10 of the Health and Safety
Code, commonly referred to as the Medical Marijuana Program.

(c) “Qualified taxpayer” means a taxpayer with unreported
income from a medical cannabis-related business subject to Part
10 (commencing with Section 17001) or Part 11 (commencing
with Section 23001).

begin insert 19741. end insert   

The tax penalty amnesty program shall be conducted
during a six-month period beginning April 1, 2016, through
September 30, 2016, inclusive, or during a timeframe ending no
later than December 31, 2016. The program shall apply to tax
liabilities for taxable years beginning before January 1, 2014.

begin insert 19742. end insert   

(a) For any qualified taxpayer that meets all of the
requirements of Section 19743, both of the following apply:

(1) The Franchise Tax Board shall waive all unpaid penalties
and fees imposed by this part for each taxable year for which tax
penalty amnesty is allowed, but only to the extent of the amount
of any penalty or fee that is owed as a result of previous
nonreporting or underreporting of tax liabilities or nonpayment
of any taxes previously assessed.

(2) No criminal action shall be brought against the qualified
taxpayer for each taxable year for which tax penalty amnesty is
allowed for the nonreporting or underreporting of tax liabilities
or the nonpayment of any taxes previously assessed or proposed
to be assessed.

(b) This chapter does not apply to violations of this part for
which, as of the first day of the amnesty period, either of the
following applies:

(1) The qualified taxpayer is on notice of a criminal investigation
by a complaint having been filed against the qualified taxpayer or
by written notice having been mailed to the qualified taxpayer that
the qualified taxpayer is under criminal investigation.

(2) A court proceeding has already been initiated.

(c) No refund or credit shall be granted with respect to any
penalty or fee paid with respect to a taxable year prior to the time
the qualified taxpayer makes a request for tax penalty amnesty
pursuant to Section 19743.

(d) Notwithstanding Chapter 6 (commencing with Section
19301), a qualified taxpayer shall not file a claim for refund or
credit for any amounts paid in connection with the tax penalty
amnesty program under this chapter.

begin insert 19743. end insert   

(a) This chapter applies to any qualified taxpayer that
during the amnesty period files an application for tax penalty
amnesty and, within 60 days after the conclusion of the amnesty
period, does all of the following:

(1) Files completed tax returns for all years for which the
qualified taxpayer has not previously filed a tax return and files
completed amended returns for all years for which the qualified
taxpayer underreported the qualified taxpayer’s income.

(2) Pays in full any taxes and interest due for each taxable year
described in paragraph (1), as applicable, for which amnesty is
requested, or applies for an installment payment agreement under
subdivision (b). For qualified taxpayers that have not paid in full
any taxes previously proposed to be assessed, pays in full the taxes
and interest due for that portion of the proposed assessment for
each taxable year for which amnesty is requested or applies for
an installment payment agreement under subdivision (b).

(b) (1) For purposes of complying with the full payment
provisions of paragraph (2) of subdivision (a), the Franchise Tax
Board may enter into an installment payment agreement, which
shall include interest on the outstanding amount due at the rate
prescribed in Section 19521.

(2) Failure by the qualified taxpayer to fully comply with the
terms of an installment payment agreement under this subdivision
shall render the waiver of penalties and fees under Section 19742
null and void, unless the Franchise Tax Board determines that the
failure was due to reasonable cause and not due to willful neglect.

(3) In the case of any failure described under paragraph (2),
the total amount of tax, interest, fees, and all penalties shall become
immediately due and payable.

(c) The application required under subdivision (a) shall be in
the form and manner specified by the Franchise Tax Board, but
in no case shall a mere payment of any taxes and interest due, in
whole or in part, for any taxable year otherwise eligible for
amnesty under this part, be deemed to constitute an acceptable
amnesty application under this part. For purposes of the prior
sentence, the application of a refund from one taxable year to
offset a tax liability from another taxable year otherwise eligible
for amnesty shall not, without the filing of an amnesty application,
be deemed to constitute an acceptable amnesty application under
this part.

(d) The Legislature specifically intends that the Franchise Tax
Board, in administering the amnesty application requirement under
this part, make the amnesty application process as streamlined as
possible to ensure participation in the amnesty program will be
available to as many qualified taxpayers as possible without
otherwise compromising the Franchise Tax Board’s ability to
enforce and collect the taxes imposed under Part 10 (commencing
with Section 17001) and Part 11 (commencing with Section 23001).

(e) Upon the conclusion of the amnesty period, the Franchise
Tax Board may propose a deficiency upon any return filed pursuant
to subdivision (a), impose penalties and fees, or initiate criminal
action under this part with respect to the difference between the
amount shown on that return and the correct amount of tax. This
action shall not invalidate any waivers previously granted under
Section 19742.

(f) All revenues derived pursuant to subdivision (c) shall be
subject to Sections 19602 and 19604.

begin insert 19744. end insert   

(a) (1) Notwithstanding any other law, a licensing
authority shall revoke or refuse to issue, reinstate, or renew a state
or local license of a qualified taxpayer that is eligible to participate
in the tax penalty amnesty program under this chapter but does
not participate in the amnesty program, and that does either of
the following:

(A) Fails to file returns with the Franchise Tax Board.

(B) Reports a gross understatement of tax.

(2) Revocation or refusal to issue, reinstate, or renew a state
or local license pursuant to paragraph (1) shall not be effective
unless the licensing agency, at least 60 days before the date of
revocation or refusal, mails a notice to the qualified taxpayer that
indicates that the license will be refused or revoked by that date.

(b) For purposes of this section, the following terms have the
following meanings:

(1) “Gross understatement of tax” is a deficiency that is in
excess of 25 percent of the amount of tax reported on a qualified
taxpayer’s return filed pursuant to Section 18633 or 18633.5,
Article 1 (commencing with Section 18501) or Article 2
(commencing with Section 18601) of Chapter 2, or Article 3
(commencing with Section 23771) of Chapter 4 of Part 11.

(2) “State or local license” includes a license issued for any
activity of a cannabis-related business or a driver’s license issued
pursuant to Division 6 (commencing with Section 12500) of the
Vehicle Code.

begin insert 19746. end insert   

(a) The Franchise Tax Board may issue forms,
instructions, notices, rules, or guidelines, and take any other
necessary actions needed to implement this chapter, specifically
including any forms, instructions, notices, rules, or guidelines that
specify the form and manner of any acceptable form of amnesty
application described in Section 19743.

(b) Chapter 3.5 (commencing with Section 11340) of Part 1 of
Division 3 of Title 2 of the Government Code does not apply to
any standard, criterion, procedure, determination, rule, notice, or
guideline established or issued by the Franchise Tax Board
pursuant to this chapter.

begin insert 19747. end insert   

(a) The Franchise Tax Board shall conduct a public
outreach program and adequately publicize the tax penalty amnesty
program for qualified taxpayers with income from medical
cannabis-related businesses so as to maximize public awareness
and make qualified taxpayers aware of the program. The Franchise
Tax Board shall coordinate to the highest degree possible its
publicity efforts and other actions taken in implementing this
chapter with similar programs administered by the State Board
of Equalization and the Employment Development Department.

end insert

begin insert

begin insert SEC. 12. end insert   

end insert

begin insert Division 11 (commencing with Section 18740) is
added to the end insert begin insert Unemployment Insurance Code end insert begin insert , to read: end insert

begin insert

 

Division  begin insert 11. end insert   Medical Cannabis Tax Amnesty

 

begin insert 18740. end insert   

The department shall develop and administer a tax
penalty amnesty program for qualified employers.

begin insert 18740.5. end insert   

For purposes of this division, the following terms
have the following meanings:

(a) “Amnesty period” means the period during which the tax
penalty amnesty program is conducted, as described in Section
18741.

(b) “Department” means the Employment Development
Department.

(c) “Employment taxes” or “taxes” means the unemployment
insurance tax and employment training tax imposed under Part 1
(commencing with Section 100) of Division 1, state disability
insurance tax imposed under Part 2 (commencing with Section
2601) of Division 1, and personal income tax withholding imposed
under Division 6 (commencing with Section 13000).

(d) “Medical cannabis-related business” means a person that
engages in the sale of cannabis for medical purposes to qualified
patients or the primary caregivers of qualified patients pursuant
to the Compassionate Use Act of 1996 (Section 11362.5 of the
Health and Safety Code) or Article 2.5 (commencing with Section
11362.7) of Chapter 6 of Division 10 of the Health and Safety
Code, commonly referred to as the Medical Marijuana Program.

(e) “Person” has the meaning set forth in Section 6005 of the
Revenue and Taxation Code.

(f) “Qualified employer” means an employer or employing unit
that is a medical cannabis-related business subject to Part 1
(commencing with Section 100) of Division 1, Part 2 (commencing
with Section 2601) of Division 1, or Division 6 (commencing with
Section 13000).

begin insert 18741. end insert   

The tax penalty amnesty program shall be conducted
for a six-month period beginning April 1, 2016, through September
30, 2016, inclusive, or during a timeframe ending no later than
December 31, 2016. The program shall apply only to amounts
unpaid for the periods beginning before January 1, 2014.

begin insert 18742. end insert   

(a) For any qualified employer that meets the
requirements of Section 18743, both of the following shall apply:

(1) The department shall waive all penalties imposed by this
code, for the tax reporting periods for which tax penalty amnesty
is requested, which are owed as a result of the nonpayment or
underpayment of employment tax liabilities or failure to file
reports.

(2) No criminal action shall be brought against the qualified
employer, for the tax reporting periods for which tax penalty
amnesty is requested, for the nonreporting or underreporting of
tax liabilities.

(b) This section does not apply to violations of this code for
which, as of the first day of the amnesty period, either of the
following applies:

(1) The qualified employer is on notice of a criminal
investigation by a complaint having been filed against the qualified
employer or by written notice having been mailed to the qualified
employer that the qualified employer is under criminal
investigation.

(2) A court proceeding has already been initiated.

(c) No refund or credit shall be granted of any penalty paid
prior to the time the qualified employer makes a request for tax
penalty amnesty pursuant to Section 18743.

begin insert 18743. end insert   

(a) This division applies to any qualified employer that
during the amnesty period files an application for tax penalty
amnesty and, within 60 days after the conclusion of the amnesty
period, does all of the following:

(1) Files quarterly contribution returns and reports reporting
the nonreported or underreported wages and taxes for the calendar
quarter that ended December 31, 2013, and prior calendar
quarters, for which amnesty is being applied.

(2) Pays in full all amounts due for all periods for which amnesty
is requested, or applies for an installment agreement under
subdivision (b).

(b) The department may enter into an installment payment
agreement pursuant to paragraph (2) of subdivision (a), which
shall include interest on the outstanding amount due at the rate
prescribed by law. Failure by the qualified employer to fully
comply with the terms of the agreement renders the waiver of
penalties null and void, unless the department determines that the
failure was due to reasonable causes, and the total amount of tax,
interest, and all penalties shall be immediately due and payable.

(c) If, subsequent to the amnesty period, the department issues
a deficiency assessment upon a return filed pursuant to subdivision
(a), the department may impose penalties and criminal action may
be brought under this division only with respect to the difference
between the amount shown on that return and the correct amount
of tax. This action shall not invalidate any waivers granted under
Section 18742.

(d) If the department issues a deficiency assessment under the
conditions described in subdivision (c), the department may issue
that deficiency assessment within 10 years from the last day of the
calendar month following the quarterly period for which the
amount is proposed to be assessed.

(e) The application required under subdivision (a) shall be in
the form and manner specified by the department, but in no case
shall a mere payment of any taxes and interest due, in whole or in
part, for any period otherwise eligible for amnesty under this
division, be deemed to constitute an acceptable amnesty application
under this division. For purposes of the preceding sentence, the
application of a refund from one period to offset a tax liability for
another period otherwise eligible for amnesty shall not be allowed
without the filing of an amnesty application under this division.

begin insert 18744. end insert   

(a) (1) Notwithstanding any other law, a licensing
authority shall revoke or refuse to issue, reinstate, or renew a state
or local license of a qualified employer that is eligible to
participate in the tax penalty amnesty program under this division
but does not participate in the amnesty program, and that does
either of the following:

(A) Fails to register with the department.

(B) Reports a gross understatement of tax.

(2) Revocation or refusal to issue, reinstate, or renew a state
or local license pursuant to paragraph (1) shall not be effective
unless the licensing agency, at least 60 days before the date of
revocation or refusal, mails a notice to the qualified employer that
indicates that the license will be refused or revoked by that date.

(b) For purposes of this section, the following terms have the
following meanings:

(1) “Gross understatement of tax” is a deficiency that is in
excess of 25 percent of the amount of tax reported on a qualified
employer’s return filed pursuant to this code.

(2) “State or local license” includes a license issued for any
activity of a cannabis-related business or a driver’s license issued
pursuant to Division 6 (commencing with Section 12500) of the
Vehicle Code.

begin insert 18746. end insert   

The department shall issue forms and instructions and
take other actions needed to implement this division.

begin insert 18747. end insert   

The department shall adequately publicize the tax
penalty amnesty program for medical cannabis-related businesses
so as to maximize public awareness of, and participation in, the
program. The department shall coordinate to the highest degree
possible its publicity efforts and other actions taken in
implementing this division with similar programs administered by
the State Board of Equalization and the Franchise Tax Board.

end insert

begin insert

begin insert SEC. 13. end insert   

end insert begin insert

The Legislature finds and declares that Sections 10,
11, and 12 of this act, establishing cannabis-related business tax
penalty programs by adding Article 2.1 (commencing with Section
7077) to Chapter 8 of Part 1 of Division 2 of, and Chapter 9.2
(commencing with Section 19740) to Part 10.2 of Division 2 of,
the Revenue and Taxation Code, and adding Division 11
(commencing with Section 18740) to the Unemployment Insurance
Code serve a general public purpose by incentivizing a specific
type of business to become current with its tax obligations, and
therefore do not constitute gifts of public funds within the meaning
of Section 6 of Article XVI of the California Constitution.

end insert

begin insert

begin insert SEC. 14. end insert   

end insert begin insert

If the Commission on State Mandates determines that
this act contains costs mandated by the state, reimbursement to
local agencies and school districts for those costs shall be made
pursuant to Part 7 (commencing with Section 17500) of Division
4 of Title 2 of the Government Code.

end insert

begin delete

SECTION 1.  

The Legislature finds and declares all of the
following:

(a) Transparency in assessed value information is critical to the
integrity of the property tax system. The public should have
sufficient information to provide assurance that property tax laws
are equitably applied and that the property tax burden is fairly
distributed. To this end, existing law requires the assessment roll,
which lists the assessed value for every property, to be open to
public inspection. Existing law further requires a quarterly list of
all recorded property transfers occurring in the prior two years to
be open to public inspection in each county.

(b) The right to privacy is a personal and fundamental right
protected by Section 1 of Article I of the California Constitution
and by the 14th Amendment to the United States Constitution. All
individuals have a right to privacy in information pertaining to
them. It is the Legislature’s intent that detailed information
requested by the county assessor or the Board of Equalization and
furnished in the change in ownership statement shall continue to
be held in secret by the assessor and the Board. However, the
Legislature does not intend for the board or the assessor to hold
secret the fact that (1) an individual or legal entity has filed a
change in ownership statement with the board pursuant to Section
480.1 with respect to a change in control as defined in subdivision
(c) of Section 64, or pursuant to Section 480.2 with respect to a
change in ownership as defined in subdivision (d) of Section 64
or that (2) the board has issued a determination to the assessor
relating to the statement filed with the board that a change in
control or change in ownership has occurred. These facts should
not be considered to be confidential information furnished in the
change in ownership statement and should not required to be held
secret by the assessor and the board.

(c) The public interest is not served by holding secret factual
information concerning legal entity changes in ownership that
become public when assessment roll updates reflect assessed value
changes. Furthermore, the public interest is not served when
available information concerning legal entity changes in ownership
is not made public, similar to other transfers in property interests,
merely because the transaction did not require the recordation of
any documents.

(d) This act balances the taxing authority’s responsibility to
safeguard confidential taxpayer information with the public’s right
to timely information.

(e) That local county assessors require the state’s assistance to
administer current change in ownership law as it relates to the
transfers of ownership interests in legal entities. The law requires
the Franchise Tax to include a question on state income tax returns
to assist the State Board of Equalization and the county assessor
in the determination of when legal entity owned property undergoes
a change of ownership for property tax purposes. The Franchise
Tax Board collects these responses for the purpose of transmitting
the information to the State Board of Equalization. The use of the
state income tax return is a practical and cost effective method to
annually communicate with legal entities operating in this state.
In some instances, a legal entity change in ownership statement
filed with the State Board of Equalization will have been prompted
by the legal entity’s response to this question.

(f) That the disclosure by the State Board of Equalization or
assessor that a statement has been filed with the State Board of
Equalization in the case where the filing was prompted by a legal
entity’s response to the property tax query on a state income tax
return should not be deemed to violate the confidentiality of
taxpayer return information. The provisions of this act allowing
the disclosure of limited facts serves a public policy that overrides
the confidentiality of return information collected by the Franchise
Tax Board.

SEC. 2.  

Section 481 of the Revenue and Taxation Code is
amended to read:

481.  

(a) All information requested by the assessor or the board
pursuant to this article or furnished in the change in ownership
statement shall be held secret by the assessor and the board. All
information furnished in either the preliminary change in ownership
statement or the change in ownership statement shall be held secret
by those authorized by law to receive or have access to this
information. These statements are not public documents and are
not open to inspection, except as provided in Section 408.

(b) (1) Information requested or furnished in a change in
ownership statement for a change in control or a change in
ownership as defined in subdivision (c) or (d) of Section 64 does
not include the fact that a change in ownership statement has been
filed with the board or that the board has issued a determination
to the assessor relating to a change in ownership statement filed
with the board. The board and the assessor are not required to hold
these facts secret.

(2) Notwithstanding any other law, the disclosure by the board
or assessor that a change in ownership statement has been filed in
the case where the filing was prompted by information collected
by the Franchise Tax Board from the property tax query on the
taxpayer’s state income tax return as required by Section 64 shall
not be deemed to violate the confidentiality of taxpayer return
information.

end delete