Amended in Senate May 24, 2016

Amended in Senate September 4, 2015

California Legislature—2015–16 Regular Session

Assembly Bill No. 567

Introduced by Assembly Member Gipson

February 24, 2015

An act to begin delete add Section 11362.6 to the Health and Safety end delete begin insert amend Section 19323 of the Business and Professions end insert Code, to amend and renumber Sections 7076, 7076.1, 7076.2, 7076.3, 7076.4, 7077, and 7078 of, begin insert and end insert to add Article 2.1 (commencing with Section 7077) to Chapter 8 of Part 1 of Division 2 of, begin delete and to add Chapter 9.2 (commencing with Section 19740) to Part 10.2 of Division 2 of, end delete the Revenue and Taxation Code, and to add Division 11 (commencing with Section 18740) to the Unemployment Insurance Code, relating to medical cannabis.

LEGISLATIVE COUNSEL’S DIGEST

AB 567, as amended, Gipson. Medical cannabis: regulation and taxation amnesty.

(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.

begin delete

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 delete begin delete

(2) Existing

end delete

begin insert Existing end insert law imposes sales and use taxes collected and administered by the State Board of begin delete Equalization, personal income and corporation taxes collected and administered by the Franchise Tax Board, end delete begin insert Equalization end insert 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 begin delete 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 delete begin insert penalties. end insert

This bill would require the State Board of begin delete Equalization, the Franchise Tax Board, end delete begin insert Equalization end insert and the Employment Development Department to administer tax penalty amnesty programs during the period beginning on begin delete April 1, 2016, through September 30, 2016, or during a timeframe before December 31, 2016, end delete begin insert July 1, 2017, through September 30, 2017, inclusive, end insert 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 begin delete a licensing authority end delete begin insert the Department of Consumer Affairs end insert to revoke or refuse to issue a state begin delete or local end delete license to a medical cannabis-related business that is eligible to, but does not participate in, those programs and meets other specified conditions. begin delete By requiring local licensing authorities to revoke or refuse to issue local licenses, this bill would impose a state-mandated local program. end delete

begin delete

(3)

end delete

begin insert (2) end insert  This bill would make related findings and declarations. The bill would also make technical and conforming changes.

begin delete

(4)

end delete

begin insert (3) end insert  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.

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.

begin delete

(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 delete begin delete

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 delete

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

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

SECTION 1.  

The Legislature finds and declares all of the
following:

(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 begin delete authorizes end delete begin insert exempts end insert patients and their designated
primary caregivers begin delete to end delete begin insert who end insert possess and cultivate cannabis for
personal medical use upon recommendation or approval of a

begin delete physician. end delete begin insert physician from specified criminal laws. end 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.

(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.

(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.

(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.

(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.

(g) Despite this identified federal guidance, the uncertainty
created by state and federal differences has left begin insert medical end insert
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.

(h) It is the intent of the Legislature to further the public
purposes of preventing undue hardship on begin insert medical end insert 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.

begin delete

SEC. 2.  

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

11362.6.  

(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 delete

begin insert

begin insert SEC. 2. end insert   

end insert

begin insert Section 19323 of the end insert begin insert Business and Professions Code end insert

begin insert is amended to read: end insert

19323.  

(a) The licensing authority shall deny an application
if either the applicant or the premises for which a state license is
applied do not qualify for licensure under this chapter.

(b) The licensing authority may deny the application for
licensure or renewal of a state license if any of the following
conditions apply:

(1) Failure to comply with the provisions of this chapter or any
rule or regulation adopted pursuant to this chapter, including but
not limited to, any requirement imposed to protect natural
resources, instream flow, and water quality pursuant to subdivision
(a) of Section 19332.

(2) Conduct that constitutes grounds for denial of licensure
pursuant to Chapter 2 (commencing with Section 480) of Division
1.5.

(3) A local agency has notified the licensing authority that a
licensee or applicant within its jurisdiction is in violation of state
rules and regulation relating to commercial cannabis activities,
and the licensing authority, through an investigation, has
determined that the violation is grounds for termination or
revocation of the license. The licensing authority shall have the
authority to collect reasonable costs, as determined by the licensing
authority, for investigation from the licensee or applicant.

(4) The applicant has failed to provide information required by
the licensing authority.

(5) The applicant or licensee has been convicted of an offense
that is substantially related to the qualifications, functions, or duties
of the business or profession for which the application is made,
except that if the licensing authority determines that the applicant
or licensee is otherwise suitable to be issued a license and granting
the license would not compromise public safety, the licensing
authority shall conduct a thorough review of the nature of the
crime, conviction, circumstances, and evidence of rehabilitation
of the applicant, and shall evaluate the suitability of the applicant
or licensee to be issued a license based on the evidence found
through the review. In determining which offenses are substantially
related to the qualifications, functions, or duties of the business or
profession for which the application is made, the licensing authority
shall include, but not be limited to, the following:

(A) A felony conviction for the illegal possession for sale, sale,
manufacture, transportation, or cultivation of a controlled
substance.

(B) A violent felony conviction, as specified in subdivision (c)
of Section 667.5 of the Penal Code.

(C) A serious felony conviction, as specified in subdivision (c)
of Section 1192.7 of the Penal Code.

(D) A felony conviction involving fraud, deceit, or
embezzlement.

(6) The applicant, or any of its officers, directors, or owners, is
a licensed physician making patient recommendations for medical
cannabis pursuant to Section 11362.7 of the Health and Safety
Code.

(7) The applicant or any of its officers, directors, or owners has
been subject to fines or penalties for cultivation or production of
a controlled substance on public or private lands pursuant to
Section 12025 or 12025.1 of the Fish and Game Code.

(8) The applicant, or any of its officers, directors, or owners,
has been sanctioned by a licensing authority or a city, county, or
city and county for unlicensed commercial medical cannabis
activities or has had a license revoked under this chapter in the
three years immediately preceding the date the application is filed
with the licensing authority.

(9) Failure to obtain and maintain a valid seller’s permit required
pursuant to Part 1 (commencing with Section 6001) of Division 2
of the Revenue and Taxation Code.

begin insert

(c) The licensing authority shall revoke or refuse to issue,
reinstate, or renew a state license pursuant to Section 7077.4 of
the Revenue and Taxation Code and Section 18744 of the
Unemployment Insurance Code.

end insert

SEC. 3.  

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

7079.  

(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.

SEC. 4.  

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

7079.1.  

A taxpayer’s account is eligible for the managed audit
program only if the taxpayer meets all of the following criteria:

(a) The taxpayer’s business involves few or no statutory
exemptions.

(b) The taxpayer’s business involves a single or small number
of clearly defined taxability issues.

(c) The taxpayer is taxed pursuant to this part and agrees to
participate in the managed audit program.

(d) The taxpayer has the resources to comply with the managed
audit instructions provided by the board.

SEC. 5.  

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

7079.2.  

(a) If the board selects a taxpayer’s account for a
managed audit, all of the following apply:

(1) The board shall identify all of the following:

(A) The audit period covered by the managed audit.

(B) The types of transactions covered by the managed audit.

(C) The specific procedures that the taxpayer is to follow in
determining any liability.

(D) The records to be reviewed by the taxpayer.

(E) The manner in which the types of transactions are to be
scheduled for review.

(F) The time period for completion of the managed audit.

(G) The time period for the payment of the liability and interest.

(H) Any other criteria that the board may require for completion
of the managed audit.

(2) The taxpayer shall:

(A) Examine its books, records, and equipment to determine if
it has any unreported tax liability for the audit period.

(B) Make available to the board for verification all computations,
books, records, and equipment examined pursuant to subparagraph
(A).

(b) The information provided by the taxpayer pursuant to
paragraph (2) of subdivision (a) is the same information that is
required for the completion of any other audit that the board may
conduct.

SEC. 6.  

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

7079.3.  

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

SEC. 7.  

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

7079.4.  

Upon completion of the managed audit and verification
by the board, interest on any unpaid liability shall be computed at
one-half the rate that would otherwise be imposed for liabilities
covered by the audit period. Payment of the liabilities and interest
shall be made within the time period specified by the board. If the
requirements for the managed audit are not satisfied, the board
may proceed to examine the records of the taxpayer in a manner
to be determined by the board under law.

SEC. 8.  

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

7076.3.  

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.

SEC. 9.  

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

7076.5.  

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

SEC. 10.  

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

 

Article 2.1.  Medical Cannabis Tax Amnesty

 

7077.  

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

7077.05.  

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.

7077.1.  

The tax penalty amnesty program shall be conducted
for a six-month period beginning begin delete April 1, 2016, through September
30, 2016, inclusive, or during a timeframe ending no later than
December 1, 2016. end delete begin insert July 1, 2017, through September 31, 2017,
inclusive. end insert The program shall apply to tax liabilities due and payable
for tax reporting periods beginning before January 1, begin delete 2014. end delete begin insert 2015. end insert

7077.2.  

(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.

7077.3.  

(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.

7077.4.  

(a) (1) Notwithstanding any other law, begin delete a licensing
authority end delete begin insert the Department of Consumer Affairs end insert shall revoke or
refuse to issue, reinstate, or renew a state begin delete or local end delete 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 begin delete or
local end delete license pursuant to paragraph (1) shall not be effective unless
the begin delete licensing agency, end delete begin insert Department of Consumer Affairs, end insert 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 begin delete or local end delete license” includes a license issued for any
activity of a begin insert medical end insert cannabis-related begin delete business or a driver’s license
issued pursuant to Division 6 (commencing with Section 12500)
of the Vehicle Code. end delete begin insert business. end insert

7077.6.  

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.

7077.7.  

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

7077.8.  

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 begin delete Franchise Tax Board
and the end delete Employment Development Department.

begin delete

SEC. 11.  

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

 

Chapter  9.2. Medical Cannabis Tax Amnesty

 

19740.  

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

19740.5.  

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).

19741.  

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.

19742.  

(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.

19743.  

(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.

19744.  

(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.

19746.  

(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.

19747.  

(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 delete

begin delete SEC. 12. end delete

begin insert SEC. 11. end insert   

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

 

Division 11.  Medical Cannabis Tax Amnesty

 

18740.  

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

18740.5.  

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).

18741.  

The tax penalty amnesty program shall be conducted
for a six-month period beginning begin delete April 1, 2016, through September
30, 2016, inclusive, or during a timeframe ending no later than
December 31, 2016. end delete begin insert July 1, 2017, through September 30, 2017,
inclusive. end insert The program shall apply only to amounts unpaid for the
periods beginning before January 1, begin delete 2014. end delete begin insert 2015. end insert

18742.  

(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.

18743.  

(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.

18744.  

(a) (1) Notwithstanding any other law, begin delete a licensing
authority end delete begin insert the Department of Consumer Affairs end insert shall revoke or
refuse to issue, reinstate, or renew a state begin delete or local end delete 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 begin delete or
local end delete license pursuant to paragraph (1) shall not be effective unless
the begin delete licensing agency, end delete begin insert Department of Consumer Affairs, end insert 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 begin delete or local end delete license” includes a license issued for any
activity of a begin insert medical end insert cannabis-related begin delete business or a driver’s license
issued pursuant to Division 6 (commencing with Section 12500)
of the Vehicle Code. end delete begin insert business. end insert

18746.  

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

18747.  

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 begin delete Equalization and the Franchise Tax Board. end delete

begin insert Equalization. end insert

begin delete SEC. 13. end delete

begin insert SEC. 12. end insert   

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

begin delete

SEC. 14.  

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 delete