California Legislature—2015–16 Regular Session

Assembly Bill No. 2692

Introduced by Assembly Member Brough

February 19, 2016

An act to amend Section 19777.5 of, to add Article 4 (commencing with Section 7100) to Chapter 8 of Part 1 of Division 2 of, and to add Chapter 9.3 (commencing with Section 19740) to Part 10.2 of Division 2 of, the Revenue and Taxation Code, relating to taxation.

LEGISLATIVE COUNSEL’S DIGEST

AB 2692, as introduced, Brough. Personal income tax: corporation tax: sales and use taxes: tax penalty and fee waiver programs.

Under existing law, the Franchise Tax Board collects and administers taxes imposed under the Personal Income Tax Law and the Corporation Tax Law. The State Board of Equalization collects and administers, among others, taxes imposed under the Sales and Use Tax Law, the Bradley-Burns Uniform Sales and Use Tax Law, and local laws imposed pursuant to the Transactions and Use Tax Law. 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, for sales, use, personal income, and corporation tax liabilities due and payable for tax reporting periods or taxable years beginning before January 1, 2003.

This bill would require the State Board of Equalization and the Franchise Tax Board to administer tax penalty and fee waiver programs, as applicable, during the period beginning on February 1, 2017, to April 30, 2017, inclusive, or a period ending no later than June 30, 2017, for specified taxpayers with respect to penalties and fees for tax reporting periods beginning before January 1, 2015. This bill would require the applicant to the waiver program to file the application under the penalty of perjury. By expanding the crime of perjury, this bill would impose state-mandated local program.

The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.

This bill would provide that no reimbursement is required by this act for a specified reason.

Vote: majority. Appropriation: no. Fiscal committee: yes. State-mandated local program: yes.

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

SECTION 1.  

Article 4 (commencing with Section 7100) is
added to Chapter 8 of Part 1 of Division 2 of the Revenue and
Taxation Code, to read:

 

Article 4.  Tax Penalty Waiver Program

 

7100.  

The board shall develop and administer a tax penalty
waiver program for taxpayers subject to Part 1 (commencing with
Section 6001), as provided in this article.

7100.2.  

The tax penalty waiver program shall be conducted
for a three-month period beginning February 1, 2017 to April 30,
2017, inclusive, or during a timeframe ending no later than June
30, 2017. The program shall apply to tax liabilities due and payable
for tax reporting periods beginning before January 1, 2015.

7100.4.  

(a) For any taxpayer who meets the requirements of
Section 7100.6:

(1) The board shall waive all penalties imposed by this part, for
the tax reporting periods for which a waiver is allowed for the
nonreporting or underreporting of tax liabilities or the nonpayment
of any taxes previously determined or proposed to be determined.

(2)  Except as provided in subdivision (b), no criminal action
shall be brought against the taxpayer, for the tax reporting periods
for which a waiver is requested, for the nonreporting or
underreporting of tax liabilities.

(b) This section does not apply to violations of this part for
which, as of the first day of the waiver period specified in Section
7100.2, (1) the taxpayer is on notice of a criminal investigation by
a complaint having been filed against him or her or by written
notice having been mailed to him or her that he or she is under
criminal investigation, or (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 taxpayer makes a request for a waiver pursuant
to Section 7100.6.

7100.6.  

(a) This article shall apply to any taxpayer who, during
the waiver period specified in Section 7100.2, meets all of the
following:

(1)  Is eligible to participate in the tax penalty waiver program.

(2) Files a completed waiver application with the board, signed
under penalty of perjury, to participate in the tax penalty waiver
program.

(3) Within 60 days after the conclusion of the waiver period,
does all of the following:

(A) Files completed tax returns for all tax reporting periods for
which he or she has not previously filed a tax return and files
completed amended returns for all tax reporting periods for which
he or she underreported his or her tax liability.

(B) Pays in full the taxes and interest due for all periods for
which a waiver is requested, or applies for an installment agreement
under subdivision (b).

(C) For taxpayers who have not paid in full any tax liabilities
due and payable for tax reporting periods beginning before January
1, 2015, pays in full the taxes and interest due for each period for
that portion of the proposed determination for each period for
which a waiver is requested or applies for an installment payment
agreement under subdivision (b).

(4) In the case of any taxpayer that has filed for bankruptcy
protection under Title 11 of the United States Code, submits an
order from a Federal Bankruptcy Court allowing the taxpayer to
participate in the waiver program.

(b) The board may enter into an installment payment agreement
in lieu of the complete payment required under subparagraph (B)
of paragraph (3) of subdivision (a), but only if final payment under
the terms of that installment payment agreement is due and is paid
no later than June 30, 2018. The installment payment agreement
shall include interest on the outstanding amount due at the rate
prescribed by law. Failure by the taxpayer to fully comply with
the terms of the installment payment agreement shall render 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) The application required under paragraph (2) of 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 a waiver
under this part, be deemed to constitute an acceptable waiver
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 a waiver shall not be
allowed without the filing of a waiver application under this part.

7100.8.  

The board shall issue forms and instructions and take
other actions needed to implement this article. The provisions
contained in subdivision (c) of Section 19745, to the extent feasible
and practical, shall also apply to the board.

7100.10.  

The board shall adequately publicize the tax penalty
waiver 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.

7100.12.  

Subdivision (b) of Section 19746, to the extent
feasible and practical, shall also apply to the board.

SEC. 2.  

Chapter 9.3 (commencing with Section 19740) is added
to Part 10.2 of Division 2 of the Revenue and Taxation Code, to
read:

 

Chapter  9.3. Tax Penalty and Fee Waiver Program

 

19740.  

The Franchise Tax Board shall administer a tax penalty
and fee waiver program for taxpayers subject to Part 10
(commencing with Section 17001) and Part 11 (commencing with
Section 23001), as provided in this chapter.

19741.  

The tax penalty and fee waiver program shall be
conducted during a three-month period beginning February 1,
2017, to April 31, 2017, inclusive, or during a timeframe ending
no later than June 30, 2017, pursuant to Section 19743. The
program shall apply to tax liabilities for taxable years beginning
before January 1, 2015.

19742.  

(a) For any taxpayer who meets each 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 a
waiver 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 prior nonpayment of any taxes
previously assessed or proposed to be assessed for that taxable
year.

(2) Except as provided in subdivision (b), no criminal action
shall be brought against the taxpayer for the taxable years for which
a waiver 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 shall not apply to violations of this part, for
which, as of February 1, 2017, any of the following applies:

(1) The taxpayer is on notice of a criminal investigation by a
complaint having been filed against the taxpayer.

(2) The taxpayer is under criminal investigation.

(3) A court proceeding has already been initiated.

(c) This section shall not apply to any nonreported or
underreported tax liability amounts attributable to tax shelter items
that could have been reported under either the voluntary compliance
initiative under Chapter 9.5 (commencing with Section 19751),
the Internal Revenue Service’s Offshore Voluntary Compliance
Initiative described in Revenue Procedure 2003-11, or the Internal
Revenue Service’s Voluntary Disclosure Program.

(d) 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 taxpayer makes a request for a waiver for that taxable year
pursuant to Section 19743.

(e) Notwithstanding Chapter 6 (commencing with Section
19301), a taxpayer may not file a claim for refund or credit for any
amounts paid in connection with the tax penalty and fee waiver
program under this chapter.

19743.  

(a) This chapter shall apply to any taxpayer who
satisfies all of the following requirements:

(1) During the tax penalty and fee waiver program period
specified in Section 19741, is eligible to participate in the waiver
program.

(2) During the tax penalty and fee waiver program period
specified in Section 19741, files a completed waiver application
with the Franchise Tax Board, signed under penalty of perjury,
electing to participate in the tax penalty and fee waiver program.

(3) Within 60 days after the conclusion of the waiver period,
does the following:

(A) (i)   For any taxable year eligible for the tax penalty and fee
waiver program where the taxpayer has not filed any required
return, files a completed original tax return for that year.

(ii) For any taxable year eligible for the tax penalty and fee
waiver program where the taxpayer filed a return but underreported
tax liability on that return, files an amended return for that year.

(B) Pays in full any taxes and interest due for each taxable year
described in clauses (i) and (ii) of subparagraph (A), as applicable,
for which a waiver is requested, or applies for an installment
payment agreement under subdivision (b). For taxpayers who 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 a waiver is requested
or applies for an installment payment agreement under subdivision
(b).

(4) For purposes of complying with the full payment provisions
of paragraph (3) of subdivision (a), if the full amount due is paid
within the period set forth in paragraph (3) of subdivision (c) of
Section 19101 after the date the Franchise Tax Board mails a notice
resulting from the filing of a waiver application or the full amount
is paid within 60 days after the conclusion of the tax penalty and
fee waiver program period, the full amount due shall be treated as
paid during the waiver period.

(5) In the case of any taxpayer that has filed for bankruptcy
protection under Title 11 of the United States Code, submits an
order from a Federal Bankruptcy Court allowing the taxpayer to
participate in the waiver program.

(b) (1)   For purposes of complying with the full payment
provisions of subparagraph (B) of paragraph (3) of subdivision
(a), the Franchise Tax Board may enter into an installment payment
agreement, but only if final payment under the terms of that
installment payment agreement is due and is paid no later than
June 30, 2018.

(2) Any installment payment agreement authorized by this
subdivision shall include interest on the outstanding amount due
at the rate prescribed in Section 19521.

(3) Failure by the 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 19732 null and void,
unless the Franchise Tax Board determines that the failure was
due to reasonable cause and not due to willful neglect.

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

(c) (1)   The application required under paragraph (2) of
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 a waiver under this part, be deemed to
constitute an acceptable waiver 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 a waiver shall not, without the filing of a
waiver application, be deemed to constitute an acceptable waiver
application under this part.

(2) The Legislature specifically intends that the Franchise Tax
Board, in administering the waiver application requirement under
this part, make the waiver application process as streamlined as
possible to ensure participation in the waiver program will be
available to as many 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).

(d) Upon the conclusion of the tax penalty and fee waiver
program period, the Franchise Tax Board may propose a deficiency
upon any return filed pursuant to subparagraph (A) of paragraph
(3) of 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 19732.

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

19744.  

Notwithstanding any other provision of this chapter, if
any overpayment of tax shown on an original or amended return
filed under this article is refunded or credited within 180 days after
the return is filed, no interest shall be allowed under Section 19340
on that overpayment.

19745.  

(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 waiver
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.

19746.  

(a) The Franchise Tax Board shall conduct a public
outreach program and adequately publicize the tax penalty and fee
waiver program so as to maximize public awareness and to make
taxpayers aware of the program. In addition, the Franchise Tax
Board shall make taxpayers aware of the new and increased
penalties associated with taxpayer failure to participate in the tax
penalty and fee waiver program.

(b) The Franchise Tax Board shall make reasonable efforts to
identify taxpayer liabilities and, to the extent practicable, will send
written notice to taxpayers of their eligibility for the tax penalty
and fee waiver program. However, failure of the Franchise Tax
Board to notify a taxpayer of the existence or correct amount of a
tax liability eligible for waiver shall not preclude the taxpayer from
participating in the tax penalty and fee waiver program.

SEC. 3.  

Section 19777.5 of the Revenue and Taxation Code
is amended to read:

19777.5.  

(a) There shall be added to the tax for each taxable
year for which amnesty could have been requested:

(1) For amounts that are due and payable on the last day of the
amnesty period, an amount equal to 50 percent of the accrued
interest payable under Section 19101 for the period beginning on
the last date prescribed by law for the payment of that tax
(determined without regard to extensions) and ending on the last
day of the amnesty period specified in Section 19731.

(2) For amounts that become due and payable after the last date
of the amnesty period, an amount equal to 50 percent of the interest
computed under Section 19101 on any final amount, including
final deficiencies and self-assessed amounts, for the period
beginning on the last date prescribed by law for the payment of
the tax for the year of the deficiency (determined without regard
to extensions) and ending on the last day of the amnesty period
specified in Section 19731.

(3) For purposes of paragraph (2), Sections 19107, 19108,
19110, and 19113 shall apply in determining the amount computed
under Section 19101.

(b) The penalty imposed by this section is in addition to any
other penalty imposed under Part 10 (commencing with Section
17001), Part 11 (commencing with Section 23001), or this part.

(c) This section does not apply to any amounts that are treated
as paid during the amnesty program period under paragraph (4)
of subdivision (a) of Section 19733 or paragraph (1) of subdivision
(b) of Section 19733.

(d) Article 3 (commencing with Section 19031), (relating to
deficiency assessments) shall not apply with respect to the
assessment or collection of any penalty imposed by subdivision
(a).

(e) (1) Notwithstanding Chapter 6 (commencing with Section
19301), a taxpayer may not file a claim for refund or credit for any
amounts paid in connection with the penalty imposed in subdivision
(a), except as provided in paragraph (2).

(2) A taxpayer may file a claim for refund for any amounts paid
to satisfy a penalty imposed under subdivision (a) on the grounds
that the amount of the penalty was not properly computed by the
Franchise Tax Board.

(f) Notwithstanding Section 18415, the amendments made to
this section by the act adding this subdivision shall apply to
penalties imposed under paragraph (2) of subdivision (a) after
March 31, 2005.

begin insert

(g) This section shall not apply to the waiver period provided
for in Part 9.4 (commencing with Section 19740).

end insert

SEC. 4.  

No reimbursement is required by this act pursuant to
Section 6 of Article XIII B of the California Constitution because
the only costs that may be incurred by a local agency or school
district will be incurred because this act creates a new crime or
infraction, eliminates a crime or infraction, or changes the penalty
for a crime or infraction, within the meaning of Section 17556 of
the Government Code, or changes the definition of a crime within
the meaning of Section 6 of Article XIII B of the California
Constitution.