Amended in Assembly April 26, 2016

California Legislature—2015–16 Regular Session

Assembly BillNo. 2692


Introduced by Assembly Member Brough

begin insert

(Coauthor: Assembly Member Ridley-Thomas)

end insert

February 19, 2016


An act to amendbegin delete 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,end deletebegin insert Sections 6487.05, 19191, and 19192 ofend insert the Revenue and Taxation Code, relating to taxation.

LEGISLATIVE COUNSEL’S DIGEST

AB 2692, as amended, Brough. begin deletePersonal income tax: corporation tax: sales end deletebegin insertSales end insertand use taxes: begin deletetax penalty and fee waiver programs. end deletebegin insertdeficiency determinations: qualifying retailers: income and corporation taxes: disclosure agreements.end insert

begin insert

The State Board of Equalization, if not satisfied with a return or the amount of sales tax, may compute and determine the amount required to be paid, as specified. Existing law provides that if the board finds that a qualifying retailer’s failure to make a timely return or payment is due to reasonable cause and circumstances beyond its control, as provided, the qualifying retailer shall be relieved of specified penalties. Existing law additionally provides that requests for the relief of those penalties shall be filed under penalty of perjury.

end insert
begin insert

This bill would revise the definition of a “qualifying retailer” to include a retailer that had gross receipts of less than $1,000,000 in the previous 4 calendar quarters.

end insert
begin insert

By requiring the qualifying retailer to file certain information under penalty of perjury, thereby expanding the crime of perjury, this bill would impose a state-mandated local program.

end insert
begin insert

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 no reimbursement is required by this act for a specified reason.

end insert
begin insert

The Personal Income Tax Law and the Corporation Tax Law impose various penalties for failure to file specified returns.

end insert
begin insert

Existing law authorizes the Franchise Tax Board to enter into voluntary disclosure agreements, as specified, with any qualified entity, qualified shareholder, qualified member, or a qualified beneficiary of a qualified trust, as defined, that permits, under the authority of the voluntary disclosure agreement, the Franchise Tax Board to waive its authority to assess taxes, additions to taxes, fees, or penalties, as described.

end insert
begin insert

This bill would expand the above authorization to allow the Franchise Tax Board to enter into voluntary disclosure agreements with out-of-state limited partnerships and qualified small businesses, as defined, and would revise the definition of qualified trust to allow the trust to have resident beneficiaries, as provided.

end insert
begin delete

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.

end delete
begin delete

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.

end delete
begin delete

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 no reimbursement is required by this act for a specified reason.

end delete

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

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

P3    1begin insert

begin insertSECTION 1.end insert  

end insert

begin insertSection 6487.05 of the end insertbegin insertRevenue and Taxation
2Code
end insert
begin insert is amended to read:end insert

3

6487.05.  

(a) Notwithstanding Section 6487, the period during
4which a deficiency determination may be mailed to a qualifying
5retailer is limited to three years after the last day of the calendar
6month following the quarterly period for which the amount is
7proposed to be determined.begin delete For purposes of this section, a
8“qualifying retailer” is a retailer that meets all of the following
9conditions:end delete

begin insert

10
(b) For purposes of this section, a “qualifying retailer” is a
11retailer that either:

end insert

12(1) begin deleteThe retailer is end deletebegin insertIs end insertlocated outside this state,begin delete andend delete has not
13previously registered with thebegin delete board.end deletebegin insert board, is engaged in business
14in this state, as defined in Section 6203, voluntarily registers with
15the board, and has not been previously contacted by the board or
16its agents regarding the provisions of Section 6203.end insert

begin delete

17(2) The retailer is engaged in business in this state, as defined
18in Section 6203.

end delete
begin delete

19(3) The retailer voluntarily registers with the board.

end delete
begin delete

20(4) The retailer has not been previously contacted by the board
21or its agents regarding the provisions of Section 6203.

end delete
begin insert

22
(2) Has gross receipts of less than one million dollars
23($1,000,000) in the previous four calendar quarters.

end insert
begin delete

24(5) As determined by the board, the

end delete

25begin insert (c)end insertbegin insertend insertbegin insertIn addition to the criteria of subdivision (a), in order to
26qualify as a “qualifying retailer,” theend insert
retailer’s failure to file a
P4    1return or failure to report or pay the tax or amount due required
2by law was due to reasonable cause and was not a result of
3negligence or intentional disregard of the law, or because of fraud
4or an intent to evade the provisions of thisbegin delete part.end deletebegin insert part, as determined
5by the board.end insert

begin delete

6(b)

end delete

7begin insert(d)end insert If the board or its designee finds that the retailer’s failure to
8make a timely return or payment is due to reasonable cause and
9circumstances beyond the retailer’s control, and occurred
10notwithstanding the exercise of ordinary care and the absence of
11willful neglect, the retailer shall be relieved of the penalties
12imposed pursuant to this part. Any retailer seeking relief of penalty
13shall file a statement under penalty of perjury setting forth the facts
14upon which he or she bases his or her claim for relief.

15begin insert

begin insertSEC. 2.end insert  

end insert

begin insertSection 19191 of the end insertbegin insertRevenue and Taxation Codeend insertbegin insert is
16amended to read:end insert

17

19191.  

(a) The Franchise Tax Board may enter into a voluntary
18disclosure agreement with anybegin insert qualified small business,end insert qualified
19entity, qualified shareholder, qualified member, or qualified
20beneficiary as defined in Section 19192, that is binding on both
21the Franchise Tax Board and thebegin insert qualified small business,end insert qualified
22entity, qualified shareholder, qualified member, or qualified
23beneficiary.

24(b) The Franchise Tax Board shall do all of the following:

25(1) Provide guidelines and establish procedures forbegin insert qualified
26small businesses,end insert
qualified entities and their qualified shareholders,
27qualified members, or qualified beneficiaries to apply for voluntary
28disclosure agreements.

29(2) Accept applications on an anonymous basis frombegin insert qualified
30small businesses,end insert
qualified entities and their qualified shareholders,
31qualified members, or qualified beneficiaries for voluntary
32disclosure agreements.

33(3) Implement procedures for accepting applications for
34voluntary disclosure agreements through the National Nexus
35Program administered by the Multistate Tax Commission.

36(4) For purposes of considering offers frombegin insert qualified small
37businesses,end insert
qualified entities and their qualified shareholders,
38qualified members, or qualified beneficiaries to enter into voluntary
39disclosure agreements, take into account the following criteria:

P5    1(A) The nature and magnitude of the qualified entity’s previous
2presence and activity in this state and the facts and circumstances
3by which the nexus of the qualified entity or qualified shareholder,
4qualified member, or qualified beneficiary was established.

5(B) The extent to which the weight of the factual circumstances
6demonstrates that a prudent business person exercising reasonable
7care would conclude that the previous activities and presence in
8this state were or were not immune from taxation by this state by
9reason of Public Law 86-272 or otherwise.

10(C) Reasonable reliance on the advice of a person in a fiduciary
11position or other competent advice that the qualified entity or
12qualified shareholder, qualified member, or qualified beneficiary
13activities were immune from taxation by this state.

14(D) Lack of evidence of willful disregard or neglect of the tax
15laws of this state on the part of thebegin insert qualified small business,end insert
16 qualified entity or qualified shareholder, qualified member, or
17qualified beneficiary.

18(E) Demonstrations of good faith on the part of thebegin insert qualified
19small business,end insert
qualified entity, qualified shareholder, qualified
20member, or qualified beneficiary.

21(F) Benefits that will accrue to the state by entering into a
22voluntary disclosure agreement.

23(5) Act on any application of a voluntary disclosure agreement
24within 120 days of receipt.

25(6) Enter into voluntary disclosure agreements withbegin insert qualified
26small businesses,end insert
qualified entities, qualified shareholders, qualified
27members, or qualified beneficiaries, as authorized in subdivision
28(a) and based on the criteria set forth in paragraph (4).

29(c) Before any voluntary disclosure agreement becomes binding,
30the Franchise Tax Board, itself, shall approve the agreement in the
31following manner:

32(1) The Executive Officer and Chief Counsel of the Franchise
33Tax Board shall recommend and submit the voluntary disclosure
34agreement to the Franchise Tax Board for approval.

35(2) Each voluntary disclosure agreement recommendation shall
36be submitted in a manner as to maintain the anonymity of the
37taxpayer applying for the voluntary disclosure agreement.

38(3) A recommendation for approval of a voluntary disclosure
39agreement shall be approved or disapproved by the Franchise Tax
P6    1Board, itself, within 45 days of the submission of that
2recommendation to the board.

3(4) A recommendation of a voluntary disclosure agreement that
4is not either approved or disapproved by the board within 45 days
5of the submission of that recommendation shall be deemed
6approved.

7(5) Disapproval of a recommendation of a voluntary disclosure
8agreement shall be made only by a majority vote of the Franchise
9Tax Board.

10(6) The members of the Franchise Tax Board shall not
11participate in any voluntary disclosure agreement except as
12provided in this subdivision.

13(d) The voluntary disclosure agreement entered into by the
14Franchise Tax Board and thebegin insert qualified small business,end insert qualified
15entity, qualified shareholder, qualified member, or qualified
16beneficiary as provided for in subdivision (a) shall to the extent
17applicable specify that:

18(1) The Franchise Tax Board shall with respect to abegin insert qualified
19small business,end insert
qualified entity, qualified shareholder, qualified
20member, or qualified beneficiary, except as provided in paragraph
21(4), (6), or (9) of subdivision (a) of Section 19192:

22(A) Waive its authority under this part, Part 10 (commencing
23with Section 17001), or Part 11 (commencing with Section 23001)
24to assess or propose to assess taxes, additions to tax, fees, or
25penalties with respect to each taxable year ending prior to six years
26from the signing date of the voluntary disclosure agreement.

27(B) With respect to each of the six taxable years ending
28immediately preceding the signing date of the voluntary disclosure
29agreement, based on its discretion, agree to waive any or all of the
30following:

31(i) A penalty related to a failure to make and file a return, as
32provided in Section 19131.

33(ii) A penalty related to a failure to pay any amount due by the
34date prescribed for payment, as provided in Section 19132.

35(iii) An addition to tax related to an underpayment of estimated
36tax, as provided in Section 19136.

37(iv) A penalty related to Section 6810 or subdivision (a) of
38Section 8810 of the Corporations Code, as provided in Section
3919141 of this code.

P7    1(v) A penalty related to a failure to furnish information or
2maintain records, as provided in Section 19141.5.

3(vi) An addition to tax related to an underpayment of tax
4imposed under Part 11 (commencing with Section 23001), as
5provided in Section 19142.

6(vii) A penalty related to a partnership required to file a return
7under Section 18633, as provided in Section 19172.

8(viii) A penalty related to a failure to file information returns,
9as provided in Section 19183.

10(ix) A penalty related to relief from contract voidability, as
11provided in Section 23305.1.

12(2) The qualified entity, qualified shareholder, qualified member,
13or qualified beneficiary shall:

14(A) With respect to each of the six taxable years ending
15immediately preceding the signing date of the written agreement:

16(i) Voluntarily and fully disclose on thebegin insert qualified small businessend insertbegin insert
17orend insert
qualified entity’s application all material facts pertinent to the
18begin insert qualified small businessend insertbegin insert’,end insert qualified entity’s, shareholder’s,
19member’s, or beneficiary’s liability for any taxes imposed under
20Part 10 (commencing with Section 17001) or Part 11 (commencing
21with Section 23001).

22(ii) Except as provided in paragraph (3), within 30 days from
23the signing date of the voluntary disclosure agreement:

24(I) File all returns required under this part, Part 10 (commencing
25with Section 17001), or Part 11 (commencing with Section 23001).

26(II) Pay in full any tax, interest, fee, and penalties, other than
27those penalties specifically waived by the Franchise Tax Board
28under the terms of the voluntary disclosure agreement, imposed
29under this part, Part 10 (commencing with Section 17001), or Part
3011 (commencing with Section 23001) in a manner as may be
31prescribed by the Franchise Tax Board. Paragraph (1) of
32subdivision (f) of Section 23153 shall not apply to qualified entities
33admitted into the voluntary disclosure program.

34(B) Agree to comply with all franchise and income tax laws of
35this state in subsequent taxable years by filing all returns required
36and paying all amounts due under this part, Part 10 (commencing
37with Section 17001), or Part 11 (commencing with Section 23001).

38(3) The Franchise Tax Board may extend the time for filing
39returns and paying amounts due to 120 days from the signing date
40of the voluntary disclosure agreement or to the latest extended due
P8    1date of the return for a taxable year for which relief is granted,
2whichever is later.

3(e) An addition to tax under Section 19136 or 19142 shall not
4be made for any underpayment of estimated tax attributable to the
5underpayment of an installment of estimated tax due before the
6signing date of the voluntary disclosure agreement.

7(f) The amendments to this section made by Chapter 954 of the
8Statutes of 1996 shall apply to taxable years beginning on or after
9January 1, 1997.

10(g) The amendments to this section made by Chapter 543 of the
11Statutes of 2001 shall apply to voluntary disclosure agreements
12entered into on or after January 1, 2002.

13(h) The amendments to this section made by Chapter 543 of the
14Statutes of 2001 shall apply to voluntary disclosure agreements
15entered into on or after January 1, 2005.

16(i) The amendments to this section made by Chapter 296 of the
17Statutes of 2011 shall apply to voluntary disclosure agreements
18entered into on or after January 1, 2011.

19begin insert

begin insertSEC. 3.end insert  

end insert

begin insertSection 19192 of the end insertbegin insertRevenue and Taxation Codeend insertbegin insert is
20amended to read:end insert

21

19192.  

For purposes of this article, the following terms have
22the following meanings:

23(a) (1) “Qualified entity” means an entity that is all of the
24following:

25(A) A corporation, as defined in Section 23038, a limited
26liability company, as defined in subdivision (d) of Section 17941,
27begin insert limited partnership, as defined in Section 17935,end insert or a qualified
28trust, as defined in paragraph (7).

29(B) An entity, including any predecessors to the entity, that
30previously has never filed a return with the Franchise Tax Board
31pursuant to this part, Part 10 (commencing with Section 17001),
32or Part 11 (commencing with Section 23011).

33(C) An entity, including any predecessors to the entity, that
34previously has not been the subject of an inquiry by the Franchise
35Tax Board with respect to liability for any of the taxes imposed
36under Part 10 (commencing with Section 17001) or Part 11
37(commencing with Section 23001).

38(D) An entity that voluntarily comes forward prior to any
39unilateral contact from the Franchise Tax Board, makes application
40for a voluntary disclosure agreement in a form and manner
P9    1prescribed by the Franchise Tax Board, and makes a full and
2accurate statement of its activities in this state for the six
3immediately preceding taxable years.

4(2) (A) Notwithstanding paragraph (1), a qualified entity does
5not include any of the following:

6(i) An entity that is organized and existing under the laws of
7this state.

8(ii) An entity that is qualified or registered with the office of
9the Secretary of State.

10(iii) An entity that maintains and staffs a permanent facility in
11this state.

12(B) For purposes of this paragraph, the storing of materials,
13goods, or products in a public warehouse pursuant to a public
14warehouse contract does not constitute maintaining a permanent
15facility in this state.

16(3) “Qualified shareholder” means an individual that is all of
17the following:

18(A) A nonresident on the signing date of the voluntary disclosure
19agreement.

20(B) A shareholder of an “S” corporation (defined in Section
2123800) that has applied for a voluntary disclosure agreement under
22this article under which all material facts pertinent to the
23shareholder’s liability would be disclosed on that “S” corporation’s
24voluntary disclosure agreement as required under clause (i) of
25subparagraph (A) of paragraph (2) of subdivision (d) of Section
2619191.

27(4) Notwithstanding paragraph (3), subparagraph (B) of
28paragraph (1) of subdivision (d) of Section 19191 shall not apply
29to any of the six taxable years immediately preceding the signing
30date that the qualified shareholder was a California resident
31required to file a California tax return, nor to any penalties or
32additions to tax attributable to income other than the California
33source income from the “S” corporation that filed an application
34under this article.

35(5) “Qualified member” means an individual, corporation, or
36limited liability company that is all of the following:

37(A) (i) In the case of an individual, is a nonresident on the
38signing date of the voluntary disclosure agreement.

39(ii) In the case of a corporation or limited liability company, is
40not either of the following:

P10   1(I) Organized under the laws of this state.

2(II) Qualified or registered with the office of the Secretary of
3State.

4(B) A member of a limited liability company that has applied
5for a voluntary disclosure agreement under this article under which
6all material facts pertinent to the member’s liability would be
7disclosed on that limited liability company’s voluntary disclosure
8agreement as required under clause (i) of subparagraph (A) of
9paragraph (2) of subdivision (d) of Section 19191.

10(6) Notwithstanding paragraph (5), in the case of a qualified
11member who is an individual, subparagraph (B) of paragraph (1)
12of subdivision (d) of Section 19191 shall not apply to any of the
13six taxable years immediately preceding the signing date that the
14qualified member was a California resident required to file a
15California tax return, nor to any penalties or additions to tax
16attributable to income other than the California source income
17from the limited liability company that filed an application under
18this article.

19(7) “Qualified trust” means a trustbegin delete that meets both of the
20following:end delete
begin insert in which the administration of the trust has never been
21performed in California. For purposes of this paragraph,
22administrative activities performed in California would be deemed
23to be performed outside of California if those activities were
24inconsequential to the overall administration of the trust.end insert

begin delete

25(A) (i) The administration of the trust has never been performed
26in California.

27(ii) For purposes of this subparagraph, administrative activities
28performed in California would be deemed to be performed outside
29of California if those activities were inconsequential to the overall
30administration of the trust.

31(B) For six taxable years ending immediately preceding the
32signing date of the voluntary disclosure agreement, the trust has
33had no resident beneficiaries (other than a beneficiary whose
34interest in that trust is contingent; a beneficiary’s trust interest is
35not contingent if the trust has made any distribution to the resident
36beneficiary at any time during the six taxable years ending
37immediately preceding the signing date of the voluntary disclosure
38agreement).

end delete

39(8) “Qualified beneficiary” means an individual who is all of
40the following:

P11   1(A) A nonresident on the signing date of the voluntary disclosure
2agreement and a nonresident during each of the six taxable years
3ending immediately preceding the signing date of the voluntary
4disclosure agreement.

5(B) A beneficiary of a qualified trust that has applied for a
6voluntary disclosure agreement under this article under which all
7material facts pertinent to the beneficiary’s liability would be
8disclosed on that trust’s voluntary disclosure agreement as required
9under clause (i) of subparagraph (A) of paragraph (2) of subdivision
10(d) of Section 19191.

11(9) Notwithstanding paragraph (8), subparagraph (B) of
12paragraph (1) of subdivision (d) of Section 19191 shall not apply
13to any penalties or additions to tax attributable to income other
14than income from the trust that filed an application under this
15article.

begin insert

16
(10) “Qualified small business” means an entity with a total
17income of less than one million dollars ($1,000,000) in the previous
18taxable year.

end insert

19(b) “Signing date” of the voluntary disclosure agreement means
20the date on which a person duly authorized by the Franchise Tax
21Board signs the agreement.

22(c) The amendments to this section made by Chapter 954 of the
23Statutes of 1996 shall apply to taxable years beginning on or after
24January 1, 1997.

25(d) The amendments to this section made by Chapter 543 of the
26Statutes of 2001 shall apply to voluntary disclosure agreements
27entered into on or after January 1, 2002.

28(e) The amendments to this section made by the act adding this
29subdivision shall apply to voluntary disclosure agreements entered
30into on or after January 1, 2005.

31begin insert

begin insertSEC. 4.end insert  

end insert
begin insert

No reimbursement is required by this act pursuant to
32Section 6 of Article XIII B of the California Constitution because
33the only costs that may be incurred by a local agency or school
34district will be incurred because this act creates a new crime or
35infraction, eliminates a crime or infraction, or changes the penalty
36for a crime or infraction, within the meaning of Section 17556 of
37the Government Code, or changes the definition of a crime within
38the meaning of Section 6 of Article XIII B of the California
39Constitution.

end insert
begin delete
P12   1

SECTION 1.  

Article 4 (commencing with Section 7100) is
2added to Chapter 8 of Part 1 of Division 2 of the Revenue and
3Taxation Code
, to read:

4 

5Article 4.  Tax Penalty Waiver Program
6

 

7

7100.  

The board shall develop and administer a tax penalty
8waiver program for taxpayers subject to Part 1 (commencing with
9Section 6001), as provided in this article.

10

7100.2.  

The tax penalty waiver program shall be conducted
11for a three-month period beginning February 1, 2017 to April 30,
122017, inclusive, or during a timeframe ending no later than June
1330, 2017. The program shall apply to tax liabilities due and payable
14for tax reporting periods beginning before January 1, 2015.

15

7100.4.  

(a) For any taxpayer who meets the requirements of
16Section 7100.6:

17(1) The board shall waive all penalties imposed by this part, for
18the tax reporting periods for which a waiver is allowed for the
19nonreporting or underreporting of tax liabilities or the nonpayment
20of any taxes previously determined or proposed to be determined.

21(2)  Except as provided in subdivision (b), no criminal action
22shall be brought against the taxpayer, for the tax reporting periods
23for which a waiver is requested, for the nonreporting or
24underreporting of tax liabilities.

25(b) This section does not apply to violations of this part for
26which, as of the first day of the waiver period specified in Section
277100.2, (1) the taxpayer is on notice of a criminal investigation by
28a complaint having been filed against him or her or by written
29notice having been mailed to him or her that he or she is under
30criminal investigation, or (2) a court proceeding has already been
31initiated.

32(c)  No refund or credit shall be granted of any penalty paid
33prior to the time the taxpayer makes a request for a waiver pursuant
34to Section 7100.6.

35

7100.6.  

(a) This article shall apply to any taxpayer who, during
36the waiver period specified in Section 7100.2, meets all of the
37following:

38(1)  Is eligible to participate in the tax penalty waiver program.

P13   1(2) Files a completed waiver application with the board, signed
2under penalty of perjury, to participate in the tax penalty waiver
3program.

4(3) Within 60 days after the conclusion of the waiver period,
5does all of the following:

6(A) Files completed tax returns for all tax reporting periods for
7which he or she has not previously filed a tax return and files
8completed amended returns for all tax reporting periods for which
9he or she underreported his or her tax liability.

10(B) Pays in full the taxes and interest due for all periods for
11which a waiver is requested, or applies for an installment agreement
12under subdivision (b).

13(C) For taxpayers who have not paid in full any tax liabilities
14due and payable for tax reporting periods beginning before January
151, 2015, pays in full the taxes and interest due for each period for
16that portion of the proposed determination for each period for
17which a waiver is requested or applies for an installment payment
18agreement under subdivision (b).

19(4) In the case of any taxpayer that has filed for bankruptcy
20protection under Title 11 of the United States Code, submits an
21order from a Federal Bankruptcy Court allowing the taxpayer to
22participate in the waiver program.

23(b) The board may enter into an installment payment agreement
24in lieu of the complete payment required under subparagraph (B)
25of paragraph (3) of subdivision (a), but only if final payment under
26the terms of that installment payment agreement is due and is paid
27no later than June 30, 2018. The installment payment agreement
28shall include interest on the outstanding amount due at the rate
29prescribed by law. Failure by the taxpayer to fully comply with
30the terms of the installment payment agreement shall render the
31waiver of penalties null and void, unless the board determines that
32the failure was due to reasonable causes, and the total amount of
33tax, interest, and all penalties shall be immediately due and payable.

34(c) The application required under paragraph (2) of subdivision
35(a) shall be in the form and manner specified by the board, but in
36no case shall a mere payment of any taxes and interest due, in
37whole or in part, for any period otherwise eligible for a waiver
38under this part, be deemed to constitute an acceptable waiver
39application under this part. For purposes of the preceding sentence,
40the application of a refund from one period to offset a tax liability
P14   1for another period otherwise eligible for a waiver shall not be
2allowed without the filing of a waiver application under this part.

3

7100.8.  

The board shall issue forms and instructions and take
4other actions needed to implement this article. The provisions
5contained in subdivision (c) of Section 19745, to the extent feasible
6and practical, shall also apply to the board.

7

7100.10.  

The board shall adequately publicize the tax penalty
8waiver program so as to maximize public awareness of the
9participation in the program. The board shall coordinate to the
10highest degree possible its publicity efforts and other actions taken
11in implementing this article with similar programs administered
12by the Franchise Tax Board.

13

7100.12.  

Subdivision (b) of Section 19746, to the extent
14feasible and practical, shall also apply to the board.

15

SEC. 2.  

Chapter 9.3 (commencing with Section 19740) is added
16to Part 10.2 of Division 2 of the Revenue and Taxation Code, to
17read:

18 

19Chapter  9.3. Tax Penalty and Fee Waiver Program
20

 

21

19740.  

The Franchise Tax Board shall administer a tax penalty
22and fee waiver program for taxpayers subject to Part 10
23(commencing with Section 17001) and Part 11 (commencing with
24Section 23001), as provided in this chapter.

25

19741.  

The tax penalty and fee waiver program shall be
26conducted during a three-month period beginning February 1,
272017, to April 31, 2017, inclusive, or during a timeframe ending
28no later than June 30, 2017, pursuant to Section 19743. The
29program shall apply to tax liabilities for taxable years beginning
30before January 1, 2015.

31

19742.  

(a) For any taxpayer who meets each of the
32requirements of Section 19743 both of the following apply:

33(1) The Franchise Tax Board shall waive all unpaid penalties
34and fees imposed by this part for each taxable year for which a
35waiver is allowed, but only to the extent of the amount of any
36penalty or fee that is owed as a result of previous nonreporting or
37underreporting of tax liabilities or prior nonpayment of any taxes
38previously assessed or proposed to be assessed for that taxable
39year.

P15   1(2) Except as provided in subdivision (b), no criminal action
2shall be brought against the taxpayer for the taxable years for which
3a waiver is allowed for the nonreporting or underreporting of tax
4liabilities or the nonpayment of any taxes previously assessed or
5proposed to be assessed.

6(b) This chapter shall not apply to violations of this part, for
7which, as of February 1, 2017, any of the following applies:

8(1) The taxpayer is on notice of a criminal investigation by a
9complaint having been filed against the taxpayer.

10(2) The taxpayer is under criminal investigation.

11(3) A court proceeding has already been initiated.

12(c) This section shall not apply to any nonreported or
13underreported tax liability amounts attributable to tax shelter items
14that could have been reported under either the voluntary compliance
15initiative under Chapter 9.5 (commencing with Section 19751),
16the Internal Revenue Service’s Offshore Voluntary Compliance
17Initiative described in Revenue Procedure 2003-11, or the Internal
18Revenue Service’s Voluntary Disclosure Program.

19(d) No refund or credit shall be granted with respect to any
20penalty or fee paid with respect to a taxable year prior to the time
21the taxpayer makes a request for a waiver for that taxable year
22pursuant to Section 19743.

23(e) Notwithstanding Chapter 6 (commencing with Section
2419301), a taxpayer may not file a claim for refund or credit for any
25amounts paid in connection with the tax penalty and fee waiver
26program under this chapter.

27

19743.  

(a) This chapter shall apply to any taxpayer who
28satisfies all of the following requirements:

29(1) During the tax penalty and fee waiver program period
30specified in Section 19741, is eligible to participate in the waiver
31program.

32(2) During the tax penalty and fee waiver program period
33specified in Section 19741, files a completed waiver application
34with the Franchise Tax Board, signed under penalty of perjury,
35electing to participate in the tax penalty and fee waiver program.

36(3) Within 60 days after the conclusion of the waiver period,
37does the following:

38(A) (i)   For any taxable year eligible for the tax penalty and fee
39 waiver program where the taxpayer has not filed any required
40return, files a completed original tax return for that year.

P16   1(ii) For any taxable year eligible for the tax penalty and fee
2waiver program where the taxpayer filed a return but underreported
3tax liability on that return, files an amended return for that year.

4(B) Pays in full any taxes and interest due for each taxable year
5described in clauses (i) and (ii) of subparagraph (A), as applicable,
6for which a waiver is requested, or applies for an installment
7payment agreement under subdivision (b). For taxpayers who have
8not paid in full any taxes previously proposed to be assessed, pays
9in full the taxes and interest due for that portion of the proposed
10assessment for each taxable year for which a waiver is requested
11or applies for an installment payment agreement under subdivision
12(b).

13(4) For purposes of complying with the full payment provisions
14of paragraph (3) of subdivision (a), if the full amount due is paid
15within the period set forth in paragraph (3) of subdivision (c) of
16Section 19101 after the date the Franchise Tax Board mails a notice
17resulting from the filing of a waiver application or the full amount
18is paid within 60 days after the conclusion of the tax penalty and
19fee waiver program period, the full amount due shall be treated as
20paid during the waiver period.

21(5) In the case of any taxpayer that has filed for bankruptcy
22protection under Title 11 of the United States Code, submits an
23order from a Federal Bankruptcy Court allowing the taxpayer to
24participate in the waiver program.

25(b) (1)   For purposes of complying with the full payment
26provisions of subparagraph (B) of paragraph (3) of subdivision
27(a), the Franchise Tax Board may enter into an installment payment
28agreement, but only if final payment under the terms of that
29installment payment agreement is due and is paid no later than
30June 30, 2018.

31(2) Any installment payment agreement authorized by this
32subdivision shall include interest on the outstanding amount due
33at the rate prescribed in Section 19521.

34(3) Failure by the taxpayer to fully comply with the terms of an
35installment payment agreement under this subdivision shall render
36the waiver of penalties and fees under Section 19732 null and void,
37unless the Franchise Tax Board determines that the failure was
38due to reasonable cause and not due to willful neglect.

P17   1(4) In the case of any failure described under paragraph (3), the
2total amount of tax, interest, fees, and all penalties shall become
3immediately due and payable.

4(c) (1)   The application required under paragraph (2) of
5subdivision (a) shall be in the form and manner specified by the
6Franchise Tax Board, but in no case shall a mere payment of any
7taxes and interest due, in whole or in part, for any taxable year
8otherwise eligible for a waiver under this part, be deemed to
9constitute an acceptable waiver application under this part. For
10purposes of the prior sentence, the application of a refund from
11one taxable year to offset a tax liability from another taxable year
12otherwise eligible for a waiver shall not, without the filing of a
13waiver application, be deemed to constitute an acceptable waiver
14application under this part.

15(2) The Legislature specifically intends that the Franchise Tax
16Board, in administering the waiver application requirement under
17this part, make the waiver application process as streamlined as
18possible to ensure participation in the waiver program will be
19available to as many taxpayers as possible without otherwise
20compromising the Franchise Tax Board’s ability to enforce and
21collect the taxes imposed under Part 10 (commencing with Section
2217001) and Part 11 (commencing with Section 23001).

23(d) Upon the conclusion of the tax penalty and fee waiver
24program period, the Franchise Tax Board may propose a deficiency
25upon any return filed pursuant to subparagraph (A) of paragraph
26(3) of subdivision (a), impose penalties and fees, or initiate criminal
27action under this part with respect to the difference between the
28amount shown on that return and the correct amount of tax. This
29action shall not invalidate any waivers previously granted under
30Section 19732.

31(e) All revenues derived pursuant to subdivision (c) shall be
32subject to Sections 19602 and 19604.

33

19744.  

Notwithstanding any other provision of this chapter, if
34any overpayment of tax shown on an original or amended return
35filed under this article is refunded or credited within 180 days after
36the return is filed, no interest shall be allowed under Section 19340
37on that overpayment.

38

19745.  

(a) The Franchise Tax Board may issue forms,
39instructions, notices, rules, or guidelines, and take any other
40necessary actions, needed to implement this chapter, specifically
P18   1including any forms, instructions, notices, rules, or guidelines that
2specify the form and manner of any acceptable form of waiver
3application described in Section 19743.

4(b) Chapter 3.5 (commencing with Section 11340) of Part 1 of
5Division 3 of Title 2 of the Government Code does not apply to
6any standard, criterion, procedure, determination, rule, notice, or
7guideline established or issued by the Franchise Tax Board
8pursuant to this chapter.

9

19746.  

(a) The Franchise Tax Board shall conduct a public
10outreach program and adequately publicize the tax penalty and fee
11waiver program so as to maximize public awareness and to make
12taxpayers aware of the program. In addition, the Franchise Tax
13Board shall make taxpayers aware of the new and increased
14penalties associated with taxpayer failure to participate in the tax
15penalty and fee waiver program.

16(b) The Franchise Tax Board shall make reasonable efforts to
17identify taxpayer liabilities and, to the extent practicable, will send
18written notice to taxpayers of their eligibility for the tax penalty
19and fee waiver program. However, failure of the Franchise Tax
20Board to notify a taxpayer of the existence or correct amount of a
21tax liability eligible for waiver shall not preclude the taxpayer from
22participating in the tax penalty and fee waiver program.

23

SEC. 3.  

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

25

19777.5.  

(a) There shall be added to the tax for each taxable
26year for which amnesty could have been requested:

27(1) For amounts that are due and payable on the last day of the
28amnesty period, an amount equal to 50 percent of the accrued
29interest payable under Section 19101 for the period beginning on
30the last date prescribed by law for the payment of that tax
31(determined without regard to extensions) and ending on the last
32day of the amnesty period specified in Section 19731.

33(2) For amounts that become due and payable after the last date
34of the amnesty period, an amount equal to 50 percent of the interest
35computed under Section 19101 on any final amount, including
36 final deficiencies and self-assessed amounts, for the period
37beginning on the last date prescribed by law for the payment of
38the tax for the year of the deficiency (determined without regard
39to extensions) and ending on the last day of the amnesty period
40specified in Section 19731.

P19   1(3) For purposes of paragraph (2), Sections 19107, 19108,
219110, and 19113 shall apply in determining the amount computed
3under Section 19101.

4(b) The penalty imposed by this section is in addition to any
5other penalty imposed under Part 10 (commencing with Section
617001), Part 11 (commencing with Section 23001), or this part.

7(c) This section does not apply to any amounts that are treated
8as paid during the amnesty program period under paragraph (4)
9of subdivision (a) of Section 19733 or paragraph (1) of subdivision
10(b) of Section 19733.

11(d) Article 3 (commencing with Section 19031), (relating to
12deficiency assessments) shall not apply with respect to the
13assessment or collection of any penalty imposed by subdivision
14(a).

15(e) (1) Notwithstanding Chapter 6 (commencing with Section
1619301), a taxpayer may not file a claim for refund or credit for any
17amounts paid in connection with the penalty imposed in subdivision
18(a), except as provided in paragraph (2).

19(2) A taxpayer may file a claim for refund for any amounts paid
20to satisfy a penalty imposed under subdivision (a) on the grounds
21that the amount of the penalty was not properly computed by the
22Franchise Tax Board.

23(f) Notwithstanding Section 18415, the amendments made to
24this section by the act adding this subdivision shall apply to
25penalties imposed under paragraph (2) of subdivision (a) after
26March 31, 2005.

27(g) This section shall not apply to the waiver period provided
28for in Part 9.4 (commencing with Section 19740).

29

SEC. 4.  

No reimbursement is required by this act pursuant to
30Section 6 of Article XIII B of the California Constitution because
31the only costs that may be incurred by a local agency or school
32district will be incurred because this act creates a new crime or
33infraction, eliminates a crime or infraction, or changes the penalty
34for a crime or infraction, within the meaning of Section 17556 of
35the Government Code, or changes the definition of a crime within
36the meaning of Section 6 of Article XIII B of the California
37Constitution.

end delete


O

    98