BILL NUMBER: AB 2896	CHAPTERED  09/12/00

	CHAPTER   414
	FILED WITH SECRETARY OF STATE   SEPTEMBER 12, 2000
	APPROVED BY GOVERNOR   SEPTEMBER 11, 2000
	PASSED THE SENATE   AUGUST 22, 2000
	PASSED THE ASSEMBLY   MAY 18, 2000
	AMENDED IN ASSEMBLY   APRIL 11, 2000

INTRODUCED BY   Committee on Revenue and Taxation (Knox (Chair),
Alquist, Aroner, Ducheny, Honda, and Romero)

                        MARCH 9, 2000

   An act to amend Sections 19033 and 21007 of the Revenue and
Taxation Code, relating to taxation.


	LEGISLATIVE COUNSEL'S DIGEST


   AB 2896, Committee on Revenue and Taxation.  Personal Income and
Bank and Corporation Tax Laws:  deficiencies.
   Existing law requires the Franchise Tax Board to mail notice to
the taxpayer of any deficiency proposed to be assessed on tax returns
filed pursuant to the Personal Income and Bank and Corporation Tax
Laws.
   This bill would require the Franchise Tax Board to request the
taxpayer to provide a paper or electronic copy of the return if the
return or related electronically stored return data has been
destroyed or cannot be located, and would require the board to
include an appropriate statement in the tax booklets informing
taxpayers they may be requested by the board to furnish a copy of
California or federal tax returns that are the subject of or related
to a federal audit.


THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:


  SECTION 1.  It is the intent of the Legislature that the amendments
made by this act is to clarify the power of the Franchise Tax Board
to issue deficiency assessments after the holding in John E. Wertin,
et al. v.  Franchise Tax Board, (1998) 68 Cal.App.4th 961.
  SEC. 2.  Section 19033 of the Revenue and Taxation Code is amended
to read:
   19033.  (a) If the Franchise Tax Board determines that the tax
disclosed by the taxpayer on an original or amended return, including
an amended return reporting federal adjustments pursuant to Section
18622, is less than the tax disclosed by its examination, it shall
mail notice to the taxpayer of the deficiency proposed to be
assessed.  In no case shall the determination of the deficiency be
arbitrary or without foundation.
   (b) (1) Except as provided in paragraph (2), the Franchise Tax
Board, in connection with the determination described in subdivision
(a), shall examine the original or amended return or related
electronically stored return data.
   (2) If the return or return data described in paragraph (1) has
been destroyed or cannot be located after reasonable effort, the
Franchise Tax Board shall request the taxpayer to provide a paper or
electronic copy of the return.  If the taxpayer fails to provide a
copy within 30 days, which may be extended an additional 30 days for
reasonable cause, from the date of the request, paragraph (1) shall
not apply.
   (c) As used in this section, "electronically stored return data"
means an electronic record of line items from an original or amended
return and accompanying schedules that is routinely created as a
return is processed.
   (d) The amendments to this section made by the act adding this
subdivision shall apply to notices of deficiencies proposed to be
assessed issued on or after January 1, 2001.
  SEC. 3.  Section 21007 of the Revenue and Taxation Code is amended
to read:
   21007.  The board shall prepare and publish brief but
comprehensive statements in simple and nontechnical language which
explain procedures, remedies, and the rights and obligations of the
board and taxpayers.  As appropriate, these statements shall be
provided to taxpayers with the initial notice of audit, the notice of
proposed additional taxes, any subsequent notice of tax due, or
other substantive notices.  Additionally, the board shall include an
appropriate statement in the tax booklets which are mailed annually
to individuals and corporations.  The board also shall include an
appropriate statement in the tax booklets informing taxpayers they
may be requested by the board to furnish a copy of California or
federal tax returns that are the subject of or related to a federal
audit.