BILL NUMBER: AB 697 AMENDED
BILL TEXT
AMENDED IN SENATE JUNE 1, 2009
AMENDED IN ASSEMBLY APRIL 14, 2009
INTRODUCED BY Assembly Member Charles Calderon
FEBRUARY 26, 2009
An act to amend Section 19136.8 and repeal
Section 19138 of the Revenue and Taxation Code, relating to
taxation.
LEGISLATIVE COUNSEL'S DIGEST
AB 697, as amended, Charles Calderon. Income and
corporation Corporation taxes:
underpayments. underpayments: penalty.
The Corporation Tax Law, for taxable years beginning on or after
January 1, 2003, imposes a penalty on a tax payer with an
understatement of tax in excess of $1,000,000 in an amount equal to
20% of that understatement.
This bill would limit the imposition of the penalty to taxable
years beginning before January 1, 2008, and would repeal the penalty
provisions on December 1, 2010.
Existing income and corporation tax laws impose a penalty for
specified underpayments of tax, except for, among other things, an
underpayment created or increased by the disallowance of a specified
hiring credit.
This bill would make clarifying changes to that provision.
Vote: majority. Appropriation: no. Fiscal committee: no
yes . State-mandated local program: no.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. Section 19138 of the Revenue
and Taxation Code is amended to read:
19138. (a) (1) A taxpayer subject to the tax imposed under Part
11 (commencing with Section 23001) with an understatement of tax in
excess of one million dollars ($1,000,000) for any taxable year shall
be subject to the penalty imposed under by
this section.
(2) For taxpayers that are required to be included in a combined
report under Section 25101 or authorized to be included in a combined
report under Section 25101.15, the threshold amount prescribed in
paragraph (1) shall apply to the aggregate amount of tax liability
under Part 11 (commencing with Section 23001) for all taxpayers that
are required to be or authorized to be included in a combined report.
(b) The penalty under this section shall be an amount equal to 20
percent of any understatement of tax. For purposes of this section,
"understatement of tax" means the amount by which the tax imposed by
Part 11 (commencing with Section 23001) exceeds the amount of tax
shown on an original return or shown on an amended return filed on or
before the original or extended due date of the return for the
taxable year. For any taxable year beginning before January 1, 2008,
the amount of tax paid on or before May 31, 2009, and shown on an
amended return filed on or before May 31, 2009, shall be treated as
the amount of tax shown on an original return for purposes of this
section.
(c) The penalty imposed by this section shall be in addition to
any other penalty imposed under Part 11 (commencing with Section
23001) or this part.
(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) A refund or credit for any amounts paid to satisfy a penalty
imposed under by this section may be
allowed only on the grounds that the amount of the penalty was not
properly computed by the Franchise Tax Board.
(f) (1) No penalty shall be imposed under this section on any
understatement to the extent that the understatement is attributable
to a change in law that is enacted, promulgated, issued, or becomes
final after the earlier of either of the following dates:
(A) The date the taxpayer files the return for the taxable year
for which the change is operative.
(B) The extended due date for the return of the taxpayer for the
taxable year for which the change is operative.
(2) For purposes of this subdivision, a "change of law" means a
statutory change or an interpretation of law or rule of law by
regulation, legal ruling of counsel, within the meaning of
subdivision (b) of Section 11340.9 of the Government Code, or a
published federal or California court decision.
(3) The Franchise Tax Board shall implement this subdivision in a
reasonable manner.
(g) No penalty shall be imposed under by
this section to the extent that a taxpayer's understatement is
attributable to the taxpayer's reasonable reliance on written advice
of the Franchise Tax Board, but only if the written advice was a
legal ruling by the Chief Counsel, within the meaning of paragraph
(1) of subdivision (a) of Section 21012.
(h) This section shall apply to each taxable year beginning on or
after January 1, 2003, and before January 1, 2008, for
which the statute of limitations on assessment has not expired.
(i) This section shall remain in effect only until December 1,
2010, and as of that date is repealed.
SECTION 1. Section 19136.8 of the Revenue and
Taxation Code, as added by Section 5 of Chapter 10 of the 3rd
Extraordinary Session of the Statutes of 2009, is amended to read:
19136.8. (a) No addition to tax shall be made under Section 19136
with respect to any underpayment of an installment to the extent
that the underpayment was created or increased by the disallowance of
a credit under subdivision (g) of Section 17053.80.
(b) No addition to tax shall be made under Section 19142 with
respect to any underpayment of an installment to the extent that the
underpayment was created or increased by the disallowance of a credit
under subdivision (g) of Section 23623.
(c) The Franchise Tax Board shall adopt procedures, forms, and
instructions necessary to implement this section in a reasonable
manner.