California Legislature—2013–14 Regular Session

Assembly Bill No. 1777

Introduced by Assembly Member Quirk-Silva

February 18, 2014

An act to repeal and add Section 19132.5 of the Revenue and Taxation Code, relating to taxation, and making an appropriation therefor.

LEGISLATIVE COUNSEL’S DIGEST

AB 1777, as introduced, Quirk-Silva. Income taxation: timeliness penalty: abatement.

Existing law imposes penalties when a taxpayer fails to timely file an income tax return or fails to timely pay the tax due as shown on, or as required to be shown on, the tax return, unless it is shown that the failure is due to reasonable cause and not due to willful neglect.

The bill would require the Franchise Tax Board, upon taxpayer request, to abate a failure-to-file or failure-to-pay timeliness penalty when specified circumstances are met, including where the taxpayer has paid, or is in a current arrangement to pay, all tax currently due and the Franchise Tax Board has not imposed a timeliness penalty in the year of the request or prior 4 years. The bill would make a continuous appropriation from the General Fund to the Franchise Tax Board in those amounts necessary to make payments to those taxpayers who have paid the penalty that is being abated before the effective date of this bill.

The bill would make a legislative finding and declaration regarding the public purpose served by the bill.

Vote: ²⁄₃. Appropriation: yes. Fiscal committee: yes. State-mandated local program: no.

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

SECTION 1.  

Section 19132.5 of the Revenue and Taxation
Code is repealed.

begin delete

19132.5.  

(a) In the case of a qualified taxpayer, no penalty
shall be assessed under Section 19132 if the return is filed timely
(not later than the extended due date granted under Section 18567
or 18604) and the tax required to be paid on or before the due date
of the return, without regard to extension, is paid within the
following time:

(1) In the case of an individual, partnership, or fiduciary, within
six months of the original due date of the return.

(2) In the case of a corporation, within seven months of the
original due date of the return.

(b) Any penalty imposed under Section 19132 shall be assessed
from the original due date of the return if the taxpayer fails to pay
the tax within the time specified in this section.

(c) This section shall apply to payment of the amount shown as
tax on the original returns required to be filed during calendar year
1994.

(d) For purposes of this section, “qualified taxpayer” means any
corporation, fiduciary, partnership, or individual taxpayer to whom
one of the following applies as a result of the Northridge
earthquake of January 1994, any related aftershock, or any related
casualty:

(1) The qualified taxpayer sustained any significant property
loss.

(2) The qualified taxpayer suffered a loss of employment due
to property damage suffered by his or her employer.

(3) The qualified taxpayer realized significant loss of business
income from a business located within the Northridge earthquake
area.

end delete

SEC. 2.  

Section 19132.5 is added to the Revenue and Taxation
Code, to read:

19132.5.  

(a) (1) A taxpayer may elect to request abatement
of a timeliness penalty under this section for a timeliness penalty
that has been considered and rejected for abatement, waiver, or
rescission pursuant to the provisions of the section under which
the penalty is imposed.

(2) A taxpayer may, in lieu of requesting consideration for
abatement, waiver, or recission pursuant to the provisions of the
section under which the timeliness penalty is imposed, instead
request abatement of a timeliness penalty under this section.

(b) If a taxpayer described in subdivision (a) requests, either
orally or in writing, the abatement of a timeliness penalty pursuant
to this section, the timeliness penalty shall be abated if all of the
following apply:

(1) The taxpayer has not previously been required to file a
California return under Part 10 (commencing with Section 17001),
this part, or Part 11 (commencing with Section 23001), or no other
timeliness penalty has been imposed by the Franchise Tax Board
in the calendar year of the request for abatement or in the prior
four tax years.

(2) The taxpayer has filed all returns required under Part 10
(commencing with Section 17001), this part, or Part 11
(commencing with Section 23001), as of the date of the taxpayer’s
request for abatement.

(3) Excluding the timeliness penalty that is the subject of the
abatement request, the taxpayer has paid in full, or arranged to pay
pursuant to an installment agreement, any tax, penalties, fees, and
interest due for all currently required returns and the taxpayer is
current with all installment payments.

(c) For purposes of this section, “timeliness penalty” means a
penalty imposed under Section 19131, 19132, 19172, or 19172.5.

(d) For purposes of this section:

(1) A timeliness penalty imposed and subsequently abated due
to a determination of reasonable cause or reasonable cause and
not willful neglect with respect to the taxpayer or the taxpayer’s
spouse, shall be considered to have not been imposed.

(2) A timeliness penalty is considered imposed on the original
due date of the return for the taxable year for which the penalty is
imposed.

(3) If a taxpayer requests abatement for more than one taxable
year and two or more taxable years would be eligible for abatement
under this section, then only the penalty for the earliest taxable
year shall be abated.

(4) This section shall apply to requests for abatement made
before, on, or after the effective date of the act adding this section.

(e) The Franchise Tax Board may issue any regulations
necessary or appropriate to implement this section.

(f) Notwithstanding Section 13340 of the Government Code,
and without regard to fiscal year, there is hereby continuously
appropriated from the General Fund to the Franchise Tax Board
those amounts necessary to make the payments required by the
act adding this subdivision with respect to the abatement of
penalties paid before the effective date of the act adding this
subdivision.

SEC. 3.  

The Legislature finds and declares that the abatement
by this act of timeliness penalties with respect to the abatement of
penalties paid before the effective date of the act adding this
subdivision, serves a public purpose and does not constitute a gift
of public funds within the meaning of Section of Article XVI of
the California Constitution.