19131.
(a) If any taxpayer fails to make and file
a return required by this part on or before the due date of the
return or the due date as extended by the Franchise Tax Board, then,
unless it is shown that the failure is due to reasonable cause and
not due to willful neglect, 5 percent of the tax shall be added
to the tax for each month or fraction thereof elapsing between the
due date of the return (determined without regard to any extension
of time for filing) and the date on which filed, but the total penalty
shall not exceed 25 percent of the tax. In the case of a commencing
corporation, the penalty shall apply to all tax accruable on the
due date of the return. The penalty so added to the tax shall be
due and payable upon notice and demand from the Franchise Tax Board.
(b) In the case of an individual or fiduciary
who fails to file a return of tax required by this part within 60
days of the date prescribed for filing of that return (determined
with regard to any extension of time for filing), unless it is shown
that the failure is due to reasonable cause and not due to willful
neglect, this penalty shall not be less than the lesser of one hundred
dollars ($100) or 100 percent of the amount of tax required to be
shown on the return.
(c) For purposes of this section, the amount
of tax required to be shown on the return shall be reduced by the
amount of any part of the tax which is paid on or before the date
prescribed for payment of the tax and by the amount of any credit
against the tax which may be claimed upon the return.
(d) If any failure to file any return is fraudulent,
subdivision
(a) shall be applied by:
(1) Substituting "15 percent" for "5
percent," and
(2) Substituting "75 percent" for "25
percent."
(e) This section shall not apply to any failure
to pay any estimated tax required by Section 19025 or 19136.
Return to Voluntary Disclosure
19132.
(a) (1) Unless it is shown that the failure
is due to reasonable cause and not due to willful neglect, a penalty
computed in accordance with paragraph (2) is hereby imposed in the
case of failure to pay any of the following:
(A) The amount shown as tax on any return on
or before the date prescribed for payment of that tax determined
with regard to any extension of time for payment.
(B) Any amount in respect of any tax required
to be shown on a return which is not so shown including an assessment
made pursuant to Section 19051 within 15 days of the date of the
notice and demand therefor.
(C) The amount required to be paid by Section
19021, if applicable, that is not paid.
(D) The amount required to be paid by Section
17941 or 23091, if applicable, that is not paid.
(E) The amount required to be paid by Section
17948 or 23097, if applicable, that is not paid.
(2) The penalty imposed under paragraph (1) shall
consist of both of the following:
(A) Five percent of the total tax unpaid as defined
in subdivision (c).
(B) An amount computed at the rate of 0.5 percent
per month of the "remaining tax" as defined in subdivision
(d) for each additional month or fraction thereof not to exceed
40 months during which the "remaining tax" is greater
than zero.
(3) The aggregate amount of penalty imposed by
this subdivision shall not exceed 25 percent of the total unpaid
tax and shall be due and payable upon notice and demand by the Franchise
Tax Board. The tender of a check or money order does not constitute
payment of the tax for purposes of this section unless the check
or money order is paid on presentment.
(b) The penalty prescribed by subdivision (a)
shall not be assessed if, for the same taxable year, the sum of
any penalties imposed under Section 19131 relating to failure
to file return and Section 19133 relating to failure to file return
after demand is equal to or greater than the subdivision (a) penalty.
In the event the penalty imposed under subdivision (a) is greater
than the sum of any penalties imposed under Sections 19131
and 19133, the penalty imposed under subdivision (a) shall be the
amount which exceeds the sum of any penalties imposed under Sections
19131 and 19133.
(c) For purposes of this section, total tax unpaid
means the amount of tax shown on the return reduced by both of the
following:
(1) The amount of any part of the tax which is
paid on or before the date prescribed for payment of the tax.
(2) The amount of any credit against the tax
which may be claimed upon the return.
(d) For purposes of this section, "remaining
tax" means total tax unpaid reduced by the amount of any payment
of the tax.
(e) If the amount required to be shown as a tax
on a return is less than the amount shown as tax on that return,
subdivisions (a), (c), and (d) shall be applied by substituting
that lower amount.
(f) No interest shall accrue on the portion of
the penalty prescribed in subparagraph (B) of paragraph (2) of subdivision
(a).
(g) The amendments made by the act adding this
subdivision are operative for notices issued on or after January
1, 1998.
Return to Voluntary Disclosure
19136.
(a) Section 6654 of the Internal Revenue Code,
relating to failure by an individual to pay estimated income tax,
shall apply, except as otherwise provided.
(b) Section 6654(a)(1) of the Internal Revenue
Code is modified to refer to the rate determined under Section
19521 in lieu of Section 6621 of the Internal Revenue Code.
(c) (1) For purposes of Section 6654(d) of the
Internal Revenue Code, relating to the amount of required
installments, any reference to "90 percent" is modified
to read "80 percent."
(2) Section 6654(d)(2)(C)(ii) of the Internal
Revenue Code, relating to applicable percentages, is modified
as follows:
| In the case of the following The applicable required installments: | The applicable percentage is: |
| 1st ................................................................................................
20 2nd ............................................................................................... 40 3rd ................................................................................................ 60 4th ................................................................................................ 80 |
(3) The
annualized income installment, determined under Section 6654(d)(2)
of the Internal Revenue Code, shall not include "alternative
minimum taxable income" or "adjusted self-employment
income."
(d) (1) Section 6654(e)(1) of the Internal
Revenue Code, relating to exceptions where the tax is
a small amount, shall not apply.
(2) No addition to the tax shall be imposed
under this section if any of the following apply:
(A) The tax imposed under Section 17041 or
17048 for the preceding taxable year, minus the sum of any credits
against the tax provided by Part 10 (commencing with Section
17001) or this part, or the tax computed under Section 17041
or 17048 upon the estimated income for the taxable year, minus
the sum of any credits against the tax provided by Part 10 (commencing
with Section 17001) or this part, is less than two hundred dollars
($200), except in the case of a separate return filed by a married
person the amount shall be less than one hundred dollars ($100).
(B) Eighty percent or more of the tax imposed
under Section 17041 or 17048 for the preceding taxable year,
less any credits against the tax other than the credit allowed
under Section 19002, was paid by withholding pursuant to Section
18662 or 18666 of this code or Section 13020 of the Unemployment
Insurance Code.
(C) Eighty percent or more of the estimated
tax for the taxable year will be paid by withholding of tax
pursuant to Section 18662 or 18666 of this code or Section
13020 of the Unemployment Insurance Code.
(D) Eighty percent or more of the adjusted
gross income for the taxable year consists of items subject
to withholding pursuant to Section 18662 or 18666 of this code
or Section 13020 of the Unemployment Insurance Code.
(3) Paragraph (2) shall not apply if the
employee files a false or fraudulent withholding exemption certificate
for the taxable year, or the taxpayer provides a false or fraudulent
document or documents to obtain reduced withholding at source
for the taxable year.
(e) Section 6654(f) of the Internal Revenue
Code shall not apply and for purposes of this section
the term "tax" means the tax imposed under Section
17041 or 17048, less any credits against the tax provided by
Part 10 (commencing with Section 17001) or this part, other
than the credit provided by subdivision (a) of Section 19002.
(f) The credit for tax withheld on wages,
as specified in Section 6654(g) of the Internal Revenue Code,
shall be the credit allowed under subdivision (a) of Section
19002.
(g) This section shall apply to a nonresident
individual.
(h) No addition to tax shall be made under
this section for any period before April 16, 1999, with respect
to any underpayment of an installment for the 1998 taxable year,
to the extent that the underpayment was created or increased
as the result of a distribution to which Section 408A(d)(3)
of the Internal Revenue Code, relating to rollovers from
an IRA other than a Roth IRA, applies.
Return to Voluntary Disclosure
19141. Upon certification by the Secretary of State pursuant to subdivision (a) of Section 2204 of the Corporations Code, the Franchise Tax Board shall assess a penalty of two hundred fifty dollars ($250). Upon certification by the Secretary of State pursuant to subdivision (a) of Section 6810 or subdivision (a) of Section 8810 of the Corporations Code, the Franchise Tax Board shall assess a penalty of fifty dollars ($50). Any such penalty shall be a final assessment due and payable at the time of assessment but no interest shall accrue thereon. The assessment shall be collected as other taxes, interest, and penalties are collected by the Franchise Tax Board unless the Secretary of State decertifies the name of the corporation as provided in subdivision (e) or (f) of Section 2204, subdivision (e) of Section 6810, or subdivision (e) of Section 8810 of the Corporations Code.
Return to Voluntary Disclosure
19141.5.
(a) (1) Section 6038A of the Internal Revenue
Code, relating to information with respect to certain foreign-owned
corporations, shall apply.
(2) A penalty shall be imposed under this part
for failure to furnish information or maintain records and that
penalty shall be determined in accordance with Section 6038A of
the Internal Revenue Code.
(3) Section 11314 of Public Law 101-508, relating
to application of amendments made by Section 7403 of the Revenue
Reconciliation Act of 1989 to taxable years beginning on or before
July 10, 1989, shall apply.
(4) Section 6038A(e) of the Internal Revenue
Code, relating to enforcement of requests for certain records,
is modified as follows:
(A) Each reference to Section 7602, 7603, or
7604 of the Internal Revenue Code shall instead refer to
Section 19504.
(B) Each reference to "summons" shall
instead refer to "subpoena duces tecum."
(C) Section 6038A(e)(4)(C) of the Internal Revenue
Code shall refer to "superior courts of the State of
California for the Counties of Los Angeles, Sacramento, and San
Diego, and for the City and County of San Francisco," instead
of "United States district court for the district in which
the person (to whom the summons is issued) resides or is found."
(b) In the case of a corporation, each of the
following shall apply:
(1) Section 6038B of the Internal Revenue Code,
relating to notice of certain transfers to foreign persons, shall
apply, except as otherwise provided.
(2) The information required to be filed with
the Franchise Tax Board under this subdivision shall be a copy of
the information required to be filed with the Internal Revenue Service.
(3) (A) A penalty shall be imposed under this
part for failure to furnish information and that penalty shall be
determined in accordance with Section 6038B of the Internal Revenue
Code, except as otherwise provided.
(B) Subparagraph (A) shall not apply to any transfer
described in Section 6038B(a)(1)(B) of the Internal Revenue Code.
(c) (1) Section 6038C of the Internal Revenue
Code, relating to information with respect to foreign corporations
engaged in United States business, shall apply.
(2) A penalty shall be imposed under this part
for failure to furnish information or maintain records and that
penalty shall be determined in accordance with Section 6038C of
the Internal Revenue Code.
(3) Section 6038C(d) of the Internal Revenue
Code, relating to enforcement of requests for certain records,
is modified as follows:
(A) Each reference to Section 7602, 7603, or
7604 of the Internal Revenue Code shall instead refer to
Section 19504.
(B) Each reference to "summons" shall
instead refer to "subpoena duces tecum."
(d) For purposes of this part, the information
required to be filed with the Franchise Tax Board pursuant to this
section shall be a copy of the information filed with the Internal
Revenue Service.
(e) For purposes of this section, each of the
following shall apply:
(1) Section 7701(a)(4) of the Internal Revenue
Code, relating to the term "domestic," shall apply.
(2) Section 7701(a)(5) of the Internal Revenue
Code, relating to the term "foreign," shall apply.
(3) Section 7701(a)(30) of the Internal Revenue
Code, relating to the term "United States person,"
shall apply. However, the term "United States person"
shall not include any corporation that is not subject to the tax
imposed under Chapter 2 (commencing with Section 23101), Chapter
2.5 (commencing with Section 23400), or Chapter 3 (commencing with
Section 23501), of Part 11.
Return to Voluntary Disclosure
19142. Except as provided in Sections 19147 and 19148, in the case of any underpayment of tax imposed under Part 11 (commencing with Section 23001) there shall be added to the tax for the income year an amount determined at the rate established under Section 19521 on the amount of the underpayment for the period of the underpayment.
Return to Voluntary Disclosure
19172.
(a) In addition to the penalty imposed by
Section 19706 (relating to willful failure to file return, supply
information, or pay tax), if any partnership required to file a
return under Section 18633 or 18633.5 for any taxable year does
either of the following:
(1) Fails to file the return at the time prescribed
therefor (determined with regard to any extension of time for filing).
(2) Files a return which fails to show the information
required under Section 18633 or 18633.5, that partnership shall
be liable for a penalty determined under subdivision (b) for each
month (or fraction thereof) during which that failure continues
(but not to exceed five months), unless it is shown that the failure
is due to reasonable cause.
(b) For purposes of subdivision (a), the amount
determined under this subdivision for any month is the product of
the following:
(1) Ten dollars ($10), multiplied by
(2) The number of persons who were partners in
the partnership during any part of the taxable year.
(c) The penalty imposed by subdivision (a) shall
be assessed against the partnership.
(d) Article 3 (commencing with Section 19031)
of this chapter (relating to deficiency assessments) shall not apply
with respect to the assessment or collection of any penalty imposed
by subdivision (a).
Return to Voluntary Disclosure
19183.
(a) (1) A penalty shall be imposed for failure
to file correct information returns, as required by this part, and
that penalty shall be determined in accordance with Section 6721
of the Internal Revenue Code.
(2) Section 6721(e) of the Internal Revenue Code
is modified as follows:
(A) To refer to subdivision (a) of Section 18641
in lieu of Section 6045(a) of the Internal Revenue Code.
(B) The reference to Section 6041A(b) of the
Internal Revenue Code shall not apply.
(b) (1) A penalty shall be imposed for failure
to furnish correct payee statements as required by this part, and
that penalty shall be determined in accordance with Section 6722
of the Internal Revenue Code.
(2) Section 6722(c) of the Internal Revenue Code
is modified as follows:
(A) To refer to subdivision (b) of Section 18641
in lieu of Section 6045(b) of the Internal Revenue Code.
(B) The references to Sections 6041A(b) and 6041A(e)
of the Internal Revenue Code shall not apply.
(c) A penalty shall be imposed for failure to
comply with other information reporting requirements under this
part, and that penalty shall be determined in accordance with Section
6723 of the Internal Revenue Code.
(d) (1) The provisions of Section 6724 of the
Internal Revenue Code relating to waiver, definitions, and
special rules, shall apply, except as otherwise provided.
(2) Section 6724(d)(1) is modified as follows:
(A) The following references are substituted:
(i) Section 18637, in lieu of Section 6041(a)
of the Internal Revenue Code.
(ii) Section 18638, in lieu of Section 6041A(a)
of the Internal Revenue Code.
(iii) Subdivision (a) of Section 18640, in lieu
of Section 6044(a) (1) of the Internal Revenue Code.
(iv) Subdivision (a) of Section 18641, in lieu
of Section 6045(a) of the Internal Revenue Code.
(v) Subdivision (a) of Section 18644, in lieu
of Section 6050A(a) of the Internal Revenue Code.
(vi) Subdivision (a) of Section 18647, in lieu
of Section 6052(a) of the Internal Revenue Code.
(B) References to Sections 4093(c)(4), 4093(e),
4101(d), 6041(b), 6041A(b), 6045(d), 6051(d), and 6053(c)(1) of
the Internal Revenue Code shall not apply.
(C) The term "information return" shall
also include the return required by paragraph (1) of subdivision
(h) of Section 18662.
(3) Section 6724(d)(2) is modified as follows:
(A) The following references are substituted:
(i) Subdivision (b) of Section 18505, in lieu
of Section 6034A of the Internal Revenue Code.
(ii) Subdivision (a) of Section 18636, in lieu
of Section 6039(a) of the Internal Revenue Code.
(iii) Subdivision (b) of Section 18640, in lieu
of Section 6044(e) of the Internal Revenue Code.
(iv) Subdivision (b) of Section 18641, in lieu
of Section 6045(b) of the Internal Revenue Code.
(v) Subdivision (b) of Section 18644, in lieu
of Section 6050A(b) of the Internal Revenue Code.
(vi) Subdivision (b) of Section 18647, in lieu
of Section 6052(b) of the Internal Revenue Code.
(B) References to Sections 4093(c)(4)(B), 6031(b),
6037(b), 6041A (e), 6045(d), 6051(d), 6053(b), and 6053(c) of the
Internal Revenue Code shall not apply.
(C) The term "payee statement" shall
also include the statement required by paragraph (2) of subdivision
(h) of Section 18662.
(e) In the case of each failure to provide a
written explanation as required by Section 402(f) of the Internal
Revenue Code, at the time prescribed therefor, unless it
is shown that the failure is due to reasonable cause and not to
willful neglect, there shall be paid, on notice and demand of the
Franchise Tax Board and in the same manner as tax, by the person
failing to provide that written explanation, an amount equal to
ten dollars ($10) for each failure, but the total amount imposed
on that person for all those failures during any calendar year shall
not exceed five thousand dollars ($5,000).
(f) Any penalty imposed by this part shall be
paid on notice and demand by the Franchise Tax Board and in the
same manner as tax.
Return to Voluntary Disclosure
19191. (a) The Franchise Tax Board may enter into a voluntary disclosure agreement with any qualified business entity or qualified shareholder, as defined in Section 19192, that is binding on both the Franchise Tax Board and the qualified business entity or qualified shareholder.
(b) The Franchise Tax Board
shall do all of the following:
(1) Provide guidelines and establish procedures
for business entities to apply for voluntary disclosure agreements.
(2) Accept applications on an anonymous basis
from business entities for voluntary disclosure agreements.
(3) Implement procedures for accepting applications
for voluntary disclosure agreements through the National Nexus Program
administered by the Multistate Tax Commission.
(4) For purposes of considering offers from business
entities to enter into voluntary disclosure agreements, take into
account the following criteria:
(A) The nature and magnitude of the business
entity's previous presence and activity in this state and the facts
and circumstances by which the nexus of the business entity was
established.
(B) The extent to which the weight of the factual
circumstances demonstrates that a prudent business person exercising
reasonable care would conclude that the previous activities and
presence in this state were or were not immune from taxation
by this state by reason of Public Law 86-272 or otherwise.
(C) Reliance on the advice of a person in a fiduciary
position or other competent advice that the business entity's activities
were immune from taxation by this state.
(D) Lack of evidence of willful disregard or
neglect of the tax laws of this state on the part of the business
entity.
(E) Demonstrations of good faith on the part
of the business entity.
(F) Benefits that will accrue to the state by
entering into a voluntary disclosure agreement.
(5) Act on any application of a voluntary disclosure
agreement within 120 days of receipt.
(6) Enter into voluntary disclosure agreements
with qualified business entities or qualified shareholders, as authorized
in subdivision (a) and based on the criteria set forth in paragraph
(4).
(c) Before any voluntary disclosure agreement
becomes binding, the Franchise Tax Board, itself, shall approve
the agreement in the following manner:
(1) The Executive Officer and Chief Counsel of
the Franchise Tax Board shall recommend and submit the voluntary
disclosure agreement to the Franchise Tax Board for approval.
(2) Each voluntary disclosure agreement recommendation
shall be submitted in a manner as to maintain the anonymity of the
taxpayer applying for the voluntary disclosure agreement.
(3) Any recommendation for approval of a voluntary
disclosure agreement shall be approved or disapproved by the Franchise
Tax Board, itself, within 45 days of the submission of that recommendation
to the board.
(4) Any recommendation of a voluntary disclosure
agreement that is not either approved or disapproved by the board
within 45 days of the submission of that recommendation shall be
deemed approved.
(5) Disapproval of a recommendation of a voluntary
disclosure agreement shall be made only by a majority vote of the
Franchise Tax Board.
(6) The members of the Franchise Tax Board shall
not participate in any voluntary disclosure agreement except as
provided in this subdivision.
(d) The voluntary disclosure agreement entered
into by the Franchise Tax Board and the qualified business entity
or qualified shareholder as provided for in subdivision (a) shall
to the extent applicable specify that:
(1) The Franchise Tax Board shall with respect
to a qualified business entity or qualified shareholder, except
as provided in paragraph (4) of subdivision (a) of Section 19192:
(A) Waive its authority under this part, Part
10 (commencing with Section 17001), or Part 11 (commencing with
Section 23001) to assess or propose to assess taxes, additions to
tax, fees, or penalties with respect to each taxable or income year
ending prior to six years from the signing date of the voluntary
disclosure agreement.
(B) With respect to each of the six taxable or
income years ending immediately preceding the signing date of the
voluntary disclosure agreement, based on its discretion, agree to
waive any or all of the following:
(i) Any penalty related to a failure to make
and file a return, as provided in Section 19131.
(ii) Any penalty related to a failure to pay
any amount due by the date prescribed for payment, as provided in
Section 19132.
(iii) Any addition to tax related to an underpayment
of estimated tax, as provided in Section 19136.
(iv) Any penalty related to Section 6810 or subdivision
(a) of Section 8810 of the Corporations Code, as provided
in Section 19141.
(v) Any penalty related to a failure to furnish
information or maintain records, as provided in Section 19141.5.
(vi) Any addition to tax related to an underpayment
of tax imposed under Part 11 (commencing with Section 23001), as
provided in Section 19142.
(vii) Any penalty related to a partnership required
to file a return under Section 18633, as provided in Section 19172.
(viii) Any penalty related to a failure to file
information returns, as provided in Section 19183.
(ix) Any penalty related to relief from contract
voidability, as provided in Section 23305.1.
(2) The qualified business entity or qualified
shareholder shall:
(A) With respect to each of the six taxable or
income years ending immediately preceding the signing date of the
written agreement:
(i) Voluntarily and fully disclose on the business
entity's application all material facts pertinent to the business
entity's and shareholder's liability for any taxes imposed under
Part 10 (commencing with Section 17001) or Part 11 (commencing with
Section 23001).
(ii) Except as provided in paragraph (3), within
30 days from the signing date of the voluntary disclosure agreement:
(I) File all returns required under this part,
Part 10 (commencing with Section 17001), or Part 11 (commencing
with Section 23001).
(II) Pay in full any tax, interest, and penalties
(other than those penalties specifically waived by the Franchise
Tax Board under the terms of the voluntary disclosure agreement)
imposed under this part, Part 10 (commencing with Section 17001),
or Part 11 (commencing with Section 23001) in a manner as may be
prescribed by the Franchise Tax Board.
(B) Agree to comply with all franchise and income
tax laws of this state in subsequent income or taxable years by
filing all returns required and paying all amounts due under this
part, Part 10 (commencing with Section 17001), or Part 11 (commencing
with Section 23001).
(3) The Franchise Tax Board may extend the time
for filing returns and paying amounts due to 120 days from the signing
date of the voluntary disclosure agreement.
(e) The amendments to this section made by the
act adding this subdivision shall apply to taxable or income years
beginning on or after January 1, 1997.
Return to Voluntary Disclosure
23301.5. Except for the purposes of filing an application for exempt status or amending the articles of incorporation as necessary either to perfect that application or to set forth a new name, the corporate powers, rights, and privileges of a domestic taxpayer may be suspended, and the exercise of the corporate powers, rights, and privileges of a foreign taxpayer in this state may be forfeited, if a taxpayer fails to file a tax return required by this part.