Voluntary Compliance Initiative Comparison Chart

Franchise Tax Board is aggressively targeting investors and promoters of abusive tax avoidance transactions by:

Auditing individuals, shareholders, partners and business entities investing in abusive schemes,
Mailing thousands of Voluntary Compliance Initiative letters to taxpayers before enforcement begins,
Signing an information sharing agreement with the IRS specifically targeting abusive schemes and
Collecting millions of dollars attributable to abusive schemes.

Due to recent legislation, more penalties and enforcement tools are effective NOW.

Use this chart to find out how you can benefit by participating in the Voluntary Compliance Initiative (VCI):

Abusive Tax Avoidance Transaction Scenarios	With VCI (Voluntary Compliance Initiative)		Without VCI (Voluntary Compliance Initiative)
Abusive Tax Avoidance Transaction Scenarios	No Appeal Rights	With Appeal Rights	Without VCI (Voluntary Compliance Initiative)
GENERAL PROVISIONS: Any taxpayer (individual or business entity) who previously filed a tax return with an abusive tax avoidance transaction for tax year 2002 or prior.	No penalties	20%-40% Accuracy Related Penalty	20%-40% Noneconomic Substance Penalty (NEW) or 20%-40% Accuracy Related Penalty 100% Interest Based Penalty (NEW) $30,000 Failure to Disclose Listed Transaction Penalty (NEW) 75% Fraud Penalty Criminal Prosecution
Specific Scenarios: For example, if the taxpayer…
Is not contacted by Franchise Tax Board or IRS, or Received Franchise Tax Board VCI Letter, or Is under audit, protest or appeal with Franchise Tax Board, or Has a pending IRS federal determination (How to Report), or Has a final IRS federal determination, settlement agreement or closing agreement (How to Report)	No penalties	20%-40% Accuracy Related Penalty	20%-40% Noneconomic Substance Penalty (NEW) or 20%-40% Accuracy Related Penalty 100% Interest Based Penalty (NEW) $30,000 Failure to Disclose Listed Transaction Penalty (NEW) 75% Fraud Penalty Criminal Prosecution
Filed an amended return to correct/disclose transaction before contact by Franchise Tax Board or IRS	No penalties	20%-40% Accuracy Related Penalty	150% Interest Rate (NEW) on amended returns filed after 4/15/04 75% Fraud Penalty Criminal Prosecution

These scenarios are ineligible for the Voluntary Compliance Initiative and subject to the following penalties or action:

If the taxpayer. . .	Applicable Penalties or Actions
Filed original return with an abusive tax avoidance transaction for tax year 2003 or later	20%-40% Noneconomic Substance Penalty (NEW) or 20%-40% Accuracy Related Penalty or 20%-30% Reportable Transaction Penalty ((NEW) 100% Interest Based Penalty (NEW) $30,000 Failure to Disclose Listed Transaction Penalty (NEW) $15,000 Failure to Disclose Reportable Transaction (NEW) 150% Interest Rate (NEW) on amended returns filed after 4/15/04 75% Fraud Penalty Criminal Prosecution
Was eligible but did not participate in the IRS Offshore Voluntary Compliance Initiative Participated in the IRS Offshore Voluntary Compliance Initiative but did not file a California amended return by October 15, 2003, or Is under criminal investigation or was party to a filed criminal complaint before 1/1/04	20%-40% Noneconomic Substance Penalty (NEW) or 20%-40% Accuracy Related Penalty 100% Interest Based Penalty (NEW) $30,000 Failure to Disclose Listed Transaction Penalty (NEW) 150% Interest Rate (NEW) on amended returns filed after 4/15/04 75% Fraud Penalty Criminal Prosecution
Participated in the IRS Offshore Voluntary Compliance Initiative and filed a California amended return by October 15, 2003.	20%-40% Accuracy Related Penalty