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Voluntary Compliance Initiative 2

Purpose of bulletin

To inform staff of recent legislation on the Voluntary Compliance Initiative 2 (VCI 2) for abusive tax avoidance transactions (ATAT) and underreporting of income from offshore financial arrangements (OFA).


Individuals and business entities have taken advantage of ATAT or OFA. VCI 2 is an opportunity for taxpayers who underreported their California income tax liabilities through the use of ATATs or OFAs, to amend their returns for 2010 and prior tax years and obtain waivers of most penalties. VCI  2 allows taxpayers to:

  • File amended returns between August 1, 2011 to October 31, 2011 and include all underreported income resulting from the use of avoidance transactions or offshore financial arrangements.
  • Pay the tax and interest by October 31, 2011.
  • Avoid certain penalties and criminal prosecution.

What is ATAT?

ATAT are plans or arrangements devised for the principal purpose of avoiding taxes which include:

  • Tax Shelter – IRC 6662(d)(2)(C)
  • Reportable transaction not adequately disclosed - IRC §6707A(c)(1)
  • Listed transaction - IRC §6707A(c)(2)
  • Gross misstatement – IRC §6404(g)(2)D)
  • Noneconomic substance transaction – R&TC §19774

What is an OFA?

An OFA is any transaction designed to avoid or evade California income or franchise tax through the use of any of the following:

  • Offshore payment cards including credit, debit, or charge cards issued by banks in foreign jurisdictions
  • Foreign banks, financial institutions, corporations, partnerships, trusts, or other entities

Who is eligible to participate in VCI2?

Taxpayers who previously filed tax returns using ATAT or OFA to underreport their tax liability may participate in Voluntary Compliance Initiative 2. This includes taxpayers participating in the federal Offshore Voluntary Disclosure Initiative.

Individuals who are subjects of a criminal complaint or investigation in California are not eligible for VCI 2.

How taxpayers participate in VCI 2?

Between August 1, 2011, and October 31, 2011 for each tax year, taxpayers must:

  • File an amended return reporting all income or loss without regard to the ATAT or to disclose income from the use of an OFA.
  • Submit FTB 621, Voluntary Compliance Participation Agreement Form (Business Entities) or FTB 622, Voluntary Compliance Participation Agreement Form (Individual Income Taxpayers). FTB 621 and 622 will be available August 1, 2011.
  • Write “VCI 2” in RED at the top of the amended return.
  • Pay in full all taxes and interest by October 31, 2011.

Taxpayers can mail their amended tax returns and participation agreement form to:

Voluntary Compliance Initiative 2
Franchise Tax Board
PO Box 1779
Rancho Cordova CA 95741-1779

Taxpayers making electronic payments must file by faxing the amended tax returns and participation agreement forms to 916.845.9000.

Taxpayer inquiries

Go to, and search for VCI 2.

Email us at

Call us at 888.825.9868, weekdays, 7 a.m. to 5 p.m., except state holidays. They can choose option 1 for general VCI 2 questions or option 3 for qualifications and account questions.

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