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California's Tax Amnesty Starts Today

California is counting on eligible taxpayers to participate in a tax amnesty program that runs from February 1 through March 31, 2005, according to the Franchise Tax Board (FTB) and the Board of Equalization (BOE).

“We're giving Californians a one-time chance to pay their past taxes without financial penalties,” said State Controller and FTB Chair Steve Westly. “People and businesses can do the right thing by coming forward to take part in the amnesty program.”

Tax amnesty legislation contained in the state budget came out of an earlier bill introduced by Assembly member Judy Chu (D-Monterey Park) and cosponsored by State Controller Steve Westly and Board of Equalization Chair John Chiang.

“We don't always get a chance to fix our mistakes,” said Chiang. “For taxpayers who didn't properly report taxes in the past, amnesty provides the chance to correct that oversight.”

Individual and business taxpayers who owe income, franchise, sales, or use taxes for tax years 2002 and earlier are eligible for amnesty. Taxpayers can avoid criminal prosecution and get most penalties and fees waived by paying the tax and interest. To learn more, visit www.taxes.ca.gov.

Excluded from participating are taxpayers currently under criminal investigation for tax-related matters, or taxpayers with abusive tax shelter transactions that were eligible to participate in either last year's Voluntary Compliance Initiative or the 2003 IRS Offshore Voluntary Compliance Initiative. These taxpayers are eligible for amnesty for non-abusive tax shelter items.

There are three simple steps to apply for amnesty:

  1. Complete an application and return it by March 31, 2005.
  2. File all past-due returns and disclose all income by May 31, 2005.
    Or
    Amend any previously filed incorrect returns to disclose previously unreported income and/or overstated deductions by May 31, 2005.
  3. Pay the taxes and interest owed that is currently on our books by May 31, 2005, or set up an installment payment agreement that will be fully paid by June 30, 2006.

Post-amnesty law increases enforcement actions for years 2002 and prior (amnesty eligible years). The accuracy-related penalty rises from 20 to 40 percent. Also, an amnesty penalty of 50 percent of the existing unpaid interest amount will be imposed on existing tax amounts owed or on new tax assessments becoming final after March 31, 2005.

The FTB estimates that amnesty will gross $670 million ($555 million for FTB for FY 04/05 and $115 million for BOE for FYs 04/05 & 05/06). The 1984-85 amnesty raised $154 million.

The five-member California State Board of Equalization is a publicly elected tax commission, and is comprised of Betty T. Yee of San Francisco, Acting Member, First District; Bill Leonard of Sacramento/Ontario, Second District; Claude Parrish of Long Beach, Third District; and Chair John Chiang of Los Angeles, Fourth District. State Controller Steve Westly also serves as a member of the Board.

The BOE collects nearly $42 billion annually in taxes and fees supporting state and local government services. It acts as the appellate body for franchise and personal income tax appeals, and also plays a significant role in the assessment and administration of property tax.

The three-member Franchise Tax Board is comprised of elected officials, including State Controller Steve Westly serving as the Chair. State Board of Equalization Chair John Chiang, and the Governor's appointed Director of the Department of Finance, Tom Campbell, also serve as members.

The FTB collects nearly $48 billion annually in taxes. It administers state personal income taxes and corporation taxes for the State of California. The FTB also is authorized to collect debts on behalf of other state agencies, and certain county and local entities.