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California Tax Program Will Aid Certain Out-of-State Nonfilers

Released April 25, 2008

“Filing Compliance Agreements” Aimed at Those Unaware of Filing Requirements

The Franchise Tax Board (FTB) today announced that some penalty relief is available to out-of-state businesses and trusts with California tax liabilities that can show reasonable cause for their failure to file. This will allow some out-of-state entities the opportunity to voluntarily come forward if they have unmet filing requirements and owe California state tax.

“Tax laws can be complicated when business operations cross state lines,” said State Controller and FTB Chair John Chiang. “Those who are unsure of their past tax liabilities should take a second look at their books to see if this program can help them.”

The class of taxpayers eligible for a penalty-relieving Filing Compliance Agreement is generally limited to certain corporations, limited liability companies, and trusts.

The program allows FTB to review a taxpayer’s particular facts and make a finding of reasonable cause before the taxpayer files their return. Those taxpayers who do qualify must then file and make full payment to FTB for every year they failed to file a California return. FTB will waive various penalties associated with the return filings identified in the agreement. The most commonly waived penalties are the Failure to File and the Failure to Pay Tax penalties.

Filing Compliance Agreements are also available to certain taxpayers who do not satisfy the statutory requirements of the existing Voluntary Disclosure Program. That program allows qualified companies, shareholders, and beneficiaries to avoid return filing penalties by voluntarily disclosing and paying tax liabilities from the past six years.

For more information, visit FTB’s website at ftb.ca.gov and search for filing compliance agreement. If FTB accepts the taxpayer’s request for a Filing Compliance Agreement, the taxpayer generally must file the required tax returns and make full payment within 30 days.

The authority for FTB’s Filing Compliance Agreement is found in California Revenue and Taxation Codes (CRTC) 19131 and 19132. The Voluntary Disclosure Program is defined in CRTC sections 19191-94.

Assistance is available to others taxpayers, including individuals, who fail to file their California income tax returns. By contacting FTB online at ftb.ca.gov or calling 800.852.5711, taxpayers can request more time to respond to notices, retrieve information that can assist them in filing a tax return, request tax forms, and find out how to pay over time.