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State of California Franchise Tax Board

2005 Tax Amnesty: 40 Percent Accuracy Penalty - June 16, 2005

1. What are the changes to the Accuracy Related Penalty under Revenue and Taxation Code section 19164?

This law revises the existing accuracy related penalty for an amnesty-eligible tax year from 20 percent to 40 percent, for any proposed assessment issued after the end of the amnesty period (March 31, 2005).

2. Is there any situation where the 40 Percent Accuracy Penalty does not apply?

The increased penalty does not apply to understatements related to tax shelter items. The increased penalty also does not apply to any understatement that is the subject of an audit, protest, appeal, settlement or litigation as of the start of the amnesty period. (Revenue and Taxation Code section 19164(a)(1)(B)(i) and (ii).)

3. What is the effective date of the increased Accuracy Related Penalty?

The penalty applies to taxable years 2002 and earlier, for notices of proposed assessment issued after March 31, 2005.

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