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Revenue and Taxation Codes

19131. (a) If any taxpayer fails to make and file a return required by this part on or before the due date of the return or the due date as extended by the Franchise Tax Board, then, unless it is shown that the failure is due to reasonable cause and not due to willful neglect, 5 percent of the tax shall be added to the tax for each month or fraction thereof elapsing between the due date of the return (determined without regard to any extension of time for filing) and the date on which filed, but the total penalty shall not exceed 25 percent of the tax. In the case of a commencing corporation, the penalty shall apply to all tax accruable on the due date of the return. The penalty so added to the tax shall be due and payable upon notice and demand from the Franchise Tax Board. 
    (b) In the case of an individual or fiduciary who fails to file a return of tax required by this part within 60 days of the date prescribed for filing of that return (determined with regard to any extension of time for filing), unless it is shown that the failure is due to reasonable cause and not due to willful neglect, this penalty shall not be less than the lesser of one hundred dollars ($100) or 100 percent of the amount of tax required to be shown on the return. 
    (c) For purposes of this section, the amount of tax required to be shown on the return shall be reduced by the amount of any part of the tax which is paid on or before the date prescribed for payment of the tax and by the amount of any credit against the tax which may be claimed upon the return. 
    (d) If any failure to file any return is fraudulent, subdivision 
(a) shall be applied by: 
    (1) Substituting "15 percent" for "5 percent," and 
    (2) Substituting "75 percent" for "25 percent." 
    (e) This section shall not apply to any failure to pay any estimated tax required by Section 19025 or 19136.

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19132.     (a) (1) Unless it is shown that the failure is due to reasonable cause and not due to willful neglect, a penalty computed in accordance with paragraph (2) is hereby imposed in the case of failure to pay any of the following: 
    (A) The amount shown as tax on any return on or before the date prescribed for payment of that tax determined with regard to any extension of time for payment. 
    (B) Any amount in respect of any tax required to be shown on a return which is not so shown including an assessment made pursuant to Section 19051 within 15 days of the date of the notice and demand therefor. 
    (C) The amount required to be paid by Section 19021, if applicable, that is not paid. 
    (D) The amount required to be paid by Section 17941 or 23091, if applicable, that is not paid. 
    (E) The amount required to be paid by Section 17948 or 23097, if applicable, that is not paid. 
    (2) The penalty imposed under paragraph (1) shall consist of both of the following: 
    (A) Five percent of the total tax unpaid as defined in subdivision (c). 
    (B) An amount computed at the rate of 0.5 percent per month of the "remaining tax" as defined in subdivision (d) for each additional month or fraction thereof not to exceed 40 months during which the "remaining tax" is greater than zero. 
    (3) The aggregate amount of penalty imposed by this subdivision shall not exceed 25 percent of the total unpaid tax and shall be due and payable upon notice and demand by the Franchise Tax Board. The tender of a check or money order does not constitute payment of the tax for purposes of this section unless the check or money order is paid on presentment. 
    (b) The penalty prescribed by subdivision (a) shall not be assessed if, for the same taxable year, the sum of any penalties imposed under Section 19131 relating to failure to file return and Section 19133 relating to failure to file return after demand is equal to or greater than the subdivision (a) penalty. In the event the penalty imposed under subdivision (a) is greater than the sum of any penalties imposed under Sections 19131 and 19133, the penalty imposed under subdivision (a) shall be the amount which exceeds the sum of any penalties imposed under Sections 19131 and 19133. 
    (c) For purposes of this section, total tax unpaid means the amount of tax shown on the return reduced by both of the following: 
    (1) The amount of any part of the tax which is paid on or before the date prescribed for payment of the tax. 
    (2) The amount of any credit against the tax which may be claimed upon the return. 
    (d) For purposes of this section, "remaining tax" means total tax unpaid reduced by the amount of any payment of the tax. 
    (e) If the amount required to be shown as a tax on a return is less than the amount shown as tax on that return, subdivisions (a), (c), and (d) shall be applied by substituting that lower amount. 
    (f) No interest shall accrue on the portion of the penalty prescribed in subparagraph (B) of paragraph (2) of subdivision (a). 
    (g) The amendments made by the act adding this subdivision are operative for notices issued on or after January 1, 1998.

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19136.    (a) Section 6654 of the Internal Revenue Code, relating to failure by an individual to pay estimated income tax, shall apply, except as otherwise provided. 
    (b) Section 6654(a)(1) of the Internal Revenue Code is modified to refer to the rate determined under Section 19521 in lieu of Section 6621 of the Internal Revenue Code
    (c) (1) For purposes of Section 6654(d) of the Internal Revenue Code, relating to the amount of required installments, any reference to "90 percent" is modified to read "80 percent." 
    (2) Section 6654(d)(2)(C)(ii) of the Internal Revenue Code, relating to applicable percentages, is modified as follows:

In the case of the following The applicable required installments:
The applicable percentage is:
1st
20
2nd
40
3rd
60
4th
80

    (3) The annualized income installment, determined under Section 6654(d)(2) of the Internal Revenue Code, shall not include "alternative minimum taxable income" or "adjusted self-employment income." 
    (d) (1) Section 6654(e)(1) of the Internal Revenue Code, relating to exceptions where the tax is a small amount, shall not apply. 
    (2) No addition to the tax shall be imposed under this section if any of the following apply: 
    (A) The tax imposed under Section 17041 or 17048 for the preceding taxable year, minus the sum of any credits against the tax provided by Part 10 (commencing with Section 17001) or this part, or the tax computed under Section 17041 or 17048 upon the estimated income for the taxable year, minus the sum of any credits against the tax provided by Part 10 (commencing with Section 17001) or this part, is less than two hundred dollars ($200), except in the case of a separate return filed by a married person the amount shall be less than one hundred dollars ($100). 
    (B) Eighty percent or more of the tax imposed under Section 17041 or 17048 for the preceding taxable year, less any credits against the tax other than the credit allowed under Section 19002, was paid by withholding pursuant to Section 18662 or 18666 of this code or Section 13020 of the Unemployment Insurance Code
    (C) Eighty percent or more of the estimated tax for the taxable year will be paid by withholding of tax pursuant to Section 18662 or 18666 of this code or Section 13020 of the Unemployment Insurance Code.
    (D) Eighty percent or more of the adjusted gross income for the taxable year consists of items subject to withholding pursuant to Section 18662 or 18666 of this code or Section 13020 of the Unemployment Insurance Code
    (3) Paragraph (2) shall not apply if the employee files a false or fraudulent withholding exemption certificate for the taxable year, or the taxpayer provides a false or fraudulent document or documents to obtain reduced withholding at source for the taxable year. 
    (e) Section 6654(f) of the Internal Revenue Code shall not apply and for purposes of this section the term "tax" means the tax imposed under Section 17041 or 17048, less any credits against the tax provided by Part 10 (commencing with Section 17001) or this part, other than the credit provided by subdivision (a) of Section 19002. 
    (f) The credit for tax withheld on wages, as specified in Section 6654(g) of the Internal Revenue Code, shall be the credit allowed under subdivision (a) of Section 19002. 
    (g) This section shall apply to a nonresident individual. 
    (h) No addition to tax shall be made under this section for any period before April 16, 1999, with respect to any underpayment of an installment for the 1998 taxable year, to the extent that the underpayment was created or increased as the result of a distribution to which Section 408A(d)(3) of the Internal Revenue Code, relating to rollovers from an IRA other than a Roth IRA, applies.

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19141.    Upon certification by the Secretary of State pursuant to subdivision (a) of Section 2204 of the Corporations Code, the Franchise Tax Board shall assess a penalty of two hundred fifty dollars ($250). Upon certification by the Secretary of State pursuant to subdivision (a) of Section 6810 or subdivision (a) of Section 8810 of the Corporations Code, the Franchise Tax Board shall assess a penalty of fifty dollars ($50). Any such penalty shall be a final assessment due and payable at the time of assessment but no interest shall accrue thereon. The assessment shall be collected as other taxes, interest, and penalties are collected by the Franchise Tax Board unless the Secretary of State decertifies the name of the corporation as provided in subdivision (e) or (f) of Section 2204, subdivision (e) of Section 6810, or subdivision (e) of Section 8810 of the Corporations Code.

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19141.5.    (a) (1) Section 6038A of the Internal Revenue Code, relating to information with respect to certain foreign-owned corporations, shall apply. 
    (2) A penalty shall be imposed under this part for failure to furnish information or maintain records and that penalty shall be determined in accordance with Section 6038A of the Internal Revenue Code
    (3) Section 11314 of Public Law 101-508, relating to application of amendments made by Section 7403 of the Revenue Reconciliation Act of 1989 to taxable years beginning on or before July 10, 1989, shall apply. 
    (4) Section 6038A(e) of the Internal Revenue Code, relating to enforcement of requests for certain records, is modified as follows: 
    (A) Each reference to Section 7602, 7603, or 7604 of the Internal Revenue Code shall instead refer to Section 19504. 
    (B) Each reference to "summons" shall instead refer to "subpoena duces tecum." 
    (C) Section 6038A(e)(4)(C) of the Internal Revenue Code shall refer to "superior courts of the State of California for the Counties of Los Angeles, Sacramento, and San Diego, and for the City and County of San Francisco," instead of "United States district court for the district in which the person (to whom the summons is issued) resides or is found." 
    (b) In the case of a corporation, each of the following shall apply: 
    (1) Section 6038B of the Internal Revenue Code, relating to notice of certain transfers to foreign persons, shall apply, except as otherwise provided. 
    (2) The information required to be filed with the Franchise Tax Board under this subdivision shall be a copy of the information required to be filed with the Internal Revenue Service. 
    (3) (A) A penalty shall be imposed under this part for failure to furnish information and that penalty shall be determined in accordance with Section 6038B of the Internal Revenue Code, except as otherwise provided.
    (B) Subparagraph (A) shall not apply to any transfer described in Section 6038B(a)(1)(B) of the Internal Revenue Code
    (c) (1) Section 6038C of the Internal Revenue Code, relating to information with respect to foreign corporations engaged in United States business, shall apply. 
    (2) A penalty shall be imposed under this part for failure to furnish information or maintain records and that penalty shall be determined in accordance with Section 6038C of the Internal Revenue Code
    (3) Section 6038C(d) of the Internal Revenue Code, relating to enforcement of requests for certain records, is modified as follows: 
    (A) Each reference to Section 7602, 7603, or 7604 of the Internal Revenue Code shall instead refer to Section 19504. 
    (B) Each reference to "summons" shall instead refer to "subpoena duces tecum." 
    (d) For purposes of this part, the information required to be filed with the Franchise Tax Board pursuant to this section shall be a copy of the information filed with the Internal Revenue Service. 
    (e) For purposes of this section, each of the following shall apply: 
    (1) Section 7701(a)(4) of the Internal Revenue Code, relating to the term "domestic," shall apply. 
    (2) Section 7701(a)(5) of the Internal Revenue Code, relating to the term "foreign," shall apply. 
    (3) Section 7701(a)(30) of the Internal Revenue Code, relating to the term "United States person," shall apply. However, the term "United States person" shall not include any corporation that is not subject to the tax imposed under Chapter 2 (commencing with Section 23101), Chapter 2.5 (commencing with Section 23400), or Chapter 3 (commencing with Section 23501), of Part 11.

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19142.    Except as provided in Sections 19147 and 19148, in the case of any underpayment of tax imposed under Part 11 (commencing with Section 23001) there shall be added to the tax for the income year an amount determined at the rate established under Section 19521 on the amount of the underpayment for the period of the underpayment.

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19172.    (a) In addition to the penalty imposed by Section 19706 (relating to willful failure to file return, supply information, or pay tax), if any partnership required to file a return under Section 18633 or 18633.5 for any taxable year does either of the following: 
    (1) Fails to file the return at the time prescribed therefor (determined with regard to any extension of time for filing). 
    (2) Files a return which fails to show the information required under Section 18633 or 18633.5, that partnership shall be liable for a penalty determined under subdivision (b) for each month (or fraction thereof) during which that failure continues (but not to exceed five months), unless it is shown that the failure is due to reasonable cause.
    (b) For purposes of subdivision (a), the amount determined under this subdivision for any month is the product of the following: 
    (1) Ten dollars ($10), multiplied by 
    (2) The number of persons who were partners in the partnership during any part of the taxable year. 
    (c) The penalty imposed by subdivision (a) shall be assessed against the partnership. 
    (d) Article 3 (commencing with Section 19031) of this chapter (relating to deficiency assessments) shall not apply with respect to the assessment or collection of any penalty imposed by subdivision (a).

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19183.    (a) (1) A penalty shall be imposed for failure to file correct information returns, as required by this part, and that penalty shall be determined in accordance with Section 6721 of the Internal Revenue Code
    (2) Section 6721(e) of the Internal Revenue Code is modified as follows: 
    (A) To refer to subdivision (a) of Section 18641 in lieu of Section 6045(a) of the Internal Revenue Code
    (B) The reference to Section 6041A(b) of the Internal Revenue Code shall not apply. 
    (b) (1) A penalty shall be imposed for failure to furnish correct payee statements as required by this part, and that penalty shall be determined in accordance with Section 6722 of the Internal Revenue Code
    (2) Section 6722(c) of the Internal Revenue Code is modified as follows: 
    (A) To refer to subdivision (b) of Section 18641 in lieu of Section 6045(b) of the Internal Revenue Code
    (B) The references to Sections 6041A(b) and 6041A(e) of the Internal Revenue Code shall not apply. 
    (c) A penalty shall be imposed for failure to comply with other information reporting requirements under this part, and that penalty shall be determined in accordance with Section 6723 of the Internal Revenue Code
    (d) (1) The provisions of Section 6724 of the Internal Revenue Code relating to waiver, definitions, and special rules, shall apply, except as otherwise provided. 
    (2) Section 6724(d)(1) is modified as follows: 
    (A) The following references are substituted: 
    (i) Section 18637, in lieu of Section 6041(a) of the Internal Revenue Code
    (ii) Section 18638, in lieu of Section 6041A(a) of the Internal Revenue Code
    (iii) Subdivision (a) of Section 18640, in lieu of Section 6044(a) (1) of the Internal Revenue Code
    (iv) Subdivision (a) of Section 18641, in lieu of Section 6045(a) of the Internal Revenue Code
    (v) Subdivision (a) of Section 18644, in lieu of Section 6050A(a) of the Internal Revenue Code
    (vi) Subdivision (a) of Section 18647, in lieu of Section 6052(a) of the Internal Revenue Code
    (B) References to Sections 4093(c)(4), 4093(e), 4101(d), 6041(b), 6041A(b), 6045(d), 6051(d), and 6053(c)(1) of the Internal Revenue Code shall not apply. 
    (C) The term "information return" shall also include the return required by paragraph (1) of subdivision (h) of Section 18662. 
    (3) Section 6724(d)(2) is modified as follows: 
    (A) The following references are substituted: 
    (i) Subdivision (b) of Section 18505, in lieu of Section 6034A of the Internal Revenue Code
    (ii) Subdivision (a) of Section 18636, in lieu of Section 6039(a) of the Internal Revenue Code
    (iii) Subdivision (b) of Section 18640, in lieu of Section 6044(e) of the Internal Revenue Code
    (iv) Subdivision (b) of Section 18641, in lieu of Section 6045(b) of the Internal Revenue Code
    (v) Subdivision (b) of Section 18644, in lieu of Section 6050A(b) of the Internal Revenue Code
    (vi) Subdivision (b) of Section 18647, in lieu of Section 6052(b) of the Internal Revenue Code
    (B) References to Sections 4093(c)(4)(B), 6031(b), 6037(b), 6041A (e), 6045(d), 6051(d), 6053(b), and 6053(c) of the Internal Revenue Code shall not apply. 
    (C) The term "payee statement" shall also include the statement required by paragraph (2) of subdivision (h) of Section 18662. 
    (e) In the case of each failure to provide a written explanation as required by Section 402(f) of the Internal Revenue Code, at the time prescribed therefor, unless it is shown that the failure is due to reasonable cause and not to willful neglect, there shall be paid, on notice and demand of the Franchise Tax Board and in the same manner as tax, by the person failing to provide that written explanation, an amount equal to ten dollars ($10) for each failure, but the total amount imposed on that person for all those failures during any calendar year shall not exceed five thousand dollars ($5,000). 
    (f) Any penalty imposed by this part shall be paid on notice and demand by the Franchise Tax Board and in the same manner as tax.

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19191.    (a) The Franchise Tax Board may enter into a voluntary disclosure agreement with any qualified business entity or qualified shareholder, as defined in Section 19192, that is binding on both the Franchise Tax Board and the qualified business entity or qualified shareholder. 

    (b) The Franchise Tax Board shall do all of the following: 
    (1) Provide guidelines and establish procedures for business entities to apply for voluntary disclosure agreements. 
    (2) Accept applications on an anonymous basis from business entities for voluntary disclosure agreements. 
    (3) Implement procedures for accepting applications for voluntary disclosure agreements through the National Nexus Program administered by the Multistate Tax Commission. 
    (4) For purposes of considering offers from business entities to enter into voluntary disclosure agreements, take into account the following criteria: 
    (A) The nature and magnitude of the business entity's previous presence and activity in this state and the facts and circumstances by which the nexus of the business entity was established. 
    (B) The extent to which the weight of the factual circumstances demonstrates that a prudent business person exercising reasonable care would conclude that the previous activities and presence in this state were or were not immune from taxation by this state by reason of Public Law 86-272 or otherwise. 
    (C) Reliance on the advice of a person in a fiduciary position or other competent advice that the business entity's activities were immune from taxation by this state. 
    (D) Lack of evidence of willful disregard or neglect of the tax laws of this state on the part of the business entity. 
    (E) Demonstrations of good faith on the part of the business entity. 
    (F) Benefits that will accrue to the state by entering into a voluntary disclosure agreement. 
    (5) Act on any application of a voluntary disclosure agreement within 120 days of receipt. 
    (6) Enter into voluntary disclosure agreements with qualified business entities or qualified shareholders, as authorized in subdivision (a) and based on the criteria set forth in paragraph (4). 
    (c) Before any voluntary disclosure agreement becomes binding, the Franchise Tax Board, itself, shall approve the agreement in the following manner: 
    (1) The Executive Officer and Chief Counsel of the Franchise Tax Board shall recommend and submit the voluntary disclosure agreement to the Franchise Tax Board for approval. 
    (2) Each voluntary disclosure agreement recommendation shall be submitted in a manner as to maintain the anonymity of the taxpayer applying for the voluntary disclosure agreement. 
    (3) Any recommendation for approval of a voluntary disclosure agreement shall be approved or disapproved by the Franchise Tax Board, itself, within 45 days of the submission of that recommendation to the board. 
    (4) Any recommendation of a voluntary disclosure agreement that is not either approved or disapproved by the board within 45 days of the submission of that recommendation shall be deemed approved. 
    (5) Disapproval of a recommendation of a voluntary disclosure agreement shall be made only by a majority vote of the Franchise Tax Board. 
    (6) The members of the Franchise Tax Board shall not participate in any voluntary disclosure agreement except as provided in this subdivision. 
    (d) The voluntary disclosure agreement entered into by the Franchise Tax Board and the qualified business entity or qualified shareholder as provided for in subdivision (a) shall to the extent applicable specify that: 
    (1) The Franchise Tax Board shall with respect to a qualified business entity or qualified shareholder, except as provided in paragraph (4) of subdivision (a) of Section 19192: 
    (A) Waive its authority under this part, Part 10 (commencing with Section 17001), or Part 11 (commencing with Section 23001) to assess or propose to assess taxes, additions to tax, fees, or penalties with respect to each taxable or income year ending prior to six years from the signing date of the voluntary disclosure agreement. 
    (B) With respect to each of the six taxable or income years ending immediately preceding the signing date of the voluntary disclosure agreement, based on its discretion, agree to waive any or all of the following: 
    (i) Any penalty related to a failure to make and file a return, as provided in Section 19131. 
    (ii) Any penalty related to a failure to pay any amount due by the date prescribed for payment, as provided in Section 19132. 
    (iii) Any addition to tax related to an underpayment of estimated tax, as provided in Section 19136. 
    (iv) Any penalty related to Section 6810 or subdivision (a) of Section 8810 of the Corporations Code, as provided in Section 19141. 
    (v) Any penalty related to a failure to furnish information or maintain records, as provided in Section 19141.5. 
    (vi) Any addition to tax related to an underpayment of tax imposed under Part 11 (commencing with Section 23001), as provided in Section 19142. 
    (vii) Any penalty related to a partnership required to file a return under Section 18633, as provided in Section 19172. 
    (viii) Any penalty related to a failure to file information returns, as provided in Section 19183. 
    (ix) Any penalty related to relief from contract voidability, as provided in Section 23305.1. 
    (2) The qualified business entity or qualified shareholder shall: 
    (A) With respect to each of the six taxable or income years ending immediately preceding the signing date of the written agreement: 
    (i) Voluntarily and fully disclose on the business entity's application all material facts pertinent to the business entity's and shareholder's liability for any taxes imposed under Part 10 (commencing with Section 17001) or Part 11 (commencing with Section 23001). 
    (ii) Except as provided in paragraph (3), within 30 days from the signing date of the voluntary disclosure agreement: 
    (I) File all returns required under this part, Part 10 (commencing with Section 17001), or Part 11 (commencing with Section 23001). 
    (II) Pay in full any tax, interest, and penalties (other than those penalties specifically waived by the Franchise Tax Board under the terms of the voluntary disclosure agreement) imposed under this part, Part 10 (commencing with Section 17001), or Part 11 (commencing with Section 23001) in a manner as may be prescribed by the Franchise Tax Board. 
    (B) Agree to comply with all franchise and income tax laws of this state in subsequent income or taxable years by filing all returns required and paying all amounts due under this part, Part 10 (commencing with Section 17001), or Part 11 (commencing with Section 23001). 
    (3) The Franchise Tax Board may extend the time for filing returns and paying amounts due to 120 days from the signing date of the voluntary disclosure agreement. 
    (e) The amendments to this section made by the act adding this subdivision shall apply to taxable or income years beginning on or after January 1, 1997.

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23301.5.    Except for the purposes of filing an application for exempt status or amending the articles of incorporation as necessary either to perfect that application or to set forth a new name, the corporate powers, rights, and privileges of a domestic taxpayer may be suspended, and the exercise of the corporate powers, rights, and privileges of a foreign taxpayer in this state may be forfeited, if a taxpayer fails to file a tax return required by this part.

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