Skip to Main Content
State of California Franchise Tax Board


If IRS Form 8264, Application for Registration of a Tax Shelter, or the Investor List filed with the FTB does not contain all the required information, will the FTB impose the failure to register or maintain investor list penalty under CR&TC Section 19173?

CR&TC Section 19173 provides a monetary penalty for:

  • Failing to register under CR&TC Section 18628,
  • Failing to maintain and provide the investor list under CR&TC Section 18648,
  • Filing false or incomplete information under Section 18628 or Section 18648, or
  • Failing to furnish the tax shelter registration number to investors.

The penalty for failing to register a tax shelter or failing to provide all requisite information is $15,000 for reportable transactions and the greater of $100,000 or 50% of gross income derived from the activity for listed transactions.

For failing to maintain the investor list or failing to provide all requisite information (in accordance with the IRS Form 8264 Instructions, under the heading "Keeping Lists of Investors"), the penalty is $10,000 a day after the 20th day from the date of FTB's written request for reportable transactions and $100,000 or 50% of gross income derived from the activity for listed transactions.

FTB's Chief Counsel may rescind the penalty only for reportable transactions if certain criteria are met.

I attached a copy of IRS Form 8886, Reportable Transaction Disclosure Statement, to the current California tax year's return, but did not mail a separate copy to the Franchise Tax Board as required under CR&TC Section 18407. Will the FTB impose the failure to disclose penalty under CR&TC Section 19772?

CR&TC Section 18407 incorporates IRC Section 6011 and the regulations there under. Section 6011 requires a taxpayer that has participated in a reportable transaction, including a listed transaction, to disclose certain information with respect to the reportable transaction with its tax return. Treasury Regulation Section 1.6011-4 requires a taxpayer file a disclosure statement on IRS Form 8886 (in accordance with the instructions to the form) for each reportable transaction in which the taxpayer participated. For California purposes, IRS Form 8886 must be attached to the taxpayer's tax return or amended return for each taxable year for which the taxpayer participates in a reportable transaction. Additionally, the taxpayer is also required to send a copy of IRS Form 8886 to the FTB at the same time the taxpayer first files a disclosure statement with a return.

CR&TC Section 19772 provides a monetary penalty for each failure to include on any return or statement any information required to be disclosed under IRC Section 6011 with respect to a reportable transaction or listed transaction. The penalty is limited to large entities or high net worth individuals who fail to: (1) attach a complete disclosure statement to an original or amended return or (2) file a separate IRS Form 8886 with the FTB.

The penalty for each omission is $15,000 for reportable transactions and $30,000 for listed transactions.

Chat with an FTB Representative