Today's Law As Amended

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SB-526 Personal income taxes: joint returns: court orders: relief from liability.(2015-2016)



SECTION 1.

 Section 19006 of the Revenue and Taxation Code is amended to read:

19006.
 (a) The spouse who controls the disposition of or who receives or spends community income as well as the spouse who is taxable on the income is liable for the payment of the taxes imposed by Part 10 (commencing with Section 17001) on that income.
(b) (1)  Whenever a joint return is filed by spouses,  a husband and wife,  the liability for the tax on the aggregate income is joint and several. The liability may be revised by a court in a proceeding for dissolution of the marriage or for termination of the registered domestic partnership of the spouses, provided: 
(1) (2)  The order revising tax liability may not relieve a spouse of tax liability on income earned by or subject to the exclusive management and control of the spouse. The liability of the spouse for the tax, penalties, and interest due for the taxable year shall be in the same ratio to total tax, penalties, and interest due for the taxable year as the income earned by or subject to the management and control of the spouse is to total gross income reportable on the return. amount of liability on a joint return may not be reduced, but a court in a proceeding for dissolution of the marriage may determine the individual responsible for all or part of the liability, provided the order revising tax liability on the joint return: 
(2) The order revising tax liability:
(A) Must separately state the income tax liabilities for the taxable years for which revision of tax liability is granted.
(B) Shall not revise a tax liability that has been fully paid prior to the effective date of the order; however, any unpaid amount may be revised.
(C) Shall become effective when the Franchise Tax Board is served with or acknowledges receipt of the order.
(D) (i)  Shall not be effective if the gross income reportable on the return exceeds one two  hundred fifty  thousand dollars ($150,000) ($200,000)  or the amount of tax liability the spouse is relieved of exceeds seven ten  thousand five hundred  dollars ($7,500), ($10,000),  unless a tax revision clearance certificate is obtained from the Franchise Tax Board and filed with the court.
(ii) Beginning on January 1, 2018, and annually thereafter, the amounts specified in clause (i) shall be recomputed in accordance with subparagraph (B) of paragraph (3) of subdivision (b) of Section 19442, modified by substituting “January 1, 2018” for “January 1, 2004.”
(E) Shall not be effective to relieve a spouse of the tax liability on income earned by or subject to the exclusive management and control of that spouse if either of the following applies:
(i) Assets or liabilities are transferred between the individuals filing the joint return for the principal purpose of avoidance of the payment of tax or as part of a fraudulent scheme by those individuals.
(ii) That liability is uncollectible and, within three years of the date the court order is effective pursuant to subparagraph (C), either of the following also applies:
(I) The spouse obligated to pay that liability pursuant to the court order files for bankruptcy and that liability is discharged in bankruptcy.
(II) The spouse obligated to pay that liability pursuant to the court order becomes a nonresident.
(c) Notwithstanding subdivisions (a) and  subdivision (a) or paragraph (1) of subdivision  (b), whenever a joint return is filed by spouses and  a husband and wife and  the tax liability is not fully paid, that liability, including interest and penalties, may be revised by the Franchise Tax Board as to one spouse.
(1) However, the liability shall not be revised:
(A) To relieve a spouse of tax liability on income earned by or subject to the exclusive management and control of the spouse. The liability of the spouse for the tax, penalties, and interest due for the taxable year shall be in the same ratio to total tax, penalties, and interest due for the taxable year as the income earned by or subject to the management and control of the spouse is to total gross income reportable on the return.
(B) To relieve a spouse of liability below the amount actually paid on the liability prior to the granting of relief, including credit from any other taxable year available for application to the liability.
(2) The liability may be revised only if the spouse whose liability is to be revised establishes that he or she did not know of, and had no reason to know of, the nonpayment at the time the return was filed. For purposes of this paragraph, “reason to know” means whether or not a reasonably prudent person would have had reason to know of the nonpayment.
(3) For purposes of this section, the determination of the spouse to whom items of gross income are attributable shall be made without regard to community property laws.
(4) (3)  The determination of the Franchise Tax Board as to whether the liability is to be revised as to one spouse shall be made not less than 30 days after notification of the other spouse and shall be based upon whether, under all of the facts and circumstances surrounding the nonpayment, it would be inequitable to hold the spouse requesting revision liable for the nonpayment. Any action taken under this section shall be treated as though it were action on a protest taken under Section 19044 and shall become final upon the expiration of 30 days from the date that notice of the action is mailed to both spouses, unless, within that 30-day period, one or both spouses appeal the determination to the board as provided in Section 19045.
(5) (4)  This subdivision shall apply to all taxable years subject to the provisions of this part, but shall not apply to any taxable year which has been closed by a statute of limitations, res judicata, or otherwise.
(d) For purposes of this section, the determination of the spouse to whom items of gross income are attributable shall be made without regard to community property laws.
(e) The amendments made to this section by the act adding this subdivision shall apply to court orders served or acknowledged on or after the effective date of that act.