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AB-2528 Sales and use taxes: income taxes: written advice.(2019-2020)

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Date Published: 06/04/2020 04:00 AM
AB2528:v97#DOCUMENT

Amended  IN  Assembly  June 03, 2020
Amended  IN  Assembly  May 05, 2020

CALIFORNIA LEGISLATURE— 2019–2020 REGULAR SESSION

Assembly Bill
No. 2528


Introduced by Assembly Members Diep and Gipson
(Coauthors: Assembly Members Low Low, Petrie-Norris, and Quirk-Silva)

February 19, 2020


An act to amend Sections 6596 and 21012 of the Revenue and Taxation Code, relating to taxation.


LEGISLATIVE COUNSEL'S DIGEST


AB 2528, as amended, Diep. Sales and use taxes: income taxes: written advice.
Under the Sales and Use Tax Law, the California Department of Tax and Fee Administration is authorized to relieve a person from the payment of sales and use taxes, penalties, and interest if the department finds that a person’s failure to make a timely return or payment is due to that person’s reasonable reliance on written advice from the department, as specified. Existing law authorizes the department to prescribe, adopt, and enforce rules and regulations relating to the administration and enforcement of the Sales and Use Tax Law.
This bill would require the department to confirm receipt of a request by a person for written advice from the department other than presentation of a taxpayer’s books and records for audit by sending a letter or email within 30 days from the date of receipt of the request. The bill would require the department to provide a response within 180 days from the date the request by a person for written advice from the department is received by the department. Under the bill, all adopted rules and regulations issued pursuant to the written advice provisions in effect on December 31, 2020, would remain in effect and be fully enforceable unless and until modified or superseded by the department. department, except as specified. The bill would make the changes to the written advice provisions apply to written requests received by the department on or after January 1, 2021.
Under existing law, the Katz-Harris Taxpayers’ Bill of Rights Act, the Franchise Tax Board is authorized to relieve a person from the payment of taxes under the Personal Income Tax Law and the Corporation Tax Law, interest, additions to those tax, taxes, or penalties if the Franchise Tax Board finds that a person’s failure to make a timely return or payment is due to that person’s reasonable reliance on written advice from the board or written advice of a legal ruling by the Chief Counsel of the Franchise Tax Board, as specified. Existing law requires chief counsel rulings to be issued as provided in published guidelines.
This bill would require the Franchise Tax Board to confirm receipt of a request by a person for written advice from the Franchise Tax Board by sending a letter within 30 days from the date of receipt of the request for written advice and would require the chief counsel to confirm receipt of a request by a person for written advice of a legal ruling by the a chief counsel ruling by sending a letter or email within 30 days of the date of receipt of the request for written advice of a legal ruling. a chief counsel ruling. The bill would require the Franchise Tax Board and the chief counsel to provide a response within 180 days from the date the request by a person for written advice from the board or written advice of a legal ruling by the chief counsel a chief counsel ruling is received. Under the bill, all published guidelines issued pursuant to the chief counsel rulings provisions in effect on December 31, 2020, would remain in effect and be fully enforceable unless and until modified or superseded by the board. The bill would make the changes to the chief counsel rulings provisions apply to written requests a written request for a chief counsel ruling received by the board on or after January 1, 2021.
Vote: MAJORITY   Appropriation: NO   Fiscal Committee: YES   Local Program: NO  

The people of the State of California do enact as follows:


SECTION 1.

 Section 6596 of the Revenue and Taxation Code is amended to read:

6596.
 (a) If the department finds that a person’s failure to make a timely return or payment is due to the person’s reasonable reliance on written advice from the department, the person may be relieved of the taxes imposed by Sections 6051 and 6201 and any penalty or interest added thereto.
(b) For the purpose of this section, a person’s failure to make a timely return or payment shall be considered to be due to reasonable reliance on written advice from the department, only if the department finds that all of the following conditions are satisfied:
(1) The person requested in writing that the department advise the person whether a particular activity or transaction is subject to tax under this part. The specific facts and circumstances of the activity or transaction shall be fully described in the request.
(2) The department responded in writing to the person regarding the written request for advice, stating whether or not the described activity or transaction is subject to tax, or stating the conditions under which the activity or transaction is subject to tax.
(3) In reasonable reliance on the department’s written advice, the person did not do either of the following:
(A) Charge or collect from the person’s customers amounts designated as sales tax reimbursement or use tax for the described activity or transaction.
(B) Pay a use tax on the storage, use, or other consumption in this state of tangible personal property.
(4) The liability for taxes applied to a particular activity or transaction which occurred before either of the following:
(A) Before the department rescinded or modified the advice so given, by sending written notice to the person of the rescinded or modified advice.
(B) Before a change in statutory or constitutional law, a change in the department’s regulations, or a final decision of a court, which renders the department’s earlier written advice no longer valid.
(c) Any person seeking relief under this section shall file with the department:
(1) A copy of the person’s written request to the department and a copy of the department’s written advice.
(2) A statement under penalty of perjury setting forth the facts on which the claim for relief is based.
(3) Any other information which the department may require.
(d) Only the person making the written request shall be entitled to rely on the department’s written advice to that person.
(e) (1) The department shall confirm receipt of a request by a person for written advice from the department other than presentation of a taxpayer’s books and records for audit by sending a letter or email within 30 days from the date of receipt of the request for written advice.
(2) The department shall provide a response within 180 days from the date the request by a person for written advice from the department other than presentation of a taxpayer’s books and records for audit is received by the department. A response shall not be subject to the 180-day timeline under any of the following circumstances:
(A) The request concerns a matter that is subject to litigation or administrative hearing.
(B) The request concerns a taxpayer that is under audit.
(C) The director determines that, under the facts and circumstances, the 180-day timeline cannot be met.

(f)All adopted rules and regulations issued pursuant to Section 7051, as they read prior to the amendment of this section by the act adding this subdivision, and in effect on December 31, 2020, shall remain in effect and shall be fully enforceable unless and until modified or superseded by the department.

(g)

(f) The changes to this section made by the act adding this subdivision shall apply to written requests received by the department on or after January 1, 2021.

SEC. 2.

 Section 21012 of the Revenue and Taxation Code is amended to read:

21012.
 (a) If a person’s failure to make a timely return or payment is due to the person’s reasonable reliance on written advice from the board, the person may be relieved of the taxes assessed or any interest, additions to tax, and penalties added thereto, as follows:
(1) Taxes shall only be relieved, and any interest, additions to tax, and penalties added thereto, if the person’s failure to make a timely return or payment was due to a person’s reasonable reliance on the written advice of a legal ruling by the chief counsel, and only if the board itself finds all the conditions satisfied.
(2) In the event that the person relied on written advice of other than a chief counsel ruling, taxes shall not be relieved. Interest, additions to tax, and penalties may be waived if the board staff finds all the conditions satisfied.
(b) For purposes of subdivision (a), all of the following conditions shall be satisfied:
(1) The person or the person’s representative requested in writing that the board advise them whether a particular activity or transaction is subject to tax under the tax laws administered by that agency, and the specific facts and circumstances of the activity or transaction were fully described in the request. If the request is for a legal ruling, the request shall specifically so state.
(2) The board responded in writing to the person regarding the written request for advice, stating whether or not the described activity or transaction is subject to tax, or stating the conditions under which the activity or transaction is subject to tax. In the case where a chief counsel ruling is issued, the ruling shall be signed by the chief counsel or the chief counsel’s designee.
(3) In reasonable reliance on the board’s written advice, the person did not remit the tax due.
(4) The liability for taxes applied to a particular activity or transaction which occurred before the board rescinded or modified the advice so given, by sending written notice to the person of the rescinded or modified advice.
(5) The tax consequences expressed in the board’s written advice were not subsequently changed by any of the following:
(A) A change in statutory law or case law.
(B) A change in federal interpretation in cases where the board’s written advice was predicated upon federal interpretation.
(C) A change in material facts or circumstances relating to the taxpayer.
(c) Any person seeking relief under this section shall file with the board all of the following:
(1) A copy of the person’s written request to the board and a copy of the board’s written advice.
(2) A statement signed under penalty of perjury, setting forth the facts on which the claim is based.
(3) Any other information which the board may require.
(d) Only the person making the written request shall be entitled to rely on the board’s written advice to that person.
(e) If written advice is issued pursuant to this section, it shall include a declaration that the tax consequences expressed in the advice may be subject to change for any of the reasons specified in paragraph (5) of subdivision (b) and that it is the duty of the taxpayer to be aware of any of these possible changes.
(f) This section does not apply if the taxpayer’s request for written advice pursuant to paragraph (1) of subdivision (b) contained a misrepresentation or omission of one or more material facts.
(g) For purposes of subdivision (a), the board shall waive only that portion of tax, penalties, interest, and additions to tax attributable to the actions taken by the taxpayer after receipt of the written advice of the board which were in reasonable reliance on the written advice.
(h) Chief counsel rulings shall be issued as provided in published guidelines.
(i) (1) The board shall confirm receipt of a request by a person for written advice from the board by sending a letter within 30 days from the date of receipt of the request for written advice. The chief counsel or their designee shall confirm receipt of a request by a person for written advice of a legal ruling by the a chief counsel ruling by sending a letter or email within 30 days of the date of receipt of the request for written advice of a legal a chief counsel ruling.
(2) The board shall provide a response within 180 days from the date the request by a person for written advice from the board is received by the board. The chief counsel or their designee shall provide a response within 180 days from the date the request by a person for written advice of a legal a chief counsel ruling is received by the chief counsel.
(j) All published guidelines issued pursuant to subdivision (h), as they read prior to the amendment of this section by the act adding this subdivision, and in effect on December 31, 2020, shall remain in effect and shall be fully enforceable unless and until modified or superseded by the board.
(k) The changes to this section made by the act adding this subdivision shall apply to a written requests request for a chief counsel ruling received by the board on or after January 1, 2021.