Code Section Group

Revenue and Taxation Code - RTC

DIVISION 2. OTHER TAXES [6001 - 61045]

  ( Heading of Division 2 amended by Stats. 1968, Ch. 279. )

PART 10.2. ADMINISTRATION OF FRANCHISE AND INCOME TAX LAWS [18401 - 19802]

  ( Part 10.2 added by Stats. 1993, Ch. 31, Sec. 26. )

CHAPTER 1. General Provisions [18401 - 18417]

  ( Chapter 1 added by Stats. 1993, Ch. 31, Sec. 26. )

ARTICLE 1. General Application [18401 - 18410.2]
  ( Article 1 added by Stats. 1993, Ch. 31, Sec. 26. )

18401.
  

Each provision of this part shall apply to Part 10 (commencing with Section 17001) and Part 11 (commencing with Section 23001), unless otherwise provided.

(Added by Stats. 1993, Ch. 31, Sec. 26. Effective June 16, 1993. Operative January 1, 1994, by Sec. 83 of Ch. 31.)

18402.
  

(a) Except where the context otherwise requires, the general provisions and definitions provided in Chapter 1 (commencing with Section 17001) of Part 10 and in Chapter 1 (commencing with Section 23001) of Part 11 shall apply to this part.

(b) For purposes of this part, “person” includes an individual, fiduciary, partnership, limited liability company, corporation, or organization exempt from taxation under Section 23701.

(c) (1) Whenever provisions of this part are applied in connection with Part 10 (commencing with Section 17001), the terms “taxpayer,” “corporation” and “taxable year” have the same meaning as defined in Chapter 1 (commencing with Section 17001) of Part 10.

(2) Whenever provisions of this part are applied in connection with Part 11 (commencing with Section 23001), the terms “taxpayer,” “corporation,” “income year,” and “taxable year” have the same meaning as defined in Article 2 (commencing with Section 23030) of Chapter 1 of Part 11.

(Amended by Stats. 1997, Ch. 605, Sec. 7. Effective January 1, 1998.)

18403.
  

For purposes of this part, any return, declaration, report, statement, or other document required to be made or filed under Part 10 (commencing with Section 17001) or Part 11 (commencing with Section 23001) shall be deemed to have been required to be made or filed under this part.

(Added by Stats. 1993, Ch. 31, Sec. 26. Effective June 16, 1993. Operative January 1, 1994, by Sec. 83 of Ch. 31.)

18405.
  

(a) In the case of a new statutory provision in Part 7.5 (commencing with Section 13201), Part 10 (commencing with Section 17001), Part 10.2 (commencing with Section 18401), or Part 11 (commencing with Section 23001), or the addition of a new part, the Franchise Tax Board itself is authorized to grant relief as set forth in subdivision (b) from the requirements of the new statutory provision in a manner as provided in subdivision (c).

(b) The relief provided in subdivision (a) may be granted only for the first taxable year for which the new statutory provision is operative and only when substantial unintentional noncompliance with the new provision has occurred by a class of affected taxpayers. The relief is limited to waiving penalties or perfecting elections and may be granted only to taxpayers who timely paid taxes and other required amounts shown on the return consistent with the election and who timely filed their return (with regard to extension).

(c) The relief granted in this section shall, upon the recommendation of the Executive Officer of the Franchise Tax Board, be made by resolution of the Franchise Tax Board that sets forth the conditions, time, and manner as the Franchise Tax Board determines are necessary. The resolution shall be adopted only by an affirmative vote of each of the three members of the Franchise Tax Board.

(d) For purposes of this section:

(1) “New statutory provision” means a complete, newly established tax program, tax credit, exemption, deduction, exclusion, penalty, or reporting or payment requirement and does not mean amendments made to existing tax provisions that make minor modifications or technical changes.

(2) “Perfecting elections” includes correcting omissions or errors only when substantial evidence is present with the filed return that the taxpayer intended to make the election and does not include making an election where one was not previously attempted to be made.

(3) “Substantial unintentional noncompliance,” for purposes of Part 11 (commencing with Section 23001), includes any case in which the taxpayer filed a water’s-edge contract with a timely filed original return and timely paid all taxes and other required amounts shown on the return consistent with the water’s-edge election, but where the taxpayer’s election is or might be invalidated by reason of the act or omission of an affiliated corporation that is not the parent or a subsidiary of the taxpayer. In that case, notwithstanding anything to the contrary in this section, relief shall be deemed granted to validate the taxpayer’s water’s-edge election, conditioned only upon an agreement by the affiliated corporation to either (A) file a water’s-edge contract and pay all taxes and other required amounts consistent with that election, or (B) waive any right, with respect to any taxable year for which the corporation did not make a water’s-edge election on its own timely filed return, to determine its income derived from or attributable to sources within this state pursuant to that election, whichever measure produces the greater amount of tax.

(e) This section shall apply to any Franchise Tax Board resolution adopted after the effective date of this section with respect to any taxable year that is subject to an open statute of limitations on the date of the resolution.

(Amended by Stats. 2004, Ch. 193, Sec. 185. Effective January 1, 2005.)

18405.1.
  

(a) Notwithstanding Section 18405, the Franchise Tax Board may, in its discretion, permit elections made under Section 25111 to be perfected during the period of limitations prescribed under Sections 19057 and 19306 for the applicable taxable year. The statute of limitations of all taxpayers in a water’s-edge group whose taxable year falls, in whole or in part, within the period of the election shall remain open to receive adjustments, under claim or deficiency, consistent with that perfection of the election.

(b) Subdivision (a) does not apply to the 1988 taxable year of any taxpayer whose water’s-edge election has been perfected pursuant to Section 18405.

(Added by Stats. 2003, Ch. 633, Sec. 5. Effective September 30, 2003.)

18407.
  

Section 6011 of the Internal Revenue Code, relating to general requirement of return, statement, or list, shall apply, except as otherwise provided.

(a) Section 6011(a) of the Internal Revenue Code, relating to general rule, is modified as follows:

(1) The phrase “any person liable for any tax imposed by Part 10 (commencing with Section 17001), Part 11 (commencing with Section 23001), or this part,” shall be substituted for the phrase “when required by regulations prescribed by the Secretary any person made liable for any tax imposed by this title,” contained therein.

(2) “Secretary of the Treasury under Section 6011 of the Internal Revenue Code for federal income tax purposes or by the Franchise Tax Board” shall be substituted for “Secretary.”

(3) To additionally provide that “reportable transaction” includes any transaction of a type that the Secretary of the Treasury under Section 6011 of the Internal Revenue Code for federal income tax purposes or the Franchise Tax Board under this section for California income or franchise tax purposes determines as having a potential for tax avoidance or evasion including deductions, basis, credits, entity classification, dividend elimination, or omission of income, and shall be reported on the return or the statement required to be made.

(4) To additionally provide that “listed transaction” includes any transaction that is the same as, or substantially similar to, a transaction specifically identified by the Secretary of the Treasury under Section 6011 of the Internal Revenue Code for federal income tax purposes or by the Franchise Tax Board under this section for California income or franchise tax purposes, as a tax avoidance transaction including deductions, basis, credits, entity classification, dividend elimination, or omission of income and shall be reported on the return or statement required to be made.

(A) The Franchise Tax Board shall identify and publish “listed transactions” (whether identified by the Secretary of the Treasury under Section 6011 of the Internal Revenue Code for federal income tax purposes or by the Franchise Tax Board) through the use of Franchise Tax Board Notices or other published positions. In addition, the “listed transactions” identified and published pursuant to the preceding sentence shall be published on the Web site of the Franchise Tax Board.

(B) The Franchise Tax Board shall conduct a public outreach program to make taxpayers aware of the new and increased penalties associated with the use of tax avoidance transactions including deductions, basis, credits, entity classification, dividend elimination, or omission of income.

(5) Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code does not apply to any standard, criterion, procedure, determination, rule, notice, or guideline established or issued by the Franchise Tax Board pursuant to paragraph (4).

(b) Section 6011(b) of the Internal Revenue Code, relating to identification of taxpayer, does not apply and, in lieu thereof, Section 18408 shall apply.

(c) Section 6011(c) of the Internal Revenue Code, relating to returns, etc., of DISCs and former DISCs and FSCs and former FSCs, does not apply.

(d) Section 6011(d) of the Internal Revenue Code, relating to authority to require information concerning Section 912 allowances, does not apply.

(e) Section 6011(e) of the Internal Revenue Code, relating to regulations requiring returns on magnetic media, etc., shall take into account Section 18408 and shall also include the modifications made to Section 6011(e) of the Internal Revenue Code by Section 18408.

(f) Section 6011(f)(2) of the Internal Revenue Code, relating to incentives, does not apply.

(Amended (as added by Stats. 2003, Ch. 656) by Stats. 2004, Ch. 183, Sec. 327. Effective January 1, 2005.)

18408.
  

The Franchise Tax Board is authorized to require that information with respect to persons subject to the taxes imposed by Article 5 (commencing with Section 18661) of Chapter 2 (relating to tax withheld at source) as is necessary or helpful in securing proper identification of those persons.

(Added by renumbering Section 18552 by Stats. 2000, Ch. 863, Sec. 11. Effective January 1, 2001.)

18409.
  

(a) The Franchise Tax Board shall prescribe regulations providing standards for determining which returns shall be filed on magnetic media or in other machine-readable form. The Franchise Tax Board may not require returns of any tax imposed by Part 10 (commencing with Section 17001) on estates and trusts to be other than on paper forms supplied by the Franchise Tax Board. In prescribing those regulations, the Franchise Tax Board shall take into account, among other relevant factors, the ability of the taxpayer to comply at a reasonable cost with that filing requirement.

(b) (1) Subdivision (a) is applicable only to taxpayers required to file returns on magnetic media or in other machine-readable form pursuant to Section 6011(e) of the Internal Revenue Code, relating to regulations requiring returns on magnetic media, and the regulations adopted thereto.

(2) For purposes of paragraph (1), the last sentence of Section 6011(e)(2) of the Internal Revenue Code, does not apply.

(3) In addition, the regulations under subdivision (a) shall not require that returns filed on magnetic media or in other machine-readable form contain more information than is required to be included in similar returns filed with the Internal Revenue Service under Section 6011(e) of the Internal Revenue Code and the regulations adopted thereto.

(c) In lieu of the magnetic media or other machine-readable form returns required by this section, a copy of the similar magnetic media or other machine-readable form returns filed with the Internal Revenue Service pursuant to Section 6011(e) of the Internal Revenue Code, and the regulations adopted thereto, may be filed with the Franchise Tax Board.

(Amended by Stats. 2003, Ch. 228, Sec. 48. Effective August 11, 2003.)

18410.
  

For purposes of Part 10 (commencing with Section 17001), Part 11 (commencing with Section 23001), and this part, a legal holiday includes a federal legal holiday recognized by the Internal Revenue Service under Section 7503 of the Internal Revenue Code.

(Added by Stats. 2012, Ch. 313, Sec. 1. (AB 318) Effective January 1, 2013.)

18410.2.
  

(a) The California Competes Tax Credit Committee is hereby established. The committee shall consist of the Treasurer, the Director of Finance, and the Director of the Governor’s Office of Business and Economic Development, who shall serve as chair of the committee, or their designated representatives, and one appointee each by the Speaker of the Assembly and the Senate Committee on Rules. A Member of the Legislature shall not be appointed.

(b) For purposes of Sections 17059.2 and 23689, the California Competes Tax Credit Committee shall do all of the following:

(1) Approve or reject any written agreement for a tax credit allocation by resolution at a duly noticed public meeting held in accordance with the Bagley-Keene Open Meeting Act (Article 9 (commencing with Section 11120) of Chapter 1 of Part 1 of Division 3 of Title 2 of the Government Code), but only after receipt of the fully executed written agreement between the taxpayer and the Governor’s Office of Business and Economic Development.

(2) Approve or reject any recommendation to recapture, in whole or in part, a tax credit allocation by resolution at a duly noticed public meeting held in accordance with the Bagley-Keene Open Meeting Act (Article 9 (commencing with Section 11120) of Chapter 1 of Part 1 of Division 3 of Title 2 of the Government Code), but only after receipt of the recommendation from the Governor’s Office of Business and Economic Development pursuant to the terms of the fully executed written agreement.

(c) For purposes of Sections 17059.2 and 23689, the Governor’s Office of Business and Economic Development shall provide a member of the committee, or their designated representatives, listed in subdivision (a), upon request of that member, with any information necessary to fulfill their duties or otherwise comply with the requirements of this section. Nothing in this subdivision shall be construed to require the Governor’s Office of Business and Economic Development to provide information to the member or their designated representative that the applicant considers to be a trade secret, confidential, privileged, or otherwise exempt from disclosure under the California Public Records Act (Chapter 3.5 (commencing with Section 6250) of Division 7 of Title 1 of the Government Code).

(Amended by Stats. 2018, Ch. 52, Sec. 5. (SB 855) Effective June 27, 2018.)

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