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 4. Payments and Assessments [19001 - 19195]

  ( Chapter 4 added by Stats. 1993, Ch. 31, Sec. 26. )

ARTICLE 7. Penalties and Additions to Tax [19131 - 19187]
  ( Article 7 added by Stats. 1993, Ch. 31, Sec. 26. )

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 may 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 may not be less than the lesser of one hundred thirty-five dollars ($135) 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 does not apply to any failure to pay any estimated tax required by Section 19025 or 19136.

(f) (1) The penalty described in this section is presumed not to apply if, with respect to the same taxable year, all of the following conditions are met:

(A) A taxpayer fails to make and file a return required by this part on or before the due date of the return, determined with regard to any extension of time for filing, and fails to make and file a return required by Section 6012 of the Internal Revenue Code on or before the due date of the return, determined with regard to any extension of time for filing.

(B) The Franchise Tax Board proposes a deficiency assessment that is based upon a final federal determination.

(C) The Commissioner of Internal Revenue or other officer of the United States determines that the penalty described in Section 6651(a)(1) of the Internal Revenue Code does not apply because the failure to file the federal return on or before the date prescribed for its filing was due to reasonable cause and not due to willful neglect.

(2) The Franchise Tax Board may rebut the presumption described in paragraph (1) by establishing, by a preponderance of the evidence, that the taxpayer’s failure to make and file a return required by this part was not due to reasonable cause or was due to willful neglect.

(Amended by Stats. 2010, Ch. 14, Sec. 44. (SB 401) Effective January 1, 2011.)

19131.5.
  

(a) Section 6164 of the Internal Revenue Code, relating to extension of time for payment of taxes by corporations expecting carrybacks, shall apply, except as otherwise provided.

(b) (1) Section 6164 of the Internal Revenue Code is modified by substituting the phrase “Secretary or the Franchise Tax Board” for the word “Secretary” in each place it appears.

(2) Section 6164(a) of the Internal Revenue Code is modified by substituting the phrase “Part 11 (commencing with Section 23001)” in lieu of the phrase “subtitle A.”

(3) Section 6164(b) of the Internal Revenue Code, relating to contents of statement, is modified by substituting the phrase “Section 24416” in lieu of the phrase “Section 172(b).”

(4) Section 6164(d)(2) of the Internal Revenue Code shall not apply.

(5) Section 6164(h) of the Internal Revenue Code, relating to jeopardy, is modified as follows:

(A) By substituting the phrase “he or the Franchise Tax Board” for the word “he” in each place it appears.

(B) By substituting the phrase “him or the Franchise Tax Board” for the word “him” in each place it appears.

(6) Section 6164(i) of the Internal Revenue Code, relating to consolidated returns, is modified by substituting the phrase “combined report” in lieu of the phrase “consolidated return” in each place it appears.

(c) This section shall not apply to a carryback of a net operating loss attributable to taxable years beginning on or after January 1, 2019.

(Amended by Stats. 2019, Ch. 39, Sec. 19. (AB 91) Effective July 1, 2019.)

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.

(Amended by Stats. 1998, Ch. 322, Sec. 50. Effective August 20, 1998.)

19132.5.
  

(a) In the case of a qualified taxpayer, no penalty shall be assessed under Section 19132 if the return is filed timely (not later than the extended due date granted under Section 18567 or 18604) and the tax required to be paid on or before the due date of the return, without regard to extension, is paid within the following time:

(1) In the case of an individual, partnership, or fiduciary, within six months of the original due date of the return.

(2) In the case of a corporation, within seven months of the original due date of the return.

(b) Any penalty imposed under Section 19132 shall be assessed from the original due date of the return if the taxpayer fails to pay the tax within the time specified in this section.

(c) This section shall apply to payment of the amount shown as tax on the original returns required to be filed during calendar year 1994.

(d) For purposes of this section, “qualified taxpayer” means any corporation, fiduciary, partnership, or individual taxpayer to whom one of the following applies as a result of the Northridge earthquake of January 1994, any related aftershock, or any related casualty:

(1) The qualified taxpayer sustained any significant property loss.

(2) The qualified taxpayer suffered a loss of employment due to property damage suffered by his or her employer.

(3) The qualified taxpayer realized significant loss of business income from a business located within the Northridge earthquake area.

(Amended by Stats. 1997, Ch. 605, Sec. 24. Effective January 1, 1998.)

19133.
  

If any taxpayer fails or refuses to furnish any information requested in writing by the Franchise Tax Board or fails or refuses to make and file a return required by this part upon notice and demand by the Franchise Tax Board, then, unless the failure is due to reasonable cause and not willful neglect, the Franchise Tax Board may add a penalty of 25 percent of the amount of tax determined pursuant to Section 19087 or of any deficiency tax assessed by the Franchise Tax Board concerning the assessment of which the information or return was required.

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

19134.
  

(a) The provisions of Section 6657 of the Internal Revenue Code, relating to bad checks, shall apply except as otherwise provided.

(b) Section 6657 of the Internal Revenue Code, relating to bad checks, is modified to apply to payments made by credit card remittance or electronic funds transfer (as provided by Section 19011) in addition to payments made by check or money order.

(c) For payments received prior to January 1, 1993, this section shall be applied only to payments pertaining to taxable years beginning on or after January 1, 1990.

(d) For payments received on or after January 1, 1993, this section shall be applied to all payments, without regard to taxable year.

(e) The amendments made to Section 6657 of the Internal Revenue Code by Public Law 110-28 that are incorporated by reference under this section shall apply to all payments received after the effective date of the act adding this subdivision, without regard to taxable year.

(Amended by Stats. 2010, Ch. 14, Sec. 45. (SB 401) Effective January 1, 2011.)

19135.
  

(a) (1) The Franchise Tax Board shall impose a penalty of two thousand dollars ($2,000) per taxable year whenever an entity described in paragraph (2) is doing business in this state, within the meaning of Section 23101, and fails to make and file a return as required by this part, within 60 days after the Franchise Tax Board sends the taxpayer a notice and demand to file the required tax return, unless the failure is due to reasonable cause and not willful neglect.

(2) (A) A foreign corporation or a foreign limited liability company that fails to qualify to do business in this state or whose powers, rights, and privileges have been forfeited.

(B) A domestic corporation or a domestic limited liability company that has been suspended.

(b) The penalty shall be in addition to any other penalty that may be due under this part.

(Repealed and added by Stats. 2012, Ch. 313, Sec. 3. (AB 318) Effective January 1, 2013.)

19136.
  

(a) Section 6654 of the Internal Revenue Code, relating to failure by an individual to pay estimated income tax, applies, 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) Section 6654(e)(1) of the Internal Revenue Code, relating to exceptions where the tax is a small amount, does not apply.

(2) An addition to tax shall not be imposed under this section if the tax imposed under Section 17041 or 17048 and the tax imposed under Section 17062 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 five hundred dollars ($500), except in the case of a separate return filed by a married person the amount shall be less than two hundred fifty dollars ($250).

(d) Section 6654(f) of the Internal Revenue Code does not apply and for purposes of this section the term “tax” means the tax imposed under Section 17041 or 17048 and the tax imposed under Section 17062 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.

(e) (1) The credit for tax withheld on wages, as specified in Section 6654(g) of the Internal Revenue Code, is the credit allowed under subdivision (a) of Section 19002.

(2) (A) Section 6654(g)(1) of the Internal Revenue Code is modified by substituting the phrase “the applicable percentage” for the phrase “an equal part.”

(B) For purposes of this paragraph, “applicable percentage” means the percentage amount prescribed under Section 6654(d)(1)(A) of the Internal Revenue Code, as modified by subdivision (a) of Section 19136.1.

(f) This section applies to a nonresident individual.

(g) (1) An addition to tax shall not be imposed under this section to the extent that the underpayment was created or increased by either of the following:

(A) Any law that is chaptered during and operative for the taxable year of the underpayment.

(B) If, for a taxable year prior to its repeal, the adjustment factor for the credit authorized by Section 17052 for the taxable year was less than the adjustment factor for that credit for the preceding taxable year.

(2) (A) Notwithstanding Section 18415, subparagraph (A) of paragraph (1) applies to penalties imposed under this section on or after January 1, 2005.

(B) Notwithstanding Section 18415, subparagraph (B) of paragraph (1) applies to penalties imposed under this section on or after January 1, 2016.

(h) The amendments made to this section by Section 5 of Chapter 305 of the Statutes of 2008 apply to taxable years beginning on or after January 1, 2009.

(i) The amendments made to this section by Section 3 of Chapter 15 of the Fourth Extraordinary Session of the Statutes of 2009 apply to amounts withheld on wages beginning on or after January 1, 2009.

(Amended by Stats. 2016, Ch. 86, Sec. 284. (SB 1171) Effective January 1, 2017.)

19136.1.
  

(a) Section 6654(d)(1)(A) of the Internal Revenue Code is modified to provide that in lieu of the required installments specified in that section, the amount of required installments shall instead be as follows:

(1) For each taxable year beginning on or after January 1, 2009, and before January 1, 2010, the amount of required installments shall be:

(A) For the 1st and 2nd required installments, 30 percent of the required annual payment.

(B) For the 3rd and 4th required installments, 20 percent of the required annual payment.

(2) For each taxable year beginning on or after January 1, 2010, the amount of required installments shall be:

(A) For the 1st required installment, 30 percent of the required annual payment.

(B) For the 2nd required installment, 40 percent of the required annual payment.

(C) The amount of the 3rd required installment shall be zero.

(D) For the 4th required installment, 30 percent of the required annual payment.

(b) Section 6654(d)(2)(C)(ii) of the Internal Revenue Code, relating to applicable percentage, is modified as follows:

(1) For each taxable year beginning on or after January 1, 2009, and before January 1, 2010, by substituting “27” for “22.5,” “54” for “45,” and “72” for “67.5.”

(2) For each taxable year beginning on or after January 1, 2010, by substituting “27” for “22.5,” “63” for “45,” and “63” for “67.5.”

(Amended by Stats. 2009, 4th Ex. Sess., Ch. 15, Sec. 4. (AB 17 4x) Effective October 23, 2009.)

19136.2.
  

For taxable years beginning on or after January 1, 1998, and before January 1, 1999, Section 6654(d)(1)(C)(i) of the Internal Revenue Code, relating to limitation on use of preceding year’s tax, shall not apply.

(Added by Stats. 1997, Ch. 611, Sec. 56.5. Effective October 3, 1997.)

19136.3.
  

(a) Section 6654(d)(1)(B) of the Internal Revenue Code is modified to additionally provide that clause (ii) shall not apply if the adjusted gross income shown on the return of the individual for the taxable year is equal to or greater than $1 million ($500,000 in the case of a married individual filing a separate return).

(b) This section shall apply to taxable years beginning on or after January 1, 2009.

(Added by Stats. 2008, 1st Ex. Sess., Ch. 1, Sec. 3. Effective December 31, 2008.)

19136.5.
  

No addition to tax shall be made under Section 19136 for any installment of tax due on or after January 1, 1993, to the extent that the underpayment is attributable solely to changes made to the laws of other states applicable to the determination of credits that make Section 18001 inapplicable, by its terms, to a resident of this state.

(Added by Stats. 1993, Ch. 877, Sec. 28.1. Effective October 6, 1993. Operative January 1, 1994, by Sec. 102 of Ch. 877.)

19136.7.
  

(a) No additions to tax shall be made under Section 19136 or 19142 with respect to any underpayment of an installment for a taxable year, to the extent that the underpayment was created or increased as the direct result of an erroneous levy, erroneous processing action, or erroneous collection action by the Franchise Tax Board.

(b) The Franchise Tax Board shall implement this section in a reasonable manner.

(Added by Stats. 2005, Ch. 349, Sec. 3. Effective January 1, 2006.)

19136.12.
  

(a) No addition to tax shall be made pursuant to Section 19136 for any period before the date prescribed under Section 18566 for the filing of the return for the 2005 taxable year, with respect to any underpayment of an installment for the 2005 taxable year, to the extent that the underpayment was created or increased by any provision of the act adding this section.

(b) No addition to tax shall be made pursuant to Section 18601 for the filing of the return for the 2005 taxable year, with respect to any underpayment of an installment for the 2005 taxable year, to the extent that the underpayment was created or increased by any provision of the act adding this section.

(c) The Franchise Tax Board shall implement this section in a reasonable manner.

(Added by Stats. 2005, Ch. 691, Sec. 47. Effective October 7, 2005.)

19136.13.
  

No addition to tax shall be made pursuant to Section 19136 for any period before the date prescribed under Section 18566 for the filing of the return for the 2007 taxable year, with respect to any underpayment of an installment for the 2007 taxable year, to the extent that the underpayment was created or increased by any provision of the act adding this section or Chapter 802 of the Statutes of 2006.

(Added by Stats. 2007, Ch. 426, Sec. 3. Effective October 10, 2007.)

19138.
  

(a) (1) A taxpayer subject to the tax imposed under Part 11 (commencing with Section 23001) with an understatement of tax for any taxable year shall be subject to the penalty imposed under this section if that understatement exceeds the greater of the following:

(A) One million dollars ($1,000,000).

(B) Twenty percent of the tax shown on an original return or shown on an amended return filed on or before the original or extended due date of the return for the taxable year.

(2) For taxpayers that are required to be included in a combined report under Section 25101 or authorized to be included in a combined report under Section 25101.15, the threshold amount prescribed in subparagraph (A) or subparagraph (B) of paragraph (1) shall apply to the aggregate amount of tax liability under Part 11 (commencing with Section 23001) for all taxpayers that are required to be or authorized to be included in a combined report.

(b) (1) The penalty under this section shall be an amount equal to 20 percent of any understatement of tax. For purposes of this section, “understatement of tax” means the amount by which the tax imposed by Part 11 (commencing with Section 23001) exceeds the amount of tax shown on an original return or shown on an amended return filed on or before the original or extended due date of the return for the taxable year.

(2) For any taxable year beginning before January 1, 2008, the amount of tax paid on or before May 31, 2009, and shown on an amended return filed on or before May 31, 2009, shall be treated as the amount of tax shown on an original return for purposes of this section.

(3) The amount of additional tax shown on the first amended return reflecting a proper election under Section 338 of the Internal Revenue Code, relating to certain stock purchases treated as asset acquisitions, shall be treated as if that amount was included in the amount of tax shown on an original return for purposes of this section.

(c) The penalty imposed by this section shall be in addition to any other penalty imposed under Part 11 (commencing with Section 23001) or this part.

(d) Article 3 (commencing with Section 19031), relating to deficiency assessments, shall not apply with respect to the assessment or collection of any penalty imposed by subdivision (a).

(e) A refund or credit for any amounts paid to satisfy a penalty imposed under this section may be allowed only on the grounds that the amount of the penalty was not properly computed by the Franchise Tax Board.

(f) No penalty shall be imposed under this section on any understatement to the extent that the understatement is attributable to any of the following:

(1) (A) A change in law that is enacted, promulgated, issued, or becomes final after the earlier of either of the following dates:

(i) The date the taxpayer files the return for the taxable year for which the change is operative.

(ii) The extended due date for the return of the taxpayer for the taxable year for which the change is operative.

(B) For purposes of this paragraph, a “change of law” means a statutory change or an interpretation of law or rule of law by regulation, legal ruling of counsel, within the meaning of subdivision (b) of Section 11340.9 of the Government Code, or a published federal or California court decision.

(C) The Franchise Tax Board shall implement this paragraph in a reasonable manner.

(2) The imposition of an alternative apportionment or allocation method by the Franchise Tax Board under the authority of Section 25137 because the standard allocation and apportionment provisions of Article 2 (commencing with Section 25120) and the regulations thereunder do not fairly represent the extent of the taxpayer’s business activity in this state.

(3) A change to the taxpayer’s federal accounting method pursuant to Section 446 of the Internal Revenue Code, relating to general rule for methods of accounting, that is applicable for purposes of Part 11 (commencing with Section 23001), but only to the extent of understatements for taxable years where the due date of the return, without regard to any extension of time for filing the return, is before the date of consent of the secretary to that change of accounting method.

(g) No penalty shall be imposed under this section to the extent that a taxpayer’s understatement is attributable to the taxpayer’s reasonable reliance on written advice of the Franchise Tax Board, but only if the written advice was a legal ruling by the Chief Counsel, within the meaning of paragraph (1) of subdivision (a) of Section 21012.

(h) (1) This section shall apply to each taxable year beginning on or after January 1, 2003, for which the statute of limitations on assessment has not expired.

(2) The amendments made to this section by Chapter 721 of the Statutes of 2010 shall apply to each taxable year beginning on or after January 1, 2010.

(3) (A) Except as otherwise provided, the amendments made to this section by the act adding this paragraph shall apply to each taxable year beginning on or after January 1, 2015.

(B) The provisions of paragraph (2) of subdivision (f), as added by the act adding this paragraph, shall apply to understatements for any taxable year for which the statute of limitations on assessments has not expired as of the effective date of the act adding this paragraph.

(Amended by Stats. 2015, Ch. 359, Sec. 20. (AB 154) Effective September 30, 2015. Applicable to taxable years beginning on or after January 1, 2015, as provided in Sec. 41 of Stats. 2015, Ch. 359.)

19141.
  

Upon certification by the Secretary of State pursuant to subdivision (a) of Section 2204 or subdivision (a) of Section 17713.09 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 penalty assessed under this section 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, subdivision (e) of Section 8810, or subdivision (e) of Section 17713.08, of the Corporations Code.

(Amended by Stats. 2012, Ch. 419, Sec. 28. (SB 323) Effective January 1, 2013. Operative January 1, 2014, by Sec. 32 of Ch. 419.)

19141.2.
  

(a) Section 6038 of the Internal Revenue Code, relating to information with respect to certain foreign corporations, shall apply, except as otherwise provided.

(b) Section 6038(a) is modified as follows:

(1) The information required to be filed with the Franchise Tax Board under this section shall be a copy of the information required to be filed with the Internal Revenue Service.

(2) The term “United States person,” as defined in Section 7701(a)(30) of the Internal Revenue Code, shall be limited to a domestic corporation, as defined in Section 7701(a) of the Internal Revenue Code, or a bank, as defined in Section 23039, that is 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.

(c) (1) Unless it is shown that the failure is due to reasonable cause and not due to willful neglect, a penalty shall be imposed under this part for failure to furnish information and that penalty shall be determined in accordance with Section 6038 of the Internal Revenue Code, except as otherwise provided.

(A) Section 6038(b) of the Internal Revenue Code shall be modified by substituting “$1,000” for “$10,000” in each place it appears.

(B) Section 6038(b)(2) of the Internal Revenue Code shall be modified by substituting “$24,000” for “$50,000.”

(2) No penalty shall be imposed under paragraph (1) if the copy of the information required to be filed with the Internal Revenue Service was not attached to the taxpayer’s return as originally filed but the taxpayer does both of the following:

(A) Furnishes the copy of the information required to be filed with the Internal Revenue Service either upon its own initiative or within 90 days of notification by the Franchise Tax Board of the requirements of this section.

(B) Agrees to attach a copy of the information required to be filed with the Internal Revenue Service to the taxpayer’s original return filed for subsequent taxable years.

(3) All or any portion of the penalty imposed under paragraph (1) may be waived by the Franchise Tax Board when the taxpayer has entered into a voluntary disclosure agreement under Article 8 (commencing with Section 19191) of Chapter 4.

(4) The penalty imposed under this subdivision shall not apply to returns required to be filed for taxable years beginning before January 1, 1998.

(d) This section shall apply to returns required to be filed for taxable years beginning on or after January 1, 1997.

(Amended by Stats. 2000, Ch. 862, Sec. 21. Effective January 1, 2001.)

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) (1) Section 6038D of the Internal Revenue Code, relating to information with respect to foreign financial assets, shall apply.

(2) A penalty shall be imposed under this part for failure to furnish information and that penalty shall be determined in accordance with Section 6038D of the Internal Revenue Code.

(e) 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.

(f) 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.

(g) The amendments made to this section by the act adding this subdivision shall apply to taxable years beginning on or after January 1, 2016.

(Amended by Stats. 2015, Ch. 359, Sec. 21. (AB 154) Effective September 30, 2015. Applicable to taxable years beginning on or after January 1, 2016, as provided in new subdivision (g).)

19141.6.
  

(a) Each taxpayer determining its income subject to tax pursuant to Section 25101 or electing to file pursuant to Section 25110 shall, for taxable years beginning on or after January 1, 1994, maintain (in the location, in the manner, and to the extent prescribed in regulations promulgated by the Franchise Tax Board on or before December 31, 1995) and make available upon request all of the following:

(1) Any records as may be appropriate to determine the correct treatment of the components that are a part of one or more unitary businesses for purposes of determining the income derived from or attributable to this state pursuant to Section 25101 or 25110.

(2) Any records as may be appropriate to determine the correct treatment of amounts that are attributable to the classification of an item as business or nonbusiness income for purposes of Article 2 (commencing with Section 25120) of Chapter 17 of Part 11.

(3) Any records as may be appropriate to determine the correct treatment of the apportionment factors for purposes of Article 2 (commencing with Section 25120) of Chapter 17 of Part 11.

(4) Documents and information, including any questionnaires completed and submitted to the Internal Revenue Service, that are necessary to audit issues involving attribution of income to the United States or foreign jurisdictions under Section 882 of, or Subpart F of Part III of Subchapter N of, or similar provisions of, the Internal Revenue Code.

(b) For purposes of this section:

(1) Information for any year shall be retained for that period of time in which the taxpayers’ income or franchise tax liability to this state may be subject to adjustment, including all periods in which additional income or franchise taxes may be assessed, not to exceed eight years from the due date or extended due date of the return, or during which a protest is pending before the Franchise Tax Board, or an appeal is pending before the State Board of Equalization, or a lawsuit is pending in the courts of this state or the United States with respect to California franchise or income tax.

(2) “Related party” means corporations that are related because one owns or controls, directly or indirectly, more than 50 percent of the stock of the other or because more than 50 percent of the voting stock of each is owned or controlled, directly or indirectly, by the same interests.

(3) “Records” includes any books, papers, or other data.

(c) (1) If a corporation subject to this section fails to maintain or fails to cause another to maintain records as required by subdivision (a), that corporation shall pay a penalty of ten thousand dollars ($10,000) for each taxable year with respect to which the failure occurs.

(2) If any failure described in paragraph (1) continues for more than 90 days after the day on which the Franchise Tax Board mails notice of the failure to the corporation, that corporation shall pay a penalty (in addition to the amount required under paragraph (1)) of ten thousand dollars ($10,000) for each 30-day period (or fraction thereof) during which the failure continues after the expiration of the 90-day period. The additional penalty imposed by this subdivision shall not exceed a maximum of fifty thousand dollars ($50,000) if the failure to maintain or the failure to cause another to maintain is not willful. This maximum shall apply with respect to taxable years beginning on or after January 1, 1994, and before the earlier of the first day of the month following the month in which regulations are adopted pursuant to this section or December 31, 1995.

(3) For purposes of this section, the time prescribed by regulations to maintain records (and the beginning of the 90-day period after notice by the Franchise Tax Board) shall be treated as not earlier than the last day on which (as shown to the satisfaction of the Franchise Tax Board) reasonable cause existed for failure to maintain the records.

(d) (1) The Franchise Tax Board may apply the rules of paragraph (2) whether or not the board begins a proceeding to enforce a subpoena, or subpoena duces tecum, if subparagraphs (A), (B), and (C) apply:

(A) For purposes of determining the correct treatment under Part 11 (commencing with Section 23001) of the items described in subdivision (a), the Franchise Tax Board issues a subpoena or subpoena duces tecum to a corporation to produce (either directly or as agent for the related party) any records or testimony.

(B) The subpoena or subpoena duces tecum is not quashed in a proceeding begun under paragraph (3) and is not determined to be invalid in a proceeding begun under Section 19504 to enforce the subpoena or subpoena duces tecum.

(C) The corporation does not substantially comply in a timely manner with the subpoena or subpoena duces tecum and the Franchise Tax Board has sent by certified or registered mail a notice to that corporation that it has not substantially complied.

(D) If the corporation fails to maintain or fails to cause another to maintain records as required by subdivision (a), and by reason of that failure, the subpoena, or subpoena duces tecum, is quashed in a proceeding described in subparagraph (B) or the corporation is not able to provide the records requested in the subpoena or subpoena duces tecum, the Franchise Tax Board may apply the rules of paragraph (2) to any of the items described in subdivision (a) to which the records relate.

(2) (A) All of the following shall be determined by the Franchise Tax Board in the Franchise Tax Board’s sole discretion from the Franchise Tax Board’s own knowledge or from information the Franchise Tax Board may obtain through testimony or otherwise:

(i) The components that are a part of one or more unitary businesses for purposes of determining the income derived from or attributable to this state pursuant to Section 25101 or 25110.

(ii) Amounts that are attributable to the classification of an item as business or nonbusiness income for purposes of Article 2 (commencing with Section 25120) of Chapter 17 of Part 11.

(iii) The apportionment factors for purposes of Article 2 (commencing with Section 25120) of Chapter 17 of Part 11.

(iv) The correct amount of income under Section 882 of, or Subpart F of Part III of Subchapter N of, or similar provisions of, the Internal Revenue Code.

(B) This paragraph shall apply to determine the correct treatment of the items described in subdivision (a) unless the corporation is authorized by its related parties (in the manner and at the time as the Franchise Tax Board shall prescribe) to act as the related parties’ limited agent solely for purposes of applying Section 19504 with respect to any request by the Franchise Tax Board to examine records or produce testimony related to any item described in subdivision (a) or with respect to any subpoena or subpoena duces tecum for the records or testimony. The appearance of persons or the production of records by reason of the corporation being an agent shall not subject those persons or records to legal process for any purpose other than determining the correct treatment under Part 11 of the items described in subdivision (a).

(C) Determinations made in the sole discretion of the Franchise Tax Board pursuant to this paragraph may be appealed to the State Board of Equalization, in the manner and at the time prescribed by Section 19045 or 19324, or may be the subject of an action to recover tax, in the manner and at a time prescribed by Section 19382. The review of determinations by the board or the court shall be limited to whether the determinations were arbitrary or capricious, or are not supported by substantial evidence.

(3) (A) Notwithstanding any other law or rule of law, any reporting corporation to which the Franchise Tax Board issues a subpoena or subpoena duces tecum referred to in subparagraph (A) of paragraph (1) shall have the right to begin a proceeding to quash the subpoena or subpoena duces tecum not later than the 90th day after the subpoena or subpoena duces tecum was issued. In that proceeding, the Franchise Tax Board may seek to compel compliance with the subpoena or subpoena duces tecum.

(B) Notwithstanding any other law or rule of law, any reporting corporation that has been notified by the Franchise Tax Board that it has determined that the corporation has not substantially complied with a subpoena or subpoena duces tecum referred to in paragraph (1) shall have the right to begin a proceeding to review the determination not later than the 90th day after the day on which the notice referred to in subparagraph (C) of paragraph (1) was mailed. If the proceeding is not begun on or before the 90th day, the determination by the Franchise Tax Board shall be binding and shall not be reviewed by any court.

(C) The 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, shall have jurisdiction to hear any proceeding brought under subparagraphs (A) and (B). Any order or other determination in the proceeding shall be treated as a final order that may be appealed.

(D) If any corporation takes any action as provided in subparagraphs (A) and (B), the running of any period of limitations under Sections 19057 to 19064, inclusive (relating to the assessment and collection of tax), or under Section 19704 (relating to criminal prosecutions) with respect to that corporation shall be suspended for the period during which the proceedings, and appeals therein, are pending. In no event shall any period expire before the 90th day after the day on which there is a final determination in the proceeding.

(Amended by Stats. 2000, Ch. 862, Sec. 22. Effective January 1, 2001.)

19142.
  

(a) Except as provided in Sections 19147 and 19148 and subdivision (b), 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 taxable year an amount determined at the rate established under Section 19521 on the amount of the underpayment for the period of the underpayment.

(b) (1) No addition to tax shall be imposed under this section to the extent that the underpayment was created or increased by any provision of law that is chaptered during and operative for the taxable year of the underpayment.

(2) Notwithstanding Section 18415, this subdivision applies to penalties imposed on and after January 1, 2005.

(Amended by Stats. 2005, Ch. 242, Sec. 8. Effective September 22, 2005.)

19144.
  

For the purposes of Section 19142 the amount of the underpayment shall be the excess of—

(a) (1) The amount of the installment which would be required to be paid if the estimated tax were equal to the applicable percentage of the tax shown on the return for the taxable year, or (2) in the case of the tax imposed by Article 3 (commencing with Section 23181) of Chapter 2 of Part 11 an amount equal to the applicable percentage of the lesser of the tax computed at the rate provided by Section 19024 (but otherwise on the basis of the facts shown on the return and the law applicable to the taxable year), or the tax shown on the return for the taxable year as prescribed by Section 19021, or (3) if no return was filed, the applicable percentage of the tax for that year, over

(b) The amount, if any, of the installment paid on or before the last date prescribed for payment.

(c) For purposes of this section, the “applicable percentage” shall be as follows:

(1) For taxable years beginning before January 1, 1998, 95 percent.

(2) For taxable years beginning on or after January 1, 1998, 100 percent.

(Amended by Stats. 2000, Ch. 862, Sec. 24. Effective January 1, 2001.)

19145.
  

For purposes of Section 19142, the period of the underpayment shall run from the date the installment was required to be made to whichever of the following dates is the earlier:

(a) The 15th day of the third month following the close of the taxable year, except in the case of an organization described in Section 23731 subject to the tax imposed under Section 23731, in which case “fifth” shall be substituted for “third.”

(b) With respect to any portion of the underpayment, the date on which that portion is paid. For purposes of this subdivision, a payment of estimated tax on any installment date shall be considered a payment of any previous underpayment only to the extent the payment exceeds the amount of the installment determined under subdivision (a) of Section 19144 for the installment date.

(Amended by Stats. 2000, Ch. 862, Sec. 25. Effective January 1, 2001.)

19147.
  

(a) Notwithstanding Sections 19142 to 19145, inclusive, the addition to the tax with respect to any underpayment of any installment shall not be imposed if the total amount of all payments of estimated tax paid on or before the last date prescribed for the payment of the installment equals or exceeds the amount which would have been required to be paid on or before that date if the estimated tax were whichever of the following is the lesser:

(1) (A) The tax shown on the return of the taxpayer for the preceding taxable year if a return showing a liability for tax was filed by the taxpayer for the preceding year and that preceding year was a year of 12 months. The tax shown on the return, in the case of the tax imposed by Article 3 (commencing with Section 23181) of Chapter 2 of Part 11, means the amount of tax shown on the return for the taxable year as prescribed in Section 19021.

(B) In the case of a large corporation, subparagraph (A) shall not apply, except as provided in clauses (i) and (ii).

(i) Subparagraph (A) shall apply for purposes of determining the amount of the first required installment for any taxable year.

(ii) Any reduction in the first required installment by reason of clause (i) shall be recaptured by increasing the amount of the next required installment by the amount of that reduction.

(2) (A) An amount equal to the applicable percentage specified in Section 19144 of the tax for the taxable year computed by placing on an annualized basis the taxable income:

(i) For the first three months of the taxable year, in the case of the installment required to be paid in the fourth month.

(ii) For the first three months of the taxable year, in the case of the installment required to be paid in the sixth month.

(iii) For the first six months of the taxable year, in the case of the installment required to be paid in the ninth month.

(iv) For the first nine months of the taxable year, in the case of the installment required to be paid in the 12th month of the taxable year.

(B) (i) If the taxpayer makes an election under this clause, each of the following shall apply:

(I) Clause (i) of subparagraph (A) shall be applied by substituting “two months” for “three months.”

(II) Clause (ii) of subparagraph (A) shall be applied by substituting “four months” for “three months.”

(III) Clause (iii) of subparagraph (A) shall be applied by substituting “seven months” for “six months.”

(IV) Clause (iv) of subparagraph (A) shall be applied by substituting “ten months” for “nine months.”

(ii) If the taxpayer makes an election under this clause, each of the following shall apply:

(I) Clause (ii) of subparagraph (A) shall be applied by substituting “five months” for “three months.”

(II) Clause (iii) of subparagraph (A) shall be applied by substituting “eight months” for “six months.”

(III) Clause (iv) of subparagraph (A) shall be applied by substituting “eleven months” for “nine months.”

(iii) An election under clause (i) or (ii) shall apply to the taxable year for which the election is made and shall be effective only if the election is made on or before the date required for the payment of the first required installment for that taxable year.

(iv) This subparagraph shall apply to taxable years beginning on or after January 1, 1997.

(C) For purposes of this paragraph, the taxable income shall be placed on an annualized basis in the following manner:

(i) Multiply by 12 the taxable income referred to in subparagraph (A).

(ii) Divide the resulting amount by the number of months in the taxable year referred to in subparagraph (A).

“Taxable income” as used in this paragraph means “net income” includable in the measure of tax or “alternative minimum taxable income” (as defined by Section 23455).

(D) In the case of any corporation which is subject to the tax imposed under Section 23731, any reference to taxable income shall be treated as including a reference to unrelated business taxable income and, except in the case of an election under subparagraph (B), each of the following shall apply:

(i) Clause (i) of subparagraph (A) shall be applied by substituting “two months” for “three months.”

(ii) Clause (ii) of subparagraph (A) shall be applied by substituting “four months” for “three months.”

(iii) Clause (iii) of subparagraph (A) shall be applied by substituting “seven months” for “six months.”

(iv) Clause (iv) of subparagraph (A) shall be applied by substituting “ten months” for “nine months.”

(3) The applicable percentage specified in Section 19144 or more of the tax for the taxable year was paid by withholding of tax pursuant to Section 18662.

(4) The applicable percentage specified in Section 19144 or more of the net income for the taxable year consists of items from which an amount was withheld pursuant to Section 18662, the amount of the first installment under Section 19025 equals at least the minimum franchise tax specified in Section 23153, and the amount of any installment under Section 19025 includes an amount equal to the applicable tax under Section 23800.5.

(b) (1) For purposes of this section, “large corporation” means any corporation if that corporation (or any predecessor corporation) had taxable income (computed without regard to net operating loss deductions) of one million dollars ($1,000,000) or more for any taxable year during the testing period.

(2) For purposes of this subdivision, “testing period” means the three taxable years immediately preceding the taxable year involved.

(c) (1) Any dividend received from a closely held real estate investment trust by any person that owns (after application of Sections 856(d)(5) and 856(l)(3)(B) of the Internal Revenue Code) 10 percent or more (by vote or value) of the stock or beneficial interests in the trust shall be taken into account in computing annualized income installments under paragraph (2) of subdivision (a) in a manner similar to the manner under which partnership income inclusions are taken into account.

(2) For purposes of paragraph (1), the term “closely held real estate investment trust” means a real estate investment trust with respect to which five or fewer persons own (after application of Sections 856(d)(5) and 856(l)(3)(B) of the Internal Revenue Code) 50 percent or more (by vote or value) of the stock or beneficial interests in the trust.

(3) The amendments made to this section by the act adding this subdivision shall apply to estimated tax payments due on or after January 1, 2001.

(Amended by Stats. 2001, Ch. 4, Sec. 1. Effective March 29, 2001.)

19148.
  

(a) Notwithstanding Sections 19142 to 19147, inclusive, the addition to the tax with respect to any underpayment of any installment shall not be imposed if the total amount of all payments of estimated tax made on or before the last date prescribed for the payment of that installment equals or exceeds the applicable percentage specified in Section 19144 of the amount determined under subdivision (b).

(b) The amount determined under this subdivision for any installment shall be determined in the following manner:

(1) Take the net income for all months during the taxable year preceding the filing month.

(2) Divide that amount by the base period percentage for all months during the taxable year preceding the filing month.

(3) Determine the tax on the amount determined under paragraph (2).

(4) Multiply the tax computed under paragraph (3) by the base period percentage for the filing months and all months during the taxable year preceding the filing month.

(c) For purposes of this subdivision:

(1) The base period percentage for any period of months shall be the average percent which the net income for the corresponding months in each of the three preceding taxable years bears to the net income for the three preceding taxable years.

(2) “Filing month” means the month in which the installment is required to be paid.

(3) This subdivision shall only apply if the base period percentage for any six consecutive months of the taxable year equals or exceeds 70 percent.

(4) The Franchise Tax Board may by regulations provide for the determination of the base period percentage in the case of reorganizations, new corporations, and other similar circumstances.

(Amended by Stats. 2000, Ch. 862, Sec. 27. Effective January 1, 2001.)

19149.
  

(a) Notwithstanding any other provision of Sections 19142 to 19151, inclusive, if the amount of estimated tax due and payable under Section 19025 is only the minimum franchise tax imposed by Section 23153 and, if applicable, the tax of a wholly owned subsidiary under Section 23800.5, then the addition to the tax with respect to any underpayment of any installment imposed by Section 19142 shall be calculated only on the basis of the amount of the minimum franchise tax and the amount of the tax of each wholly owned subsidiary.

(b) This section shall not apply to a large corporation as defined in subdivision (b) of Section 19147.

(Amended by Stats. 1998, Ch. 7, Sec. 22. Effective March 14, 1998.)

19150.
  

The application of Sections 19142 to 19151, inclusive, to taxable years of less than 12 months shall be in accordance with regulations prescribed by the Franchise Tax Board.

(Amended by Stats. 2000, Ch. 862, Sec. 28. Effective January 1, 2001.)

19151.
  

Notwithstanding Sections 19142 to 19150, inclusive, the addition to the tax with respect to underpayment of any installment shall not be imposed on an exempt organization described in Section 23731 whose exemption is retroactively revoked unless the organization described in Section 23731 has notice that the estimated tax should have been paid. The denial of the organization’s exemption application or the revocation of its exemption by the Internal Revenue Service normally satisfies the notice requirement.

(Amended by Stats. 1999, Ch. 987, Sec. 75.3. Effective October 10, 1999.)

19161.
  

(a) An addition to tax shall not be made under Section 19132, 19136, or 19142 for failure to make timely payment of tax with respect to a period during which a case is pending under Title 11 of the United States Code in either of the following situations:

(1) If that tax was incurred by the estate and the failure occurred pursuant to an order of the court finding probable insufficiency of funds of the estate to pay administrative expenses.

(2) If:

(A) That tax was incurred by the debtor before the earlier of the order for relief or (in the involuntary case) the appointment of a trustee, and

(B) (i) The petition was filed before the due date prescribed by law (including extensions) for filing a return of that tax, or

(ii) The date for making the addition to the tax occurs on or after the day on which the petition was filed.

(b) Subdivision (a) does not apply to any liability for an addition to the tax which arises from the failure to pay or deposit a tax withheld or collected from others and required to be paid to the State of California.

(Amended by Stats. 2016, Ch. 86, Sec. 285. (SB 1171) Effective January 1, 2017.)

19164.
  

(a) (1) (A) An accuracy-related penalty shall be imposed under this part and shall be determined in accordance with Section 6662 of the Internal Revenue Code, relating to imposition of accuracy-related penalty on underpayments, except as otherwise provided.

(B) (i) Except for understatements relating to reportable transactions to which Section 19164.5 applies, in the case of any proposed deficiency assessment issued after the last date of the amnesty period specified in Chapter 9.1 (commencing with Section 19730) for any taxable year beginning prior to January 1, 2003, the penalty specified in Section 6662(a) of the Internal Revenue Code shall be computed by substituting “40 percent” for “20 percent.”

(ii) Clause (i) shall not apply to any taxable year of a taxpayer beginning prior to January 1, 2003, if, as of the start date of the amnesty program period specified in Section 19731, the taxpayer is then under audit by the Franchise Tax Board, or the taxpayer has filed a protest under Section 19041, or the taxpayer has filed an appeal under Section 19045, or the taxpayer is engaged in settlement negotiations under Section 19442, or the taxpayer has a pending judicial proceeding in any court of this state or in any federal court relating to the tax liability of the taxpayer for that taxable year.

(2) With respect to corporations, this subdivision shall apply to all of the following:

(A) All taxable years beginning on or after January 1, 1990.

(B) Any other taxable year for which an assessment is made after July 16, 1991.

(C) For purposes of this section, references in Section 6662(e) of the Internal Revenue Code and the regulations thereunder, relating to treatment of an affiliated group that files a consolidated federal return, are modified to apply to those entities required to be included in a combined report under Section 25101 or 25110. For these purposes, entities included in a combined report pursuant to paragraph (4) or (6) of subdivision (a) of Section 25110 shall be considered only to the extent required to be included in the combined report.

(3) Section 6662(d)(1)(B) of the Internal Revenue Code is modified to provide that in the case of a corporation, other than an “S” corporation, there is a substantial understatement of tax for any taxable year if the amount of the understatement for the taxable year exceeds the lesser of:

(A) Ten percent of the tax required to be shown on the return for the taxable year (or, if greater, two thousand five hundred dollars ($2,500)).

(B) Five million dollars ($5,000,000).

(4) Section 6662(d)(2)(A) of the Internal Revenue Code is modified to additionally provide that the excess determined under Section 6662(d)(2)(A) of the Internal Revenue Code shall be determined without regard to items to which Section 19164.5 applies and without regard to items with respect to which a penalty is imposed by Section 19774.

(5) The provisions of Sections 6662(e)(1) and 6662(h)(2) of the Internal Revenue Code shall apply to returns filed on or after January 1, 2010.

(b) For purposes of Section 6662(d) of the Internal Revenue Code, Section 6664 of the Internal Revenue Code, Section 6694(a)(1) of the Internal Revenue Code, and this part, the Franchise Tax Board may prescribe a list of positions for which the Franchise Tax Board believes there is not substantial authority or there is no reasonable belief that the tax treatment is more likely than not the proper tax treatment. That list (and any revisions thereof) shall be published 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.

(c) A fraud penalty shall be imposed under this part and shall be determined in accordance with Section 6663 of the Internal Revenue Code, relating to imposition of fraud penalty, except as otherwise provided.

(d) (1) Section 6664 of the Internal Revenue Code, relating to definitions and special rules, shall apply, except as otherwise provided.

(2) Section 6664(c)(3) of the Internal Revenue Code shall apply to returns filed on or after January 1, 2010.

(3) Section 6664(c)(4) of the Internal Revenue Code shall apply to appraisals prepared with respect to returns or submissions filed on or after January 1, 2010.

(e) Except for purposes of subdivision (e) of Section 19774, Section 6662(b)(6) of the Internal Revenue Code shall not apply.

(f) Except for purposes of subdivision (e) of Section 19774, Section 6662(i) of the Internal Revenue Code, relating to increase in penalty in case of nondisclosed noneconomic substance transactions, shall not apply.

(g) Section 6665 of the Internal Revenue Code, relating to applicable rules, shall apply, except as otherwise provided.

(h) The amendments made to this section by Chapter 14 of the Statutes of 2011 shall apply to notices mailed on or after January 1, 2012.

(Amended by Stats. 2015, Ch. 359, Sec. 22. (AB 154) Effective September 30, 2015. Applicable to taxable years beginning on or after January 1, 2015, as provided in Sec. 41 of Stats. 2015, Ch. 359.)

19164.1.
  

(a) Any understatement determined pursuant to subdivision (a) of Section 19164 (relating to the accuracy-related penalty) may not include amounts that are attributable to the credit allowed under Section 17052.2 (relating to the teacher retention tax credit).

(b) This section applies only to tax credits claimed under Section 17052.2 for taxable years beginning on or after January 1, 2000, and before January 1, 2001.

(Added by Stats. 2001, Ch. 410, Sec. 1. Effective January 1, 2002.)

19164.5.
  

(a) A reportable transaction accuracy-related penalty shall be imposed under this part and shall be determined in accordance with Section 6662A of the Internal Revenue Code, relating to the imposition of an accuracy-related penalty on understatements with respect to reportable transactions, except as otherwise provided.

(b) (1) The reportable transaction understatement, as determined under Section 6662A(b) of the Internal Revenue Code, is modified to not include amounts to which the penalty of Section 19774 is imposed.

(2) Section 6662A(b)(1)(A)(ii) of the Internal Revenue Code is modified to substitute the phrase “Sections 17041, 23151, 23181, or 23501” for “section 1 (section 11 in the case of a taxpayer which is a corporation).”

(3) Section 6662A(b)(1)(B) of the Internal Revenue Code is modified to substitute the phrase “Part 10 (commencing with Section 17001) or Part 11 (commencing with Section 23001)” for “subtitle A.”

(4) Section 6662A(b)(2)(B) of the Internal Revenue Code is modified to substitute the phrase “income or franchise tax” for “Federal income tax.”

(5) Section 6662A(e)(1) of the Internal Revenue Code is modified to additionally provide that the amount of the understatement is increased by noneconomic transaction understatements, as defined in Section 19774.

(c) Section 6662A(e)(2) of the Internal Revenue Code is modified to additionally provide that Section 6662A of the Internal Revenue Code does not apply to amounts to which a penalty is imposed under Section 19774.

(d) The provisions of subdivision (f) of Section 19772, relating to the rescission of the penalty by the Chief Counsel, shall apply to any penalty imposed by this section.

(Added by Stats. 2005, Ch. 691, Sec. 47.2. Effective October 7, 2005.)

19166.
  

(a) A penalty shall be imposed for understatement of any taxpayer’s liability by a tax return preparer and shall be determined in accordance with Section 6694 of the Internal Revenue Code, relating to understatement of taxpayer’s liability by tax return preparer, except as otherwise provided.

(b) (1) Except as provided in paragraph (2), Section 6694(a)(1) of the Internal Revenue Code is modified to substitute “$250” for “$1,000.”

(2) For taxpayers that have a reportable transaction, as defined in Section 6707A(c)(1) of the Internal Revenue Code, with respect to which the requirements of Section 6664(d)(2)(A) of the Internal Revenue Code are not met, any listed transaction, as defined in Section 6707A(c)(2) of the Internal Revenue Code, or a gross misstatement within the meaning of Section 6404(g)(2)(D) of the Internal Revenue Code, paragraph (1) shall not apply.

(c) Section 6694(c) of the Internal Revenue Code shall not apply and, in lieu thereof, the following shall apply:

(1) If, within 30 days after the day on which notice and demand of any penalty under Section 6694(a) or 6694(b) of the Internal Revenue Code is made against any person who is an income tax return preparer, that person pays an amount which is not less than 15 percent of the amount of that penalty and files a claim for refund of the amount so paid, no levy or proceeding in court for the collection of the remainder of that penalty shall be made, begun, or prosecuted until the final resolution of a proceeding begun as provided in paragraph (2). Notwithstanding Section 19381, the beginning of that proceeding or levy during the time that prohibition is in force may be enjoined in a proceeding in the superior court. Nothing in this paragraph shall be construed to prohibit any counterclaim for the remainder of that penalty in a proceeding begun as provided in paragraph (2).

(2) If, within 30 days after the day on which a claim for refund of any partial payment of any penalty under Section 6694(a) or 6694(b) of the Internal Revenue Code is denied (or, if earlier, within 30 days after the expiration of six months after the day on which the claim for refund has been filed), the income tax return preparer fails to begin a proceeding in the superior court for the determination of his or her liability for that penalty, paragraph (1) shall cease to apply with respect to that penalty, effective on the day following the close of the applicable 30-day period referred to in this paragraph.

(3) The running of the period of limitations provided in Section 19371 on the collection by levy or by a proceeding in court in respect of any penalty described in paragraph (1) shall be suspended for the period during which the Franchise Tax Board is prohibited from collecting by levy or a proceeding in court.

(d) The amendments made to this section by the act adding this subdivision shall apply to returns prepared after the effective date of the act adding this subdivision.

(Amended by Stats. 2010, Ch. 14, Sec. 47. (SB 401) Effective January 1, 2011.)

19167.
  

(a) A penalty shall be imposed under this section for any of the following:

(1) In accordance with Section 6695(a) of the Internal Revenue Code, for failure to furnish a copy of the return to the taxpayer, as required by Section 18625.

(2) In accordance with Section 6695(c) of the Internal Revenue Code, for failure to furnish an identifying number, as required by Section 18624.

(3) In accordance with Section 6695(d) of the Internal Revenue Code, for failure to retain a copy or list, as required by Section 18625 or for failure to retain an electronic filing declaration, as required by Section 18621.5.

(4) Failure to register as a tax preparer with the California Tax Education Council, as required by Section 22253 of the Business and Professions Code, unless it is shown that the failure was due to reasonable cause and not due to willful neglect.

(A) The amount of the penalty under this paragraph for the first failure to register is two thousand five hundred dollars ($2,500). This penalty shall be waived if proof of registration is provided to the Franchise Tax Board within 90 days from the date notice of the penalty is mailed to the tax preparer.

(B) The amount of the penalty under this paragraph for a failure to register, other than the first failure to register, is five thousand dollars ($5,000).

(C) The Franchise Tax Board shall not impose the penalties authorized by this paragraph until either one of the following has occurred:

(i) Commencing January 1, 2006, and continuing each year thereafter, there is an appropriation in the Franchise Tax Board’s annual budget to fund the costs associated with the penalty authorized by this paragraph.

(ii) (I)  An agreement has been executed between the California Tax Education Council and the Franchise Tax Board that provides that an amount equal to all first year costs associated with the penalty authorized by this paragraph shall be received by the Franchise Tax Board. For purposes of this subclause, first year costs include, but are not limited to, costs associated with the development of processes or systems changes, if necessary, and labor.

(II) An agreement has been executed between the California Tax Education Council and the Franchise Tax Board that provides that the annual costs incurred by the Franchise Tax Board associated with the penalty authorized by this paragraph shall be reimbursed by the California Tax Education Council to the Franchise Tax Board.

(III) Pursuant to the agreement described in subclause (I), the Franchise Tax Board has received an amount equal to the first year costs described in that subclause.

(5) In accordance with Section 6695(g) of the Internal Revenue Code, for failure to be diligent in determining eligibility for earned income credit for returns required to be filed on or after June 24, 2015.

(b) Section 6695(h) of the Internal Revenue Code, relating to adjustment for inflation, shall not apply.

(Amended by Stats. 2015, Ch. 359, Sec. 23. (AB 154) Effective September 30, 2015. Applicable to taxable years beginning on or after January 1, 2015, as provided in Sec. 41 of Stats. 2015, Ch. 359.)

19168.
  

The following rules shall apply to any penalty imposed under Section 19166 or 19167:

(a) The penalties shall be in addition to any other penalties provided by law.

(b) Article 3 (commencing with Section 19031) of this chapter (relating to deficiency assessments) shall not be applicable.

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

19169.
  

(a) In addition to the criminal penalty provided by Section 19712, any tax preparer who endorses or otherwise negotiates (directly or through an agent) any warrant made in respect of the taxes imposed by Part 10 (commencing with Section 17001) or Part 11 (commencing with Section 23001) which is issued to a taxpayer (other than the tax preparer) shall pay a penalty of two hundred fifty dollars ($250) with respect to each warrant. The preceding sentence shall not apply with respect to the deposit by a bank (as defined by Section 581 of the Internal Revenue Code) of the full amount of the warrant in the taxpayer’s account in that bank for the benefit of the taxpayer.

(b) For purposes of subdivision (a), “tax preparer” means any person who prepares for compensation, or who employs one or more persons to prepare for compensation, any return of tax imposed by Part 10 (commencing with Section 17001) or Part 11 (commencing with Section 23001) or any claim for refund of tax imposed by Part 10 or Part 11. For purposes of the preceding sentence, the preparation of a substantial portion of a return or claim for refund shall be treated as if it were the preparation of that return or claim for refund.

A person shall not be a “tax preparer” merely because the person does any of the following:

(1) Furnishes typing, reproducing, or other mechanical assistance.

(2) Prepares a return or claim for refund of the employer (or of an officer or employee of the employer) by whom that person is regularly and continuously employed.

(3) Prepares as a fiduciary a return or claim for refund for any person.

(c) This section shall not apply where the tax preparer has advanced the taxpayer an amount of money equal to or greater than the amount of the taxpayer’s refund.

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

19170.
  

(a) An income tax preparer that is subject to Section 18621.9 is liable for a penalty in the amount of fifty dollars ($50) for each acceptable individual income tax return prepared by that income tax preparer that is not electronically filed, unless it is shown that the failure to electronically file that acceptable individual income tax return is due to reasonable cause and not due to willful neglect.

(b) For purposes of this section, reasonable cause includes, but is not limited to, a taxpayer’s election not to electronically file an acceptable individual income tax return in compliance with Section 18621.9.

(c) This section shall apply to acceptable individual income tax returns required to be filed on or after January 1, 2005.

(Repealed (by Sec. 1) and added by Stats. 2004, Ch. 267, Sec. 3. Effective August 23, 2004. Added section applicable January 1, 2005, as provided in subd. (c).)

19171.
  

(a) A business entity required to electronically file a return pursuant to Section 18621.10 that files a return in a manner that fails to comply with Section 18621.10, shall be subject to a penalty in the amount of one hundred dollars ($100) for an initial failure and a penalty in the amount of five hundred dollars ($500) for each subsequent failure unless the failure is due to reasonable cause, and not willful neglect.

(b) If a group return is filed on behalf of eligible electing taxpayer members of a combined reporting group, the penalties described in subdivision (a) shall apply to the combined reporting group and not to a taxpayer member of the combined reporting group.

(c) This section shall apply to returns filed for taxable years beginning on or after January 1, 2017.

(Added by Stats. 2014, Ch. 478, Sec. 6. (AB 2754) Effective January 1, 2015.)

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 12 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) Eighteen dollars ($18), 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).

(e) The amendments made to this section by the act adding this subdivision shall apply to returns required to be filed after the effective date of the act adding this subdivision.

(Amended by Stats. 2010, Ch. 14, Sec. 48. (SB 401) Effective January 1, 2011.)

19172.5.
  

(a) In addition to the penalty imposed by Section 19706, if any “S” corporation required to file a return under Section 18601 for any taxable year fails to file the return at the time prescribed therefor (determined with regard to any extension of time for filing), or files a return that fails to show the information required under Section 18601, then that “S” corporation 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 12 months), unless that failure is due to reasonable cause.

(b) (1) For purposes of subdivision (a), the amount determined under this subdivision for any month is the product of the following:

(2) Eighteen dollars ($18), multiplied by the number of persons who were shareholders in the “S” corporation during any part of the taxable year.

(c) The penalty imposed by subdivision (a) shall be assessed against the “S” corporation.

(d) Article 3 (commencing with Section 19031), relating to deficiency assessments, shall not apply with respect to the assessment or collection of any penalty imposed by subdivision (a).

(e) This section shall apply to returns required to be filed after the effective date of the act adding this section.

(Added by Stats. 2010, Ch. 14, Sec. 49. (SB 401) Effective January 1, 2011.)

19173.
  

(a) A penalty shall be imposed under this part for failure to maintain lists of advisees with respect to reportable transactions and shall be determined in accordance with Section 6708 of the Internal Revenue Code, except as otherwise provided.

(b) If a material advisor fails to meet the requirements of subdivision (d) of Section 18648 with respect to a listed transaction, as defined in Section 6707A(c)(2) of the Internal Revenue Code, an additional penalty shall be imposed equal to the greater of:

(1) One hundred thousand dollars ($100,000).

(2) Fifty percent of the gross income that the material advisor derived from that activity.

(c) A penalty imposed under this section does not apply if it is shown that the additional information required under paragraph (1) of subdivision (d) of Section 18648 was not identified in a Franchise Tax Board notice issued prior to the date the transaction or shelter was entered into.

(d) The penalty imposed by subdivision (a) shall be assessed against the person required to maintain or provide a list under Section 18648. The penalty may be assessed at any time during the period ending eight years after the failure has occurred.

(e) (1) The Chief Counsel of the Franchise Tax Board may rescind all or any portion of any penalty imposed by this section with respect to a list required to be maintained or provided under Section 18648, if all of the following apply:

(A) The violation is with respect to a reportable transaction, other than a listed transaction, as defined in Section 6707A(c)(2) of the Internal Revenue Code.

(B) The person on whom the penalty is imposed has a history of complying with the requirements of this part and Part 10 (commencing with Section 17001) or Part 11 (commencing with Section 23001).

(C) It is shown that the violation is due to an unintentional mistake of fact.

(D) Imposing the penalty would be against equity and good conscience.

(E) Rescinding the penalty would promote compliance with the requirements of this part and Part 10 (commencing with Section 17001) or Part 11 (commencing with Section 23001) and effective tax administration.

(2) The exercise of authority under paragraph (1) shall be at the sole discretion of the Chief Counsel of the Franchise Tax Board and may not be delegated.

(3) Notwithstanding any other law or rule of law, any determination under this subdivision may not be reviewed in any administrative or judicial proceeding.

(f) 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).

(g) The penalty imposed by this section is in addition to any penalty imposed under Part 10 (commencing with Section 17001), Part 11 (commencing with Section 23001), or this part.

(Amended by Stats. 2005, Ch. 691, Sec. 47.4. Effective October 7, 2005.)

19175.
  

(a) In addition to the penalty imposed by Section 19183 (relating to failure to file information returns), if any person or entity fails to report amounts paid as remuneration for personal services as required under Section 13050 of the Unemployment Insurance Code or Section 18631 on the date prescribed therefor (determined with regard to any extension of time for filing), that person or entity may be liable for a penalty determined under subdivision (b).

(b) For purposes of subdivision (a), the amount determined under this subdivision is the maximum rate under Section 17041 multiplied by the unreported amounts paid as remuneration for personal services.

(c) The penalty imposed by subdivision (a) shall be assessed against that person or entity required to file a return under Section 13050 of the Unemployment Insurance Code or Section 18631.

(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).

(e) The penalty imposed under subdivision (a) shall be in lieu of the penalty imposed under Section 13052.5 of the Unemployment Insurance Code (relating to unreported compensation). In the event that a penalty is imposed under this section and Section 13052.5 of the Unemployment Insurance Code, only the penalty imposed under Section 13052.5 of the Unemployment Insurance Code shall apply.

(Amended by Stats. 2007, Ch. 156, Sec. 2. Effective January 1, 2008.)

19176.
  

(a) In addition to any criminal penalty provided by law if:

(1) Any individual makes a statement under Section 13040, 13041, or 13042 of the Unemployment Insurance Code which results in a decrease in the amounts deducted and withheld under Division 6 (commencing with Section 13000) of the Unemployment Insurance Code; and

(2) As of the time the statement was made, there was no reasonable basis for the statement, the individual shall pay a penalty of five hundred dollars ($500) for the statement. Any penalty so imposed shall be paid upon notice and demand from the Franchise Tax Board and shall be collected as a tax.

(b) The Franchise Tax Board may waive (in whole or in part) the penalty imposed under subdivision (a) if the taxes imposed under Part 10 (commencing with Section 17001) with respect to the individual for the taxable year are equal to or less than the sum of both of the following:

(1) The credits against those taxes allowed by Chapter 2 (commencing with Section 17041) of Part 10 and Section 19002.

(2) The payments of estimated tax which are considered payments on account of those taxes.

(c) This section supersedes Section 13101 of the Unemployment Insurance Code and shall apply to acts and failures to act after December 31, 1981.

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

19177.
  

A penalty shall be imposed for promoting abusive tax shelters and shall be determined in accordance with the provisions of Section 6700 of the Internal Revenue Code, except as otherwise provided.

(Amended by Stats. 2005, Ch. 691, Sec. 47.5. Effective October 7, 2005.)

19178.
  

A penalty shall be imposed for aiding and abetting understatement of tax liability. The penalty shall be determined in accordance with Section 6701 of the Internal Revenue Code.

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

19179.
  

(a) A penalty shall be imposed for filing a frivolous return and shall be determined in accordance with Section 6702 of the Internal Revenue Code, except as otherwise provided.

(b) Section 6702 of the Internal Revenue Code shall be applied to returns required to be filed under this part.

(c) Section 6702 of the Internal Revenue Code is modified as follows:

(1) (A) By substituting the phrase “tax imposed under Part 10 (commencing with Section 17001), Part 11 (commencing with Section 23001), or this part” for the phrase “tax imposed by this title” contained therein.

(B) By substituting the phrase “frivolous or is based on a position that the Franchise Tax Board has identified as frivolous under subdivision (d) of Section 19179” for the term “frivolous” contained therein.

(C) By substituting the phrase “reflects a desire to delay or impede the administration of federal income tax laws as determined by the Secretary of the Treasury or the administration of the tax imposed under Part 10 (commencing with Section 17001), Part 11 (commencing with Section 23001), or this part as determined by the Franchise Tax Board” for the phrase “reflects a desire to delay or impede the administration of Federal tax laws” contained therein.

(D) By substituting the phrase “is based on a position which the Secretary of the Treasury has identified as frivolous under Section 6702(c) of the Internal Revenue Code or the Franchise Tax Board has identified as frivolous under subdivision (d)” for the phrase “is based on a position which the Secretary has identified as frivolous under subsection (c).”

(E) By substituting the phrase “If the Franchise Tax Board provides a person with notice that a submission is a specified frivolous submission and the person withdraws that submission within 30 days after the notice, the penalty imposed under Section 6702(b)(1) of the Internal Revenue Code does not apply with respect to that submission” for the phrase “If the Secretary provides a person with notice that a submission is a specified frivolous submission and such person withdraws such submission within 30 days after such notice, the penalty imposed under paragraph (1) shall not apply with respect to such submission.”

(2) Section 6702(b)(2)(B) of the Internal Revenue Code shall not apply and, in lieu thereof, the phrase “specified submission” means any of the following:

(A) A protest under Section 19041.

(B) A request for a hearing under Section 19044.

(C) An application under any of the following sections:

(i) Section 19008, relating to agreements for payment of tax liability in installments.

(ii) Section 19443, relating to compromises.

(iii) Section 21004, relating to actions of the Taxpayers’ Rights Advocate.

(iv) Section 21015.5, relating to a request for review prior to levy.

(d) (1) The Franchise Tax Board shall prescribe (and periodically revise) a list of positions which the Secretary of the Treasury for federal income tax purposes or the Franchise Tax Board has identified as being frivolous for purposes of this section.

(2) 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 prescribed by the Franchise Tax Board pursuant to paragraph (1).

(e) (1) The Chief Counsel of the Franchise Tax Board may rescind all or any portion of any penalty imposed by this section if both of the following apply:

(A) Imposing the penalty would be against equity and good conscience.

(B) Rescinding the penalty would promote compliance with the requirements of this part and Part 10 (commencing with Section 17001) or Part 11 (commencing with Section 23001) and effective tax administration.

(2) The exercise of authority under paragraph (1) shall be at the sole discretion of the Chief Counsel of the Franchise Tax Board and may not be delegated.

(3) Notwithstanding any other law or rule of law, any determination under this subdivision may not be reviewed in any administrative or judicial proceeding.

(f) The penalties imposed by this section shall be in addition to any other penalty provided by law.

(Amended by Stats. 2010, Ch. 14, Sec. 50. (SB 401) Effective January 1, 2011.)

19180.
  

(a) In any proceeding involving the issue of whether or not any person is liable for a penalty under Section 19177, 19178, or 19179, the burden of proof with respect to that issue shall be on the Franchise Tax Board.

(b) Sections 19041 to 19049, inclusive, (relating to deficiency procedures) shall not apply with respect to the assessment or collection of the penalties provided by Section 19177, 19178, or 19179.

(c) (1) If, within 30 days after the day on which notice and demand of any penalty under Section 19177 or 19178 is made against any person, that person pays an amount which is not less than 15 percent of the amount of that penalty and files a claim for refund of the amount so paid, no levy or proceeding in court for the collection of the remainder of that penalty shall be made, begun, or prosecuted until the final resolution of a proceeding begun as provided in paragraph (2). Notwithstanding Section 19381, the beginning of that proceeding or levy during the time that prohibition is in force may be enjoined by a proceeding in the superior court. Nothing in this paragraph shall be construed to prohibit any counterclaim for the remainder of that penalty in a proceeding begun as provided in paragraph (2).

(2) If, within 30 days after the day on which the claim for refund of any partial payment of any penalty under Section 19177 or 19178 is denied (or, if earlier, within 30 days after the expiration of six months after the day on which a claim for refund was filed), the person fails to begin a proceeding in the superior court for the determination of the liability for that penalty, paragraph (1) shall cease to apply with respect to that penalty, effective on the day following the close of the applicable 30-day period referred to in this paragraph.

(3) The running of the period of limitations provided in Section 19371 on the collection by levy or by a proceeding in court in respect of any penalty described in paragraph (1) shall be suspended for the period during which the Franchise Tax Board is prohibited from collecting by levy or a proceeding in court.

(Amended by Stats. 2002, Ch. 374, Sec. 6. Effective January 1, 2003.)

19181.
  

A penalty shall be imposed for failing to meet the requirements of Section 18649, relating to original issue discount reporting requirements with respect to any person subject to tax under Part 10 (commencing with Section 17001) or Part 11 (commencing with Section 23001). The penalty shall be determined in accordance with Section 6706 of the Internal Revenue Code.

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

19182.
  

(a) A penalty shall be imposed for failure to furnish information pursuant to Section 18628 and shall be determined in accordance with Section 6707 of the Internal Revenue Code, relating to failure to furnish information regarding reportable transactions, except as otherwise provided.

(b) Article 3 (commencing with Section 19031) of this chapter (relating to deficiency assessments) does not apply in respect of the assessment or collection of any penalty imposed under this section.

(c) A penalty under this section does not apply if it is shown that the additional information required under paragraph (2) of subdivision (d) of Section 18628 was not identified in a Franchise Tax Board notice issued prior to the date the transaction or shelter was entered into.

(d) The provisions of subdivision (e) of Section 19173, relating to the rescission of the penalty by the Chief Counsel of the Franchise Tax Board, shall apply to any penalty imposed by this section.

(Amended by Stats. 2005, Ch. 691, Sec. 47.7. Effective October 7, 2005.)

19182.5.
  

(a) A penalty shall be imposed for failing to meet the requirements of Section 18648.5 and the penalty amount shall be determined in accordance with Section 6714 of the Internal Revenue Code.

(b) No penalty shall be imposed under paragraph (1) upon a showing that the requirements in Section 6115 of the Internal Revenue Code have been met with respect to that contribution for federal purposes.

(c) The provisions of this section shall apply to quid pro quo contributions made on or after January 1, 1997.

(Added by Stats. 1997, Ch. 611, Sec. 61. Effective October 3, 1997.)

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, relating to failure to file correct information returns.

(2) Section 6721(e) of the Internal Revenue Code, relating to penalty in case of intentional disregard, is modified to the extent that the reference to Section 6041A(b) of the Internal Revenue Code, relating to direct sales of $5,000 or more, shall not apply.

(3) Section 6721(f)(1) of the Internal Revenue Code is modified to substitute the phrase “For each fifth calendar year beginning after 2014” for the phrase “In the case of any failure relating to a return required to be filed in a calendar year beginning after 2014.”

(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, relating to failure to furnish correct payee statements.

(2) Section 6722(c) of the Internal Revenue Code, relating to exception for de minimus failures, is modified to the extent that the references to Sections 6041A(b) and 6041A(e) of the Internal Revenue Code, relating to direct sales of $5,000 or more, and statements to be furnished to persons with respect to whom information is required to be furnished, shall not apply.

(3) Section 6722(f)(1) of the Internal Revenue Code is modified to substitute the phrase “For each fifth calendar year beginning after 2014” for the phrase “In the case of any failure relating to a return required to be filed in a calendar year beginning after 2014.”

(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, relating to failure to comply with other information reporting requirements.

(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) of the Internal Revenue Code, relating to information return, is modified as follows:

(A) The following references are substituted:

(i) Subdivision (a) of Section 18640, in lieu of Section 6044(a)(1) of the Internal Revenue Code.

(ii) Subdivision (a) of Section 18644, in lieu of Section 6050A(a) of the Internal Revenue Code, relating to reports.

(B) References to Sections 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 both of the following:

(i) The return required by paragraph (1) of subdivision (i) of Section 18662.

(ii) The return required by subdivision (a) of Section 18631.7.

(3) Section 6724(d)(2) of the Internal Revenue Code, relating to payee statement, is modified as follows:

(A) The following references are substituted:

(i) Subdivision (b) of Section 18640, in lieu of Section 6044(e) of the Internal Revenue Code, relating to statements to be furnished to persons with respect to whom information is required.

(ii) Subdivision (b) of Section 18644, in lieu of Section 6050A(b) of the Internal Revenue Code, relating to written statement.

(B) References to Sections 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 (i) 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, relating to written explanation to recipients of distributions eligible for rollover treatment, 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.

(g) The amendments made to this section by the act adding this subdivision shall apply to information returns required to be filed on or after January 1, 2016.

(Amended by Stats. 2015, Ch. 359, Sec. 24. (AB 154) Effective September 30, 2015. Applicable to taxable years beginning on or after January 1, 2015, as provided in Sec. 41 of Stats. 2015, Ch. 359.)

19184.
  

(a) A penalty of fifty dollars ($50) shall be imposed for each failure, unless it is shown that the failure is due to reasonable cause, by any person required to file who fails to file a report at the time and in the manner required by any of the following provisions:

(1) Subdivision (c) of Section 17507, relating to individual retirement accounts.

(2) Section 220(h) of the Internal Revenue Code, relating to medical savings accounts for taxable years beginning on or after January 1, 1997.

(3) Subdivision (b) of Section 17140.3 or subdivision (b) of Section 23711 relating to qualified tuition programs.

(4) Subdivision (e) of Section 23712, relating to Coverdell education savings accounts.

(b) (1) Any individual who:

(A) Is required to furnish information under Section 17508 as to the amount designated nondeductible contributions made for any taxable year, and

(B) Overstates the amount of those contributions made for that taxable year, shall pay a penalty of one hundred dollars ($100) for each overstatement unless it is shown that the overstatement is due to reasonable cause.

(2) Any individual who fails to file a form required to be filed by the Franchise Tax Board under Section 17508 shall pay a penalty of fifty dollars ($50) for each failure unless it is shown that the failure is due to reasonable cause.

(c) Article 3 (commencing with Section 19031) of this chapter (relating to deficiency assessments) shall not apply in respect of the assessment or collection of any penalty imposed under this section.

(Amended by Stats. 2005, Ch. 691, Sec. 48. Effective October 7, 2005.)

19185.
  

(a) Section 6695A of the Internal Revenue Code, relating to substantial and gross valuation misstatements attributable to incorrect appraisals, shall apply, except as otherwise provided.

(b) This section shall apply to appraisals with respect to returns or submissions filed on or after January 1, 2011.

(Added by Stats. 2010, Ch. 14, Sec. 51. (SB 401) Effective January 1, 2011.)

19186.
  

(a) Section 6720B of the Internal Revenue Code, relating to the fraudulent identification of exempt use property, shall apply, except as otherwise provided.

(b) This section shall apply to identifications made after January 1, 2011.

(Added by Stats. 2010, Ch. 14, Sec. 52. (SB 401) Effective January 1, 2011.)

19187.
  

(a) The Franchise Tax Board shall include with each notice imposing a penalty under this part information that contains the name of the penalty, the section of this part under which the penalty is imposed, and a description of the computation of the penalty. Upon the request of the taxpayer, the Franchise Tax Board shall also provide a computation of the penalty imposed.

(b) (1) No penalty under this part shall be imposed unless the initial determination of the imposition of the penalty is personally approved in writing by the immediate supervisor of the individual making that determination or a higher level official as designated by the executive officer, or his or her delegee.

(2) Paragraph (1) shall not apply to any of the following:

(A) Any addition to tax under Sections 19131, 19132, 19136, or 19142.

(B) Any other penalty automatically calculated through electronic means.

(C) Any penalty resulting from a change or correction by the Commissioner of Internal Revenue or other officer of the United States or other competent authority required to be reported under subdivision (a) of Section 18622.

(c) For purposes of this section, “penalty” includes any addition to tax or any additional amount.

(d) This section shall apply to notices issued and penalties imposed after December 31, 2001.

(Added by Stats. 1999, Ch. 931, Sec. 20. Effective October 10, 1999.)

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