Code Section Group

Revenue and Taxation Code - RTC

DIVISION 2. OTHER TAXES [6001 - 60709]

  ( 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 9.5. Tax Shelters [19751 - 19778]

  ( Chapter 9.5 added by Stats. 2003, Ch. 656, Sec. 13. )

ARTICLE 3. Voluntary Compliance Initiative Two [19761 - 19764]
  ( Article 3 added by Stats. 2011, Ch. 14, Sec. 21. )

19761.
  

(a) The Franchise Tax Board shall develop and administer a voluntary compliance initiative for taxpayers subject to Part 10 (commencing with Section 17001) and Part 11 (commencing with Section 23001), as provided in this article.

(b) The voluntary compliance initiative shall be conducted during the period from August 1, 2011, to October 31, 2011, inclusive, pursuant to Section 19764. This initiative shall apply to tax liabilities attributable to the use of abusive tax avoidance transactions and to unreported income from the use of offshore financial arrangements for taxable years beginning before January 1, 2011.

(c) The Franchise Tax Board shall issue forms and instructions and may take any other actions necessary, including the use of closing agreements, to implement this article.

(d) The Franchise Tax Board shall publicize the voluntary compliance initiative so as to maximize public awareness of and participation in the initiative. The Franchise Tax Board shall coordinate to the highest degree possible its publicity efforts and other actions taken in implementing this article.

(e) Any correspondence mailed by the Franchise Tax Board to a taxpayer at the taxpayer’s last known address outlining the voluntary compliance initiative under this article constitutes “contact” within the meaning of Treasury Regulation Section 1.6664-2(c)(3), relating to qualified amended returns, and Sections 19164.5 and 19777.

(Added by Stats. 2011, Ch. 14, Sec. 21. (SB 86) Effective March 24, 2011.)

19762.
  

(a) Any taxpayer who meets the requirements of Section 19764 may elect to participate in the voluntary compliance initiative under this article.

(b) For taxpayers electing to participate in the voluntary compliance initiative under this article, all of the following shall apply:

(1) (A) Except as provided in subparagraph (B), the Franchise Tax Board shall waive or abate all penalties imposed by this part, for all taxable years where the taxpayer elects to participate in the initiative, as a result of the unreported tax liabilities attributable to the use of abusive tax avoidance transactions and to unreported income from the use of offshore financial arrangements.

(B) The penalties imposed under Section 19138 or 19777.5 may not be waived.

(2) Except as provided in Section 19763, no criminal action shall be brought against the taxpayer for the taxable years with respect to issues for which the taxpayer voluntarily complies under this article.

(3) No penalty assessed after July 31, 2011, may be waived or abated under this article if the penalty imposed is attributable to an assessment of taxes that became final prior to July 31, 2011. For purposes of this paragraph, assessment of taxes does not include taxes self-assessed on an original or amended return filed before August 1, 2011.

(4) Notwithstanding Chapter 6 (commencing with Section 19301) of this part, no refund or credit shall be allowed for amounts paid in connection with abusive tax avoidance transactions or unreported income from the use of offshore financial arrangements under this article.

(Added by Stats. 2011, Ch. 14, Sec. 21. (SB 86) Effective March 24, 2011.)

19763.
  

(a) This article does not apply to violations of this part for which, as of July 31, 2011, any of the following applies:

(1) A criminal complaint was filed against the taxpayer in connection with an abusive tax avoidance transaction, transactions, or unreported income from the use of an offshore financial arrangement or arrangements.

(2) The taxpayer is the subject of a criminal investigation in connection with an abusive tax avoidance transaction, transactions, or unreported income from the use of an offshore financial arrangement or arrangements.

(b) No refund or credit shall be allowed with respect to any penalty paid prior to the time the taxpayer participates in the voluntary compliance initiative authorized by this article.

(c) For purposes of this article, an “abusive tax avoidance transaction” has the same meaning as in Section 19777, as amended by the act adding this section.

(Added by Stats. 2011, Ch. 14, Sec. 21. (SB 86) Effective March 24, 2011.)

19764.
  

(a) The voluntary compliance initiative described in this article applies to any taxpayer who, during the period from August 1, 2011, to October 31, 2011, makes an election as described in Section 19762 and does both of the following:

(1) (A) Files an amended tax return under this part for each taxable year for which the taxpayer has previously filed a tax return using an abusive tax avoidance transaction or an offshore financial arrangement to underreport the taxpayer’s tax liability for that taxable year or failed to include income from the offshore financial arrangement. Each amended return shall report all income from all sources, without regard to the abusive tax avoidance transaction, including all income from offshore financial arrangements. No deduction shall be allowed for transaction costs associated with an abusive tax avoidance transaction or for transaction or other costs associated with unreported income from the use of an offshore financial arrangement.

(B) For purposes of this article, an “offshore financial arrangement” means any transaction involving financial arrangements that in any manner rely on the use of offshore payment cards, including credit, debit, or charge cards, issued by banks in foreign jurisdictions or offshore financial arrangements, including arrangements with foreign banks, financial institutions, corporations, partnerships, trusts, or other entities to avoid or evade income or franchise tax.

(2) Except as provided in subdivision (b), pays in full all taxes and interest due.

(b) The Franchise Tax Board may enter into an installment payment agreement in lieu of the full payment required by paragraph (2) of subdivision (a), but only if final payment under the terms of that installment payment agreement is due and paid no later than June 15, 2012. Any installment payment agreement authorized by this subdivision shall include interest on the unpaid amount at the rate prescribed in Section 19521. Failure by the taxpayer to fully comply with the terms of the installment payment agreement shall render the waiver of penalties null and void, and the total amount of tax, interest, and all penalties shall be immediately due and payable.

(c) After October 31, 2011, the Franchise Tax Board may issue a deficiency assessment upon an amended return filed pursuant to subdivision (a), impose penalties, or initiate criminal action under this part with respect to the difference between the amount shown on that return and the correct amount of tax. This action shall not invalidate any waivers granted under Section 19762.

(d) In addition to any other authority to examine returns, for the purpose of improving state tax administration, the Franchise Tax Board may inquire into the facts and circumstances related to the use of abusive tax avoidance transactions or offshore financial arrangements to underreport the tax liabilities for which a taxpayer has participated in the voluntary compliance initiative under this article. Taxpayers shall cooperate fully with inquiries described in this subdivision. Failure by a taxpayer to fully cooperate in an inquiry described in this subdivision shall render the waiver of penalties under this article null and void and the taxpayer may be assessed any penalties that may apply.

(Added by Stats. 2011, Ch. 14, Sec. 21. (SB 86) Effective March 24, 2011.)

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