Laws, Regulations & Annotations

Business Taxes Law Guide – Revision 2011
 

Sales And Use Tax Law

CHAPTER 8. ADMINISTRATION


CHAPTER 8. ADMINISTRATION

Article 1. Administration

7051. Enforcement by board; rules and regulations. The board shall enforce the provisions of this part and may prescribe, adopt, and enforce rules and regulations relating to the administration and enforcement of this part. The board may prescribe the extent to which any ruling or regulation shall be applied without retroactive effect.

Discriminatory ruling invalid.—A ruling which results in exempting one class of sales while taxing another class is discriminatory and invalid unless the classification is made on a rational basis. Maranville v. State Board of Equalization (1950) 99 Cal.App.2d 841.

Reliance upon erroneous ruling.—The state is not estopped from collecting sales taxes because of reliance upon an erroneous ruling by the Board of Equalization. However, the state is estopped from collecting penalties and interest for failure to pay taxes because of such reliance. Market Street Railway Co. v. State Board of Equalization (1955) 137 Cal.App.2d 87.

Suit against discharged bankrupt.—Failure to file bankruptcy claim when there are sufficient funds in bankrupt's estate to pay delinquent sales and use taxes does not bar subsequent action against discharged bankrupt. California State Board of Equalization v. Coast Radio Products (1955) 228 F.2d 520.

Uncertainty in concept of fixtures justifies initial administrative determination.—The difficulty involved in drawing a line of demarcation between fixtures and materials justifies a process of initial administrative determination pursuant to a regulation subject to judicial review. Honeywell, Inc. v. State Board of Equalization (1975) 48 Cal.App.3d 907.

Classification by Board.—A court may not substitute its own policy judgment for that of the board in distinguishing by regulation between fixtures and materials incorporated into a structure in the absence of substantial evidence showing that the classification by the board is arbitrary or capricious or that the classification had no reasonable or rational basis. Oliver and Williams Elevator Corp. v. State Board of Equalization (1975) 48 Cal.App.3d 890.

Interpretation of Regulations by Board.—An administrative agency's interpretation of its own regulations deserves great weight; however, the ultimate resolution of such legal questions rests with the courts. Culligan Water Conditioning v. State Board of Equalization (1976) 17 Cal.3d 86.

Administrative ruling entitled to great weight.—Long-standing tax counsel ruling that nonreusable hospital menus are not meal components under Board Regulation 1503, was entitled to great weight as an administrative interpretation of general application. American Hospital Supply Corp. v. State Board of Equalization (1985) 169 Cal.App.3d 1088 [to the extent this case held that an annotation is entitled to the same weight as a regulation, this case was disapproved in Yamaha Corp. of America v. State Board of Equalization (1998) 19 Cal.4th 1.

Annotations not entitled to the same weight as regulations.—Board annotations are entitled to some consideration by the court, but they are not entitled to the same deference as regulations. Yamaha Corp. of America v. State Board of Equalization (1998) 19 Cal.4th 1.

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7051.1. Retailers; direct payment permit. The board may adopt rules and regulations which provide for the issuance of a permit to a person who holds a valid seller's permit which allows the purchase of tangible personal property without payment by the retailer of the tax imposed under this part and any reimbursement of the sales tax to the retailer by that person, if all of the following conditions are met:

(a) That person agrees to report and pay the retailer's tax liability directly to the board.

(b) The board determines that such a direct payment permit will facilitate the collection of the tax imposed under this part.

(c) The board determines that the issuance of a direct payment permit is to the mutual convenience of the board, the person to whom the direct payment permit is issued, and the retailers whose tax liability will be reported and paid by that person.

(d) The board determines that the issuance of a direct payment permit will not result in a tax loss either in total or on a cash flow basis. To ensure against a potential cash flow loss, the board may accelerate by not more than 10 days the prepayment due dates of a person.

(e) Any person who is issued a direct payment permit shall include with each tax return required to be filed under this part a schedule upon which all local sales and use tax, and any applicable district transactions and use tax, reported on the return as provided in subdivision (a) is allocated to the cities, counties, city and county, redevelopment agencies, and districts to which the tax would have been allocated if it had been reported and paid by the retailers.

History.—Added by Stats. 1985, Ch. 1343, effective January 1, 1986.

7051.2. Retailers; direct payment permit. (a) If a holder of a direct payment permit issued by the board pursuant to Section 7051.1 gives an exemption certificate to a retailer for the purpose of paying that retailer's tax liability to the board, and fails or refuses to pay that retailer's tax liability to the board on a timely basis, then in addition to that retailer's tax liability, the direct payment permitholder shall be subject to the same penalty provisions that would apply if that permit holder was the retailer.

(b) If a holder of a direct payment permit issued by the board pursuant to Section 7051.1 does not properly allocate a retailer's local sales and use tax liability, or that retailer's district transactions and use tax liability, if applicable, to the cities, counties, city and county, redevelopment agencies, and districts to which those taxes would have been allocated if properly reported by that retailer, then the direct payment permitholder shall be liable to the state for a penalty of 10 percent of the amount of that retailer's tax liability not properly allocated by the direct payment permitholder for improper allocation due to negligence or intentional disregard of the law.

History.—Added by Stats. 1985, Ch. 1343, effective January 1, 1986.

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7051.3. Use tax direct payment permit. (a) "Use tax direct payment permit" means a permit issued by the board that allows a taxpayer to self-assess and pay state and local use tax under Part 1 (commencing with Section 6001), Part 1.5 (commencing with Section 7200), and if otherwise applicable, Part 1.6 (commencing with Section 7251), and Part 1.7 (commencing with Section 7280) directly to the board.

(b) Every person seeking to pay use taxes directly to the board shall file an application for a use tax direct payment permit. An application for a use tax direct payment permit shall be made upon a form prescribed by the board and shall set forth the name under which the applicant transacts or intends to transact business, the location of the place or places of business where the applicant intends to make direct payment of use tax, and any other information that the board may require. An applicant for a use tax direct payment permit may register as a place to make direct payment of use tax, any of the places of business in this state that the applicant expects to be a place of first use for purchases subject to use tax, in accordance with the requirements of subdivision (d). The application shall be signed by the owner, if a natural person; in the case of an association or partnership, by a member or partner; and in the case of a corporation, by an executive officer or some person specifically authorized by the corporation to sign the application.

(c) Pursuant to an application, a use tax direct payment permit shall be issued to any person who meets all of the following conditions:

(1) The applicant agrees to self-assess and pay directly to the board any use tax liability incurred under this section.

(2) The applicant certifies to the board either of the following:

(A) The applicant is the purchaser for its own use or is the lessee of tangible personal property at a cost of five hundred thousand dollars ($500,000) or more in the aggregate, during the calendar year immediately preceding the application for the permit.

(B) The applicant is a county, city, city and county, or redevelopment agency.

(d) Any person who holds a valid use tax direct payment permit shall self-assess and pay directly to the board use taxes due under this part, Part 1.5 (commencing with Section 7200), and if otherwise applicable, Part 1.6 (commencing with Section 7251), and Part 1.7 (commencing with Section 7280) for all purchases subject to use tax for which a use tax direct payment exemption certificate was issued, and shall report on the tax return required to be filed by Section 6452, the amount of local use tax applicable to each county, city, city and county, or redevelopment agency in which the first "use," as defined in Section 6009, occurs.

(e) The board shall allow any holder of a use tax direct payment permit to issue a use tax direct payment certificate to any registered retailer or seller subject to all of the following:

(1) The use tax direct payment certificate shall be in a form prescribed by the board, and shall be signed by, and bear the name, address, and permit number of, the holder of the use tax direct payment permit.

(2) Once a use tax direct payment certificate has been issued by a holder of a use tax direct payment permit, it shall remain effective until revised or withdrawn by the holder of the permit or until the retailer or seller has received actual notice that the permit has been revoked by the board.

(3) A use tax direct payment certificate relieves a person selling property from the duty of collecting use tax only if taken in good faith from a person who holds a use tax direct payment permit. A purchaser who issues a use tax direct payment certificate that is accepted in good faith by a seller or retailer of tangible personal property shall be the sole person liable for any sales tax and related interest and penalties with respect to any transaction that is subsequently determined by the board to be subject to sales tax and not use tax.

(4) Any person who holds a use tax direct payment permit and gives a use tax direct payment certificate to a seller or retailer shall, in addition to any applicable use tax liabilities, be subject to the same penalty provisions that apply to a seller or retailer.

(f) It is the intent of the Legislature that the board administer this part in a manner which assures that local use tax be received by the county, city, city and county, or redevelopment agency where the first use occurs.

History.—Added by Stats. 1997, Ch. 702 (SB 110), in effect January 1, 1998. Stats. 1998, Ch. 15 (AB 1243), in effect April 7, 1998, deleted former subdivision (f) which provided, "Each quarter the board shall allocate local use tax not reported to a county, city, city and county, or redevelopment agency, based upon the distribution of local use tax that has been reported to the county, city, city and county, or redevelopment agency in the prior quarter.", and relettered former subdivision (g) as (f).

Note.—Sec. 5 of Ch. 702 (SB 110), Stats. 1997, provides that the Legislature hereby recognizes that currently there are a number of claims pending before the State Board of Equalization relating to the distribution of local taxes that were filed by, or on behalf of, various cities and counties. Section 7051.3 of the Revenue and Taxation Code shall not be construed to impair or otherwise affect the validity of any claim or the interpretation of any law or regulation applicable to any claim of incorrect distribution of a local tax filed with the State Board of Equalization or its staff by a local government agency or its representative designated pursuant to Section 7056 of the Revenue and Taxation Code that was filed prior to January 1, 1998.

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7051.5. Rules and regulations respecting retail grocers. The board shall prescribe rules and regulations respecting retail grocers who sell both taxable items and exempt food items to provide one or more methods whereby they may report their sales tax liabilities in as simplified a manner as is consistent with law. Such rules and regulations shall be applied equally to all grocers who report their sales tax liabilities thereunder.

History.—Added by Stats. 1972, Ch. 1351, effective March 7, 1973.

Note.—Section 3 of Ch. 1351, Stats. 1972, recites the legislative intent in adding section 7051.5.

7052. Employees and representatives of board. The board may employ accountants, auditors, investigators, assistants, and clerks necessary for the efficient administration of this part and may designate representatives to conduct hearings, prescribe regulations, or perform any other duties imposed by this part or other laws of this State upon the board.

7053. Records. Every seller, every retailer as defined in subdivision (b) of Section 6015, and every person storing, using, or otherwise consuming in this State tangible personal property purchased from a retailer shall keep such records, receipts, invoices, and other pertinent papers in such form as the board may require.

Evidence.—The state is not bound to accept the statements of the taxpayer, unsupported by any record, which are contrary to entries in his books of transactions pointing to a larger sum as the true total. People v. Schwartz (1947) 31 Cal.2d 59.

Adequate records must support all claimed exemptions.—Taxpayer did not maintain records adequate to support claimed exempt sales of animal feed, because sales invoices were not correlated to exemption certificates. Paine v. State Board of Equalization (1982) 137 Cal.App.3d 438.

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7054. Examination of records. The board or any person authorized in writing by it may examine the books, papers, records, and equipment of any person selling tangible personal property and any person liable for the use tax and may investigate the character of the business of the person in order to verify the accuracy of any return made, or, if no return is made by the person, to ascertain and determine the amount required to be paid.

Post-audit test as admissible evidence.—Board's test period results were properly admitted as evidence where sales during test period were representative of sales during audit period and where taxpayer's business remained similar in both periods. Paine v. State Board of Equalization (1982) 137 Cal.App.3d 438.

7055. Reports relative to use tax liability. In administration of the use tax the board may require the filing of reports by any person or class of persons having in his or their possession or custody information relating to sales of tangible personal property the storage, use, or other consumption of which is subject to the tax. The reports shall be filed when the board requires and shall set forth the names and addresses of purchasers of the tangible personal property, the sales price of the property, the date of sale, and such other information as the board may require.

7056. Divulging of information forbidden. (a) (1) Excepting the information set forth on permits issued under Article 2 (commencing with Section 6066) of Chapter 2, the information set forth on certificates of registration issued pursuant to Section 6226, and the terms of any settlement made pursuant to Section 19442 (as amended by Chapter 138 of the Statutes of 1994), it is unlawful for the board, any person having an administrative duty under this part or any person who obtains access to information contained in, or derived from, sales or transactions and use tax records of the board pursuant to subdivision (b), to make known in any manner whatever the business affairs, operations, or any other information pertaining to any retailer or any other person required to report to the board or pay a tax pursuant to this part, or the amount or source of income, profits, losses, expenditures, or any particular thereof, set forth or disclosed in any return, or to permit any return or copy thereof or any book containing any abstract or particulars thereof to be seen or examined by any person.

(2) It is also unlawful for any person, other than an officer or employee of a county, city and county, city, or district, who obtains access to information contained in, or derived from, sales or transactions and use tax records of the board pursuant to subdivision (b), to retain that information after that person's contract with the county, city and county, city, or district has expired.

(3) Notwithstanding paragraphs (1) and (2), the Governor may, by general or special order, authorize examination by other state officers, by tax officers of another state, by the federal government, if a reciprocal arrangement exists, by the tax officials of Mexico, if a reciprocal agreement exists, or by any other person of the records maintained by the board under this part. The information so obtained pursuant to the order of the Governor shall not be made public except to the extent and in the manner that the order may authorize that it be made public.

(b) When requested by resolution of the legislative body of any county, city and county, city, or district, the board shall permit any duly authorized officer or employee of the county, city and county, city, or district, or other person designated by that resolution, to examine all of the sales or transactions and use tax records of the board pertaining to the ascertainment of those sales or transactions and use taxes to be collected for the county, city and county, city, or district by the board pursuant to contract entered into between the board and the county, city and county, city, or district under the Bradley-Burns Uniform Local Sales and Use Tax Law (Part 1.5 (commencing with Section 7200)) or the Transactions and Use Tax Law (Part 1.6 (commencing with Section 7251)). Except as otherwise provided herein, this subdivision shall not be construed to allow any officer, employee, or other person authorized or designated by a county, city and county, city, or district to examine any sales or transactions and use tax records of any taxpayer. The costs that are incurred by the board in complying with a request made pursuant to this subdivision shall be deducted by the board from those revenues collected by the board on behalf of the county, city and county, city, or district making the request.

(1) The resolution shall certify that any person designated by the resolution, other than an officer or employee, meets all of the following conditions:

(A) Has an existing contract with the county, city and county, city, or district to examine those sales and use tax records.

(B) Is required by that contract to disclose information contained in, or derived from, those sales or transactions and use tax records only to an officer or employee of the county, city and county, city, or district who is authorized by the resolution to examine the information.

(C) Is prohibited by that contract from performing consulting services for a retailer during the term of that contract.

(D) Is prohibited by that contract from retaining the information contained in, or derived from, those sales or transactions and use tax records, after that contract has expired.

(2) Information obtained by examination of board records as permitted in this subdivision shall be used only for purposes related to the collection of local sales or transactions and use taxes by the board pursuant to the contract, or for purposes related to other governmental functions of the county, city and county, city, or district set forth in the resolution.

(c) If the board believes that any information obtained pursuant to subdivision (b) has been disclosed to any person not authorized or designated by the resolution of the legislative body of the county, city and county, city, or district, or has been used for purposes not permitted by subdivision (b), then notwithstanding subdivision (b), the board may impose conditions on access to its sales and use tax records which the board considers reasonable, in order to protect the confidentiality of those records.

(d) Predecessors, successors, receivers, trustees, executors, administrators, assignees, and guarantors, if directly interested, may be given information as to the items included in the measure and amounts of any unpaid tax or amounts of tax required to be collected, interest, and penalties.

(e) For purposes of this section, "reciprocal agreement" means a formal agreement to exchange information between national taxing officials of Mexico and taxing authorities of the State Board of Equalization, the Franchise Tax Board, and the Employment Development Department. Furthermore, the reciprocal agreement shall be limited to the exchange of information which is essential for tax administration purposes only. Taxing authorities of the State of California shall be granted tax information only on California residents. Taxing authorities of Mexico shall be granted tax information only on Mexican nationals.

History.—Stats. 1951, p. 2390, operative July 1, 1951, authorized Governor to permit examination of board's records
in addition to returns; added provision limiting publicity of information obtained pursuant to Governor's order; and rearranged wording for clarity. Stats. 1957, p. 2802, in effect July 4, 1957, added second paragraph, added "or the resolution of the local legislative body" and "or resolution" to third paragraph, and divided section into paragraphs. Stats. 1963, p. 2611, in effect September 20, 1963, added last sentence in paragraph one; changed wording in paragraph two; and added last sentence in paragraph two in place of former paragraph three. Stats. 1965, p. 2465, in effect September 17, 1965, added all before "it is unlawful for the board" in the first paragraph, and deleted "information obtained by an investigation of records and equipment of any retailer or any other person visited or examined in the discharge of official duty" and substituted "any other information pertaining to any retailer or any other person required to pay to the board or pay a tax pursuant to this part." Stats. 1969, p. 459, in effect June 12, 1969, added the third paragraph. Stats. 1985, Ch. 211, effective July 12, 1985, added subdivision designations (a) through (e), deleted "of this part" after "Chapter 2" and added "any person . . . subdivision (b) or (c)" in the first paragraph after "board" in subdivision (a) (1), added subdivision (a) (2), added paragraph designation and language "(3) Notwithstanding . . . and
(2)" in subdivision (a), added subdivision "(b)", designation, added subdivision (b) (1), added paragraph "(2)" before "Information", and added "in this subdivision", and "or for . . . resolution" in subdivision (b) (2), added subdivision "c" designation, substituted "the" for "such", deleted "herein" before "permitted" and added "in this subdivision" after "permitted," and, added subdivision (e) designation. Stats. 1986, Ch. 308, effective January 1, 1987, added "Predecessors" to (e). Stats. 1991, Ch. 236, in effect July 29, 1991, added "the information set . . . to Section 7093," in paragraph (1) of subdivision (a). Stats. 1991, Ch. 479, in effect October 2, 1991, deleted "or (c)" after "subdivision" in paragraph (1) of subdivision (a) and twice in subdivision (c); deleted "or" after "city or county" twice in paragraph 2 of subdivision (a), three times in subdivision (b), in subparagraphs (A) and (B) of paragraph (1) of subdivision (b), and in paragraph (2) of subdivision (b); added "or district," after "city," in paragraph (2) of subdivision (a), and in subdivision (b); added "or transactions" after "sales" in paragraph (2) of subdivision (a), twice in subdivision (b), in subparagraphs (B) and (D) of paragraph (1) of subdivision (b), and in paragraph (2) of subdivision (b); added ", or district" after "city" in paragraph (2) of subdivision (a), twice in subdivision (b), in subparagraphs (A) and (B) of paragraph (1) of subdivision (b), and in paragraph (2) of subdivision (b); added "or district" after "city," in subdivision (b), and in subparagraph (A) of paragraph (1) of subdivision (b); added "or the Transactions . . . Section 7251))" after "Section 7200))" in subdivision (b); deleted former subdivision (c) which provided, "When requested by resolution of the legislative body of a district, the board shall permit any duly authorized officer or employee of the district to examine the records of the board pertaining to transactions and use taxes collected for the district by the board pursuant to contract entered into between the board and the district. Information obtained by examination of the board records as permitted in this subdivision shall be used only for purposes related to the collection of district transactions and use taxes by the board pursuant to the contract."; and relettered former subdivisions (d) and (e) as subdivisions (c) and (d). Stats. 1993, Ch. 891, in effect January 1, 1994, added "by the tax . . . agreement exists" after "exists" in the first sentence of paragraph (3) of subdivision (a), and added subdivision (e). Stats. 1997, Ch. 702 (SB 110), in effect January 1, 1998, substituted "19442 (as . . . of 1994)" for "7093" after "pursuant to Section", and added "or transactions" after "from, sales" in paragraph (1) of subdivision (a); added "the ascertainment of those" after "pertaining to" and added "to be" after "use taxes" in the first sentence, and added the second and third sentences in subdivision (b).

Information on tax returns not subject to discovery.—It is the clear legislative intent that disclosures made in tax returns shall not be indiscriminately exposed to public scrutiny. The purpose is to facilitate tax enforcement by encouraging full and truthful declarations on returns. A taxpayer is therefore privileged to refuse to furnish information concerning specific entries on his return when such information is sought by means of an interrogatory. Sav-On Drugs, Inc. v. Superior Court (1975) 15 Cal.3d 1.

Public Records Act.—The Board cannot avoid a Public Records Act request for disclosure of documents merely because the documents contain confidential information that may identify a taxpayer if such information can be excised without destroying the utility of the documents. State Board of Equalization v. Superior Court (Associated Sales Tax Consultants) (1992) 10 Cal.App. 4th 1177.

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7056.5. Unauthorized inspection of information. (a) Except as otherwise provided by this article or other express provision of law, the information furnished or secured pursuant to this part shall be used solely for the purpose of administering the tax laws or other laws administered by the person or agency obtaining it. Any willful unauthorized inspection or unwarranted disclosure or use of the information by the person or agency, or the employees and officers thereof, is a misdemeanor. For purposes of this section, "inspection" means any examination of confidential information furnished or secured pursuant to this part.

(b) The board shall notify a taxpayer of any known incidents of willful unauthorized inspection or unwarranted disclosure or use of the taxpayer's confidential tax records, but only if criminal charges have been filed for the willful unauthorized inspection or unwarranted disclosure.

History.—Added by Stats. 1998, Ch. 623, in effect January 1, 1999.

7056.6. Disclosure of information; return preparers. (a) Except as otherwise provided by law, any person who is engaged in the business of preparing, or providing services in connection with the preparation of, returns under Chapter 5 (commencing with Section 6451), or any person who for compensation prepares any such return for any other person, and who knowingly or recklessly does either of the following, shall be guilty of a misdemeanor, and, upon conviction thereof, shall be fined not more than one thousand dollars ($1,000) or imprisoned no more than one year, or both, together with the costs of prosecution:

(1) Discloses any information furnished to him or her for, or in connection with, the preparation of the return.

(2) Uses that information for any purpose other than to prepare, or assist in preparing, the return.

(b) Subdivision (a) shall not apply to disclosure of information if that disclosure is made pursuant to the person's consent or pursuant to a subpoena, court order, or other compulsory legal process.

History.—Added by Stats. 2000, Ch. 1052 (AB 2898), if effect January 1, 2001.

7057. Registration of employers. [Repealed by Stats. 2004, Ch. 353 (AB 3071), in effect January 1, 2005.]

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7058. Certificate of notice. A certificate by the board or an employee of the board stating that a notice required by this part was given by mailing or personal service shall be prima facie evidence in any administrative or judicial proceeding of the fact and regularity of the mailing or personal service in accordance with any requirement of this part for the giving of a notice. Unless otherwise specifically required, any notice provided by this part to be mailed or served may be given either by mailing or by personal service in the manner provided for giving notice of a deficiency determination.

History.—Added by Stats. 1974, Ch. 610, effective January 1, 1975.

Note.—Stats. 1974, Ch. 610, section 16, explains the purpose of the enactment.

7059. Notice to computer industry. The board shall provide notice of the application of the sales and use tax laws to automatic data-processing services and equipment, as defined in Section 1502 of Title 18 of the California Administrative Code, and to other related items of particular interest to the computer industry. The notice required by this section shall be provided annually to trade magazines, periodicals, or other publications devoted to, and published for, the computer industry.

This section shall remain in effect only until January 1, 1986, and as of such date is repealed, unless a later enacted statute, which is chaptered before January 1, 1986, deletes or extends such date.

History.—Added by Stats. 1982, Ch. 1274, in effect September 22, 1982.

7059. Reward program for unreported tax information. [Renumbered, as Section 7060, by Stats. 1985, Ch. 591, effective January 1, 1986.]

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7060. Reward program for unreported tax information. (a) The board, under regulations prescribed by the board, may establish a reward program for information resulting in the identification of underreported or unreported taxes due under this part. Any reward may not exceed 10 percent of the taxes collected as a result of the information provided. Any person employed by or under contract with any state or federal tax collection agency shall not be eligible for a reward provided pursuant to this section.

(b) Within 2½ years of the effective date of the act adding this subdivision or within 2½ years of the commencement of a program pursuant to subdivision (a), whichever is later, the board shall report to the Legislature on all of the following:

(1) The number of informant letters and telephone calls received during the 2-year period following the effective date of the act adding this subdivision or following the commencement of a program pursuant to subdivision (a), whichever is later.

(2) The amount of additional taxes and penalties assessed and collected as a result of this program and the amount of rewards distributed.

(3) The administrative costs incurred in implementing and operating this program.

(c) Rewards paid pursuant to this section shall be paid from amounts appropriated by the Legislature for that purpose.

History.—Added by renumbering Section 7059, as added by Stats. 1984, Ch. 1490, by Stats. 1985, Ch. 591, effective January 1, 1986. Stats. 1992, Ch. 671, in effect January 1, 1993, added the subdivision letter (a) to the beginning of the section; and added subdivisions (b) and (c).

7062. Report to Legislature; waterborne vessels. [Repealed by Stats. 1987, Ch. 921, effective September 22, 1987.]

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Article 1.5. Public Disclosure of Tax Delinquencies*


* Article 1.5 was added by Stats. 2006, Ch. 716 (AB 1418), in effect January 1, 2007.

7063. Requirements relating to disclosure of tax delinquencies. (a) Notwithstanding any other provision of law, the board shall make available as a matter of public record each quarter a list of the 250 largest tax delinquencies in excess of one hundred thousand dollars ($100,000) under this part. For purposes of compiling the list, a tax delinquency means an amount owed to the board which is all of the following:

(1) Based on a determination made under Article 2 (commencing with Section 6481) or Article 3 (commencing with Section 6511) of Chapter 5 deemed final pursuant to Article 5 (commencing with Section 6561) of Chapter 5, or that is "due and payable" under Article 4 (commencing with Section 6536) of Chapter 5, or self-assessed by the taxpayer.

(2) Recorded as a notice of state tax lien pursuant to Chapter 14 (commencing with Section 7150) of Division 7 of Title 1 of the Government Code, in any county recorder's office in this state.

(3) For an amount of tax delinquent for more than 90 days.

(b) For purposes of the list, a tax delinquency does not include any of the following and may not be included on the list:

(1) A delinquency that is under litigation in a court of law.

(2) A delinquency for which payment arrangements have been agreed to by both the taxpayer and the board and the taxpayer is in compliance with the arrangement.

(3) A delinquency for which the taxpayer has filed for bankruptcy protection pursuant to Title 11 of the United States Code.

(c) Each quarterly list shall, with respect to each delinquency, include all the following:

(1) The name of the person or persons liable for payment of the tax and that person's or persons' last known address.

(2) The amount of tax delinquency as shown on the notice or notices of state tax lien and any applicable interest or penalties, less any amounts paid.

(3) The earliest date that a notice of state tax lien was filed.

(4) The type of tax that is delinquent.

(d) Prior to making a tax delinquency a matter of public record as required by this section, the board shall provide a preliminary written notice to the person or persons liable for the tax by certified mail, return receipt requested. If within 30 days after issuance of the notice, the person or persons do not remit the amount due or make arrangements with the board for payment of the amount due, the tax delinquency shall be included on the list.

(e) The quarterly list described in subdivision (a) shall include the following:

(1) The telephone number and address of the board office to contact if a person believes placement of his or her name on the list is in error.

(2) The aggregate number of persons that have appeared on the list who have satisfied their delinquencies in their entirety and the dollar amounts, in the aggregate, that have been paid attributable to those delinquencies.

(f) As promptly as feasible, but no later than 5 business days from the occurrence of any of the following, the board shall remove that taxpayer's name from the list of tax delinquencies:

(1) Tax delinquencies for which the person liable for the tax has contacted the board and resolution of the delinquency has been arranged.

(2) Tax delinquencies for which the board has verified that an active bankruptcy proceeding has been initiated.

(3) Tax delinquencies for which the board has verified that a bankruptcy proceeding has been completed and there are no assets available with which to pay the delinquent amount or amounts.

(4) Tax delinquencies that the board has determined to be uncollectible.

(g) A person whose delinquency appears on the quarterly list, and who satisfies that delinquency in whole or in part, may request the board to include in its quarterly list any payments that person made to satisfly the delinquency. Upon receipt of that request, the board shall include those payments on the list as promptly as feasible.

(h) Notwithstanding subdivision (a), a person whose delinquency appeared on the quarterly list and whose name has been removed pursuant to paragraph (1) of subdivision (f) shall comply with the terms of the arranged resolution. If a person fails to do so, the board shall add that person's name to the list of delinquencies without providing the prior written notice required by subdivision (d).

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Article 2. Tax Amnesty Program*


* Article 2 was added by Stats. 2004, Ch. 226 (SB 1100), in effect August 16, 2004.

7070. Administration. The board shall develop and administer a tax amnesty program for taxpayers subject to Part 1 (commencing with Section 6001), as provided in this article.

7071. Timeframe of program. The tax amnesty program shall be conducted for a two month period beginning February 1, 2005 through March 31, 2005, inclusive, or during a timeframe ending no later than June 30, 2005. The program shall apply to tax liabilities due and payable for tax reporting periods beginning before January 1, 2003.

7072. Waiver of penalty and criminal action. (a) For any taxpayer who meets the requirements of Section 7073:

(1) The board shall waive all penalties imposed by this part, for the tax reporting periods for which tax amnesty is allowed for the nonreporting or underreporting of tax liabilities or the nonpayment of any taxes previously determined or proposed to be determined.

(2) Except as provided in subdivision (b), no criminal action shall be brought against the taxpayer, for the tax reporting periods for which tax amnesty is requested, for the nonreporting or underreporting of tax liabilities.

(b) This section does not apply to violations of this part for which, as of the first day of the amnesty period specified in Section 7071, (1) the taxpayer is on notice of a criminal investigation by a complaint having been filed against him or her or by written notice having been mailed to him or her that he or she is under criminal investigation, or (2) a court proceeding has already been initiated.

(c) No refund or credit shall be granted of any penalty paid prior to the time the taxpayer makes a request for tax amnesty pursuant to Section 7073.

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7073. Eligibility for participation in program. (a) This article shall apply to any taxpayer who, during the amnesty period specified in Section 7071, meets all of the following:

(1) Is eligible to participate in the tax amnesty program.

(2) Files a completed amnesty application with the board, signed under penalty of perjury, to participate in the tax amnesty program.

(3) Within 60 days after the conclusion of the tax amnesty period, does all of the following:

(A) Files completed tax returns for all tax reporting periods for which he or she has not previously filed a tax return and files completed amended returns for all tax reporting periods for which he or she underreported his or her tax liability.

(B) Pays in full the taxes and interest due for all periods for which amnesty is requested, or applies for an installment agreement under subdivision (b).

(C) For taxpayers who have not paid in full any tax liabilities due and payable for tax reporting periods beginning before January 1, 2003, pays in full the taxes and interest due for each period for that portion of the proposed determination for each period for which amnesty is requested or applies for an installment payment agreement under subdivision (b).

(4) In the case of any taxpayer that has filed for bankruptcy protection under Title 11 of the United States Code, submits an order from a Federal Bankruptcy Court allowing the taxpayer to participate in the amnesty program.

(b) The board may enter into an installment payment agreement in lieu of the complete payment required under subparagraph (B) of paragraph (3) of subdivision (a), but only if final payment under the terms of that installment payment agreement is due and is paid no later than June 30, 2006. The installment payment agreement shall include interest on the outstanding amount due at the rate prescribed by law. Failure by the taxpayer to fully comply with the terms of the installment payment agreement shall render the waiver of penalties null and void, unless the board determines that the failure was due to reasonable causes, and the total amount of tax, interest, and all penalties shall be immediately due and payable.

(c) If, subsequent to the amnesty period specified in Section 7071, the board issues a deficiency determination upon a return filed pursuant to subdivision (a), or upon any other nonreporting or underreporting of tax liability by any person who could have otherwise been eligible for amnesty, the board shall impose penalties at a rate that is double the rate of penalties described in law and criminal action may be brought under this part only with respect to the difference between the amount shown on that return and the correct amount of tax, or the amount of unreported or underreported tax, whichever the case may be. This action may not invalidate any waivers granted under Section 7072.

(d) If the board issues a deficiency determination under conditions described in subdivision (c), the board may issue that deficiency determination within 10 years from the last day of the calendar month following the quarterly period for which the amount is proposed to be determined.

(e) The application required under paragraph (2) of subdivision (a) shall be in the form and manner specified by the board, but in no case shall a mere payment of any taxes and interest due, in whole or in part, for any period otherwise eligible for amnesty under this part, be deemed to constitute an acceptable amnesty application under this part. For purposes of the preceding sentence, the application of a refund from one period to offset a tax liability for another period otherwise eligible for amnesty shall not be allowed without the filing of an amnesty application under this part.

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7074. Interest penalty. (a) Except for taxpayers who have entered into an installment payment agreement pursuant to subdivision (b) of Section 7073, there shall be added to the tax for each period for which amnesty could have been requested:

(1) For amounts that are due and payable on the last date of the amnesty period, an amount equal to 50 percent of the accrued interest payable under Section 6591 for the period beginning on the date in which the tax was due and ending on the last day of the amnesty period specified in Section 7071.

(2) An amount equal to 50 percent of the interest computed under Section 6591 on any final amount, including final deficiencies and self-assessed amounts, for the period beginning on the date in which the tax was due and ending on the last day of the amnesty period specified in Section 7071.

(b) The penalty imposed by this section is in addition to any other penalty imposed under this part.

(c) Article 2 (commencing with Section 6481) does not apply with respect to the assessment or collection of any penalty imposed by subdivision (a).

History.—Stats. 2005, Ch. 398 (AB 911), in effect September 9, 2005, deleted former subdivision (d) which provided, "Notwithstanding Chapter 7 (commencing with Section 6901), a taxpayer may not file a claim for refund for any amounts paid in connection with the penalty imposed in subdivision (a)."

7075. Interest penalty exception. Any taxpayer who has an existing installment payment agreement under Section 6832 as of the start of the amnesty program, and who does not participate in the amnesty program, may not be subject to the penalty imposed under Section 7074.

7076. Implementation of program. The board shall issue forms and instructions and take other actions needed to implement this article. The provisions contained in subdivision (c) of Section 19735, to the extent feasible and practical, shall also apply to the board.

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7077. Publicizing amnesty program. The board shall adequately publicize the tax penalty amnesty program so as to maximize public awareness of the participation in the program. The board shall coordinate to the highest degree possible its publicity efforts and other actions taken in implementing this article with similar programs administered by the Franchise Tax Board.

7078. Notification to taxpayers. Subdivision (b) of Section 19736, to the extent feasible and practical, shall also apply to the board.

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Article 2.5. Managed Audit Program*


* Article 2.5 was added by Stats. 2003, Ch. 87 (AB 1043), in effect January 1, 2004.

7076. Board determines which accounts are eligible. (a) The State Board of Equalization shall determine which taxpayer's accounts are eligible for the managed audit program in a manner that is consistent with the efficient use of its auditing resources and the maximum effectiveness of the program.

(b) A taxpayer is not required to participate in the managed audit program.

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7076.1. Eligibility. A taxpayer's account is eligible for the managed audit program only if the taxpayer meets all of the following criteria:

(a) The taxpayer's business involves few or no statutory exemptions.

(b) The taxpayer's business involves a single or small number of clearly defined taxability issues.

(c) The taxpayer is taxed pursuant to this part and agrees to participate in the managed audit program.

(d) The taxpayer has the resources to comply with the managed audit instructions provided by the board.

Text of section operative January 1, 2004 through January 1, 2009

7076.2. Information required to conduct self-audit. (a) If the board selects a taxpayer's account for a managed audit, all of the following apply:

(1) The board shall identify all of the following:

(A) The audit period covered by the managed audit.

(B) The types of transactions covered by the managed audit.

(C) The specific procedures that the taxpayer is to follow in determining any liability.

(D) The records to be reviewed by the taxpayer.

(E) The manner in which the types of transactions are to be scheduled for review.

(F) The time period for completion of the managed audit.

(G) The time period for the payment of the liability and interest.

(H) Any other criteria that the board may require for completion of the managed audit.

(2) The taxpayer shall:

(A) Examine its books, records, and equipment to determine if it has any unreported tax liability for the audit period.

(B) Make available to the board for verification all computations, books, records, and equipment examined pursuant to subparagraph (A).

(b) The information provided by the taxpayer pursuant to paragraph (2) of subdivision (a) is the same information that is required for the completion of any other audit that the board may conduct.

Text of section operative January 1, 2004 through January 1, 2009

7076.3. Authority to examine records. Nothing in this article limits the board's authority to examine the books, papers, records, and equipment of a taxpayer under Section 7054.

Text of section operative January 1, 2004 through January 1, 2009

7076.4. Interest on liabilities. Upon completion of the managed audit and verification by the board, interest on any unpaid liability shall be computed at one-half the rate that would otherwise be imposed for liabilities covered by the audit period. Payment of the liabilities and interest shall be made within the time period specified by the board. If the requirements for the managed audit are not satisfied, the board may proceed to examine the records of the taxpayer in a manner to be determined by the board under law.

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7076.5. Repeal of article. [Repealed by Stats. 2008, Ch. 306 (AB 3079, effective January 1, 2009.]

History.—Added by Stats. 2003, Ch. 87 (AB 1043), in effect January 1, 2004.

Note.—Section 2 of Stats. 2003, Ch. 87 (AB 1043) requires the Board, on or before January 1, 2008, to report to the Legislature regarding the managed audit program as of June 30, 2007, and requires the report contain all of the following:

(a) The amount of taxes, penalties, and interest payments collected from taxpayers that participated in the managed audit program.

(b) The amount of interest that was forgiven as a result of the managed audit program.

(c) The amount of taxes, penalties, and interest payments that was collected as a result of redirecting the board's auditing resources away from taxpayers participating in the managed audit program toward audits of other taxpayers with outstanding sales and use tax liabilities.

(d) Board recommendations for improving the success of the managed audit program.

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Article 3. The California Taxpayers' Bill of Rights*


* Article 3 was added by Stats. 1988, Ch. 1574, in effect January 1, 1989.

7080. Title. This article shall be known and may be cited as "The Harris-Katz California Taxpayers' Bill of Rights."

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7081. Legislature's findings and declarations. The Legislature finds and declares that taxes are the most sensitive point of contact between citizens and their government, and that there is a delicate balance between revenue collection and freedom from government oppression. It is the intent of the Legislature to place guarantees in California law to ensure that the rights, privacy, and property of California taxpayers are adequately protected during the process of the assessment and collection of taxes.

The Legislature further finds that the California tax system is based largely on voluntary compliance, and the development of understandable tax laws and taxpayers informed of those laws will both improve voluntary compliance and the relationship between taxpayers and government. It is the further intent of the Legislature to promote improved voluntary taxpayer compliance by improving the clarity of tax laws and efforts to inform the public of the proper application of those laws.

The Legislature further finds and declares that the purpose of any tax proceeding between the State Board of Equalization and a taxpayer is the determination of the taxpayer's correct amount of tax liability. It is the intent of the Legislature that, in furtherance of this purpose, the State Board of Equalization may inquire into, and shall allow the taxpayer every opportunity to present, all relevant information pertaining to the taxpayer's liability.

History.—Stats. 2001, Ch. 670 (SB 445), in effect January 1, 2002, added third paragraph.

7082. Administration. The board shall administer this article. Unless the context indicates otherwise, the provisions of this article shall apply to this part.

7083. Taxpayers' Rights Advocate. (a) The board shall establish the position of the Taxpayers' Rights Advocate. The advocate or his or her designee shall be responsible for facilitating resolution of taxpayer complaints and problems, including any taxpayer complaints regarding unsatisfactory treatment of taxpayers by board employees, and staying actions where taxpayers have suffered or will suffer irreparable loss as the result of those actions. Applicable statutes of limitation shall be tolled during the pendency of a stay. Any penalties and interest which would otherwise accrue shall not be affected by the granting of a stay.

(b) The advocate shall report directly to the executive officer of the board.

7084. Education and information program. (a) The board shall develop and implement a taxpayer education and information program directed at, but not limited to, all of the following groups:

(1) Taxpayers newly registered with the board.

(2) Taxpayer or industry groups identified in the annual report described in Section 7085.

(3) Board audit and compliance staff.

(b) The education and information program shall include all of the following:

(1) Mailings to, or appropriate and effective contact with, the taxpayer groups specified in subdivision (a) which explain in simplified terms the most common areas of noncompliance the taxpayers or industry groups are likely to encounter.

(2) A program of written communication with newly registered taxpayers explaining in simplified terms their duties and responsibilities as a holder of a seller's permit or use tax registrant and the most common areas of noncompliance encountered by participants in their business or industry.

(3) Participation in small business seminars and similar programs organized by federal, state, and local agencies.

(4) Revision of taxpayer educational materials currently produced by the board which explain the most common areas of taxpayer nonconformance in simplified terms.

(5) Implementation of a continuing education program for audit and compliance personnel to include the application of new legislation to taxpayer activities and areas of recurrent taxpayer noncompliance or inconsistency of administration.

(c) Electronic media used pursuant to this section shall not represent the voice, picture, or name of members of the board or of the Controller.

History.—Stats. 1989, Ch. 163, in effect January 1, 1990, added "federal," and a comma after "state" in paragraph (3) of subdivision (b). Stats. 1998, Ch. 612, in effect January 1, 1999, substituted "holder of a seller's permit or use tax registrant" for "resale permitholder" in paragraph (2), and added "and compliance" after "audit" in paragraph (5) of subdivision (b).

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7085. Identification of taxpayer noncompliance by board. (a) The board shall perform annually a systematic identification of areas of recurrent taxpayer noncompliance and shall report its findings in its annual report submitted pursuant to Section 15616 of the Government Code.

(b) As part of the identification process described in subdivision (a), the board shall do both of the following:

(1) Compile and analyze sample data from its audit process, including, but not limited to, all of the following:

(A) The statute or regulation violated by the taxpayer.

(B) The amount of tax involved.

(C) The industry or business engaged in by the taxpayer.

(D) The number of years covered in the audit period.

(E) Whether or not professional tax preparation assistance was utilized by the taxpayer.

(F) Whether sales and use tax returns were filed by the taxpayer.

(2) Conduct an annual hearing before the full board where industry representatives and individual taxpayers are allowed to present their proposals on changes to the Sales and Use Tax Law which may further facilitate achievement of the legislative findings.

(c) The board shall include in its report recommendations for improving taxpayer compliance and uniform administration, including, but not limited to, all of the following:

(1) Changes in statute or board regulations.

(2) Improvement of training of board personnel.

(3) Improvement of taxpayer communication and education.

7086. Preparation of statements by board. The board shall prepare and publish brief but comprehensive statements in simple and nontechnical language which explain procedures, remedies, and the rights and obligations of the board and taxpayers. As appropriate, statements shall be provided to taxpayers with the initial notice of audit, the notice of proposed additional taxes, any subsequent notice of tax due, or other substantive notices. Additionally, the board shall include the statement in the annual tax information bulletins which are mailed to taxpayers.

7087. Limit on revenue collected or assessed. (a) The total amount of revenue collected or assessed pursuant to this part shall not be used for any of the following:

(1) To evaluate individual officers or employees.

(2) To impose or suggest production quotas or goals, other than quotas or goals with respect to accounts receivable.

(b) The board shall certify in its annual report submitted pursuant to Section 15616 of the Government Code that revenue collected or assessed is not used in a manner prohibited by subdivision (a).

(c) Nothing in this section shall prohibit the setting of goals and the evaluation of performance with respect to productivity and the efficient use of time.

History.—Stats. 1991, Ch. 402, in effect January 1, 1992, added "total" after "(a) The" in subdivision (a), added ", other than . . . accounts receivable" after "goals" in paragraph (2) of subdivision (a), and added subdivision (c).

7088. Evaluation of employee's contact with taxpayers. (a) The board shall develop and implement a program which will evaluate an individual employee's or officer's performance with respect to his or her contact with taxpayers. The development and implementation of the program shall be coordinated with the Taxpayers' Rights Advocate.

(b) The board shall report to the Legislature on the implementation of this program in its annual report.

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7089. Plan to timely resolve claims and petitions. No later than July 1, 1989, the board shall, in cooperation with the State Bar of California, the California Society of Certified Public Accountants, the Taxpayers' Rights Advocate, and other interested taxpayer-oriented groups, develop a plan to reduce the time required to resolve petitions for redetermination and claims for refunds. The plan shall include determination of standard time frames and special review of cases which take more time than the appropriate standard time frame.

7090. Procedures relating to protest hearings. Procedures of the board, relating to protest hearings before board hearing officers, shall include all of the following:

(a) Any hearing shall be held at a reasonable time at a board office which is convenient to the taxpayer.

(b) The hearing may be recorded only if prior notice is given to the taxpayer and the taxpayer is entitled to receive a copy of the recording.

(c) The taxpayer shall be informed prior to any hearing that he or she has a right to have present at the hearing his or her attorney, accountant, or other designated agent.

7091. Reimbursement to taxpayer. (a) Every taxpayer is entitled to be reimbursed for any reasonable fees and expenses related to a hearing before the board if all of the following conditions are met:

(1) The taxpayer files a claim for the fee and expenses with the board within one year of the date the decision of the board becomes final.

(2) The board, in its sole discretion, finds that the action taken by the board staff was unreasonable.

(3) The board decides that the taxpayer be awarded a specific amount of fees and expenses related to the hearing, in an amount determined by the board in its sole discretion.

(b) To determine whether the board staff has been unreasonable, the board shall consider whether the board staff has established that its position was substantially justified.

(c) The amount of reimbursed fees and expenses shall be limited to the following:

(1) Fees and expenses incurred after the date of the notice of determination, jeopardy determination, or a claim for refund.

(2) If the board finds that the staff was unreasonable with respect to certain issues but reasonable with respect to other issues, the amount of reimbursed fees and expenses shall be limited to those which relate to the issues where the staff was unreasonable.

(d) Any proposed award by the board pursuant to this section shall be available as a public record for at least 10 days prior to the effective date of the award.

(e) The amendments to this section by the act adding this subdivision shall be operative for claims filed on or after January 1, 1999.

History.—Stats. 1994, Ch. 726, in effect September 22, 1994, substituted "board" for "State Board of Control" after "expenses with the" in paragraph (1) of subdivision (a); substituted "decides" for "makes a recommendation to the State Board of Control" after "the board", and substituted "that" for "which" after "hearing," in paragraph (2) of subdivision (a); deleted paragraph (4) of subdivision (a) which read, "The State Board of Control concurs with the recommendations and orders the board to provide reimbursement of fees and expenses to the taxpayer."; and added subdivision (d). Stats. 1998, Ch. 612, in effect January 1, 1999, added "within one year . . . final" after "the board" in paragraph (1), substituted "in an amount" for "that shall be" after "hearing," and added "in its sole discretion" after "board" in paragraph (3) of subdivision (a); substituted "board staff" for "taxpayer" after "whether the", and substituted "its position was" for "the position of the board staff was not" after "established that" in subdivision (b); and added subdivision (e). Stats. 2000, Ch. 1052 (AB 2898), in effect January 1, 2001, substituted "the notice of . . . a claim" for "filing petitions for redetermination and claims" after "the date of" in paragraph (1) of subdivision (c).

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7092. Investigations for nontax administration purposes. (a) An officer or employee of the board acting in connection with any law administered by the board shall not knowingly authorize, require, or conduct any investigation of, or surveillance over, any person for nontax administration related purposes.

(b) Any person violating subdivision (a) shall be subject to disciplinary action in accordance with the State Civil Service Act, including dismissal from office or discharge from employment.

(c) This section shall not apply with respect to any otherwise lawful investigation concerning organized crime activities.

(d) The provisions of this section are not intended to prohibit, restrict, or prevent the exchange of information where the person is being investigated for multiple violations which include sales and use tax violations.

(e) For the purposes of this section:

(1) "Investigation" means any oral or written inquiry directed to any person, organization, or governmental agency.

(2) "Surveillance" means the monitoring of persons, places, or events by means of electronic interception, overt or covert observations, or photography, and the use of informants.

7093. Settlement of disputed tax liabilities. [Repealed by Stats. 1994, Ch. 138, in effect July 7, 1994.]

7093.5. Settlement authority. (a) It is the intent of the Legislature that the State Board of Equalization, its staff, and the Attorney General pursue settlements as authorized under this section with respect to civil tax matters in dispute that are the subject of protests, appeals, or refund claims, consistent with a reasonable evaluation of the costs and risks associated with litigation of these matters.

(b) (1) Except as provided in paragraph (3) and subject to paragraph (2), the executive director or chief counsel, if authorized by the executive director, of the board may recommend to the State Board of Equalization, itself, a settlement of any civil tax matter in dispute.

(2) No recommendation of settlement shall be submitted to the board, itself, unless and until that recommendation has been submitted by the executive director or chief counsel to the Attorney General. Within 30 days of receiving that recommendation, the Attorney General shall review the recommendation and advise in writing the executive director or chief counsel of the board of his or her conclusions as to whether the recommendation is reasonable from an overall perspective. The executive director or chief counsel shall, with each recommendation of settlement submitted to the board, itself, also submit the Attorney General's written conclusions obtained pursuant to this paragraph.

(3) A settlement of any civil tax matter in dispute involving a reduction of tax or penalties in settlement, the total of which reduction of tax and penalties in settlement does not exceed five thousand dollars ($5,000), may be approved by the executive director and chief counsel, jointly. The executive director shall notify the board, itself, of any settlement approved pursuant to this paragraph.

(c) Whenever a reduction of tax or penalties or total tax and penalties in settlement in excess of five hundred dollars ($500) is approved pursuant to this section, there shall be placed on file, for at least one year, in the office of the executive director of the board a public record with respect to that settlement. The public record shall include all of the following information:

(1) The name or names of the taxpayers who are parties to the settlement.

(2) The total amount in dispute.

(3) The amount agreed to pursuant to the settlement.

(4) A summary of the reasons why the settlement is in the best interests of the State of California.

(5) For any settlement approved by the board, itself, the Attorney General's conclusion as to whether the recommendation of settlement was reasonable from an overall perspective.

The public record shall not include any information that relates to any trade secret, patent, process, style of work, apparatus, business secret, or organizational structure that, if disclosed, would adversely affect the taxpayer or the national defense.

(d) The members of the State Board of Equalization shall not participate in the settlement of tax matters pursuant to this section, except as provided in subdivision (e).

(e) (1) Any recommendation for settlement shall be approved or disapproved by the board, itself, within 45 days of the submission of that recommendation to the board. Any recommendation for settlement that is not either approved or disapproved by the board within 45 days of the submission of that recommendation shall be deemed approved. Upon approval of a recommendation for settlement, the matter shall be referred back to the executive director or chief counsel in accordance with the decision of the board.

(2) Disapproval of a recommendation for settlement shall be made only by a majority vote of the board. Where the board disapproves a recommendation for settlement, the matter shall be remanded to board staff for further negotiation, and may be resubmitted to the board, in the same manner and subject to the same requirements as the initial submission, at the discretion of the executive director or chief counsel.

(f) All settlements entered into pursuant to this section shall be final and nonappealable, except upon a showing of fraud or misrepresentation with respect to a material fact.

(g) Any proceedings undertaken by the board itself pursuant to a settlement as described in this section shall be conducted in a closed session or sessions. Except as provided in subdivision (c), any settlement considered or entered into pursuant to this section shall constitute confidential tax information for purposes of Section 7056.

(h) This section shall apply only to civil tax matters in dispute on or after the effective date of the act adding this subdivision.

(i) The Legislature finds that it is essential for fiscal purposes that the settlement program authorized by this section be expeditiously implemented. Accordingly, Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code shall not apply to any determination, rule, notice, or guideline established or issued by the board in implementing and administering the settlement program authorized by this section.

History.—Added by Stats. 1992, Ch. 708, in effect September 15, 1992. Stats. 1993, Ch. 75, in effect June 30, 1993, and Ch. 155, in effect July 19, 1993, substituted "1993" for "1992" and "1994" twice for "1993" in subdivision (f). Stats. 1993, Ch. 868, in effect January 1, 1994, substituted "January 1, 1994" for "July 1, 1993" and added second paragraph in subdivision (f). Stats. 1994, Ch. 138, in effect July 7, 1994, added new subdivision (a); renumbered former paragraph (1) of subdivision (a) as paragraph (1) of subdivision (b), deleted "In addition to the authority provided by Section 7093 and" after "(1)" and substituted "Subject" for "subject" after "(1)", therein; deleted former paragraph (3) of subdivision (a) which read, "The members of the board shall not participate in the settlement of these tax matters, except as provided in subdivision (c)."; relettered former subdivision (b) as (c) and added "settlement in" after "tax in" therein; substituted "in dispute" for "involved" in paragraph (2) and substituted "agreed to" for "payable or refundable" in paragraph (3) of subdivision (c); added new subdivision (d); relettered former subdivisions (c), (d), (e), (f), and (g) as (e), (f), (g), (h), and (i), respectively; substituted "(c)" for "(b)" after "subdivision" in subdivision (g); and substituted "in dispute . . . subdivision" for "disputes existing on January 1, 1994, with respect to which recommendations for settlement, pursuant to paragraph (2) of subdivision (a), are first submitted to the Attorney General no later than June 30, 1994, and are first submitted to the board no later than September 15, 1994. With respect to civil tax matter disputes that did not exist on September 1, 1993, but that existed on January 1, 1994, this section shall apply only to determinations issued during that interval and to payments made pursuant to those determinations." after "tax matter" in subdivision (h). Stats. 2000, Ch. 923 (AB 2894), in effect January 1, 2001, substituted "Except as provided . . . subject" for "Subject" in subparagraph (1), added "itself," after "to the board," in the first and third sentences of subparagraph (2), and added subparagraph (3) in subdivision (b); added "or penalties . . . and penalties" after "reduction of tax" in subdivision (c); substituted "For any . . . itself, the" for "The" in subparagraph (5) of subdivision (c); added ", itself" after "by the board" in the second sentence of subparagraph (1) of subdivision (e); added "considered or" after "any settlement" in the second sentence of subdivision (g); and substituted "matters" for "matter" after "civil tax" in subdivision (h). Stats. 2003, Ch. 605 (SB 1060), in effect January 1, 2004, added ", for at least one year," after "placed on file" in subdivision (c).

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Text of section operative through September 30, 2011

7093.6. Offers in compromise. (a) (1) Beginning January 1, 2003, the executive director and chief counsel of the board, or their delegates, may compromise any final tax liability in which the reduction of tax is seven thousand five hundred dollars ($7,500) or less.

(2) Except as provided in paragraph (3), the board, upon recommendation by its executive director and chief counsel, jointly, may compromise a final tax liability involving a reduction in tax in excess of seven thousand five hundred dollars ($7,500). Any recommendation for approval of an offer in compromise that is not either approved or disapproved within 45 days of the submission of the recommendation shall be deemed approved.

(3) The board, itself, may by resolution delegate to the executive director and the chief counsel, jointly, the authority to compromise a final tax liability in which the reduction of tax is in excess of seven thousand five hundred dollars ($7,500), but less than ten thousand dollars ($10,000).

(b) For purposes of this section, "a final tax liability" means any final tax liability arising under Part 1 (commencing with Section 6001), Part 1.5 (commencing with Section 7200), Part 1.6 (commencing with Section 7251), and Part 1.7 (commencing with Section 7280) or related interest, additions to tax, penalties, or other amounts assessed under this part.

(c) (1) Offers in compromise shall be considered only for liabilities that were generated from a business that has been discontinued or transferred, where the taxpayer making the offer no longer has a controlling interest or association with the transferred business or has a controlling interest or association with a similar type of business as the transferred or discontinued business.

(2) Notwithstanding paragraph (1), a qualified final tax liability may be compromised regardless of whether the business has been discontinued or transferred or whether the taxpayer has a controlling interest or association with a similar type of business as the transferred or discontinued business. All other provisions of this section that apply to a final tax liability shall also apply to a qualified final tax liability, and no compromise shall be made under this subdivision unless all other requirements of this section are met. For purposes of this subdivision, a "qualified final tax liability" means any of the following:

(A) That part of a final tax liability, including related interest, additions to tax, penalties, or other amounts assessed under this part, arising from a transaction or transactions in which the board finds no evidence that the taxpayer collected sales tax reimbursement or use tax from the purchaser or other person and which was determined against the taxpayer under Article 2 (commencing with Section 6481), Article 3 (commencing with Section 6511), and Article 5 (commencing with Section 6561) of Chapter 5.

(B) A final tax liability, including related interest, additions to tax, penalties, or other amounts assessed under this part, arising under Article 7 (commencing with Section 6811) of Chapter 6.

(C) That part of a final tax liability for use tax, including related interest, additions to tax, penalties, or other amounts assessed under this part, determined under Article 2 (commencing with Section 6481), Article 3 (commencing with Section 6511), and Article 5 (commencing with Section 6561) of Chapter 5, against a taxpayer who is a consumer that is not required to hold a permit under Section 6066.

(3) A qualified final tax liability may not be compromised with any of the following:

(A) A taxpayer who previously received a compromise under paragraph (2) for a liability, or a part thereof, arising from a transaction or transactions that are substantially similar to the transaction or transactions attributable to the liability for which the taxpayer is making the offer.

(B) A business that was transferred by a taxpayer who previously received a compromise under paragraph (2) and who has a controlling interest or association with the transferred business, when the liability for which the offer is made is attributable to a transaction or transactions substantially similar to the transaction or transactions for which the taxpayer's liability was previously compromised.

(C) A business in which a taxpayer who previously received a compromise under paragraph (2) has a controlling interest or association with a similar type of business for which the taxpayer received the compromise, when the liability of the business making the offer arose from a transaction or transactions substantially similar to the transaction or transactions for which the taxpayer's liability was previously compromised.

(d) The board may, in its discretion, enter into a written agreement that permits the taxpayer to pay the compromise in installments for a period not exceeding one year. The agreement may provide that the installments shall be paid by electronic funds transfers or any other means to facilitate the payment of each installment.

(e) Except for any recommendation for approval as specified in subdivision (a), the members of the State Board of Equalization shall not participate in any offer in compromise matters pursuant to this section.

(f) A taxpayer that has received a compromise under paragraph (2) of subdivision (c) may be required to enter into any collateral agreement that is deemed necessary for the protection of the interests of the state. A collateral agreement may include a provision that allows the board to reestablish the liability, or any portion thereof, if the taxpayer has sufficient annual income during the succeeding five-year period. The board shall establish criteria for determining "sufficient annual income" for purposes of this subdivision.

(g) A taxpayer that has received a compromise under paragraph (2) of subdivision (c) shall file and pay by the due date all subsequently required sales and use tax returns for a five-year period from the date the liability is compromised, or until the taxpayer is no longer required to file sales and use tax returns, whichever period is earlier.

(h) For amounts to be compromised under this section, the following conditions shall exist:

(1) The taxpayer shall establish that:

(A) The amount offered in payment is the most that can be expected to be paid or collected from the taxpayer's present assets or income.

(B) The taxpayer does not have reasonable prospects of acquiring increased income or assets that would enable the taxpayer to satisfy a greater amount of the liability than the amount offered, within a reasonable period of time.

(2) The board shall have determined that acceptance of the compromise is in the best interest of the state.

(i) A determination by the board that it would not be in the best interest of the state to accept an offer in compromise in satisfaction of a final tax liability shall not be subject to administrative appeal or judicial review.

(j) When an offer in compromise is either accepted or rejected, or the terms and conditions of a compromise agreement are fulfilled, the board shall notify the taxpayer in writing. In the event an offer is rejected, the amount posted will either be applied to the liability or refunded, at the discretion of the taxpayer.

(k) When more than one taxpayer is liable for the debt, such as with spouses or partnerships or other business combinations, the acceptance of an offer in compromise from one liable taxpayer shall not relieve the other taxpayers from paying the entire liability. However, the amount of the liability shall be reduced by the amount of the accepted offer.

(l) Whenever a compromise of tax or penalties or total tax and penalties in excess of five hundred dollars ($500) is approved, there shall be placed on file for at least one year in the office of the executive director of the board a public record with respect to that compromise. The public record shall include all of the following information:

(1) The name of the taxpayer.

(2) The amount of unpaid tax and related penalties, additions to tax, interest, or other amounts involved.

(3) The amount offered.

(4) A summary of the reason why the compromise is in the best interest of the state.

The public record shall not include any information that relates to any trade secrets, patent, process, style of work, apparatus, business secret, or organizational structure, that if disclosed, would adversely affect the taxpayer or violate the confidentiality provisions of Section 7056. No list shall be prepared and no releases distributed by the board in connection with these statements.

(m) Any compromise made under this section may be rescinded, all compromised liabilities may be reestablished (without regard to any statute of limitations that otherwise may be applicable), and no portion of the amount offered in compromise refunded, if either of the following occurs:

(1) The board determines that any person did any of the following acts regarding the making of the offer:

(A) Concealed from the board any property belonging to the estate of any taxpayer or other person liable for the tax.

(B) Received, withheld, destroyed, mutilated, or falsified any book, document, or record or made any false statement, relating to the estate or financial condition of the taxpayer or other person liable for the tax.

(2) The taxpayer fails to comply with any of the terms and conditions relative to the offer.

(n) Any person who, in connection with any offer or compromise under this section, or offer of that compromise to enter into that agreement, willfully does either of the following shall be guilty of a felony and, upon conviction, shall be fined not more than fifty thousand dollars ($50,000) or imprisoned in the state prison, or both, together with the costs of investigation and prosecution:

(1) Conceals from any officer or employee of this state any property belonging to the estate of a taxpayer or other person liable in respect of the tax.

(2) Receives, withholds, destroys, mutilates, or falsifies any book, document, or record, or makes any false statement, relating to the estate or financial condition of the taxpayer or other person liable in respect of the tax.

(o) For purposes of this section, "person" means the taxpayer, any member of the taxpayer's family, any corporation, agent, fiduciary, or representative of, or any other individual or entity acting on behalf of, the taxpayer, or any other corporation or entity owned or controlled by the taxpayer, directly or indirectly, or that owns or controls the taxpayer, directly or indirectly.

(p) This section shall remain in effect only until January 1, 2013, and as of that date is repealed, unless a later enacted statute, that is enacted before January 1, 2013, deletes or extends that date.

History.—Added by Stats. 2002, Ch. 152, (AB 1458), in effect January 1, 2003. Stats. 2006, Ch. 347 (AB 2367), in effect January 1, 2007, substituted "in the state prison" for "not more than three years" after "($50,000) or imprisoned" in subdivision (j). Stats. 2008, Ch. 222 (AB 2047), in effect January 1, 2009, redesignated former subdivision "(c)" as "(c)(1)" and added paragraphs (2)(A), (2)(B), (2)(C), (3)(A), (3)(B), and (3)(C) to subdivision (c); added new subdivisions (d), (e), (f), and (g); relettered former subdivisions (d), (e), (f), (g), (h), (i), (j), and (k) as ((h), (i), (j), (k), (l), (m), (n), and (o), respectively, and added new subdivision (p). Stats. 2009, Ch. 140 (AB 1164), in effect January 1, 2010, substituted "at" for "a" after "on file for" in subdivision (l).

Text of section operative October 1, 2011

7093.6. Offers in compromise. (a) (1) Beginning January 1, 2003, the executive director and chief counsel of the board, or their delegates, may compromise any final tax liability in which the reduction of tax is seven thousand five hundred dollars ($7,500) or less.

(2) Except as provided in paragraph (3), the board, upon recommendation by its executive director and chief counsel, jointly, may compromise a final tax liability involving a reduction in tax in excess of seven thousand five hundred dollars ($7,500). Any recommendation for approval of an offer in compromise that is not either approved or disapproved within 45 days of the submission of the recommendation shall be deemed approved.

(3) The board, itself, may by resolution delegate to the executive director and the chief counsel, jointly, the authority to compromise a final tax liability in which the reduction of tax is in excess of seven thousand five hundred dollars ($7,500), but less than ten thousand dollars ($10,000).

(b) For purposes of this section, "a final tax liability" means any final tax liability arising under Part 1 (commencing with Section 6001), Part 1.5 (commencing with Section 7200), Part 1.6 (commencing with Section 7251), and Part 1.7 (commencing with Section 7280) or related interest, additions to tax, penalties, or other amounts assessed under this part.

(c) (1) Offers in compromise shall be considered only for liabilities that were generated from a business that has been discontinued or transferred, where the taxpayer making the offer no longer has a controlling interest or association with the transferred business or has a controlling interest or association with a similar type of business as the transferred or discontinued business.

(2) Notwithstanding paragraph (1), a qualified final tax liability may be compromised regardless of whether the business has been discontinued or transferred or whether the taxpayer has a controlling interest or association with a similar type of business as the transferred or discontinued business. All other provisions of this section that apply to a final tax liability shall also apply to a qualified final tax liability, and no compromise shall be made under this subdivision unless all other requirements of this section are met. For purposes of this subdivision, a "qualified final tax liability" means any of the following:

(A) That part of a final tax liability, including related interest, additions to tax, penalties, or other amounts assessed under this part, arising from a transaction or transactions in which the board finds no evidence that the taxpayer collected sales tax reimbursement or use tax from the purchaser or other person and which was determined against the taxpayer under Article 2 (commencing with Section 6481), Article 3 (commencing with Section 6511), and Article 5 (commencing with Section 6561) of Chapter 5.

(B) A final tax liability, including related interest, additions to tax, penalties, or other amounts assessed under this part, arising under Article 7 (commencing with Section 6811) of Chapter 6.

(C) That part of a final tax liability for use tax, including related interest, additions to tax, penalties, or other amounts assessed under this part, determined under Article 2 (commencing with Section 6481), Article 3 (commencing with Section 6511), and Article 5 (commencing with Section 6561) of Chapter 5, against a taxpayer who is a consumer that is not required to hold a permit under Section 6066.

(3) A qualified final tax liability may not be compromised with any of the following:

(A) A taxpayer who previously received a compromise under paragraph (2) for a liability, or a part thereof, arising from a transaction or transactions that are substantially similar to the transaction or transactions attributable to the liability for which the taxpayer is making the offer.

(B) A business that was transferred by a taxpayer who previously received a compromise under paragraph (2) and who has a controlling interest or association with the transferred business, when the liability for which the offer is made is attributable to a transaction or transactions substantially similar to the transaction or transactions for which the taxpayer's liability was previously compromised.

(C) A business in which a taxpayer who previously received a compromise under paragraph (2) has a controlling interest or association with a similar type of business for which the taxpayer received the compromise, when the liability of the business making the offer arose from a transaction or transactions substantially similar to the transaction or transactions for which the taxpayer's liability was previously compromised.

(d) The board may, in its discretion, enter into a written agreement that permits the taxpayer to pay the compromise in installments for a period not exceeding one year. The agreement may provide that the installments shall be paid by electronic funds transfers or any other means to facilitate the payment of each installment.

(e) Except for any recommendation for approval as specified in subdivision (a), the members of the State Board of Equalization shall not participate in any offer in compromise matters pursuant to this section.

(f) A taxpayer that has received a compromise under paragraph (2) of subdivision (c) may be required to enter into any collateral agreement that is deemed necessary for the protection of the interests of the state. A collateral agreement may include a provision that allows the board to reestablish the liability, or any portion thereof, if the taxpayer has sufficient annual income during the succeeding five-year period. The board shall establish criteria for determining "sufficient annual income" for purposes of this subdivision.

(g) A taxpayer that has received a compromise under paragraph (2) of subdivision (c) shall file and pay by the due date all subsequently required sales and use tax returns for a five-year period from the date the liability is compromised, or until the taxpayer is no longer required to file sales and use tax returns, whichever period is earlier.

(h) For amounts to be compromised under this section, the following conditions shall exist:

(1) The taxpayer shall establish that:

(A) The amount offered in payment is the most that can be expected to be paid or collected from the taxpayer's present assets or income.

(B) The taxpayer does not have reasonable prospects of acquiring increased income or assets that would enable the taxpayer to satisfy a greater amount of the liability than the amount offered, within a reasonable period of time.

(2) The board shall have determined that acceptance of the compromise is in the best interest of the state.

(i) A determination by the board that it would not be in the best interest of the state to accept an offer in compromise in satisfaction of a final tax liability shall not be subject to administrative appeal or judicial review.

(j) When an offer in compromise is either accepted or rejected, or the terms and conditions of a compromise agreement are fulfilled, the board shall notify the taxpayer in writing. In the event an offer is rejected, the amount posted will either be applied to the liability or refunded, at the discretion of the taxpayer.

(k) When more than one taxpayer is liable for the debt, such as with spouses or partnerships or other business combinations, the acceptance of an offer in compromise from one liable taxpayer shall not relieve the other taxpayers from paying the entire liability. However, the amount of the liability shall be reduced by the amount of the accepted offer.

(l) Whenever a compromise of tax or penalties or total tax and penalties in excess of five hundred dollars ($500) is approved, there shall be placed on file for at least one year in the office of the executive director of the board a public record with respect to that compromise. The public record shall include all of the following information:

(1) The name of the taxpayer.

(2) The amount of unpaid tax and related penalties, additions to tax, interest, or other amounts involved.

(3) The amount offered.

(4) A summary of the reason why the compromise is in the best interest of the state.

The public record shall not include any information that relates to any trade secrets, patent, process, style of work, apparatus, business secret, or organizational structure, that if disclosed, would adversely affect the taxpayer or violate the confidentiality provisions of Section 7056. No list shall be prepared and no releases distributed by the board in connection with these statements.

(m) Any compromise made under this section may be rescinded, all compromised liabilities may be reestablished (without regard to any statute of limitations that otherwise may be applicable), and no portion of the amount offered in compromise refunded, if either of the following occurs:

(1) The board determines that any person did any of the following acts regarding the making of the offer:

(A) Concealed from the board any property belonging to the estate of any taxpayer or other person liable for the tax.

(B) Received, withheld, destroyed, mutilated, or falsified any book, document, or record or made any false statement, relating to the estate or financial condition of the taxpayer or other person liable for the tax.

(2) The taxpayer fails to comply with any of the terms and conditions relative to the offer.

(n) Any person who, in connection with any offer or compromise under this section, or offer of that compromise to enter into that agreement, willfully does either of the following shall be guilty of a felony and, upon conviction, shall be fined not more than fifty thousand dollars ($50,000) or imprisoned deletionpursuant to subdivision (h) of Section 1170 of the Penal Code, or both, together with the costs of investigation and prosecution:

(1) Conceals from any officer or employee of this state any property belonging to the estate of a taxpayer or other person liable in respect of the tax.

(2) Receives, withholds, destroys, mutilates, or falsifies any book, document, or record, or makes any false statement, relating to the estate or financial condition of the taxpayer or other person liable in respect of the tax.

(o) For purposes of this section, "person" means the taxpayer, any member of the taxpayer's family, any corporation, agent, fiduciary, or representative of, or any other individual or entity acting on behalf of, the taxpayer, or any other corporation or entity owned or controlled by the taxpayer, directly or indirectly, or that owns or controls the taxpayer, directly or indirectly.

(p) This section shall remain in effect only until January 1, 2013, and as of that date is repealed, unless a later enacted statute, that is enacted before January 1, 2013, deletes or extends that date.

History.—Added by Stats. 2002, Ch. 152, (AB 1458), in effect January 1, 2003. Stats. 2006, Ch. 347 (AB 2367), in effect January 1, 2007, substituted "in the state prison" for "not more than three years" after "($50,000) or imprisoned" in subdivision (j). Stats. 2008, Ch. 222 (AB 2047), in effect January 1, 2009, redesignated former subdivision "(c)" as "(c)(1)" and added paragraphs (2)(A), (2)(B), (2)(C), (3)(A), (3)(B), and (3)(C) to subdivision (c); added new subdivisions (d), (e), (f), and (g); relettered former subdivisions (d), (e), (f), (g), (h), (i), (j), and (k) as ((h), (i), (j), (k), (l), (m), (n), and (o), respectively, and added new subdivision (p). Stats. 2009, Ch. 140 (AB 1164), in effect January 1, 2010, substituted "at" for "a" after "on file for" in subdivision (l). Stats. 2011, Ch. 15 (AB 109), in effect April 4, 2011, operative October 1, 2011, substituted "pursuant to subdivision (h) of Section 1170 of the Penal Code" for "in the state prison" after "($50,000) or imprisoned" in subdivision (n).

NOTE.—SEC 1 of Stats 2011, Ch. 15 (AB 109), in effect April 4, 2011, states: "This act is titled and may be cited as the 2011 Realignment Legislation addressing public safety."

NOTE.—SEC 636 of Stats 2011, Ch. 15 (AB 109) in effect April 4, 2011, states: "This act will become operative no earlier than July 1, 2011, and only upon creation of a community corrections grant program to assist in implementing this act and upon an appropriation to fund the grant program."

NOTE.—The Community Corrections Grant Program referred to in SEC 636 of Stats. 2011, Ch. 15 (AB 109), as amended by SEC 68 of Stats. 2011, Ch. 39 (AB 117), was created by SEC 3 of Stats. 2011, Ch. 40 (AB 118), operative October 1, 2011.

deletionText of section operative January 1, 2013

7093.6. Offers in compromise. (a) (1) The executive director and chief counsel of the board, or their delegates, may compromise any final tax liability in which the reduction of tax is seven thousand five hundred dollars ($7,500) or less.

(2) Except as provided in paragraph (3), the board, upon recommendation by its executive director and chief counsel, jointly, may compromise a final tax liability involving a reduction in tax in excess of seven thousand five hundred dollars ($7,500). Any recommendation for approval of an offer in compromise that is not either approved or disapproved within 45 days of the submission of the recommendation shall be deemed approved.

(3) The board, itself, may by resolution delegate to the executive director and the chief counsel, jointly, the authority to compromise a final tax liability in which the reduction of tax is in excess of seven thousand five hundred dollars ($7,500), but less than ten thousand dollars ($10,000).

(b) For purposes of this section, "a final tax liability" means any final tax liability arising under Part 1 (commencing with Section 6001), Part 1.5 (commencing with Section 7200), Part 1.6 (commencing with Section 7251), and Part 1.7 (commencing with Section 7280) or related interest, additions to tax, penalties, or other amounts assessed under this part.

(c) Offers in compromise shall be considered only for liabilities that were generated from a business that has been discontinued or transferred, where the taxpayer making the offer no longer has a controlling interest or association with the transferred business or has a controlling interest or association with a similar type of business as the transferred or discontinued business.

(d) For amounts to be compromised under this section, the following conditions shall exist:

(1) The taxpayer shall establish that:

(A) The amount offered in payment is the most that can be expected to be paid or collected from the taxpayer's present assets or income.

(B) The taxpayer does not have reasonable prospects of acquiring increased income or assets that would enable the taxpayer to satisfy a greater amount of the liability than the amount offered, within a reasonable period of time.

(2) The board shall have determined that acceptance of the compromise is in the best interest of the state.

(e) A determination by the board that it would not be in the best interest of the state to accept an offer in compromise in satisfaction of a final tax liability shall not be subject to administrative appeal or judicial review.

(f) When an offer in compromise is either accepted or rejected, or the terms and conditions of a compromise agreement are fulfilled, the board shall notify the taxpayer in writing. In the event an offer is rejected, the amount posted will either be applied to the liability or refunded, at the discretion of the taxpayer.

(g) When more than one taxpayer is liable for the debt, such as with spouses or partnerships or other business combinations, the acceptance of an offer in compromise from one liable taxpayer shall not relieve the other taxpayers from paying the entire liability. However, the amount of the liability shall be reduced by the amount of the accepted offer.

(h) Whenever a compromise of tax or penalties or total tax and penalties in excess of five hundred dollars ($500) is approved, there shall be placed on file for at least one year in the office of the executive director of the board a public record with respect to that compromise. The public record shall include all of the following information:

(1) The name of the taxpayer.

(2) The amount of unpaid tax and related penalties, additions to tax, interest, or other amounts involved.

(3) The amount offered.

(4) A summary of the reason why the compromise is in the best interest of the state.

The public record shall not include any information that relates to any trade secrets, patent, process, style of work, apparatus, business secret, or organizational structure, that if disclosed, would adversely affect the taxpayer or violate the confidentiality provisions of Section 7056. No list shall be prepared and no releases distributed by the board in connection with these statements.

(i) Any compromise made under this section may be rescinded, all compromised liabilities may be reestablished (without regard to any statute of limitations that otherwise may be applicable), and no portion of the amount offered in compromise refunded, if either of the following occurs:

(1) The board determines that any person did any of the following acts regarding the making of the offer:

(A) Concealed from the board any property belonging to the estate of any taxpayer or other person liable for the tax.

(B) Received, withheld, destroyed, mutilated, or falsified any book, document, or record, or made any false statement, relating to the estate or financial condition of the taxpayer or other person liable for the tax.

(2) The taxpayer fails to comply with any of the terms and conditions relative to the offer.

(j) Any person who, in connection with any offer or compromise under this section, or offer of that compromise to enter into that agreement, willfully does either of the following shall be guilty of a felony and, upon conviction, shall be fined not more than fifty thousand dollars ($50,000) or imprisoned deletionpursuant to subdivision (h) of subdivision 1170 of the Penal Code, or both, together with the costs of investigation and prosecution:

(1) Conceals from any officer or employee of this state any property belonging to the estate of a taxpayer or other person liable in respect of the tax.

(2) Receives, withholds, destroys, mutilates, or falsifies any book, document, or record, or makes any false statement, relating to the estate or financial condition of the taxpayer or other person liable in respect of the tax.

(k) For purposes of this section, "person" means the taxpayer, any member of the taxpayer's family, any corporation, agent, fiduciary, or representative of, or any other individual or entity acting on behalf of, the taxpayer, or any other corporation or entity owned or controlled by the taxpayer, directly or indirectly, or that owns or controls the taxpayer, directly or indirectly.

(l) This section shall become operative on January 1, 2013.

History.—Added by Stats. 2008, Ch. 222 (AB 2047), in effect January 1, 2009, operative January 1, 2013. Stats. 2009, Ch. 140 (AB 1164), in effect January 1, 2010, substituted "at" for "a" after "on file for" in subdivision (h). Stats. 2011, Ch. 15 (AB 109), in effect April 4, 2011, operative October 1, 2011, substituted "pursuant to subdivision (h) of Section 1170 of the Penal Code" for "in the state prison" after "($50,000) or imprisoned" in subdivision (j).

NOTE.—SEC 1 of Stats 2011, Ch. 15 (AB 109), in effect April 4, 2011, states: "This act is titled and may be cited as the 2011 Realignment Legislation addressing public safety."

NOTE.—SEC 636 of Stats 2011, Ch. 15 (AB 109) in effect April 4, 2011, states: "This act will become operative no earlier than July 1, 2011, and only upon creation of a community corrections grant program to assist in implementing this act and upon an appropriation to fund the grant program."

NOTE.—The Community Corrections Grant Program referred to in SEC 636 of Stats. 2011, Ch. 15 (AB 109), as amended by SEC 68 of Stats. 2011, Ch. 39 (AB 117), was created by SEC 3 of Stats. 2011, Ch. 40 (AB 118), operative October 1, 2011.

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7093.8. Waiver of interest and penalty. [Repealed effective December 31, 2004 pursuant to Stats. 2002, Ch. 488 (AB 2065).]

7094. Release of levy. (a) The board shall release any levy or notice to withhold issued pursuant to this part on any property in the event that the expense of the sale process exceeds the liability for which the levy is made.

(b) The Taxpayers' Rights Advocate may order the release of any levy or notice to withhold issued pursuant to this part or, within 90 days from the receipt of funds pursuant to a levy or notice to withhold, order the return of any amount up to one thousand five hundred dollars ($1,500) of moneys received, upon his or her finding that the levy or notice to withhold threatens the health or welfare of the taxpayer or his or her spouse and dependents or family.

(c) The board shall not sell any seized property until it has first notified the taxpayer in writing of the exemptions from levy under Chapter 4 (commencing with Section 703.010) of Title 9 of the Code of Civil Procedure.

(d) This section shall not apply to the seizure of any property as a result of a jeopardy assessment.

History.—Stats. 1995, Ch. 555, in effect January 1, 1996, added "or notice of withhold" after "levy", and substituted "that the" for "of any of the following: (1) The" in subdivision (a); substituted "(b)" for "(2)" before "The", substituted "may order" for "orders" after "Advocate", substituted "any" for "the" after "release of", added "or notice . . . moneys received" after "levy", and added "or notice to withhold" after "the levy" in subdivision (b); relettered former subdivisions (b) and (c), as (c) and (d), respectively.

7094.1. Return of property. (a) Except in any case where the board finds collection of the tax to be in jeopardy, if any property has been levied upon, the property or the proceeds from the sale of the property shall be returned to the taxpayer if the board determines any one of the following:

(1) The levy on the property was not in accordance with the law.

(2) The taxpayer has entered into and is in compliance with an installment payment agreement pursuant to Section 6832 to satisfy the tax liability for which the levy was imposed, unless that or another agreement allows for the levy.

(3) The return of the property will facilitate the collection of the tax liability or will be in the best interest of the state and the taxpayer.

(b) Property returned under paragraphs (1) and (2) of subdivision (a) is subject to the provisions of Section 7096.

History.—Added by Stats. 1998, Ch. 612, in effect January 1, 1999.

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7095. Exemptions from levy. Exemptions from levy under Chapter 4 (commencing with Section 703.010) of Title 9 of the Code of Civil Procedure shall be adjusted for purposes of enforcing the collection of debts under this part to reflect changes in the California Consumer Price Index whenever the change is more than 5 percent higher than any previous adjustment.

7096. Claim for reimbursement of bank charges by taxpayer. (a) A taxpayer may file a claim with the board for reimbursement of bank charges and any other reasonable third-party check charge fees incurred by the taxpayer as the direct result of an erroneous levy or notice to withhold by the board. Bank and third-party charges include a financial institution's or third party's customary charge for complying with the levy or notice to withhold instructions and reasonable charges for overdrafts that are a direct consequence of the erroneous levy or notice to withhold. The charges are those paid by the taxpayer and not waived or reimbursed by the financial institution or third party. Each claimant applying for reimbursement shall file a claim with the board that shall be in the form as may be prescribed by the board. In order for the board to grant a claim, the board shall determine that both of the following conditions have been satisfied:

(1) The erroneous levy or notice to withhold was caused by board error.

(2) Prior to the levy or notice to withhold, the taxpayer responded to all contacts by the board and provided the board with any requested information or documentation sufficient to establish the taxpayer's position. This provision may be waived by the board for reasonable cause.

(b) Claims pursuant to this section shall be filed within 90 days from the date of the levy or notice to withhold. Within 30 days from the date the claim is received, the board shall respond to the claim. If the board denies the claim, the taxpayer shall be notified in writing of the reason or reasons for the denial of the claim.

History.—Stats. 1991, Ch. 236, in effect July 29, 1991, added "or notice to withhold" after "levy" throughout entire text of section. Stats. 2001, Ch. 543 (SB 1185), in effect January 1, 2002, added "and any other . . . fees" after "bank charges" in the first sentence, added "and third-party" after "board. Bank" and added "or third party's" after "financial institution's" in the second sentence, and added "or third party" after "financial institution" in the third sentence, and substituted "that" for "which" after "with the board", substituted "the" for "such" after "shall be in" in the fourth sentence.

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7097. Preliminary notice to taxpayers prior to lien. (a) At least 30 days prior to the filing or recording of liens under Chapter 14 (commencing with Section 7150) or Chapter 14.5 (commencing with Section 7220) of Division 7 of Title 1 of the Government Code, the board shall mail to the taxpayer a preliminary notice. The notice shall specify the statutory authority of the board for filing or recording the lien, indicate the earliest date on which the lien may be filed or recorded, and state the remedies available to the taxpayer to prevent the filing or recording of the lien. In the event tax liens are filed for the same liability in multiple counties, only one preliminary notice shall be sent.

(b) The preliminary notice required by this section shall not apply to jeopardy determinations issued under Article 4 (commencing with Section 6536) of Chapter 5.

(c) If the board determines that filing a lien was in error, it shall mail a release to the taxpayer and the entity recording the lien as soon as possible, but no later than seven days, after this determination and the receipt of lien recording information. The release shall contain a statement that the lien was filed in error. In the event the erroneous lien is obstructing a lawful transaction, the board shall immediately issue a release of lien to the taxpayer and the entity recording the lien.

(d) When the board releases a lien erroneously filed, notice of that fact shall be mailed to the taxpayer and, upon the request of the taxpayer, a copy of the release shall be mailed to the major credit reporting companies in the county where the lien was filed.

(e) The board may release or subordinate a lien if the board determines that the release or subordination will facilitate the collection of the tax liability or will be in the best interest of the state and the taxpayer.

History.—Stats. 1998, Ch. 612, in effect January 1, 1999, added subdivision (e).

7098. Notice preliminary to suspension. For the purposes of this part only, the board shall not revoke or suspend a person's permit pursuant to Section 6070 or 6072 unless the board has mailed a notice preliminary to revocation or suspension which indicates that the taxpayer will be suspended by a date certain pursuant to that section. The notice preliminary to suspension shall be mailed to the taxpayer at least 60 days before the date certain.

History.—Stats. 1989, Ch. 654, in effect January 1, 1990, substituted "the board shall not revoke or suspend a person's permit" for "a taxpayer shall not be suspended," and added "revocation or" after "pursuant to" in the first sentence.

7099. Disregard by board employee or officer. (a) If any officer or employee of the board recklessly disregards board-published procedures, a taxpayer aggrieved by that action or omission may bring an action for damages against the State of California in superior court.

(b) In any action brought under subdivision (a), upon a finding of liability on the part of the State of California, the state shall be liable to the plaintiff in an amount equal to the sum of all of the following:

(1) Actual and direct monetary damages sustained by the plaintiff as a result of the actions or omissions.

(2) Reasonable litigation costs, as defined for purposes of Section 7156.

(c) In the awarding of damages under subdivision (b), the court shall take into consideration the negligence or omissions, if any, on the part of the plaintiff which contributed to the damages.

(d) Whenever it appears to the court that the taxpayer's position in the proceedings brought under subdivision (a) is frivolous, the court may impose a penalty against the plaintiff in an amount not to exceed ten thousand dollars ($10,000). A penalty so imposed shall be paid upon notice and demand from the board and shall be collected as a tax imposed under this part.

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Text of section operative January 1, 2001 through January 1, 2009

7099.1. Protection of taxpayer communications. (a) (1) With respect to tax advice, the protections of confidentiality that apply to a communication between a client and an attorney, as set forth in Article 3 (commencing with Section 950) of Chapter 4 of Division 8 of the Evidence Code, shall also apply to a communication between a taxpayer and any federally authorized tax practitioner to the extent the communication would be considered a privileged communication if it were between a client and an attorney.

(2) Paragraph (1) may only be asserted in any noncriminal tax matter before the State Board of Equalization.

(3) For purposes of this section:

(A) "Federally authorized tax practitioner" means any individual who is authorized under federal law to practice before the Internal Revenue Service if the practice is subject to federal regulation under Section 330 of Title 31 of the United States Code, as provided by federal law as of January 1, 2000.

(B) "Tax advice" means advice given by an individual with respect to a state tax matter, which may include federal tax advice if it relates to the state tax matter. For purposes of this subparagraph, "federal tax advice" means advice given by an individual within the scope of his or her authority to practice before the federal Internal Revenue Service on noncriminal tax matters.

(C) "Tax shelter" means a partnership or other entity, any investment plan or arrangement, or any other plan or arrangement if a significant purpose of that partnership, entity, plan, or arrangement is the avoidance or evasion of federal income tax.

(b) The privilege under subdivision (a) shall not apply to any written communication between a federally authorized tax practitioner and a director, shareholder, officer, or employee, agent, or representative of a corporation in connection with the promotion of the direct or indirect participation of the corporation in any tax shelter, or in any proceeding to revoke or otherwise discipline any license or right to practice by any governmental agency.

(c) This section shall be operative for communications made on or after the effective date of the act adding this section.

(d) This section shall remain in effect only until January 1, 2009, and as of that date is repealed, unless a later enacted statute, that is enacted before January 1, 2009, deletes or extends that date.

History.—Added by Stats. 2000, Ch. 438 (AB 1016), in effect January 1, 2001. Stats. 2004, Ch. 412 (AB 1416), in effect January 1, 2005, substituted "2009" for "2005" after "January 1," in subdivision (d).

Text of section operative October 11, 2009.

7099.1. Protection of taxpayer communications. (a) (1) With respect to tax advice, the protections of confidentiality that apply to a communication between a client and an attorney, as set forth in Article 3 (commencing with Section 950) of Chapter 4 of Division 8 of the Evidence Code, also shall apply to a communication between a taxpayer and any federally authorized tax practitioner to the extent the communication would be considered a privileged communication if it were between a client and an attorney. A federally authorized tax practitioner has the legal obligation and duty to maintain confidentiality with respect to such communication.

(2) Paragraph (1) may only be asserted in any noncriminal tax matter before the State Board of Equalization.

(3) For purposes of this section:

(A) "Federally authorized tax practitioner" means any individual who is authorized under federal law to practice before the Internal Revenue Service if the practice is subject to federal regulation under Section 330 of Title 31 of the United States Code, as provided by federal law as of January 1, 2000.

(B) "Tax advice" means advice given by an individual with respect to a state tax matter, which may include federal tax advice if it relates to the state tax matter. For purposes of this subparagraph, "federal tax advice" means advice given by an individual within the scope of his or her authority to practice before the federal Internal Revenue Service on noncriminal tax matters.

(C) "Tax shelter" means a partnership or other entity, any investment plan or arrangement, or any other plan or arrangement if a significant purpose of that partnership, entity, plan, or arrangement is the avoidance or evasion of federal income tax.

(b) The privilege under subdivision (a) shall not apply to any written communication between a federally authorized tax practitioner and a director, shareholder, officer, or employee, agent, or representative of a corporation in connection with the promotion of the direct or indirect participation of the corporation in any tax shelter, or in any proceeding to revoke or otherwise discipline any license or right to practice by any governmental agency.

(c) This section shall be operative for communications made on or after the effective date of the act adding this section.

History.—Added by Stats. 2009, Ch. 411 (AB 129) in effect October 11, 2009.

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Uncodified Sections

1. Multiagency task force. (a) The multiagency task force established pursuant to Executive Order D-51-86 (hereinafter referred to as "task force") shall include among its goals and objectives the following:

(1) To deter tax evasion by maximizing recoveries from blatant tax evaders and violators of cash-pay reporting laws, utilizing all penalties which are available to the taxing and enforcement agencies under existing law.

(2) To reduce enforcement costs by eliminating duplicative audits and investigations.

(3) To generate greater voluntary taxpayer compliance and to deter tax and cash-pay violations by publicizing the efforts of the task force.

(4) To provide opportunities for auditors and investigators from tax and enforcement agencies to become familiar with other agencies' laws and enforcement procedures.

(5) To concentrate its efforts in investigating and prosecuting violations of cash-pay and tax laws by employers with five or more employees and by individuals who are habitual or willfull violators of those laws.

(b) In addition to the responsibilities cited in Executive Order D-51-86, the task force shall be empowered to do all of the following:

(1) Identify areas of blatant violations and noncompliance with tax and cash-pay laws.

(2) Solicit referrals from the tax and enforcement agencies represented on the task force committee of instances of blatant violations and noncompliance with tax and cash-pay laws.

(3) Conduct audits, investigations, and referrals for prosecution of violations referred by other agencies and in the identified areas of violations and noncompliance, using all enforcement powers available in existing laws and regulations.

(4) Establish an advertised telephone "hotline" for referrals from the public.

(5) Publicize the activities of the task force.

(6) Keep the audit and investigative staff of the tax and enforcement agencies represented on the task force committee fully informed of the activities of the task force.

(7) Develop procedures for improved information sharing among the agencies represented on the task force committee, consistent with restrictions on disclosure of confidential tax information in existing law, for the purpose of improving enforcement.

(8) Based on the activities of the task force, evaluate the need for any law changes to do any of the following:

(A) Eliminate barriers to interagency information sharing.

(B) Improve agencies' ability to audit, investigate, and prosecute tax and cash-pay violations.

(C) Deter violations and improve voluntary compliance.

(D) Eliminate duplication and improve cooperation among the participating agencies.

(c) The task force shall report to the Governor, the Senate and Assembly Revenue and Taxation Committees, and the Commission on California State Government Organization and Economy every six months during the period it is in existence, beginning on March 1, 1987, regarding the activities of the task force. The reports shall include, but not be limited to, all of the following:

(1) The number of cases of blatant violations and noncompliance with tax and cash-pay laws identified, audited or investigated, and referred for prosecution.

(2) Actions taken by the task force to publicize its activities.

(3) Efforts made by the task force to establish an advertised telephone "hotline" for referrals from the public.

(4) Procedures developed for improved information sharing among the agencies represented on the task force.

(5) Steps taken by the task force to improve cooperation among participating agencies, reduce duplication of effort, and improve voluntary compliance.

(6) Recommendations for any law changes needed to accomplish the goals described in paragraph (8) of subdivision (b).

History.—Added by Sec. 40, Stats. 1986, Ch. 1361, effective January 1, 1987.