Laws, Regulations & Annotations

Business Taxes Law Guide – Revision 2013
 

Emergency Telephone Users Surcharge Law

CHAPTER 7. ADMINISTRATION.


CHAPTER 7. ADMINISTRATION.

Article 1. Regulations, Records and Reports

41128. Enforcement by board; rulings 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 shall not prescribe, adopt or enforce any rule or regulation which has the effect, directly or indirectly, of altering the terms and conditions of service of a service supplier serving the general public, other than the imposition of the surcharge.

41129. Service supplier records. Every service supplier in this state shall keep such records pertaining thereto in such form as the board may require.

41130. Examination of records and returns. Upon proper notification to the service supplier, the board or its authorized representative shall have the right to inspect and audit all records and returns of the service supplier at all reasonable times.

41131. Access to records of P.U.C., political subdivisions and public agencies. The board shall have full access to records of the Public Utilities Commission, and any political subdivision or public agency of this state that regulates, operates or owns a public utility, which pertain to the furnishing of telephone communication services in this state.

41132. Information confidential; tax preparer. (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 4 (commencing with Section 41050), 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), in effect January 1, 2001.

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Article 2. Disposition of Proceeds

41135. State Emergency Telephone Number Account. All amounts required to be paid to the state under this part shall be paid to the board in the form of remittances payable to the State Board of Equalization of the State of California. The board shall transmit the payments to the State Treasurer to be deposited in the State Treasury to the credit of the State Emergency Telephone Number Account in the General Fund, which is hereby created.

41136. Disposition of funds. Funds in the State Emergency Telephone Number Account shall, when appropriated by the Legislature, be spent solely for the following purposes:

(a) A minimum of one-half of 1 percent of the charges for intrastate telephone communications services and VoIP service to which the surcharge applies, as follows:

(1) To pay refunds authorized by this part.

(2) To pay the State Board of Equalization for the cost of the administration of this part.

(3) To pay the office of the State Chief Information Officer for its costs in administration of the "911" emergency telephone number system.

(4) To pay bills submitted to the office of the State Chief Information Officer by service suppliers or communications equipment companies for the installation of, and ongoing expenses for, the following communications services supplied to local agencies in connection with the "911" emergency phone number system:

(A) A basic system.

(B) A basic system with telephone central office identification.

(C) A system employing automatic call routing.

(D) Approved incremental costs.

(5) To pay claims of local agencies for approved incremental costs, not previously compensated for by another governmental agency.

(6) To pay claims of local agencies for incremental costs and amounts, not previously compensated for by another governmental agency, incurred prior to the effective date of this part, for the installation and ongoing expenses for the following communication services supplied in connection with the "911" emergency telephone number system:

(A) A basic system.

(B) A basic system with telephone central office identification.

(C) A system employing automatic call routing.

(D) Approved incremental costs. Incremental costs shall not be allowed unless the costs are concurred in by the office of the State Chief Information Officer.

(b)(1) For the purposes of paragraph (5) of subdivision (a), the term incremental costs shall include a maximum of one-quarter of 1 percent of the charges for intrastate telephone communications services and VoIP service to which the surcharge applies for a one-time payment to Primary Public Safety Answering Points for the cost necessary to recruit and train additional personnel necessary to accept wireless enhanced "911" calls from within their jurisdiction routed directly to their call centers.

(2) Funds allocated pursuant to this subdivision shall supplement, and not supplant, existing funding for these services.

(3) This subdivision shall remain in effect only until December 31, 2011.

History.—Stats. 1994, Ch. 146, in effect January 1, 1995, added "expenses for the following" after "installation and ongoing" in subdivision (d); substituted "Incremental costs shall . . . unless costs are" for "Such incremental costs shall not be allowed unless such costs are recommended by the advisory committee and" in subparagraph (f)(4). Stats. 1997, Ch. 887 (AB 1198), in effect October 12, 1997, added subdivision (g). Stats. 1998, Ch. 485 (AB 2803), in effect January 1, 1999, substituted "Division of Telecommunications" for "Telecommunications Division" following "To pay the" in subdivision (g). Stats. 1999, Ch. 83 (SB 966), in effect January 1, 2000, added "of," after "for the installation", added a comma after "ongoing expenses for", and added "to" after "communications services supplied" in subdivision (d) and substituted "Division of Telecommunications of the Department of General Services" for "Communications Division" in paragraph (4) of subdivision (h). Stats. 2009, Ch. 489 (AB 912), in effect January 1, 2010, added "A minimum of one-half of 1 percent of the charges . . . surcharge applies as follows:" after ", when appropriated by the Legislature, . . . for the following purposes:" to the new subdivision (a); redesignated former subdivisions (a), (b), (c), and (d) as paragraphs (a)(1), (a)(2), (a)(3), and (a)(4), respectively; redesignated former paragraphs (d)(1), (d)(2), (d)(3), and (d)(4) as subparagraphs (a)(4)(A), (a)(4)(B), (a)(4)(C), and (a)(4)(D), respectively; redesignated former subdivisions (e) and (f) as paragraphs (a)(5) and (a)(6), respectively; redesignated former paragraphs (f)(1), (f)(2), (f)(3), and (f)(4) as (a)(6)(A), (a)(6)(B), (a)(6)(C), and (a)(6)(D), respectively; added new subdivision (b); deleted former subdivision (g); and substituted "office of the State Chief Information Officer" for "Department of General Services" throughout the entire section. Stats. 2010, Ch. 328 (SB 1330), in effect January 1, 2011, added a comma after "to which the surcharge applies" in subdivision (a) and substituted "telephone" for "phone" after "in connection with the "911" emergency" in paragraph (6) of subdivision (a).

Note.—Sec. 1, Stats. 2009, Ch. 489 (AB 912) provided the following Legislative findings and declarations:

(a) The Warren-911-Emergency Assistance Act establishes the number "911" as the primary emergency telephone number of use in this state.

(b) The Emergency Telephone Users Surcharge Act generally imposes a surcharge on amounts paid by every person in the state for intrastate telephone service and is imposed at a percentage rate range, established in 1980, of between one-half of 1 percent and three-quarters of 1 percent. This surcharge is annually estimated to provide revenues to fund "911" emergency telephone system costs for the current fiscal year. The rate range has remained unchanged since 1980.

(c) In 2005, there were over five million "911" calls, over eight million "911" calls in 2006, and an estimated 12 million "911" calls in 2007. This represents a 119 percent increase in "911" calls over those past two years alone. The Department of the California Highway Patrol, a Public Safety Answering Point, receives approximately 750,000 "911" calls monthly at its 24 answering points statewide.

(d) This rapid increase has made it difficult for Public Safety Answering Points, including the Department of the California Highway Patrol, to meet the 10-second answering guideline recommended by the National Emergency Number Association and accepted by the industry, potentially affecting the safety and well-being of "911" callers.

(e) "911" call volumes continue to grow and additional personnel with the appropriate training and skills, including language skills, is needed to meet the 10-second answering guideline.

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41136.1. Funds held in trust for future appropriation. For each fiscal year, moneys in the State Emergency Telephone Number Account not appropriated for a purpose specified in Section 41136 shall be held in trust for future appropriation for upcoming, planned "911" emergency telephone number projects that have been approved by the California Technology Agency, even if the projects have not yet commenced.

History.—Added by Stats. 2006, Ch. 73 (SB 1597), in effect January 1, 2007. Stats. 2010, Ch. 404 (AB 2408), in effect January 1, 2011, substituted "California Technology Agency" for "Department of General Services".

41137. Payments to suppliers. The California Technology Agency shall pay, from funds appropriated from the State Emergency Telephone Number Account by the Legislature, as provided in Section 41138, bills submitted by service suppliers or communications equipment companies for the installation and ongoing costs of the following communication services provided local agencies by service suppliers in connection with the "911" emergency telephone number system:

(a) A basic system.

(b) A basic system with telephone central office identification.

(c) A system employing automatic call routing.

(d) Approved incremental costs that have been concurred in by the California Technology Agency.

History.—Stats. 1994, Ch. 146, in effect January 1, 1995, substituted "that have been" for "which have been recommended by the advisory committee and" in subdivision (d). Stats. 2010, Ch. 404 (AB 2408), in effect January 1, 2011, substituted "California Technology Agency" for "Department of General Services" or "Communications Division" throughout section.

41137.1. Payments to local agencies. The California Technology Agency shall pay, from funds appropriated from the State Emergency Telephone Number Account by the Legislature, as provided in Section 41138, claims submitted by local agencies for approved incremental costs and for the cost of preparation of final plans submitted to the California Technology Agency for approval on or before October 1, 1978, as provided in Section 53115 of the Government Code.

History.—Stats. 1978, Ch. 352, effective July 4, 1978, added language following "incremental costs". Stats. 2010, Ch. 404 (AB 2408), in effect January 1, 2011, substituted "California Technology Agency" for "Department of General Services" or "Communications Division" throughout section.

41138. Conditions for payment. (a) It is the intent of the Legislature that the reimbursement rates for "911" emergency telephone number equipment shall not exceed specified amounts negotiated with each interested supplier and approved by the California Technology Agency. The California Technology Agency shall negotiate supplier pricing to ensure cost effectiveness and the best value for the "911" emergency telephone number system. The California Technology Agency shall pay those bills as provided in Section 41137 only under the following conditions:

(1) The California Technology Agency shall have received the local agency's "911" emergency telephone number system plan by July 1 of the prior fiscal year and approved the plan by October 1 of the prior fiscal year.

(2) The Legislature has appropriated in the Budget Bill an amount sufficient to pay those bills.

(3) The California Technology Agency has reviewed and approved each line item of a request for funding to ensure the necessity of the proposed equipment or services and the eligibility for reimbursement.

(4) The amounts to be paid do not exceed the pricing submitted by the supplier and approved by the California Technology Agency. Extraordinary circumstances may warrant spending in excess of the established rate, but shall be preapproved by the California Technology Agency. In determining the reimbursement rate, the California Technology Agency shall utilize the approved pricing submitted by the supplier providing the equipment or service.

(b) Nothing in this section shall be construed to limit an agency's ability to select a supplier or procure telecommunications equipment as long as the supplier's pricing is preapproved by the California Technology Agency. Agencies shall be encouraged to procure equipment on a competitive basis. Any amount in excess of the pricing approved by the California Technology Agency shall not be reimbursed.

History.—Stats. 1996, Ch. 746, in effect January 1, 1997, added subdivision letter (a), added "It is the intent . . . by the department." as the first sentence of, and substituted "negotiate supplier pricing . . . shall pay those" for "pay such" in the second sentence of, subdivision (a), substituted "agency's" for "agencies" after "received the local" and substituted "the" for "such" after "year and approved" in paragraph (1) of, substituted "those" for "such" after "sufficient to pay" in paragraph (2) of, substituted "department has reviewed . . . eligibility for reimbursement" for "amounts to be paid shall not exceed the contract or established tariff rates for the costs of telephone equipment" in paragraph (3) of, substituted "do not exceed . . . equipment or service." for "shall not exceed approved incremental costs." in paragraph (4) of, subdivision (a), and added subdivision (b). Stats. 2010, Ch. 404 (AB 2408), in effect January 1, 2011, substituted "California Technology Agency" for "department" throughout section.

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41139. Date of commencing payments. From funds appropriated by the Legislature from the Emergency Telephone Number Account, the California Technology Agency shall begin paying bills as provided in Sections 41137, 41137.1, and 41138 in the 1977–78 fiscal year for plans submitted by local agencies by July 1, 1976, to the California Technology Agency which the California Technology Agency has approved.

History.—Stats. 2010, Ch. 404 (AB 2408), in effect January 1, 2011, substituted "California Technology Agency" for "department", deleted "such" after "shall begin paying" and added a comma after "July 1, 1976".

41140. Payment for previous costs. The California Technology Agency shall reimburse local agencies, from funds appropriated from the Emergency Telephone Number Account by the Legislature, for amounts not previously compensated for by another governmental agency, which have been paid by agencies for approved incremental costs or to service suppliers or communication equipment companies for the following communications services supplied in connection with the "911" emergency telephone number, provided local agency plans had been approved by the California Technology Agency:

(a) A basic system.

(b) A basic system with telephone central office identification.

(c) A system employing automatic call routing.

(d) Approved incremental costs.

History.—Stats. 2010, Ch. 404 (AB 2408), in effect January 1, 2011, substituted "California Technology Agency" for "Department of General Services" or "department", deleted "such" twice after "which have been paid by" and after "number, provided", and substituted "telephone" for "phone" after "emergency" in the first sentence, and redesignated former paragraphs (1), (2), (3), and (4) as (a), (b), (c), and (d).

41141. Claims for payment. Claims for reimbursement shall be submitted by local agencies to the California Technology Agency, which shall determine payment eligibility and shall reduce the claim for charges that exceed the approved incremental costs, approved contract amounts, or the established tariff rates for costs. No claim shall be paid until funds are appropriated by the Legislature.

History.—Stats. 1980, Ch. 1035, operative January 1, 1981, substituted present wording of first sentence following "agencies" for former wording and deleted former second sentence. Stats. 2010, Ch. 404 (AB 2408), in effect January 1, 2011, substituted "California Technology Agency" for "Communications Division in the Department of General Services", substituted "that" for "which" after "reduce the claim for charges", and deleted "such" after "established tariff rates for".

41142. Failure of Legislature to appropriate funds. Notwith-standing any other provision of this article, if the Legislature fails to appropriate an amount sufficient to pay bills submitted to the California Technology Agency by service suppliers or communications equipment companies for the installation and ongoing communications services supplied local agencies in connection with the "911" emergency telephone number system, and to pay claims of local agencies which, prior to the effective date of this part, paid amounts to service suppliers or communications equipment companies for the installation and ongoing expenses in connection with the "911" emergency telephone number system, the obligation of service suppliers and local agencies to provide "911" emergency telephone service shall terminate and service shall not again be required until the Legislature has appropriated an amount sufficient to pay those bills or claims. Nothing in this part shall preclude local agencies from purchasing or acquiring any communication equipment from companies other than the telephone service suppliers.

History.—Stats. 2010, Ch. 404 (AB 2408), in effect January 1, 2011, substituted "California Technology Agency" for "Department of General Services", substituted "telephone" for "phone" twice after "connection with the "911" emergency", deleted "such" after "terminate and", and substituted "those" for "such" after "an amount sufficient to pay".

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Article 2.5. Violations*

* Article 2.5 was added by Stats. 1986, Ch. 1361, effective January 1, 1987.

41143. Penalty. Any person who fails or refuses to file a return or report required to be made or who fails or refuses to furnish a supplemental report or other data required by the board, or who renders a false or fraudulent report is guilty of a misdemeanor and may be punished by a fine not exceeding five hundred dollars ($500) for each offense.

41143.4. Felony provisions. Notwithstanding any other provision of this part, any person who violates this part with intent to defeat or evade the determination of an amount due required by law to be made is guilty of a felony when the amount of tax liability aggregates twenty-five thousand dollars ($25,000) or more in any 12-consecutive-month period. The determination shall be approved by the executive director or his or her designee. Each offense shall be punished by a fine of not less than five thousand dollars ($5,000) and not more than twenty thousand dollars ($20,000), or imprisonment for 16 months, two years, or three years, or by both the fine and imprisonment in the discretion of the court.

History.—Added by Stats. 1987, Ch. 1064, effective January 1, 1988. Stats. 1989, Ch. 654, in effect January 1, 1990, substituted "Deputy Director, Business Taxes," for "administrator of the excise taxes" and "designee" for "supervisor". Stats. 1995, Ch. 555, in effect January 1, 1996, substituted "any person who violates this part" for "any violation of this part by any person" after "of this part," in the first sentence, and substituted "executive director or his or her" for "Deputy Director, Business Taxes, or that person's" after "approved by the" and added "by" after "three years, or" in the second sentence.

41143.8. Prosecution. Any prosecution for violation of any of the penal provisions of this part shall be instituted within three years after commission of the offense or within two years after the violation is discovered, whichever is later.

Note.—Sec. 41. Stats. 1986, Ch. 1361 required that:

(a) On January 15 of each year from 1988 to 1992, inclusive, the State Board of Equalization and the Franchise Tax Board shall submit a report to the Legislature on implementation of the provisions of this act, with the exception of Section 40 of this act (for which separate reporting requirements are set out).

(b) The revenue and taxation policy committees of each house of the Legislature shall hold a public hearing no later than June 30 of each year from 1988 to 1992, inclusive, on the reports submitted pursuant to subdivision (a).

(c) The intent of this section is to assure the Legislature the opportunity to oversee the implementation of this act. The intent of the Legislature in enacting this act is to improve enforcement and voluntary compliance with the tax system and cash-pay reporting rules. The intent of the Legislature in enacting this act is not to cause harassment of or undue burden on innocent taxpayers.

Sec. 41. applies to the following Revenue and Taxation Code Sections: 6069, 6071, 6366, 6366.1, 6368.1, 6452, 6455, 6776, 6777, 7154, 8404, 9355, 30481, 32556, 40188, 41143, and 44186.

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Article 3. Notices

41144. Notices. 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 of personal service in accordance with any requirement of this part for the giving of notice. Unless otherwise specifically required, any notice required by this part to be mailed or served may be given by mailing or personal service in the manner provided for giving notice of a deficiency determination.

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Article 4. Purpose

41150. Purpose. The Legislature hereby declares and finds that to enable public agencies to implement "911" emergency phone systems required by the provisions of Chapter 1005 of the 1972 Regular Session (Article 6 (commencing with Section 53100) of Chapter 1 of Part 1 of Division 2 of Title 5 of the Government Code) it is necessary that a surcharge be imposed upon amounts paid by every person in the state for intrastate telephone communication services in this state. This bill will provide funding for basic 911, basic 911 (including telephone central office identification) 911 with selective routing or a combination of the above. These services will include incoming 911 lines/trunks, 911 answering positions including common control equipment, transfer lines and transfer positions. In addition, this part will provide funding for incremental costs.

41152. Legislative intent. The Legislature finds and declares all of the following:

(a) Access to emergency telephone service has been a longstanding goal of the state.

(b) The Emergency Telephone Users Surcharge Act remains an important means for making emergency telephone service available to every person in this state.

(c) Every reasonable means should be employed by telephone corporations and every provider of telephone quality communication to ensure that every person using their service is informed of and is afforded the opportunity to use emergency telephone service, regardless of the means by which emergency telephone calls are placed.

(d) The furnishing of emergency telephone service is in the public interest and should be supported fairly and equitably by every telephone corporation and every provider of telephone quality communication in a way that is equitable, nondiscriminatory, and competitively neutral.

History.—Added by Stats. 2008, Ch. 17 (SB 1040), in effect May 21, 2008.

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Article 5. The California Taxpayers' Bill of Rights*

* Added by Stats. 1992, Ch. 438, in effect January 1, 1993.

41160. Administration. The board shall administer this article. Unless the context indicates otherwise, the provisions of this article shall apply to this part.

41161. 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 that 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.

41162. Education and information program. (a) The board shall develop and implement an education and information program directed at, but not limited to, all of the following groups:

(1) Taxpayers newly registered with the board.

(2) Board audit and compliance staff.

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

(1) A program of written communication with newly registered taxpayers explaining in simplified terms their duties and responsibilities.

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

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

(4) 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 the Controller.

History.—Stats. 1999, Ch. 929 (AB 1638), in effect January 1, 2000, added "and compliance" after "program for audit" in paragraph (4) of subdivision (b).

41163. Annual hearing for taxpayer proposals. The board shall conduct an annual hearing before the full board where industry representatives and individual taxpayers are allowed to present their proposals on changes to the Emergency Telephone Users Surcharge Law which may further improve voluntary compliance and the relationship between taxpayers and government.

41164. Preparation of statements by board. The board shall prepare and publish brief but comprehensive statements in simple and nontechnical language that 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 this language for statements in the annual tax information bulletins that are mailed to taxpayers.

41165. Limit on uses of 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.

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41166. Evaluation of employee's contact with taxpayers. The board shall develop and implement a program that 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.

41167. Plan to timely resolve claims and petitions. The board shall, in cooperation with 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 timeframes and special review of cases which take more time than the appropriate standard timeframe.

41168. Procedures relating to review conferences. Procedures of the board, relating to appeals staff review conferences before a staff attorney or supervising tax auditor independent of the assessing department, shall include all of the following:

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

(b) The conference 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 conference that he or she has a right to have present at the conference his or her attorney, accountant, or other designated agent.

41169. 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 decisiion 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 filing petitions for redetermination and claims 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 that relate to the issues where the staff was unreasonable.

(d) Any proposed award by the board pursuant to subdivision (a) 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, 2000.

History.—Stats. 1995, Ch. 555, in effect January 1, 1996, substituted "board" for "State Board of Control" after "expenses with the" in paragraph (1) of, substituted "decides" for "makes a recommendation to the State Board of Control" after "The board" in paragraph (3) of, and deleted paragraph (4) which read: "The State Board of Control concurs with the recommendation and orders the board to provide reimbursement of fees and expenses to the taxpayer." from, subdivision (a); and added subdivision (d). Stats. 1999, Ch. 929 (AB 1638), in effect January 1, 2000, added "within one year of the date the decision of the board becomes final" after "with the board" in paragraph (1) of, and substituted "in an amount determined by the board in its sole discretion" for "which shall be determined by the board" after "to the hearing," in paragraph (3) of, subdivision (a), substituted "board staff has . . . was substantially justified" for "taxpayer has established that the position of the board staff was not substantially justified" after "consider whether the" in subdivision (b), and added subdivision (e).

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41170. Investigation 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 emergency telephone users surcharge 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.

41171. Settlement of disputed tax liabilities. [Repealed by Stats. 1995, Ch. 497, in effect January 1, 1996.]

41171. 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 surcharge 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 surcharge 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 surcharge matter in dispute involving a reduction of surcharge or penalties in settlement, the total of which reduction

of surcharge 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 surcharge, or penalties, or total surcharge 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 surcharge payers 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 surcharge payer or the national defense.

(d) The members of the State Board of Equalization shall not participate in the settlement of surcharge 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, itself, 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.

(h) This section shall apply only to surcharge 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. 1995, Ch. 497, in effect January 1, 1996. Stats. 2003, Ch. 605 (SB 1060), in effect January 1, 2004, added ", for at least one year," after "placed on file" to subdivision (c). Stats. 2006, Ch. 364 (AB 3076), in effect January 1, 2007, substituted "Except as provided in paragraph (3) and subject" for "Subject" before "to paragraph (2)" in paragraph (1) of, added ", itself," after "submitted to the board" in the first and third sentences of paragraph (2) of, and added paragraph (3) to subdivision (b); added ", or penalties, or total surcharge and penalties" after "a reduction of surcharge" in the first paragraph of, and substituted "For any settlement approved by the board, itself, the" for "The" before "Attorney General's conclusion" in the first sentence of paragraph (5) of subdivision (c); and added ", itself," after "disapproved by the board" in the second sentence of paragraph (1) of subdivision (e).

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Text of section operative through September 30, 2011

41171.5. Offers in compromise. (a) (1) Beginning on January 1, 2007, the executive director and chief counsel of the board, or their delegates, may compromise any final surcharge liability where the reduction of surcharges 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 surcharge liability involving a reduction in surcharges 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 surcharge liability in which the reduction of surcharges 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 surcharge liability" means any final surcharge liability arising under Part 20 (commencing with Section 41001), or related interest, additions to surcharges, 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 surcharge payer 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 surcharge liability may be compromised regardless of whether the business has been discontinued or transferred or whether the surcharge payer 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 surcharge liability shall also apply to a qualified final surcharge 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 surcharge liability" means either of the following:

(A) That part of a final surcharge liability, including related interest, additions to surcharge, penalties, or other amounts assessed under this part, arising from a transaction or transactions in which the board finds no evidence that the service supplier collected the surcharge from the service user or other person and which was determined against the service supplier under Article 3 (commencing with Section 41070), Article 4 (commencing with Section 41080), or Article 5 (commencing with Section 41085) of Chapter 4.

(B) That part of a final surcharge liability, including related interest, additions to surcharge, penalties, or other amounts assessed under this part, determined under Article 3 (commencing with Section 41070), Article 4 (commencing with Section 41080), and Article 5 (commencing with Section 41085) of Chapter 4 against a service user who is a consumer that is not required to register with the board under Article 3 (commencing with section 41040) of Chapter 2.

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

(A) A surcharge payer 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 surcharge payer is making the offer.

(B) A business that was transferred by a surcharge payer 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 surcharge payer's liability was previously compromised.

(C) A business in which a surcharge payer who previously received a compromise under paragraph (2) has a controlling interest or association with a similar type of business for which the surcharge payer 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 surcharge payer's liability was previously compromised.

(d) The board may, in its discretion, enter into a written agreement which permits the surcharge payer to pay the compromise in installments for a period not exceeding one year. The agreement may provide that such 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 surcharge payer 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 surcharge payer 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 surcharge payer that has received a compromise under paragraph (2) of subdivision (c) shall file and pay by the due date all subsequently required emergency telephone users surcharge returns for a five-year period from the date the liability is compromised, or until the surcharge payer is no longer required to file emergency telephone users surcharge returns, whichever period is earlier.

(h) Offers in compromise shall not be considered where the surcharge payer has been convicted of felony tax evasion under this part during the liability period.

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

(1) The surcharge payer shall establish that:

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

(B) The surcharge payer does not have reasonable prospects of acquiring increased income or assets that would enable the surcharge payer 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.

(j) 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 surcharge liability shall not be subject to administrative appeal or judicial review.

(k) (1) Offers for liabilities with a fraud or evasion penalty shall require a minimum offer of the unpaid surcharge and fraud or evasion penalty.

(2) The minimum offer may be waived if it can be shown that the surcharge payer making the offer was not the person responsible for perpetrating the fraud or evasion. This authorization to waive only applies to partnership accounts where the intent to commit fraud or evasion can be clearly attributed to a partner of the surcharge payer.

(l) 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 surcharge payer 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 surcharge payer.

(m) When more than one surcharge payer is liable for the debt, such as with spouses or partnerships or other business combinations, including, but not limited to, surcharge payers who are liable through dual determination or successor's liability, the acceptance of an offer in compromise from one liable surcharge payer shall reduce the amount of the liability of the other surcharge payers by the amount of the accepted offer.

(n) Whenever a compromise of surcharges or penalties or total surcharges 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 surcharge payer.

(2) The amount of unpaid surcharges and related penalties, additions to surcharges, 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 surcharge payer or violate the confidentiality provisions of Section 41131. No list shall be prepared and no releases distributed by the board in connection with these statements.

(o) 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 surcharge payer or other person liable for the surcharge.

(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 surcharge payer or other person liable for the surcharge.

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

(p) 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 surcharge payer or other person liable in respect of the surcharge.

(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 surcharge payer or other person liable in respect of the surcharge.

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

(r) 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. 2006, Ch. 364 (AB 3076), in effect January 1, 2007. Stats. 2008, Ch. 222 (AB 2047), in effect January 1, 2009, redesignated former subdivision "(c)" to be "(c)(1)" and added paragraphs (2) and (3) in subdivision (c); added subdivisions (d), (e), (f), and (g); relettered former subdivisions (d), (e), (f), (g), (h), (i), (j), (k), (l), and (m) as (h), (i), (j), (k), (l), (m), (n), (o), (p), and (q), respectively; and added subdivision (r).

Text of section operative October 1, 2011

41171.5. Offers in compromise. (a) (1) Beginning on January 1, 2007, the executive director and chief counsel of the board, or their delegates, may compromise any final surcharge liability where the reduction of surcharges 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 surcharge liability involving a reduction in surcharges in excess of seven thousand five hundred dollars ($7,500). deletionA 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 surcharge liability in which the reduction of surcharges 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 surcharge liability" means any final surcharge liability arising under Part 20 (commencing with Section 41001), or related interest, additions to deletionthe surcharge, 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 surcharge payer 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 surcharge liability may be compromised regardless of whether the business has been discontinued or transferred or whether the surcharge payer 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 surcharge liability shall also apply to a qualified final surcharge liability, and deletiona compromise shall not be made under this subdivision unless all other requirements of this section are met. For purposes of this subdivision, a "qualified final surcharge liability" means either of the following:

(A) That part of a final surcharge liability, including related interest, additions to the surcharge, penalties, or other amounts assessed under this part, arising from a transaction or transactions in which the board finds no evidence that the service supplier collected the surcharge from the service user or other person and which was determined against the service supplier under Article 3 (commencing with Section 41070), Article 4 (commencing with Section 41080), or Article 5 (commencing with Section 41085) of Chapter 4.

(B) That part of a final surcharge liability, including related interest, additions to the surcharge, penalties, or other amounts assessed under this part, determined under Article 3 (commencing with Section 41070), Article 4 (commencing with Section 41080), and Article 5 (commencing with Section 41085) of Chapter 4 against a service user who is a consumer that is not required to register with the board under Article 3 (commencing with section 41040) of Chapter 2.

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

(A) A surcharge payer 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 surcharge payer is making the offer.

(B) A business that was transferred by a surcharge payer 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 surcharge payer's liability was previously compromised.

(C) A business in which a surcharge payer who previously received a compromise under paragraph (2) has a controlling interest or association with a similar type of business for which the surcharge payer 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 surcharge payer's liability was previously compromised.

(d) The board may, in its discretion, enter into a written agreement which permits the surcharge payer to pay the compromise in installments for a period not exceeding one year. The agreement may provide that such 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 surcharge payer 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 surcharge payer 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 surcharge payer that has received a compromise under paragraph (2) of subdivision (c) shall file and pay by the due date all subsequently required emergency telephone users surcharge returns for a five-year period from the date the liability is compromised, or until the surcharge payer is no longer required to file emergency telephone users surcharge returns, whichever period is earlier.

(h) Offers in compromise shall not be considered where the surcharge payer has been convicted of felony tax evasion under this part during the liability period.

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

(1) The surcharge payer shall establish that:

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

(B) The surcharge payer does not have reasonable prospects of acquiring increased income or assets that would enable the surcharge payer 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.

(j) 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 surcharge liability shall not be subject to administrative appeal or judicial review.

(k) (1) Offers for liabilities with a fraud or evasion penalty shall require a minimum offer of the unpaid surcharge and fraud or evasion penalty.

(2) The minimum offer may be waived if it can be shown that the surcharge payer making the offer was not the person responsible for perpetrating the fraud or evasion. This authorization to waive only applies to partnership accounts where the intent to commit fraud or evasion can be clearly attributed to a partner of the surcharge payer.

(l) 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 surcharge payer 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 surcharge payer.

(m) When more than one surcharge payer is liable for the debt, such as with spouses or partnerships or other business combinations, including, but not limited to, surcharge payers who are liable through dual determination or successor's liability, the acceptance of an offer in compromise from one liable surcharge payer shall reduce the amount of the liability of the other surcharge payers by the amount of the accepted offer.

(n) Whenever a compromise of surcharges or penalties or total surcharges 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 surcharge payer.

(2) The amount of unpaid surcharges and related penalties, additions to surcharges, 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 surcharge payer or violate the confidentiality provisions of Section deletion41132. deletionA list shall not be prepared and deletion releases shall not be distributed by the board in connection with these statements.

(o) deletionA 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 deletiona person did any of the following acts regarding the making of the offer:

(A) Concealed from the board deletion property belonging to the estate of deletiona surcharge payer or other person liable for the surcharge.

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

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

(p) deletionA person who, in connection with deletionan 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 pursuant to subdivision (h) of Section 1170 of the Penal Code, or both, together with the costs of investigation and prosecution:

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

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

(q) For purposes of this section, "person" means the surcharge payer, deletiona member of the surcharge payer's family, deletiona corporation, agent, fiduciary, or representative of, or deletionanother individual or entity acting on behalf of, the surcharge payer, or deletionanother corporation or entity owned or controlled by the surcharge payer, directly or indirectly, or that owns or controls the surcharge payer, directly or indirectly.

(r) This section shall remain in effect only until January 1, deletion2018, and as of that date is repealed, unless a later enacted statute, that is enacted before January 1, deletion2018, deletes or extends that date.

History.—Added by Stats. 2006, Ch. 364 (AB 3076), in effect January 1, 2007. Stats. 2008, Ch. 222 (AB 2047), in effect January 1, 2009, redesignated former subdivision "(c)" to be "(c)(1)" and added paragraphs (2) and (3) in subdivision (c); added subdivisions (d), (e), (f), and (g); relettered former subdivisions (d), (e), (f), (g), (h), (i), (j), (k), (l), and (m) as (h), (i), (j), (k), (l), (m), (n), (o), (p), and (q), respectively; and added subdivision (r). 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 (p).Stats. 2012, Ch. 285 (SB 1548), in effect January 1, 2013, substituted "A" for "Any" or "an" for "any" throughout the section; substituted "the surcharge" for "surcharges" after "additions to" in subdivision (b); substituted "a" for "no" after "final surcharge liability, and" and added "not" after "compromise shall" in paragraph (2) of subdivision (c); added "the" after "additions to" in subparagraphs (c)(2)(A) and (c)(2)(B); substituted "41132" for "41131" and revised the last sentence in the last paragraph of subdivision (n); deleted "any" after "from the board" in subparagraph (1)(A) of subdivision (o); substituted "another" for "any other" in subdivision (q); and substituted "2018" for "2013" in subdivision (r).

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.

Text of section operative January 1, 2013

41171.5. Offers in compromise. (a) (1) The executive director and chief counsel of the board, or their delegates, may compromise any final surcharge liability where the reduction of surcharges 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 surcharge liability involving a reduction in surcharges in excess of seven thousand five hundred dollars ($7,500). deletionA 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 surcharge liability in which the reduction of surcharges 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 surcharge liability" means any final surcharge liability arising under Part 20 (commencing with Section 41001), or related interest, additions to deletionthe surcharge, 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 surcharge payer 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) Offers in compromise shall not be considered where the surcharge payer has been convicted of felony tax evasion under this part during the liability period.

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

(1) The surcharge payer shall establish that:

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

(B) The surcharge payer does not have reasonable prospects of acquiring increased income or assets that would enable the surcharge payer 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.

(f) 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 surcharge liability shall not be subject to administrative appeal or judicial review.

(g) (1) Offers for liabilities with a fraud or evasion penalty shall require a minimum offer of the unpaid surcharge and fraud or evasion penalty.

(2) The minimum offer may be waived if it can be shown that the surcharge payer making the offer was not the person responsible for perpetrating the fraud or evasion. This authorization to waive only applies to partnership accounts where the intent to commit fraud or evasion can be clearly attributed to a partner of the surcharge payer.

(h) 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 surcharge payer 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 surcharge payer.

(i) When more than one surcharge payer is liable for the debt, such as with spouses or partnerships or other business combinations, including, but not limited to, surcharge payers who are liable through dual determination or successor's liability, the acceptance of an offer in compromise from one liable surcharge payer shall reduce the amount of the liability of the other surcharge payers by the amount of the accepted offer.

(j) Whenever a compromise of surcharges or penalties or total surcharges 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 surcharge payer.

(2) The amount of unpaid surcharges and related penalties, additions to surcharges, 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 surcharge payer or violate the confidentiality provisions of Section deletion41132. deletionA list shall not be prepared and deletion releases shall not be distributed by the board in connection with these statements.

(k) deletionA 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 deletiona surcharge payer or other person liable for the surcharge.

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

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

(l) deletionA person who, in connection with deletionan 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 pursuant to subdivision (h) of Section 1170 of the Penal Code, or both, together with the costs of investigation and prosecution:

(1) Conceals from deletionan officer or employee of this state deletion property belonging to the estate of a surcharge payer or other person liable in respect of the surcharge.

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

(m) For purposes of this section, "person" means the surcharge payer, deletiona member of the surcharge payer's family, deletiona corporation, agent, fiduciary, or representative of, or deletionanother individual or entity acting on behalf of, the surcharge payer, or deletionanother corporation or entity owned or controlled by the surcharge payer, directly or indirectly, or that owns or controls the surcharge payer, directly or indirectly.

(n) This section shall become operative on January 1, deletion2018.

History.—Added by Stats. 2008, Ch. 222 (AB 2047), in effect January 1, 2009, operative January 1, 2013. 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 (l). Stats. 2012, Ch. 285 (SB 1548), in effect January 1, 2013, substituted "A" for "Any" or "an" for "any" throughout the section; substituted "the surcharge" for "surcharges" after "additions to" in subdivision (b); substituted "41132" for "41131" and revised the last sentence in the last paragraph of subdivision (j); deleted "any" after ""of this state" in subparagraph (1)(A) of subdivision (l); substituted "another" for "any other" in subdivision (m); and substituted "2018" for "2013" 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.

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41172. 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 Division 2 of Title 9 of Part 2 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. 1993, Ch. 589, in effect January 1, 1994, added "of Division 2" after "(commencing with Section 703.010)" and added "Part 2 of" after "Title 9 of" in subdivision (b). Stats. 1995, Ch. 555, in effect January 1, 1996, substituted "that the" for "of any of the following: (1) The" after "in the event" in subdivision (a); substituted subdivision letter "(b)" for paragraph number "(2)" and substituted "may order the . . . of moneys received" for "orders the release of the levy or notice to withhold" after "Taxpayers' Rights Advocate" in subdivision (b); and relettered former subdivisions (b) and (c) as (c) and (d), respectively.

41172.5. Return of property. (a) 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 41127.5 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 41174.

History.—Added by Stats. 1999, Ch. 929 (AB 1638), in effect January 1, 2000.

41173. Exemptions from levy. Exemptions from levy under Chapter 4 (commencing with Section 703.010) of Division 2 of Title 9 of Part 2 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.

History.—Stats. 1993, Ch. 589, in effect January 1, 1994, added "of Division 2" after "(commencing with Section 703.010)" and added "Part 2 of" after "Title 9 of".

41174. 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 for reimbursement by the financial institution or third party. Each claimant applying for reimbursement shall file a claim with the board that shall be in a 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. 2001, Ch. 543 (SB 1185), added "and any other . . . check charge fees" after "of bank charges" in subdivision (a), added "and third party" prior to "charges include a" in subdivision (a), added "or third party's" after "a financial institution's" in subdivision (a), added "or third party" after "the financial institution" in subdivision (a), effective January 1, 2002.

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41175. Preliminary notice to taxpayer 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) 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 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.

(c) 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.

(d) 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. 1999, Ch. 929 (AB 1638), in effect January 1, 2000, added subdivision (d).

41176. 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 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 including any of the following:

(A) Reasonable court costs.

(B) Prevailing market rates for the kind or quality of services furnished in connection with any of the following:

(i) The reasonable expenses of expert witnesses in connection with the civil proceeding, except that no expert witness shall be compensated at a rate in excess of the highest rate of compensation for expert witnesses paid by the State of California.

(ii) The reasonable cost of any study, analysis, engineering report, test, or project that is found by the court to be necessary for the preparation of the party's case.

(iii) Reasonable fees paid or incurred for the services of attorneys in connection with the civil proceeding, except that those fees shall not be in excess of seventy-five dollars ($75) per hour unless the court determines that an increase in the cost of living or a special factor, such as the limited availability of qualified attorneys for the proceeding, justifies a higher rate.

(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 that contributed to the damages.

(d) Whenever it appears to the court that the taxpayer's position in the proceeding brought under subdivisions (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.

History.—Stats. 2006, Ch. 538 (SB 1852), in effect January 1, 2007, substituted "that" for "which" after "on the part of the plaintiff" in subdivision (c).

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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.

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