Bill Text: CA AB1397 | 2023-2024 | Regular Session | Amended

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Bill Title: Administration of income taxes: electronic remittance: penalty.

Spectrum: Partisan Bill (Democrat 1-0)

Status: (Failed) 2024-02-01 - From committee: Filed with the Chief Clerk pursuant to Joint Rule 56. [AB1397 Detail]

Download: California-2023-AB1397-Amended.html

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Amended  IN  Assembly  March 23, 2023

CALIFORNIA LEGISLATURE— 2023–2024 REGULAR SESSION

Assembly Bill

No. 1397

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Introduced by Assembly Member Low

February 17, 2023

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An act relating to taxation. An act to amend Section 19011.5 of the Revenue and Taxation Code, relating to taxation.

LEGISLATIVE COUNSEL'S DIGEST

AB 1397, as amended, Low. Taxation: penalties. Administration of income taxes: electronic remittance: penalty.

Existing law requires the Franchise Tax Board to administer and enforce the Personal Income Tax Law and the Corporation Tax Law and requires a payment required of an individual pursuant to those provisions to be electronically remitted to the Franchise Tax Board in the form and manner prescribed by the board if any of certain conditions are met, including that the total tax liability exceeds $80,000. Existing law requires a taxpayer required to electronically remit payment pursuant to that provision who makes payment by other means to pay a penalty of 1% of the amount paid, unless it is shown that the failure to make payment as required was for reasonable cause and was not the result of willful neglect.

This bill would cap the amount of the 1% penalty described above at $25,000 per payment. The bill would apply that cap to a payment made on or after January 1, 2024, and to a payment made before January 1, 2024, that is, or may be, the subject of a timely filed protest or claim for refund.

This bill would also make findings and declarations related to a gift of public funds.

Existing law imposes various taxes, including, but not limited to, taxes on personal and real property, income, the sales of tangible personal property at retail, and the storage, use, or other consumption in this state of tangible personal property purchased from any retailer. Existing law imposes various penalties on certain violations related to these taxes, including, for purposes of income taxes, an additional 5% tax on income tax due for each month or fraction thereof elapsing between the due date of the return and the date on which it is filed, as specified, if the taxpayer fails to make and file a required return.

This bill would state the intent of the Legislature to enact legislation relating to the review and revision of the Revenue and Taxation Code to ensure penalties are commensurate to the violation or violations of that code. The bill would make related findings and declarations.

Digest Key

Vote: MAJORITY   Appropriation: NO   Fiscal Committee: NOYES   Local Program: NO  

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Bill Text

The people of the State of California do enact as follows:

SECTION 1.

 Section 19011.5 of the Revenue and Taxation Code is amended to read:

19011.5.

 (a) All payments required by of an individual under this part, regardless of the taxable year to which the payments apply, made on or after January 1, 2009, shall be electronically remitted to the Franchise Tax Board in the form and manner prescribed by the Franchise Tax Board, once any of the following conditions are met by an individual:

(1) Any installment payment of estimated tax made pursuant to this part in excess of twenty thousand dollars ($20,000), or any payment made pursuant to Section 18567 with regard to an extension of time to file that exceeds twenty thousand dollars ($20,000), for any taxable year beginning on or after January 1, 2009.

(2) The total tax liability exceeds eighty thousand dollars ($80,000) in any taxable year beginning on or after January 1, 2009. For purposes of this section, total tax liability shall be the total tax liability as shown on the original return, after any adjustment made pursuant to Section 19051.

(b) A taxpayer required to electronically remit payment to the Franchise Tax Board pursuant to this section may elect to discontinue making payments electronically where if the threshold requirements set forth in paragraphs (1) and (2) of subdivision (a) were not met for the preceding taxable year. The election shall be made in a form and manner prescribed by the Franchise Tax Board.

(c) (1) Any taxpayer required to electronically remit payment pursuant to this section who makes payment by other means shall pay a penalty of 1 percent of the amount paid, unless it is shown that the failure to make payment as required was for reasonable cause and was not the result of willful neglect.

(2) (A) The penalty imposed by this subdivision shall not exceed twenty-five thousand dollars ($25,000) per payment.

(B) This paragraph shall apply to a penalty with respect to both of the following:

(i) A payment made on or after January 1, 2024.

(ii) A payment made before January 1, 2024, that is, or may be, the subject of a timely filed protest or claim for refund.

(d) Any taxpayer required to electronically remit payments pursuant to this section may request a waiver of those requirements from the Franchise Tax Board. The Franchise Tax Board may grant a waiver only if it determines that the particular amounts paid in excess of the threshold amounts established in this section were not representative of the taxpayer’s tax liability. If the Franchise Tax Board grants a waiver to a taxpayer, the waiver shall be in writing, and subsequent electronic remittances shall be required only on those terms set forth in the written waiver.

(e) For purposes of this section, 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 standard, criterion, procedure, determination, rule, notice, or guideline established or issued by the Franchise Tax Board pursuant to subdivision (a).

(f) For purposes of this section, both of the following shall apply:

(1) “Electronically remit” means to send payment through use of any of the electronic payment applications provided by the Franchise Tax Board, including, but not limited to, a pay by phone option, when made available by the Franchise Tax Board.

(2) “Pay by phone” means a method that allows a taxpayer to authorize a transfer of funds from a financial institution using telephonic technology.

SEC. 2.

 The Legislature hereby finds and declares that the retroactive application of the amendments to Section 19011.5 of the Revenue and Taxation Code made by this act serve the public purpose of avoiding unnecessarily harsh results of the existing unlimited penalty on individual taxpayers by establishing a limit on the penalty to avoid an inappropriate windfall for the state and in an amount more consistent with the harm caused to the state when taxpayers fail to pay taxes through electronic means and do not constitute a gift of public funds within the meaning of Section 6 of Article XVI of the California Constitution.

SECTION 1.

(a)The Legislature finds and declares all of the following:

(1)It is important to promote and protect the integrity of the California tax system.

(2)It is important that California’s tax system is perceived, and is in fact, fair to all taxpayers.

(3)It is important that violations of the Revenue and Taxation Code are subject to appropriate penalties.

(4)It is important that these penalties are commensurate with the violation or violations.

(b)It is the intent of the Legislature to enact legislation relating to the review and revision of the Revenue and Taxation Code to ensure penalties are commensurate to the violation or violations of that code.