SB 526: Personal income taxes: joint returns: court orders: relief from liability.

Existing law generally provides that the spouse or partner who controls the disposition of or who receives or spends community income, as well as the spouse who is taxable on the income, is liable for the payment of the taxes imposed by the Personal Income Tax Law on that income, and that whenever a joint income tax return is filed by spouses or registered domestic partners the liability for the tax is joint and several. Existing law allows, under specified conditions, a court in a proceeding for dissolution of marriage to revise the income tax liabilities on a joint return of spouses or registered domestic partners, but prohibits revisions to relieve a spouse or domestic partner of tax liability on income earned by or subject to the exclusive management and control of the spouse or domestic partner. Existing law also provides that the order revising tax liability is not effective if the gross income reportable on the return exceeds $150,000 or the amount of the tax liability the spouse is relieved of exceeds $7,500, except as specified.

This bill would instead provide that an order revising tax liability may relieve a spouse or domestic partner of tax liability on income earned by or subject to the exclusive management and control of that spouse or domestic partner, except if assets or liabilities are transferred between the individuals filing the joint return for the principal purpose of avoidance of the payment of tax or as part of a fraudulent scheme by those individuals or that liability is uncollectible or if, within 3 years of when the court order is effective, specified conditions apply. This bill would also instead provide that the order revising tax liability is not effective if the gross income reportable on the return exceeds $200,000 or the amount of the tax liability the spouse is relieved of exceeds $10,000, except as specified, and would require those amounts to be recomputed annually beginning on January 1, 2018, as specified. The bill would apply to court orders served or acknowledged on or after the effective date of this bill.