AB 1765: Income tax administration: installment agreements, suspension, forfeiture, and revivor.
- Session Year: 2023-2024
- House: Assembly
- Latest Version Date: 2023-09-22
Current Status:
Passed
(2023-09-22: Chaptered by Secretary of State - Chapter 209, Statutes of 2023.)
Introduced
In Committee
First Chamber
In Committee
Second Chamber
Enacted
(1)Existing law requires the Franchise Tax Board to administer the levy and collection of taxes pursuant to the Personal Income Tax Law and the Corporation Tax Law, and establishes procedures for the collection of those taxes. Existing law authorizes the Franchise Tax Board, in cases of financial hardship, to allow a taxpayer to enter into an installment payment agreement with the Franchise Tax Board for the full or partial payment of the amount of the taxpayers tax liability, as specified. Under existing law, failure by a taxpayer to comply fully with the terms of an installment payment agreement renders the agreement null and void, except as specified, and makes the total amount of tax, interest, and penalties immediately due and payable.
This bill would expand the authority of the Franchise Tax Board to enter into these installment payment agreements to include all liabilities imposed pursuant to the specified tax laws that the board administers. Under the bill, the application of the existing noncompliance provisions would be limited to installment payment agreements entered into before January 1, 2024. The bill, for installment payment agreements entered into on or after January 1, 2024, would add revised noncompliance provisions that, among other things, authorize the Franchise Tax Board, under certain conditions, to alter or modify an agreement to add a liability that the taxpayer has failed to pay while the agreement is in effect.
In the case of a liability for tax of an individual under the Personal Income Tax Law or the laws related to the administration of franchise and income tax laws, existing law requires the Franchise Tax Board to enter into an installment payment agreement if, among other conditions, the taxpayers liability does not exceed $10,000, as specified, and full repayment of liability is required within 3 years. Those conditions also exclude an agreement if, in the preceding 5 taxable years, the taxpayer has failed to pay a tax or has entered into a similar installment agreement, as specified.
This bill would raise the cap on the taxpayers liability to $25,000, and would extend the maximum time for full repayment to 5 years. The bill would also revise the conditions related to the taxpayers most recent 5 taxable year history by removing the exclusion of a taxpayer who has failed to pay a tax and, instead, excluding an agreement with a taxpayer who has failed to satisfy the terms of a similar installment agreement.
Existing law requires the Franchise Tax Board every 2 years to review an installment agreement that is for the partial payment of a liability.
This bill would revise that biennial duty to be, instead, a review of a representative sample of existing installment agreements, as specified.
The bill would authorize the Franchise Tax Board to prescribe regulations as necessary to implement the installment payment agreement provisions. The bill would make conforming and nonsubstantive changes.
(2)Existing law authorizes the suspension or forfeiture of certain corporate powers, rights, and privileges of a taxpayer for failure to file a tax return or pay delinquent taxes, penalties, or interest. Existing law authorizes the Franchise Tax Board to issue a certificate of revivor for a taxpayer that has suffered the suspension or forfeiture if the taxpayer, among other requirements, pays certain taxes, penalties, and interest. Existing law also authorizes the Franchise Tax Board to revive a corporation to good standing without full payment if it will improve the prospects for collection, as prescribed.
Existing law generally defines taxpayer, for purposes of these and other suspension, forfeiture, and revivor provisions, as either a corporation subject to the franchise tax or a limited liability company, as specified.
This bill would apply the above-described provisions relating to suspension, forfeiture, and revivor to taxpayers, as defined above to include limited liability companies, as well as corporations. The bill would make conforming changes to other related provisions.
(3)This bill would incorporate additional changes to Section 19008 of the Revenue and Taxation Code proposed by SB 516 to be operative only if this bill and SB 516 are enacted and this bill is enacted last.
(1)Existing law requires the Franchise Tax Board to administer the levy and collection of taxes pursuant to the Personal Income Tax Law and the Corporation Tax Law, and establishes procedures for the collection of those taxes. Existing law authorizes the Franchise Tax Board, in cases of financial hardship, to allow a taxpayer to enter into an installment payment agreement with the Franchise Tax Board for the full or partial payment of the amount of the taxpayers tax liability, as specified. Under existing law, failure by a taxpayer to comply fully with the terms of an installment payment agreement renders the agreement null and void, except as specified, and makes the total amount of tax, interest, and penalties immediately due and payable.
This bill would expand the authority of the Franchise Tax Board to enter into these installment payment agreements to include all liabilities imposed pursuant to the specified tax laws that the board administers. Under the bill, the application of the existing noncompliance provisions would be limited to installment payment agreements entered into before January 1, 2024. The bill, for installment payment agreements entered into on or after January 1, 2024, would add revised noncompliance provisions that, among other things, authorize the Franchise Tax Board, under certain conditions, to alter or modify an agreement to add a liability that the taxpayer has failed to pay while the agreement is in effect.
In the case of a liability for tax of an individual under the Personal Income Tax Law or the laws related to the administration of franchise and income tax laws, existing law requires the Franchise Tax Board to enter into an installment payment agreement if, among other conditions, the taxpayers liability does not exceed $10,000, as specified, and full repayment of liability is required within 3 years. Those conditions also exclude an agreement if, in the preceding 5 taxable years, the taxpayer has failed to pay a tax or has entered into a similar installment agreement, as specified.
This bill would raise the cap on the taxpayers liability to $25,000, and would extend the maximum time for full repayment to 5 years. The bill would also revise the conditions related to the taxpayers most recent 5 taxable year history by removing the exclusion of a taxpayer who has failed to pay a tax and, instead, excluding an agreement with a taxpayer who has failed to satisfy the terms of a similar installment agreement.
Existing law requires the Franchise Tax Board every 2 years to review an installment agreement that is for the partial payment of a liability.
This bill would revise that biennial duty to be, instead, a review of a representative sample of existing installment agreements, as specified.
The bill would authorize the Franchise Tax Board to prescribe regulations as necessary to implement the installment payment agreement provisions. The bill would make conforming and nonsubstantive changes.
(2)Existing law authorizes the suspension or forfeiture of certain corporate powers, rights, and privileges of a taxpayer for failure to file a tax return or pay delinquent taxes, penalties, or interest. Existing law authorizes the Franchise Tax Board to issue a certificate of revivor for a taxpayer that has suffered the suspension or forfeiture if the taxpayer, among other requirements, pays certain taxes, penalties, and interest. Existing law also authorizes the Franchise Tax Board to revive a corporation to good standing without full payment if it will improve the prospects for collection, as prescribed.
Existing law generally defines taxpayer, for purposes of these and other suspension, forfeiture, and revivor provisions, as either a corporation subject to the franchise tax or a limited liability company, as specified.
This bill would apply the above-described provisions relating to suspension, forfeiture, and revivor to taxpayers, as defined above to include limited liability companies, as well as corporations. The bill would make conforming changes to other related provisions.
(3)This bill would incorporate additional changes to Section 19008 of the Revenue and Taxation Code proposed by SB 516 to be operative only if this bill and SB 516 are enacted and this bill is enacted last.
(1)Existing law requires the Franchise Tax Board to administer the levy and collection of taxes pursuant to the Personal Income Tax Law and the Corporation Tax Law, and establishes procedures for the collection of those taxes. Existing law authorizes the Franchise Tax Board, in cases of financial hardship, to allow a taxpayer to enter into an installment payment agreement with the Franchise Tax Board for the full or partial payment of the amount of the taxpayers tax liability, as specified. Under existing law, failure by a taxpayer to comply fully with the terms of an installment payment agreement renders the agreement null and void, except as specified, and makes the total amount of tax, interest, and penalties immediately due and payable.
This bill would expand the authority of the Franchise Tax Board to enter into these installment payment agreements to include all liabilities imposed pursuant to the specified tax laws that the board administers. Under the bill, the application of the existing noncompliance provisions would be limited to installment payment agreements entered into before January 1, 2024. The bill, for installment payment agreements entered into on or after January 1, 2024, would add revised noncompliance provisions that, among other things, authorize the Franchise Tax Board, under certain conditions, to alter or modify an agreement to add a liability that the taxpayer has failed to pay while the agreement is in effect.
In the case of a liability for tax of an individual under the Personal Income Tax Law or the laws related to the administration of franchise and income tax laws, existing law requires the Franchise Tax Board to enter into an installment payment agreement if, among other conditions, the taxpayers liability does not exceed $10,000, as specified, and full repayment of liability is required within 3 years. Those conditions also exclude an agreement if, in the preceding 5 taxable years, the taxpayer has failed to pay a tax or has entered into a similar installment agreement, as specified.
This bill would raise the cap on the taxpayers liability to $25,000, and would extend the maximum time for full repayment to 5 years. The bill would also revise the conditions related to the taxpayers most recent 5 taxable year history by removing the exclusion of a taxpayer who has failed to pay a tax and, instead, excluding an agreement with a taxpayer who has failed to satisfy the terms of a similar installment agreement.
Existing law requires the Franchise Tax Board every 2 years to review an installment agreement that is for the partial payment of a liability.
This bill would revise that biennial duty to be, instead, a review of a representative sample of existing installment agreements, as specified.
The bill would authorize the Franchise Tax Board to prescribe regulations as necessary to implement the installment payment agreement provisions. The bill would make conforming and nonsubstantive changes.
(2)Existing law authorizes the suspension or forfeiture of certain corporate powers, rights, and privileges of a taxpayer for failure to file a tax return or pay delinquent taxes, penalties, or interest. Existing law authorizes the Franchise Tax Board to issue a certificate of revivor for a taxpayer that has suffered the suspension or forfeiture if the taxpayer, among other requirements, pays certain taxes, penalties, and interest. Existing law also authorizes the Franchise Tax Board to revive a corporation to good standing without full payment if it will improve the prospects for collection, as prescribed.
Existing law generally defines taxpayer, for purposes of these and other suspension, forfeiture, and revivor provisions, as either a corporation subject to the franchise tax or a limited liability company, as specified.
This bill would apply the above-described provisions relating to suspension, forfeiture, and revivor to taxpayers, as defined above to include limited liability companies, as well as corporations. The bill would make conforming changes to other related provisions.
This bill would incorporate additional changes to Section 19008 of the Revenue and Taxation Code proposed by SB 516 to be operative only if this bill and SB 516 are enacted and this bill is enacted last.
(1)Existing law requires the Franchise Tax Board to administer the levy and collection of taxes pursuant to the Personal Income Tax Law and the Corporation Tax Law, and establishes procedures for the collection of those taxes. Existing law authorizes the Franchise Tax Board, in cases of financial hardship, to allow a taxpayer to enter into an installment payment agreement with the Franchise Tax Board for the full or partial payment of the amount of the taxpayers tax liability, as specified. Under existing law, failure by a taxpayer to comply fully with the terms of an installment payment agreement renders the agreement null and void, except as specified, and makes the total amount of tax, interest, and penalties immediately due and payable.
This bill would expand the authority of the Franchise Tax Board to enter into these installment payment agreements to include all liabilities imposed pursuant to the specified tax laws that the board administers. Under the bill, the application of the existing noncompliance provisions would be limited to installment payment agreements entered into before January 1, 2024. The bill, for installment payment agreements entered into on or after January 1, 2024, would add revised noncompliance provisions that, among other things, authorize the Franchise Tax Board, under certain conditions, to alter or modify an agreement to add a liability that the taxpayer has failed to pay while the agreement is in effect.
In the case of a liability for tax of an individual under the Personal Income Tax Law or the laws related to the administration of franchise and income tax laws, existing law requires the Franchise Tax Board to enter into an installment payment agreement if, among other conditions, the taxpayers liability does not exceed $10,000, as specified, and full repayment of liability is required within 3 years. Those conditions also exclude an agreement if, in the preceding 5 taxable years, the taxpayer has failed to pay a tax or has entered into a similar installment agreement, as specified.
This bill would raise the cap on the taxpayers liability to $25,000, and would extend the maximum time for full repayment to 5 years. The bill would also revise the conditions related to the taxpayers most recent 5 taxable year history by removing the exclusion of a taxpayer who has failed to pay a tax and, instead, excluding an agreement with a taxpayer who has failed to satisfy the terms of a similar installment agreement.
Existing law requires the Franchise Tax Board every 2 years to review an installment agreement that is for the partial payment of a liability.
This bill would revise that biennial duty to be, instead, a review of a representative sample of existing installment agreements, as specified.
The bill would authorize the Franchise Tax Board to prescribe regulations as necessary to implement the installment payment agreement provisions. The bill would make conforming and nonsubstantive changes.
(2)Existing law authorizes the suspension or forfeiture of certain corporate powers, rights, and privileges of a taxpayer for failure to file a tax return or pay delinquent taxes, penalties, or interest. Existing law authorizes the Franchise Tax Board to issue a certificate of revivor for a taxpayer that has suffered the suspension or forfeiture if the taxpayer, among other requirements, pays certain taxes, penalties, and interest. Existing law also authorizes the Franchise Tax Board to revive a corporation to good standing without full payment if it will improve the prospects for collection, as prescribed.
Existing law generally defines taxpayer, for purposes of these and other suspension, forfeiture, and revivor provisions, as either a corporation subject to the franchise tax or a limited liability company, as specified.
This bill would apply the above-described provisions relating to suspension, forfeiture, and revivor to taxpayers, as defined above to include limited liability companies, as well as corporations. The bill would make conforming changes to other related provisions.
(a)The Franchise Tax Board may, in cases of financial hardship, enter into installment payment agreements with any taxpayer under which that taxpayer is allowed to make payment of any liability imposed or collected under Part 10 (commencing with Section 17001), Part 11 (commencing with Section 23001), or this part, including any additions to tax, interest, penalties, fees, and any other amounts relating to the imposed liability, in installment payments, pursuant to the agreement, if the Franchise Tax Board determines that the agreement will facilitate full or partial collection of the liability.
(b)In the case of a liability of an individual under Part 10 (commencing with Section 17001) or this part, the Franchise Tax Board shall enter into an agreement to accept the full payment of the liability in installments if, as of the date the individual offers to enter into the agreement, all of the following apply:
(1)The aggregate amount of the liability (determined without regard to interest, penalties, additions to the tax, and additional amounts) does not exceed twenty-five thousand dollars ($25,000).
(2)The taxpayer (and, if the liability relates to a joint return, the taxpayers spouse) has not during any of the preceding five taxable years done any of the following:
(A)Failed to file any return of liability imposed under Part 10 (commencing with Section 17001) or this part.
(B)Failed to satisfy any term of an installment agreement under this section for payment of any liability imposed by Part 10 (commencing with Section 17001) or this part.
(3)The Franchise Tax Board determines that the taxpayer is financially unable to pay the liability in full when due, and the taxpayer submits any information as the Franchise Tax Board may require to make this determination.
(4)The agreement requires full payment of the liability within five years.
(5)The taxpayer agrees to comply with the provisions of this part and Part 10 (commencing with Section 17001) for the period the agreement is in effect.
(c)(1)(A)Failure by a taxpayer to comply fully with the terms of the installment payment agreement shall render the agreement null and void, unless the Franchise Tax Board determines that the failure was due to a reasonable cause, and the total amount of tax, interest, and all penalties shall be immediately due and payable. Except in any case where the Franchise Tax Board finds collection of the tax to which an installment payment agreement relates to be in jeopardy, or there is a mutual consent to terminate, alter, or modify the agreement, the agreement shall not be considered null and void, or otherwise terminated, unless both of the following occur:
(i)A notice of termination is provided to the taxpayer not later than 30 days before the date of termination.
(ii)The notice includes an explanation of why the Franchise Tax Board intends to terminate the agreement.
(B)This paragraph shall apply only to agreements entered into before January 1, 2024.
(2)(A)(i)The Franchise Tax Board may alter, modify, or terminate an agreement entered into under this section if any of the following apply:
(I)Information that the taxpayer provided to the Franchise Tax Board before the date the agreement was entered into was inaccurate or incomplete.
(II)The Franchise Tax Board determines that the collection of any liability to which an agreement under this section relates is in jeopardy.
(III)The Franchise Tax Board determines that the financial condition of a taxpayer with whom the Franchise Tax Board has entered into an agreement has significantly changed.
(IV)The taxpayer fails to make an installment payment at the time the installment payment is due under the agreement.
(V)The taxpayer fails to file a required tax return under this part or pay any other liability at the time that the liability is due.
(VI)The taxpayer fails to provide a financial condition update upon the Franchise Tax Boards request.
(ii)The Franchise Tax Board may modify or alter an agreement under this section to add a liability that the taxpayer fails to pay at the time that the liability is due.
(iii)If a taxpayer is currently in an installment agreement under subdivision (a) or (b), the Franchise Tax Board may require financial hardship to alter or modify the installment agreement.
(iv)(I)Except as provided in subclause (II), the Franchise Tax Board shall not alter, modify, or terminate any agreement under this paragraph unless both of the following occur:
(ia)A notice of the alteration, modification, or termination is provided to the taxpayer not later than 30 days before the date of that action.
(ib)The notice includes an explanation of the rationale of the Franchise Tax Board for altering, modifying, or terminating the agreement.
(II)In any case where the Franchise Tax Board finds collection of the liability to which an installment payment agreement relates to be in jeopardy, the Franchise Tax Board may terminate the installment agreement and issue demand for immediate payment of the liability or the deficiency declared to be in jeopardy.
(B)This paragraph shall apply only to agreements entered into on or after January 1, 2024.
(d)No levy may be issued on the property or rights to property of any person with respect to any unpaid liability:
(1)During the period that an offer by the taxpayer for an installment agreement under this section for payment of the unpaid liability is pending with the Franchise Tax Board.
(2)If the offer is rejected by the Franchise Tax Board, during the 30 days thereafter and, if a request for review of the rejection is filed within the 30 days, during the period that the review is pending.
(3)During the period that the installment agreement for payment of the unpaid liability is in effect.
(4)If the agreement is terminated by the Franchise Tax Board, during the 30 days thereafter (and, if a request for review of the termination is filed within the 30 days, during the period that the review is pending).
(5)This subdivision shall not apply with respect to any of the following:
(A)Any unpaid liability if either of the following occurs:
(i)The taxpayer files a written notice with the Franchise Tax Board that waives the restriction imposed by this subdivision on levy with respect to the liability.
(ii)The Franchise Tax Board finds that the collection of that liability is in jeopardy.
(B)Any levy that was first issued before the date that the applicable proceeding under this subdivision commenced.
(C)At the discretion of the Franchise Tax Board, any unpaid liability for which the taxpayer makes an offer of an installment agreement subsequent to a rejection of an offer of an installment agreement with respect to that unpaid liability (or to any review thereof).
(D)The period of limitation under Section 19371 shall be suspended for the period during which the Franchise Tax Board is prohibited under this subdivision from making a levy.
(e)The Taxpayers Rights Advocate shall establish procedures for an independent departmental administrative review for the rejection of the offer of an installment payment and for installment payment agreements that are rendered null and void, or otherwise terminated under this section, for taxpayers that request that review. This administrative review shall not be subject to Chapter 4.5 (commencing with Section 11400) of Part 1 of Division 3 of the Government Code. Unless review is requested by the taxpayer within 30 days of the date of rejection of the offer of an installment agreement or termination of the installment agreement, this administrative review shall not stay collection of the liability to which the installment payment agreement relates.
(f)The Franchise Tax Board shall review a representative sample of existing installment agreements entered into under this section at least once every two years to ensure taxpayers are in compliance with the terms of the agreement.
(g)(1)The Franchise Tax Board may prescribe regulations as necessary or appropriate to carry out the purposes of this section.
(2)The Administrative Procedure Act (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, guideline, or any other guidance established or issued by the Franchise Tax Board pursuant to this section.
SEC. 1.5.Section 19008 of the Revenue and Taxation Code is amended to read:19008.(a)(1)The Franchise Tax Board may, in cases of financial hardship, enter into installment payment agreements with any taxpayer under which that taxpayer is allowed to make payment of any liability imposed or collected under Part 10 (commencing with Section 17001), Part 11 (commencing with Section 23001), or this part, including any additions to tax, interest, penalties, fees, and any other amounts relating to the imposed liability, in installment payments, pursuant to the agreement, if the Franchise Tax Board determines that the agreement will facilitate full or partial collection of the liability.
(2)(A)The Franchise Tax Board shall allow a taxpayer to submit an offer for an installment agreement online or by mail or telephone.
(B)The terms of the installment agreement shall not be less favorable because of the method chosen by the taxpayer to submit an offer pursuant to subparagraph (A).
(b)In the case of a liability of an individual under Part 10 (commencing with Section 17001) or this part, the Franchise Tax Board shall enter into an agreement to accept the full payment of the tax in installments if, as of the date the individual offers to enter into the agreement, all of the following apply:
(1)The aggregate amount of the liability (determined without regard to interest, penalties, additions to the tax, and additional amounts) does not exceed twenty-five thousand dollars ($25,000).
(2)The taxpayer (and, if the liability relates to a joint return, the taxpayers spouse) has not during any of the preceding five taxable years done any of the following:
(A)Failed to file any return of liability imposed under Part 10 (commencing with Section 17001) or this part.
(B)Failed to satisfy any term of an installment agreement under this section for payment of any liability imposed by Part 10 (commencing with Section 17001) or this part.
(3)The Franchise Tax Board determines that the taxpayer is financially unable to pay the liability in full when due, and the taxpayer submits any information as the Franchise Tax Board may require to make this determination.
(4)The agreement requires full payment of the liability within five years.
(5)The taxpayer agrees to comply with the provisions of this part and Part 10 (commencing with Section 17001) for the period the agreement is in effect.
(c)(1)(A)Failure by a taxpayer to comply fully with the terms of the installment payment agreement shall render the agreement null and void, unless the Franchise Tax Board determines that the failure was due to a reasonable cause, and the total amount of tax, interest, and all penalties shall be immediately due and payable. Except in any case where the Franchise Tax Board finds collection of the tax to which an installment payment agreement relates to be in jeopardy, or there is a mutual consent to terminate, alter, or modify the agreement, the agreement shall not be considered null and void, or otherwise terminated, unless all of the following occur:
(i)A notice of termination is provided to the taxpayer not later than 30 days before the date of termination.
(ii)The notice includes an explanation of why the Franchise Tax Board intends to terminate the agreement.
(iii)If the taxpayer has failed to comply fully with the terms of the installment payment agreement, the taxpayer has been given at least 60 calendar days to cure the failure.
(B)This paragraph shall apply only to agreements entered into before January 1, 2024.
(2)(A)(i)The Franchise Tax Board may alter, modify, or terminate an agreement entered into under this section if any of the following apply:
(I)Information that the taxpayer provided to the Franchise Tax Board before the date the agreement was entered into was inaccurate or incomplete.
(II)The Franchise Tax Board determines that the collection of any liability to which an agreement under this section relates is in jeopardy.
(III)The Franchise Tax Board determines that the financial condition of a taxpayer with whom the Franchise Tax Board has entered into an agreement has significantly changed.
(IV)The taxpayer fails to make an installment payment at the time the installment payment is due under the agreement.
(V)The taxpayer fails to file a required tax return under this part or pay any other liability at the time that the liability is due.
(VI)The taxpayer fails to provide a financial condition update upon the Franchise Tax Boards request.
(ii)The Franchise Tax Board may modify or alter an agreement under this section to add a liability that the taxpayer fails to pay at the time that the liability is due.
(iii)If a taxpayer is currently in an installment agreement under subdivision (a) or (b), the Franchise Tax Board may require financial hardship to alter or modify the installment agreement.
(iv)(I)Except as provided in subclause (II), the Franchise Tax Board shall not alter, modify, or terminate any agreement under this paragraph unless both of the following occur:
(ia)A notice of the alteration, modification, or termination is provided to the taxpayer not later than 30 days before the date of that action.
(ib)The notice includes an explanation of the rationale of the Franchise Tax Board for altering, modifying, or terminating the agreement.
(II)In any case where the Franchise Tax Board finds collection of the liability to which an installment payment agreement relates to be in jeopardy, the Franchise Tax Board may terminate the installment agreement and issue demand for immediate payment of the liability or the deficiency declared to be in jeopardy.
(B)This paragraph shall apply only to agreements entered into on or after January 1, 2024.
(d)No levy may be issued on the property or rights to property of any person with respect to any unpaid liability, including, but not limited to, an offset as described in Section 12419.5 or 12419.8 of the Government Code, or the amount referred to the Franchise Tax Board pursuant to Section 19280:
(1)During the period that an offer by the taxpayer for an installment agreement under this section for payment of the unpaid liability is pending with the Franchise Tax Board.
(2)If the offer is rejected by the Franchise Tax Board, during the 30 days thereafter and, if a request for review of the rejection is filed within the 30 days, during the period that the review is pending.
(3)During the period that the installment agreement for payment of the unpaid liability is in effect.
(4)If the agreement is terminated by the Franchise Tax Board, during the 30 days thereafter (and, if a request for review of the termination is filed within the 30 days, during the period that the review is pending).
(5)This subdivision shall not apply with respect to any of the following:
(A)Any unpaid liability if either of the following occurs:
(i)The taxpayer files a written notice with the Franchise Tax Board that waives the restriction imposed by this subdivision on levy with respect to the liability.
(ii)The Franchise Tax Board finds that the collection of that liability is in jeopardy.
(B)Any levy that was first issued before the date that the applicable proceeding under this subdivision commenced.
(C)At the discretion of the Franchise Tax Board, any unpaid liability for which the taxpayer makes an offer of an installment agreement subsequent to a rejection of an offer of an installment agreement with respect to that unpaid liability (or to any review thereof).
(D)The period of limitation under Section 19371 shall be suspended for the period during which the Franchise Tax Board is prohibited under this subdivision from making a levy.
(e)The Taxpayers Rights Advocate shall establish procedures for an independent departmental administrative review for the rejection of the offer of an installment payment and for installment payment agreements that are rendered null and void, or otherwise terminated under this section, for taxpayers that request that review. This administrative review shall not be subject to Chapter 4.5 (commencing with Section 11400) of Part 1 of Division 3 of Title 2 of the Government Code. Unless review is requested by the taxpayer within 30 days of the date of rejection of the offer of an installment agreement or termination of the installment agreement, this administrative review shall not stay collection of the liability to which the installment payment agreement relates.
(f)The Franchise Tax Board shall review a representative sample of existing installment agreements entered into under this section at least once every two years to ensure taxpayers are in compliance with the terms of the agreement.
(g)(1)The Franchise Tax Board may prescribe regulations as necessary or appropriate to carry out the purposes of this section.
(2)The Administrative Procedure Act (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, guideline, or any other guidance established or issued by the Franchise Tax Board pursuant to this section.
SEC. 2.Section 23301 of the Revenue and Taxation Code is amended to read:23301.Except for the purposes of filing an application for exempt status or amending the articles of incorporation or organization as necessary either to perfect that application or to set forth a new name, the powers, rights and privileges of a domestic taxpayer may be suspended, and the exercise of the powers, rights and privileges of a foreign taxpayer in this state may be forfeited, if any of the following conditions occur:
(a)If any tax, penalty, or interest, or any portion thereof, that is due and payable under Chapter 4 (commencing with Section 19001) of Part 10.2, or under this part, either at the time the return is required to be filed or on or before the 15th day of the ninth month following the close of the taxable year, is not paid on or before 6 p.m. on the last day of the 12th month after the close of the taxable year.
(b)If any tax, penalty, or interest, or any portion thereof, due and payable under Chapter 4 (commencing with Section 19001) of Part 10.2, or under this part, upon notice and demand from the Franchise Tax Board, is not paid on or before 6 p.m. on the last day of the 11th month following the due date of the tax.
(c)If any liability, or any portion thereof, which is due and payable under Article 7 (commencing with Section 19131) of Chapter 4 of Part 10.2, is not paid on or before 6 p.m. on the last day of the 11th month following the date that the tax liability is due and payable.
SEC. 3.Section 23301.5 of the Revenue and Taxation Code is amended to read:23301.5.Except for the purposes of filing an application for exempt status or amending the articles of incorporation or organization as necessary either to perfect that application or to set forth a new name, the powers, rights, and privileges of a domestic taxpayer may be suspended, and the exercise of the powers, rights, and privileges of a foreign taxpayer in this state may be forfeited, if a taxpayer fails to file a tax return required by this part.
SEC. 4.Section 23301.6 of the Revenue and Taxation Code is amended to read:23301.6.Sections 23301, 23301.5, and 23775 shall apply to a foreign taxpayer only if the taxpayer is qualified or registered to do business in California. A taxpayer that is required under Section 2105 or 17708.02 of the Corporations Code to qualify or register to do business shall not be deemed to have qualified or registered to do business for purposes of this article unless the taxpayer has in fact qualified or registered with the Secretary of State.
SEC. 5.Section 23302 of the Revenue and Taxation Code is amended to read:23302.(a)Forfeiture or suspension of a taxpayers powers, rights, and privileges pursuant to Section 23301, 23301.5, or 23775 shall occur and become effective only as expressly provided in this section in conjunction with Section 21020, which requires notice prior to the suspension of a taxpayers powers, rights, and privileges.
(b)The notice requirements of Section 21020 shall also apply to any forfeiture of a taxpayers powers, rights, and privileges pursuant to Section 23301, 23301.5, or 23775 and to any voidability pursuant to subdivision (d) of Section 23304.1.
(c)The Franchise Tax Board shall transmit the names of taxpayers to the Secretary of State as to which the suspension or forfeiture provisions of Section 23301, 23301.5, or 23775 are or become applicable, and the suspension or forfeiture therein provided for shall thereupon become effective. The certificate of the Secretary of State shall be prima facie evidence of the suspension or forfeiture.
(d)If a taxpayers powers, rights, and privileges are forfeited or suspended pursuant to Section 23301, 23301.5, or 23775, without limiting any other consequences of such forfeiture or suspension, the taxpayer shall not be entitled to sell, transfer, or exchange real property in California during the period of forfeiture or suspension.
SEC. 6.Section 23303 of the Revenue and Taxation Code is amended to read:23303.Notwithstanding the provisions of Section 23301 or 23301.5, any taxpayer that transacts business or receives income within the period of its suspension or forfeiture shall be subject to tax under the provisions of this chapter.
SEC. 7.Section 23305.1 of the Revenue and Taxation Code is amended to read:23305.1.(a)A taxpayer may make application to the Franchise Tax Board for relief from the voidability provisions of Section 23304.1. To be relieved from voidability, the taxpayer shall do all of the following:
(1)Provide the Franchise Tax Board with an application for relief from contract voidability in a form and manner prescribed by the Franchise Tax Board.
(2)Include on the application the period for which relief is requested in accordance with subdivision (b).
(3)File any tax returns required to be filed under this part with the Franchise Tax Board, including returns for the period for which relief is requested.
(4)Pay any tax, additions to tax, penalties, interest, and any other amounts owing to the Franchise Tax Board, including any liability attributable to the period for which relief is requested.
(5)Pay any penalty imposed under subdivision (b) for the period for which relief is requested.
(6)In the case of a taxpayer that applies for and enters into an approved voluntary disclosure agreement in accordance with Article 8 (commencing with Section 19191) of Chapter 4 of Part 10.2, for purposes of this section, the taxpayer shall be considered to have met the requirements of paragraphs (3), (4), and (5) if the taxpayer fulfills to the satisfaction of the Franchise Tax Board all the specifications of the voluntary disclosure agreement within the meaning of paragraph (2) of subdivision (d) of Section 19191 and if the Franchise Tax Board has not found that any of the circumstances described in Section 19194 has rendered the voluntary disclosure agreement null and void.
(b)(1)Except as provided in paragraph (2), both of the following shall apply:
(A)The period for which relief is requested shall begin on the date that one of the taxpayers taxable years begins and ends on the date that relief is granted.
(B)The Franchise Tax Board shall assess a daily penalty equal to one hundred dollars ($100) for each day of the period for which relief from voidability is granted, but not to exceed a total penalty equal to the amount of the tax for the period for which relief is requested.
(2)If an application for relief from voidability is filed for a period in which an application for revivor has been filed and the certificate of revivor has been issued, all of the following shall apply:
(A)The period for which relief is requested shall begin on the date the taxpayers powers, rights, and privileges had been suspended or forfeited and ends on the date relief is granted.
(B)The Franchise Tax Board shall assess a daily penalty equal to one hundred dollars ($100) for each day of the period for which relief from voidability is granted, but not to exceed a total penalty equal to that amount of the tax that would be imposed under Sections 17941 and 17942 or Section 23151 and, except as provided in subparagraph (C), that penalty shall be equal to no less than the amount of the minimum tax provided under Section 17941 or 23153 for the period for which relief is requested.
(C)In the case of an exempt organization or trust subject to Article 2 (commencing with Section 23731) of Chapter 4 (the tax on unrelated business taxable income), the daily penalty provided in subparagraph (B) shall not exceed a total penalty equal to the amount of tax imposed upon its unrelated business taxable income for the period for which relief is requested.
(3)Any penalty imposed under this subdivision shall, subject to Section 23305.2, be due and payable on demand by the Franchise Tax Board.
(c)(1)Upon satisfaction of the conditions specified in subdivision (a), including through the application of Section 23305.2, the following shall apply:
(A)All contracts entered into during the period for which relief is granted that have not been rescinded by a final court order pursuant to Section 23304.5 may be enforced in the same manner and to the same extent, with regard to both the parties to the contract and any third parties, as if the contract had never been voidable.
(B)Any sale, transfer, or exchange of real property in California during the period for which relief is granted and which the taxpayer at that time was not entitled to sell, transfer, or exchange by reason of subdivision (d) of Section 23302 and which has not been rescinded by a final court order pursuant to Section 23304.5, shall be as valid as if the taxpayer had not been subject to subdivision (d) of Section 23302 at the time of the sale, transfer, or exchange.
(2)Upon being granted relief from voidability, the Franchise Tax Board shall certify that relief to the taxpayer in a form and manner as prescribed by the Franchise Tax Board. The certificate shall be issued or mailed to the taxpayer, or as directed by the taxpayer, and shall indicate the period for which relief is granted.
(d)The fact that a certificate of relief from voidability was issued pursuant to this section and the information contained on that certificate shall be subject to public disclosure. The certificate shall be prima facie evidence of the relief from voidability for contracts entered into during the period of relief stated on the certificate and the certificate may be recorded in the office of the county recorder of any county of this state.
(e)Subject to limitations set forth in Section 17 of Chapter 926 of the Statutes of 1990, a taxpayer that received a certificate of revivor between January 1, 1990, and January 1, 1991, may apply for relief from voidability under this section.
SEC. 8.Section 23305a of the Revenue and Taxation Code is amended to read:23305a.Before the certificate of revivor is issued by the Franchise Tax Board, it shall obtain from the Secretary of State an endorsement upon the application of the fact that the name of the taxpayer then meets the requirements of subdivision (b) of Section 201 or subdivision (b) of Section 17701.08 of the Corporations Code in the case of a domestic taxpayer or of subdivision (b) of Section 2106 or Section 17708.05 of the Corporations Code in the case of a foreign taxpayer that has qualified to do business. The reference to amendment of the articles of incorporation to set forth a new name contained in Sections 23301, 23301.5, and 23775 includes in the case of a foreign taxpayer the filing of an amended statement and designation to set forth its new name or to set forth an assumed name under subdivision (b) of Section 2106 or Section 17708.05 of the Corporations Code. Upon the issuance of the certificate by the Franchise Tax Board the taxpayer therein named shall become reinstated but the reinstatement shall be without prejudice to any action, defense or right which has accrued by reason of the original suspension or forfeiture, except that contracts which were voidable pursuant to Section 23304.1, but which have not been rescinded pursuant to Section 23304.5, may have that voidability cured in accordance with Section 23305.1. The certificate of revivor shall be prima facie evidence of the reinstatement and the certificate may be recorded in the office of the county recorder of any county of this state.
SEC. 9.Section 23305b of the Revenue and Taxation Code is amended to read:23305b.Notwithstanding Section 23305, the Franchise Tax Board may revive a taxpayer to good standing without full payment of the taxes, penalties, and interest due if it determines that the revivor will improve the prospects for collection of the full amount due. This revivor may be limited as to time or may limit the functions the revived taxpayer can perform, or both. The taxpayers powers, rights, and privileges may again be suspended or forfeited if the Franchise Tax Board determines that the prospects for collection of the full amount due have not been improved by the revivor of the taxpayer.
SEC. 10.Section 23305c of the Revenue and Taxation Code is amended to read:23305c.(a)Upon issuance of the certificate of revivor, the Franchise Tax Board shall transmit to the Secretary of State the revived taxpayers name and its entity number.
(b)The taxpayers name and number, the fact that the taxpayers powers, rights, and privileges have been revived and the effective date of the revivor shall be a matter of public record.
(c)If the Franchise Tax Board determines that a suspension or forfeiture was in error by the Franchise Tax Board, the Franchise Tax Board shall, in connection with the revivor, indicate that the taxpayer is restored. The status of the restored taxpayer shall be retroactive to the date of suspension or forfeiture as if there had been no suspension or forfeiture.
(d)If the Franchise Tax Board determines that the mailing of the 60-day demand notice referred to in subdivision (d) of Section 23304.1 was in error or that the Franchise Tax Boards original determination as to compliance with the 60-day demand notice was in error, the Franchise Tax Boards revised conclusions also shall be part of the public record referred to in that subdivision.
SEC. 11.Section 23305e of the Revenue and Taxation Code is amended to read:23305e.(a)The Franchise Tax Board may provide letters of good standing, verifying a taxpayers status for doing business in California, at a charge reflecting the reasonable costs to the department of responding to these requests.
(b)Fees received under this section shall be handled in accordance with Section 19604.
SEC. 12.Section 1.5 of this bill incorporates amendments to Section 19008 of the Revenue and Taxation Code proposed by both this bill and Senate Bill 516. That section of this bill shall only become operative if (1) both bills are enacted and become effective on or before January 1, 2024, (2) each bill amends Section 19008 of the Revenue and Taxation Code, and (3) this bill is enacted after Senate Bill 516, in which case Section 1 of this bill shall not become operative.
(a)The Franchise Tax Board may, in cases of financial hardship, enter into installment payment agreements with any taxpayer under which that taxpayer is allowed to make payment of any liability imposed or collected under Part 10 (commencing with Section 17001), Part 11 (commencing with Section 23001), or this part, including any additions to tax, interest, penalties, fees, and any other amounts relating to the imposed liability, in installment payments, pursuant to the agreement, if the Franchise Tax Board determines that the agreement will facilitate full or partial collection of the liability.
(b)In the case of a liability of an individual under Part 10 (commencing with Section 17001) or this part, the Franchise Tax Board shall enter into an agreement to accept the full payment of the liability in installments if, as of the date the individual offers to enter into the agreement, all of the following apply:
(1)The aggregate amount of the liability (determined without regard to interest, penalties, additions to the tax, and additional amounts) does not exceed twenty-five thousand dollars ($25,000).
(2)The taxpayer (and, if the liability relates to a joint return, the taxpayers spouse) has not during any of the preceding five taxable years done any of the following:
(A)Failed to file any return of liability imposed under Part 10 (commencing with Section 17001) or this part.
(B)Failed to satisfy any term of an installment agreement under this section for payment of any liability imposed by Part 10 (commencing with Section 17001) or this part.
(3)The Franchise Tax Board determines that the taxpayer is financially unable to pay the liability in full when due, and the taxpayer submits any information as the Franchise Tax Board may require to make this determination.
(4)The agreement requires full payment of the liability within five years.
(5)The taxpayer agrees to comply with the provisions of this part and Part 10 (commencing with Section 17001) for the period the agreement is in effect.
(c)(1)(A)Failure by a taxpayer to comply fully with the terms of the installment payment agreement shall render the agreement null and void, unless the Franchise Tax Board determines that the failure was due to a reasonable cause, and the total amount of tax, interest, and all penalties shall be immediately due and payable. Except in any case where the Franchise Tax Board finds collection of the tax to which an installment payment agreement relates to be in jeopardy, or there is a mutual consent to terminate, alter, or modify the agreement, the agreement shall not be considered null and void, or otherwise terminated, unless both of the following occur:
(i)A notice of termination is provided to the taxpayer not later than 30 days before the date of termination.
(ii)The notice includes an explanation of why the Franchise Tax Board intends to terminate the agreement.
(B)This paragraph shall apply only to agreements entered into before January 1, 2024.
(2)(A)(i)The Franchise Tax Board may alter, modify, or terminate an agreement entered into under this section if any of the following apply:
(I)Information that the taxpayer provided to the Franchise Tax Board before the date the agreement was entered into was inaccurate or incomplete.
(II)The Franchise Tax Board determines that the collection of any liability to which an agreement under this section relates is in jeopardy.
(III)The Franchise Tax Board determines that the financial condition of a taxpayer with whom the Franchise Tax Board has entered into an agreement has significantly changed.
(IV)The taxpayer fails to make an installment payment at the time the installment payment is due under the agreement.
(V)The taxpayer fails to file a required tax return under this part or pay any other liability at the time that the liability is due.
(VI)The taxpayer fails to provide a financial condition update upon the Franchise Tax Boards request.
(ii)The Franchise Tax Board may modify or alter an agreement under this section to add a liability that the taxpayer fails to pay at the time that the liability is due.
(iii)If a taxpayer is currently in an installment agreement under subdivision (a) or (b), the Franchise Tax Board may require financial hardship to alter or modify the installment agreement.
(iv)(I)Except as provided in subclause (II), the Franchise Tax Board shall not alter, modify, or terminate any agreement under this paragraph unless both of the following occur:
(ia)A notice of the alteration, modification, or termination is provided to the taxpayer not later than 30 days before the date of that action.
(ib)The notice includes an explanation of the rationale of the Franchise Tax Board for altering, modifying, or terminating the agreement.
(II)In any case where the Franchise Tax Board finds collection of the liability to which an installment payment agreement relates to be in jeopardy, the Franchise Tax Board may terminate the installment agreement and issue demand for immediate payment of the liability or the deficiency declared to be in jeopardy.
(B)This paragraph shall apply only to agreements entered into on or after January 1, 2024.
(d)No levy may be issued on the property or rights to property of any person with respect to any unpaid liability:
(1)During the period that an offer by the taxpayer for an installment agreement under this section for payment of the unpaid liability is pending with the Franchise Tax Board.
(2)If the offer is rejected by the Franchise Tax Board, during the 30 days thereafter and, if a request for review of the rejection is filed within the 30 days, during the period that the review is pending.
(3)During the period that the installment agreement for payment of the unpaid liability is in effect.
(4)If the agreement is terminated by the Franchise Tax Board, during the 30 days thereafter (and, if a request for review of the termination is filed within the 30 days, during the period that the review is pending).
(5)This subdivision shall not apply with respect to any of the following:
(A)Any unpaid liability if either of the following occurs:
(i)The taxpayer files a written notice with the Franchise Tax Board that waives the restriction imposed by this subdivision on levy with respect to the liability.
(ii)The Franchise Tax Board finds that the collection of that liability is in jeopardy.
(B)Any levy that was first issued before the date that the applicable proceeding under this subdivision commenced.
(C)At the discretion of the Franchise Tax Board, any unpaid liability for which the taxpayer makes an offer of an installment agreement subsequent to a rejection of an offer of an installment agreement with respect to that unpaid liability (or to any review thereof).
(D)The period of limitation under Section 19371 shall be suspended for the period during which the Franchise Tax Board is prohibited under this subdivision from making a levy.
(e)The Taxpayers Rights Advocate shall establish procedures for an independent departmental administrative review for the rejection of the offer of an installment payment and for installment payment agreements that are rendered null and void, or otherwise terminated under this section, for taxpayers that request that review. This administrative review shall not be subject to Chapter 4.5 (commencing with Section 11400) of Part 1 of Division 3 of the Government Code. Unless review is requested by the taxpayer within 30 days of the date of rejection of the offer of an installment agreement or termination of the installment agreement, this administrative review shall not stay collection of the liability to which the installment payment agreement relates.
(f)The Franchise Tax Board shall review a representative sample of existing installment agreements entered into under this section at least once every two years to ensure taxpayers are in compliance with the terms of the agreement.
(g)(1)The Franchise Tax Board may prescribe regulations as necessary or appropriate to carry out the purposes of this section.
(2)The Administrative Procedure Act (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, guideline, or any other guidance established or issued by the Franchise Tax Board pursuant to this section.
SEC. 1.5.Section 19008 of the Revenue and Taxation Code is amended to read:19008.(a)(1)The Franchise Tax Board may, in cases of financial hardship, enter into installment payment agreements with any taxpayer under which that taxpayer is allowed to make payment of any liability imposed or collected under Part 10 (commencing with Section 17001), Part 11 (commencing with Section 23001), or this part, including any additions to tax, interest, penalties, fees, and any other amounts relating to the imposed liability, in installment payments, pursuant to the agreement, if the Franchise Tax Board determines that the agreement will facilitate full or partial collection of the liability.
(2)(A)The Franchise Tax Board shall allow a taxpayer to submit an offer for an installment agreement online or by mail or telephone.
(B)The terms of the installment agreement shall not be less favorable because of the method chosen by the taxpayer to submit an offer pursuant to subparagraph (A).
(b)In the case of a liability of an individual under Part 10 (commencing with Section 17001) or this part, the Franchise Tax Board shall enter into an agreement to accept the full payment of the tax in installments if, as of the date the individual offers to enter into the agreement, all of the following apply:
(1)The aggregate amount of the liability (determined without regard to interest, penalties, additions to the tax, and additional amounts) does not exceed twenty-five thousand dollars ($25,000).
(2)The taxpayer (and, if the liability relates to a joint return, the taxpayers spouse) has not during any of the preceding five taxable years done any of the following:
(A)Failed to file any return of liability imposed under Part 10 (commencing with Section 17001) or this part.
(B)Failed to satisfy any term of an installment agreement under this section for payment of any liability imposed by Part 10 (commencing with Section 17001) or this part.
(3)The Franchise Tax Board determines that the taxpayer is financially unable to pay the liability in full when due, and the taxpayer submits any information as the Franchise Tax Board may require to make this determination.
(4)The agreement requires full payment of the liability within five years.
(5)The taxpayer agrees to comply with the provisions of this part and Part 10 (commencing with Section 17001) for the period the agreement is in effect.
(c)(1)(A)Failure by a taxpayer to comply fully with the terms of the installment payment agreement shall render the agreement null and void, unless the Franchise Tax Board determines that the failure was due to a reasonable cause, and the total amount of tax, interest, and all penalties shall be immediately due and payable. Except in any case where the Franchise Tax Board finds collection of the tax to which an installment payment agreement relates to be in jeopardy, or there is a mutual consent to terminate, alter, or modify the agreement, the agreement shall not be considered null and void, or otherwise terminated, unless all of the following occur:
(i)A notice of termination is provided to the taxpayer not later than 30 days before the date of termination.
(ii)The notice includes an explanation of why the Franchise Tax Board intends to terminate the agreement.
(iii)If the taxpayer has failed to comply fully with the terms of the installment payment agreement, the taxpayer has been given at least 60 calendar days to cure the failure.
(B)This paragraph shall apply only to agreements entered into before January 1, 2024.
(2)(A)(i)The Franchise Tax Board may alter, modify, or terminate an agreement entered into under this section if any of the following apply:
(I)Information that the taxpayer provided to the Franchise Tax Board before the date the agreement was entered into was inaccurate or incomplete.
(II)The Franchise Tax Board determines that the collection of any liability to which an agreement under this section relates is in jeopardy.
(III)The Franchise Tax Board determines that the financial condition of a taxpayer with whom the Franchise Tax Board has entered into an agreement has significantly changed.
(IV)The taxpayer fails to make an installment payment at the time the installment payment is due under the agreement.
(V)The taxpayer fails to file a required tax return under this part or pay any other liability at the time that the liability is due.
(VI)The taxpayer fails to provide a financial condition update upon the Franchise Tax Boards request.
(ii)The Franchise Tax Board may modify or alter an agreement under this section to add a liability that the taxpayer fails to pay at the time that the liability is due.
(iii)If a taxpayer is currently in an installment agreement under subdivision (a) or (b), the Franchise Tax Board may require financial hardship to alter or modify the installment agreement.
(iv)(I)Except as provided in subclause (II), the Franchise Tax Board shall not alter, modify, or terminate any agreement under this paragraph unless both of the following occur:
(ia)A notice of the alteration, modification, or termination is provided to the taxpayer not later than 30 days before the date of that action.
(ib)The notice includes an explanation of the rationale of the Franchise Tax Board for altering, modifying, or terminating the agreement.
(II)In any case where the Franchise Tax Board finds collection of the liability to which an installment payment agreement relates to be in jeopardy, the Franchise Tax Board may terminate the installment agreement and issue demand for immediate payment of the liability or the deficiency declared to be in jeopardy.
(B)This paragraph shall apply only to agreements entered into on or after January 1, 2024.
(d)No levy may be issued on the property or rights to property of any person with respect to any unpaid liability, including, but not limited to, an offset as described in Section 12419.5 or 12419.8 of the Government Code, or the amount referred to the Franchise Tax Board pursuant to Section 19280:
(1)During the period that an offer by the taxpayer for an installment agreement under this section for payment of the unpaid liability is pending with the Franchise Tax Board.
(2)If the offer is rejected by the Franchise Tax Board, during the 30 days thereafter and, if a request for review of the rejection is filed within the 30 days, during the period that the review is pending.
(3)During the period that the installment agreement for payment of the unpaid liability is in effect.
(4)If the agreement is terminated by the Franchise Tax Board, during the 30 days thereafter (and, if a request for review of the termination is filed within the 30 days, during the period that the review is pending).
(5)This subdivision shall not apply with respect to any of the following:
(A)Any unpaid liability if either of the following occurs:
(i)The taxpayer files a written notice with the Franchise Tax Board that waives the restriction imposed by this subdivision on levy with respect to the liability.
(ii)The Franchise Tax Board finds that the collection of that liability is in jeopardy.
(B)Any levy that was first issued before the date that the applicable proceeding under this subdivision commenced.
(C)At the discretion of the Franchise Tax Board, any unpaid liability for which the taxpayer makes an offer of an installment agreement subsequent to a rejection of an offer of an installment agreement with respect to that unpaid liability (or to any review thereof).
(D)The period of limitation under Section 19371 shall be suspended for the period during which the Franchise Tax Board is prohibited under this subdivision from making a levy.
(e)The Taxpayers Rights Advocate shall establish procedures for an independent departmental administrative review for the rejection of the offer of an installment payment and for installment payment agreements that are rendered null and void, or otherwise terminated under this section, for taxpayers that request that review. This administrative review shall not be subject to Chapter 4.5 (commencing with Section 11400) of Part 1 of Division 3 of Title 2 of the Government Code. Unless review is requested by the taxpayer within 30 days of the date of rejection of the offer of an installment agreement or termination of the installment agreement, this administrative review shall not stay collection of the liability to which the installment payment agreement relates.
(f)The Franchise Tax Board shall review a representative sample of existing installment agreements entered into under this section at least once every two years to ensure taxpayers are in compliance with the terms of the agreement.
(g)(1)The Franchise Tax Board may prescribe regulations as necessary or appropriate to carry out the purposes of this section.
(2)The Administrative Procedure Act (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, guideline, or any other guidance established or issued by the Franchise Tax Board pursuant to this section.
SEC. 2.Section 23301 of the Revenue and Taxation Code is amended to read:23301.Except for the purposes of filing an application for exempt status or amending the articles of incorporation or organization as necessary either to perfect that application or to set forth a new name, the powers, rights and privileges of a domestic taxpayer may be suspended, and the exercise of the powers, rights and privileges of a foreign taxpayer in this state may be forfeited, if any of the following conditions occur:
(a)If any tax, penalty, or interest, or any portion thereof, that is due and payable under Chapter 4 (commencing with Section 19001) of Part 10.2, or under this part, either at the time the return is required to be filed or on or before the 15th day of the ninth month following the close of the taxable year, is not paid on or before 6 p.m. on the last day of the 12th month after the close of the taxable year.
(b)If any tax, penalty, or interest, or any portion thereof, due and payable under Chapter 4 (commencing with Section 19001) of Part 10.2, or under this part, upon notice and demand from the Franchise Tax Board, is not paid on or before 6 p.m. on the last day of the 11th month following the due date of the tax.
(c)If any liability, or any portion thereof, which is due and payable under Article 7 (commencing with Section 19131) of Chapter 4 of Part 10.2, is not paid on or before 6 p.m. on the last day of the 11th month following the date that the tax liability is due and payable.
SEC. 3.Section 23301.5 of the Revenue and Taxation Code is amended to read:23301.5.Except for the purposes of filing an application for exempt status or amending the articles of incorporation or organization as necessary either to perfect that application or to set forth a new name, the powers, rights, and privileges of a domestic taxpayer may be suspended, and the exercise of the powers, rights, and privileges of a foreign taxpayer in this state may be forfeited, if a taxpayer fails to file a tax return required by this part.
SEC. 4.Section 23301.6 of the Revenue and Taxation Code is amended to read:23301.6.Sections 23301, 23301.5, and 23775 shall apply to a foreign taxpayer only if the taxpayer is qualified or registered to do business in California. A taxpayer that is required under Section 2105 or 17708.02 of the Corporations Code to qualify or register to do business shall not be deemed to have qualified or registered to do business for purposes of this article unless the taxpayer has in fact qualified or registered with the Secretary of State.
SEC. 5.Section 23302 of the Revenue and Taxation Code is amended to read:23302.(a)Forfeiture or suspension of a taxpayers powers, rights, and privileges pursuant to Section 23301, 23301.5, or 23775 shall occur and become effective only as expressly provided in this section in conjunction with Section 21020, which requires notice prior to the suspension of a taxpayers powers, rights, and privileges.
(b)The notice requirements of Section 21020 shall also apply to any forfeiture of a taxpayers powers, rights, and privileges pursuant to Section 23301, 23301.5, or 23775 and to any voidability pursuant to subdivision (d) of Section 23304.1.
(c)The Franchise Tax Board shall transmit the names of taxpayers to the Secretary of State as to which the suspension or forfeiture provisions of Section 23301, 23301.5, or 23775 are or become applicable, and the suspension or forfeiture therein provided for shall thereupon become effective. The certificate of the Secretary of State shall be prima facie evidence of the suspension or forfeiture.
(d)If a taxpayers powers, rights, and privileges are forfeited or suspended pursuant to Section 23301, 23301.5, or 23775, without limiting any other consequences of such forfeiture or suspension, the taxpayer shall not be entitled to sell, transfer, or exchange real property in California during the period of forfeiture or suspension.
SEC. 6.Section 23303 of the Revenue and Taxation Code is amended to read:23303.Notwithstanding the provisions of Section 23301 or 23301.5, any taxpayer that transacts business or receives income within the period of its suspension or forfeiture shall be subject to tax under the provisions of this chapter.
SEC. 7.Section 23305.1 of the Revenue and Taxation Code is amended to read:23305.1.(a)A taxpayer may make application to the Franchise Tax Board for relief from the voidability provisions of Section 23304.1. To be relieved from voidability, the taxpayer shall do all of the following:
(1)Provide the Franchise Tax Board with an application for relief from contract voidability in a form and manner prescribed by the Franchise Tax Board.
(2)Include on the application the period for which relief is requested in accordance with subdivision (b).
(3)File any tax returns required to be filed under this part with the Franchise Tax Board, including returns for the period for which relief is requested.
(4)Pay any tax, additions to tax, penalties, interest, and any other amounts owing to the Franchise Tax Board, including any liability attributable to the period for which relief is requested.
(5)Pay any penalty imposed under subdivision (b) for the period for which relief is requested.
(6)In the case of a taxpayer that applies for and enters into an approved voluntary disclosure agreement in accordance with Article 8 (commencing with Section 19191) of Chapter 4 of Part 10.2, for purposes of this section, the taxpayer shall be considered to have met the requirements of paragraphs (3), (4), and (5) if the taxpayer fulfills to the satisfaction of the Franchise Tax Board all the specifications of the voluntary disclosure agreement within the meaning of paragraph (2) of subdivision (d) of Section 19191 and if the Franchise Tax Board has not found that any of the circumstances described in Section 19194 has rendered the voluntary disclosure agreement null and void.
(b)(1)Except as provided in paragraph (2), both of the following shall apply:
(A)The period for which relief is requested shall begin on the date that one of the taxpayers taxable years begins and ends on the date that relief is granted.
(B)The Franchise Tax Board shall assess a daily penalty equal to one hundred dollars ($100) for each day of the period for which relief from voidability is granted, but not to exceed a total penalty equal to the amount of the tax for the period for which relief is requested.
(2)If an application for relief from voidability is filed for a period in which an application for revivor has been filed and the certificate of revivor has been issued, all of the following shall apply:
(A)The period for which relief is requested shall begin on the date the taxpayers powers, rights, and privileges had been suspended or forfeited and ends on the date relief is granted.
(B)The Franchise Tax Board shall assess a daily penalty equal to one hundred dollars ($100) for each day of the period for which relief from voidability is granted, but not to exceed a total penalty equal to that amount of the tax that would be imposed under Sections 17941 and 17942 or Section 23151 and, except as provided in subparagraph (C), that penalty shall be equal to no less than the amount of the minimum tax provided under Section 17941 or 23153 for the period for which relief is requested.
(C)In the case of an exempt organization or trust subject to Article 2 (commencing with Section 23731) of Chapter 4 (the tax on unrelated business taxable income), the daily penalty provided in subparagraph (B) shall not exceed a total penalty equal to the amount of tax imposed upon its unrelated business taxable income for the period for which relief is requested.
(3)Any penalty imposed under this subdivision shall, subject to Section 23305.2, be due and payable on demand by the Franchise Tax Board.
(c)(1)Upon satisfaction of the conditions specified in subdivision (a), including through the application of Section 23305.2, the following shall apply:
(A)All contracts entered into during the period for which relief is granted that have not been rescinded by a final court order pursuant to Section 23304.5 may be enforced in the same manner and to the same extent, with regard to both the parties to the contract and any third parties, as if the contract had never been voidable.
(B)Any sale, transfer, or exchange of real property in California during the period for which relief is granted and which the taxpayer at that time was not entitled to sell, transfer, or exchange by reason of subdivision (d) of Section 23302 and which has not been rescinded by a final court order pursuant to Section 23304.5, shall be as valid as if the taxpayer had not been subject to subdivision (d) of Section 23302 at the time of the sale, transfer, or exchange.
(2)Upon being granted relief from voidability, the Franchise Tax Board shall certify that relief to the taxpayer in a form and manner as prescribed by the Franchise Tax Board. The certificate shall be issued or mailed to the taxpayer, or as directed by the taxpayer, and shall indicate the period for which relief is granted.
(d)The fact that a certificate of relief from voidability was issued pursuant to this section and the information contained on that certificate shall be subject to public disclosure. The certificate shall be prima facie evidence of the relief from voidability for contracts entered into during the period of relief stated on the certificate and the certificate may be recorded in the office of the county recorder of any county of this state.
(e)Subject to limitations set forth in Section 17 of Chapter 926 of the Statutes of 1990, a taxpayer that received a certificate of revivor between January 1, 1990, and January 1, 1991, may apply for relief from voidability under this section.
SEC. 8.Section 23305a of the Revenue and Taxation Code is amended to read:23305a.Before the certificate of revivor is issued by the Franchise Tax Board, it shall obtain from the Secretary of State an endorsement upon the application of the fact that the name of the taxpayer then meets the requirements of subdivision (b) of Section 201 or subdivision (b) of Section 17701.08 of the Corporations Code in the case of a domestic taxpayer or of subdivision (b) of Section 2106 or Section 17708.05 of the Corporations Code in the case of a foreign taxpayer that has qualified to do business. The reference to amendment of the articles of incorporation to set forth a new name contained in Sections 23301, 23301.5, and 23775 includes in the case of a foreign taxpayer the filing of an amended statement and designation to set forth its new name or to set forth an assumed name under subdivision (b) of Section 2106 or Section 17708.05 of the Corporations Code. Upon the issuance of the certificate by the Franchise Tax Board the taxpayer therein named shall become reinstated but the reinstatement shall be without prejudice to any action, defense or right which has accrued by reason of the original suspension or forfeiture, except that contracts which were voidable pursuant to Section 23304.1, but which have not been rescinded pursuant to Section 23304.5, may have that voidability cured in accordance with Section 23305.1. The certificate of revivor shall be prima facie evidence of the reinstatement and the certificate may be recorded in the office of the county recorder of any county of this state.
SEC. 9.Section 23305b of the Revenue and Taxation Code is amended to read:23305b.Notwithstanding Section 23305, the Franchise Tax Board may revive a taxpayer to good standing without full payment of the taxes, penalties, and interest due if it determines that the revivor will improve the prospects for collection of the full amount due. This revivor may be limited as to time or may limit the functions the revived taxpayer can perform, or both. The taxpayers powers, rights, and privileges may again be suspended or forfeited if the Franchise Tax Board determines that the prospects for collection of the full amount due have not been improved by the revivor of the taxpayer.
SEC. 10.Section 23305c of the Revenue and Taxation Code is amended to read:23305c.(a)Upon issuance of the certificate of revivor, the Franchise Tax Board shall transmit to the Secretary of State the revived taxpayers name and its entity number.
(b)The taxpayers name and number, the fact that the taxpayers powers, rights, and privileges have been revived and the effective date of the revivor shall be a matter of public record.
(c)If the Franchise Tax Board determines that a suspension or forfeiture was in error by the Franchise Tax Board, the Franchise Tax Board shall, in connection with the revivor, indicate that the taxpayer is restored. The status of the restored taxpayer shall be retroactive to the date of suspension or forfeiture as if there had been no suspension or forfeiture.
(d)If the Franchise Tax Board determines that the mailing of the 60-day demand notice referred to in subdivision (d) of Section 23304.1 was in error or that the Franchise Tax Boards original determination as to compliance with the 60-day demand notice was in error, the Franchise Tax Boards revised conclusions also shall be part of the public record referred to in that subdivision.
SEC. 11.Section 23305e of the Revenue and Taxation Code is amended to read:23305e.(a)The Franchise Tax Board may provide letters of good standing, verifying a taxpayers status for doing business in California, at a charge reflecting the reasonable costs to the department of responding to these requests.
(b)Fees received under this section shall be handled in accordance with Section 19604.
SEC. 12.Section 1.5 of this bill incorporates amendments to Section 19008 of the Revenue and Taxation Code proposed by both this bill and Senate Bill 516. That section of this bill shall only become operative if (1) both bills are enacted and become effective on or before January 1, 2024, (2) each bill amends Section 19008 of the Revenue and Taxation Code, and (3) this bill is enacted after Senate Bill 516, in which case Section 1 of this bill shall not become operative.
(a)The Franchise Tax Board may, in cases of financial hardship, enter into installment payment agreements with any taxpayer under which that taxpayer is allowed to make payment of any liability imposed or collected under Part 10 (commencing with Section 17001), Part 11 (commencing with Section 23001), or this part, including any additions to tax, interest, penalties, fees, and any other amounts relating to the imposed liability, in installment payments, pursuant to the agreement, if the Franchise Tax Board determines that the agreement will facilitate full or partial collection of the liability.
(b)In the case of a liability of an individual under Part 10 (commencing with Section 17001) or this part, the Franchise Tax Board shall enter into an agreement to accept the full payment of the liability in installments if, as of the date the individual offers to enter into the agreement, all of the following apply:
(1)The aggregate amount of the liability (determined without regard to interest, penalties, additions to the tax, and additional amounts) does not exceed twenty-five thousand dollars ($25,000).
(2)The taxpayer (and, if the liability relates to a joint return, the taxpayers spouse) has not during any of the preceding five taxable years done any of the following:
(A)Failed to file any return of liability imposed under Part 10 (commencing with Section 17001) or this part.
(B)Failed to satisfy any term of an installment agreement under this section for payment of any liability imposed by Part 10 (commencing with Section 17001) or this part.
(3)The Franchise Tax Board determines that the taxpayer is financially unable to pay the liability in full when due, and the taxpayer submits any information as the Franchise Tax Board may require to make this determination.
(4)The agreement requires full payment of the liability within five years.
(5)The taxpayer agrees to comply with the provisions of this part and Part 10 (commencing with Section 17001) for the period the agreement is in effect.
(c)(1)(A)Failure by a taxpayer to comply fully with the terms of the installment payment agreement shall render the agreement null and void, unless the Franchise Tax Board determines that the failure was due to a reasonable cause, and the total amount of tax, interest, and all penalties shall be immediately due and payable. Except in any case where the Franchise Tax Board finds collection of the tax to which an installment payment agreement relates to be in jeopardy, or there is a mutual consent to terminate, alter, or modify the agreement, the agreement shall not be considered null and void, or otherwise terminated, unless both of the following occur:
(i)A notice of termination is provided to the taxpayer not later than 30 days before the date of termination.
(ii)The notice includes an explanation of why the Franchise Tax Board intends to terminate the agreement.
(B)This paragraph shall apply only to agreements entered into before January 1, 2024.
(2)(A)(i)The Franchise Tax Board may alter, modify, or terminate an agreement entered into under this section if any of the following apply:
(I)Information that the taxpayer provided to the Franchise Tax Board before the date the agreement was entered into was inaccurate or incomplete.
(II)The Franchise Tax Board determines that the collection of any liability to which an agreement under this section relates is in jeopardy.
(III)The Franchise Tax Board determines that the financial condition of a taxpayer with whom the Franchise Tax Board has entered into an agreement has significantly changed.
(IV)The taxpayer fails to make an installment payment at the time the installment payment is due under the agreement.
(V)The taxpayer fails to file a required tax return under this part or pay any other liability at the time that the liability is due.
(VI)The taxpayer fails to provide a financial condition update upon the Franchise Tax Boards request.
(ii)The Franchise Tax Board may modify or alter an agreement under this section to add a liability that the taxpayer fails to pay at the time that the liability is due.
(iii)If a taxpayer is currently in an installment agreement under subdivision (a) or (b), the Franchise Tax Board may require financial hardship to alter or modify the installment agreement.
(iv)(I)Except as provided in subclause (II), the Franchise Tax Board shall not alter, modify, or terminate any agreement under this paragraph unless both of the following occur:
(ia)A notice of the alteration, modification, or termination is provided to the taxpayer not later than 30 days before the date of that action.
(ib)The notice includes an explanation of the rationale of the Franchise Tax Board for altering, modifying, or terminating the agreement.
(II)In any case where the Franchise Tax Board finds collection of the liability to which an installment payment agreement relates to be in jeopardy, the Franchise Tax Board may terminate the installment agreement and issue demand for immediate payment of the liability or the deficiency declared to be in jeopardy.
(B)This paragraph shall apply only to agreements entered into on or after January 1, 2024.
(d)No levy may be issued on the property or rights to property of any person with respect to any unpaid liability:
(1)During the period that an offer by the taxpayer for an installment agreement under this section for payment of the unpaid liability is pending with the Franchise Tax Board.
(2)If the offer is rejected by the Franchise Tax Board, during the 30 days thereafter and, if a request for review of the rejection is filed within the 30 days, during the period that the review is pending.
(3)During the period that the installment agreement for payment of the unpaid liability is in effect.
(4)If the agreement is terminated by the Franchise Tax Board, during the 30 days thereafter (and, if a request for review of the termination is filed within the 30 days, during the period that the review is pending).
(5)This subdivision shall not apply with respect to any of the following:
(A)Any unpaid liability if either of the following occurs:
(i)The taxpayer files a written notice with the Franchise Tax Board that waives the restriction imposed by this subdivision on levy with respect to the liability.
(ii)The Franchise Tax Board finds that the collection of that liability is in jeopardy.
(B)Any levy that was first issued before the date that the applicable proceeding under this subdivision commenced.
(C)At the discretion of the Franchise Tax Board, any unpaid liability for which the taxpayer makes an offer of an installment agreement subsequent to a rejection of an offer of an installment agreement with respect to that unpaid liability (or to any review thereof).
(D)The period of limitation under Section 19371 shall be suspended for the period during which the Franchise Tax Board is prohibited under this subdivision from making a levy.
(e)The Taxpayers Rights Advocate shall establish procedures for an independent departmental administrative review for the rejection of the offer of an installment payment and for installment payment agreements that are rendered null and void, or otherwise terminated under this section, for taxpayers that request that review. This administrative review shall not be subject to Chapter 4.5 (commencing with Section 11400) of Part 1 of Division 3 of the Government Code. Unless review is requested by the taxpayer within 30 days of the date of rejection of the offer of an installment agreement or termination of the installment agreement, this administrative review shall not stay collection of the liability to which the installment payment agreement relates.
(f)The Franchise Tax Board shall review a representative sample of existing installment agreements entered into under this section at least once every two years to ensure taxpayers are in compliance with the terms of the agreement.
(g)(1)The Franchise Tax Board may prescribe regulations as necessary or appropriate to carry out the purposes of this section.
(2)The Administrative Procedure Act (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, guideline, or any other guidance established or issued by the Franchise Tax Board pursuant to this section.
SEC. 1.5.Section 19008 of the Revenue and Taxation Code is amended to read:19008.(a)(1)The Franchise Tax Board may, in cases of financial hardship, as determined by the Franchise Tax Board, allow a taxpayer to enter into installment payment agreements with the Franchise Tax Board to make full or partial payment of taxes due, plus applicable interest and penalties over the life of the installment period. Failure by a taxpayer to comply fully with the terms of the installment payment agreement shall render the agreement null and void, unless any taxpayer under which that taxpayer is allowed to make payment of any liability imposed or collected under Part 10 (commencing with Section 17001), Part 11 (commencing with Section 23001), or this part, including any additions to tax, interest, penalties, fees, and any other amounts relating to the imposed liability, in installment payments, pursuant to the agreement, if the Franchise Tax Board determines that the failure was due to a reasonable cause, and the total amount of tax, interest, and all penalties shall be immediately due and payable. agreement will facilitate full or partial collection of the liability.
(2)(A)The Franchise Tax Board shall allow a taxpayer to submit an offer for an installment agreement online or by mail or telephone.
(B)The terms of the installment agreement shall not be less favorable because of the method chosen by the taxpayer to submit an offer pursuant to subparagraph (A).
(b)In the case of a liability for tax of an individual under Part 10 (commencing with Section 17001) or this part, the Franchise Tax Board shall enter into an agreement to accept the full payment of the tax in installments if, as of the date the individual offers to enter into the agreement, all of the following apply:
(1)The aggregate amount of the liability (determined without regard to interest, penalties, additions to the tax tax, and additional amounts) does not exceed ten thousand dollars ($10,000). twenty-five thousand dollars ($25,000).
(2)The taxpayer (and, if the liability relates to a joint return, the taxpayers spouse) has not during any of the preceding five taxable years done any of the following:
(A)Failed to file any return of tax liability imposed under Part 10 (commencing with Section 17001) or this part.
(B)Failed to pay any tax required to be shown on the return.(C)Entered into(B)Failed to satisfy any term of an installment agreement under this section for payment of any tax liability imposed by Part 10 (commencing with Section 17001) or this part.
(3)The Franchise Tax Board determines that the taxpayer is financially unable to pay the liability in full when due, and the taxpayer submits any information as the Franchise Tax Board may require to make this determination.
(4)The agreement requires full payment of the liability within three five years.
(5)The taxpayer agrees to comply with the provisions of this part and Part 10 (commencing with Section 17001) for the period the agreement is in effect.
(c)(1)(A)Failure by a taxpayer to comply fully with the terms of the installment payment agreement shall render the agreement null and void, unless the Franchise Tax Board determines that the failure was due to a reasonable cause, and the total amount of tax, interest, and all penalties shall be immediately due and payable. Except in any case where the Franchise Tax Board finds collection of the tax to which an installment payment agreement relates to be in jeopardy, or there is a mutual consent to terminate, alter, or modify the agreement, the agreement shall not be considered null and void, or otherwise terminated, unless both all of the following occur:
(1)(i)A notice of termination is provided to the taxpayer not later than 30 days before the date of termination.
(2)(ii)The notice includes an explanation of why the Franchise Tax Board intends to terminate the agreement.
(iii)If the taxpayer has failed to comply fully with the terms of the installment payment agreement, the taxpayer has been given at least 60 calendar days to cure the failure.
(B)This paragraph shall apply only to agreements entered into before January 1, 2024.
(2)(A)(i)The Franchise Tax Board may alter, modify, or terminate an agreement entered into under this section if any of the following apply:
(I)Information that the taxpayer provided to the Franchise Tax Board before the date the agreement was entered into was inaccurate or incomplete.
(II)The Franchise Tax Board determines that the collection of any liability to which an agreement under this section relates is in jeopardy.
(III)The Franchise Tax Board determines that the financial condition of a taxpayer with whom the Franchise Tax Board has entered into an agreement has significantly changed.
(IV)The taxpayer fails to make an installment payment at the time the installment payment is due under the agreement.
(V)The taxpayer fails to file a required tax return under this part or pay any other liability at the time that the liability is due.
(VI)The taxpayer fails to provide a financial condition update upon the Franchise Tax Boards request.
(ii)The Franchise Tax Board may modify or alter an agreement under this section to add a liability that the taxpayer fails to pay at the time that the liability is due.
(iii)If a taxpayer is currently in an installment agreement under subdivision (a) or (b), the Franchise Tax Board may require financial hardship to alter or modify the installment agreement.
(iv)(I)Except as provided in subclause (II), the Franchise Tax Board shall not alter, modify, or terminate any agreement under this paragraph unless both of the following occur:
(ia)A notice of the alteration, modification, or termination is provided to the taxpayer not later than 30 days before the date of that action.
(ib)The notice includes an explanation of the rationale of the Franchise Tax Board for altering, modifying, or terminating the agreement.
(II)In any case where the Franchise Tax Board finds collection of the liability to which an installment payment agreement relates to be in jeopardy, the Franchise Tax Board may terminate the installment agreement and issue demand for immediate payment of the liability or the deficiency declared to be in jeopardy.
(B)This paragraph shall apply only to agreements entered into on or after January 1, 2024.
(d)No levy may be issued on the property or rights to property of any person with respect to any unpaid tax: liability, including, but not limited to, an offset as described in Section 12419.5 or 12419.8 of the Government Code, or the amount referred to the Franchise Tax Board pursuant to Section 19280:
(1)During the period that an offer by the taxpayer for an installment agreement under this section for payment of the unpaid tax liability is pending with the Franchise Tax Board.
(2)If the offer is rejected by the Franchise Tax Board, during the 30 days thereafter and, if a request for review of the rejection is filed within the 30 days, during the period that the review is pending.
(3)During the period that the installment agreement for payment of the unpaid tax liability is in effect.
(4)If the agreement is terminated by the Franchise Tax Board, during the 30 days thereafter (and, if a request for review of the termination is filed within the 30 days, during the period that the review is pending).
(5)This subdivision shall not apply with respect to any of the following:
(A)Any unpaid tax liability if either of the following occurs:
(i)The taxpayer files a written notice with the Franchise Tax Board that waives the restriction imposed by this subdivision on levy with respect to the tax. liability.
(ii)The Franchise Tax Board finds that the collection of that tax liability is in jeopardy.
(B)Any levy that was first issued before the date that the applicable proceeding under this subdivision commenced.
(C)At the discretion of the Franchise Tax Board, any unpaid tax liability for which the taxpayer makes an offer of an installment agreement subsequent to a rejection of an offer of an installment agreement with respect to that unpaid tax liability (or to any review thereof).
(D)The period of limitation under Section 19371 shall be suspended for the period during which the Franchise Tax Board is prohibited under this subdivision from making a levy.
(e)The Taxpayers Rights Advocate shall establish procedures for an independent departmental administrative review for the rejection of the offer of an installment payment and for installment payment agreements that are rendered null and void, or otherwise terminated under this section, for taxpayers that request that review. This administrative review shall not be subject to Chapter 4.5 (commencing with Section 11400) of Part 1 of Division 3 of Title 2 of the Government Code. Unless review is requested by the taxpayer within 30 days of the date of rejection of the offer of an installment agreement or termination of the installment agreement, this administrative review shall not stay collection of the tax liability to which the installment payment agreement relates.
(f)In the case of an agreement entered into by the Franchise Tax Board under subdivision (a) for partial payment of a tax liability, the The Franchise Tax Board shall review the agreement a representative sample of existing installment agreements entered into under this section at least once every two years. years to ensure taxpayers are in compliance with the terms of the agreement.
(g)(1)In the case of any taxpayer that is making payments to the Franchise Tax Board under an informal payment arrangement that was in existence prior to the effective date of the act adding this subdivision, that informal payment arrangement, for purposes of this section, shall be treated as an installment payment agreement that was entered into on the later of the following:(A)January 1, 2005.(B)The date on which the arrangement was established by the Franchise Tax Board.(2)In any case where the date determined under the rules of paragraph (1) is a date prior to February 1, 2005, the amount due under the informal payment arrangement as of February 1, 2005, shall be treated as an installment payment agreement amount as of the start of the amnesty program within the meaning of Section 19738.(3)Section 19591 does not apply to either of the following:(A)Informal payment arrangements treated as installment payment agreements under paragraph (1).(B)Installment payment agreements authorized by the amendments made by the act adding this subdivision that were entered into prior to July 1, 2005, or the effective date of the act adding this subdivision, whichever occurs later.(g)(1)The Franchise Tax Board may prescribe regulations as necessary or appropriate to carry out the purposes of this section.
(2)The Administrative Procedure Act (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, guideline, or any other guidance established or issued by the Franchise Tax Board pursuant to this section.
SEC. 2.Section 23301 of the Revenue and Taxation Code is amended to read:23301.Except for the purposes of filing an application for exempt status or amending the articles of incorporation or organization as necessary either to perfect that application or to set forth a new name, the powers, rights and privileges of a domestic taxpayer may be suspended, and the exercise of the powers, rights and privileges of a foreign taxpayer in this state may be forfeited, if any of the following conditions occur:
(a)If any tax, penalty, or interest, or any portion thereof, that is due and payable under Chapter 4 (commencing with Section 19001) of Part 10.2, or under this part, either at the time the return is required to be filed or on or before the 15th day of the ninth month following the close of the taxable year, is not paid on or before 6 p.m. on the last day of the 12th month after the close of the taxable year.
(b)If any tax, penalty, or interest, or any portion thereof, due and payable under Chapter 4 (commencing with Section 19001) of Part 10.2, or under this part, upon notice and demand from the Franchise Tax Board, is not paid on or before 6 p.m. on the last day of the 11th month following the due date of the tax.
(c)If any liability, or any portion thereof, which is due and payable under Article 7 (commencing with Section 19131) of Chapter 4 of Part 10.2, is not paid on or before 6 p.m. on the last day of the 11th month following the date that the tax liability is due and payable.
SEC. 3.Section 23301.5 of the Revenue and Taxation Code is amended to read:23301.5.Except for the purposes of filing an application for exempt status or amending the articles of incorporation or organization as necessary either to perfect that application or to set forth a new name, the powers, rights, and privileges of a domestic taxpayer may be suspended, and the exercise of the powers, rights, and privileges of a foreign taxpayer in this state may be forfeited, if a taxpayer fails to file a tax return required by this part.
SEC. 4.Section 23301.6 of the Revenue and Taxation Code is amended to read:23301.6.Sections 23301, 23301.5, and 23775 shall apply to a foreign taxpayer only if the taxpayer is qualified or registered to do business in California. A taxpayer that is required under Section 2105 or 17708.02 of the Corporations Code to qualify or register to do business shall not be deemed to have qualified or registered to do business for purposes of this article unless the taxpayer has in fact qualified or registered with the Secretary of State.
SEC. 5.Section 23302 of the Revenue and Taxation Code is amended to read:23302.(a)Forfeiture or suspension of a taxpayers powers, rights, and privileges pursuant to Section 23301, 23301.5, or 23775 shall occur and become effective only as expressly provided in this section in conjunction with Section 21020, which requires notice prior to the suspension of a taxpayers powers, rights, and privileges.
(b)The notice requirements of Section 21020 shall also apply to any forfeiture of a taxpayers powers, rights, and privileges pursuant to Section 23301, 23301.5, or 23775 and to any voidability pursuant to subdivision (d) of Section 23304.1.
(c)The Franchise Tax Board shall transmit the names of taxpayers to the Secretary of State as to which the suspension or forfeiture provisions of Section 23301, 23301.5, or 23775 are or become applicable, and the suspension or forfeiture therein provided for shall thereupon become effective. The certificate of the Secretary of State shall be prima facie evidence of the suspension or forfeiture.
(d)If a taxpayers powers, rights, and privileges are forfeited or suspended pursuant to Section 23301, 23301.5, or 23775, without limiting any other consequences of such forfeiture or suspension, the taxpayer shall not be entitled to sell, transfer, or exchange real property in California during the period of forfeiture or suspension.
SEC. 6.Section 23303 of the Revenue and Taxation Code is amended to read:23303.Notwithstanding the provisions of Section 23301 or 23301.5, any taxpayer that transacts business or receives income within the period of its suspension or forfeiture shall be subject to tax under the provisions of this chapter.
SEC. 7.Section 23305.1 of the Revenue and Taxation Code is amended to read:23305.1.(a)A taxpayer may make application to the Franchise Tax Board for relief from the voidability provisions of Section 23304.1. To be relieved from voidability, the taxpayer shall do all of the following:
(1)Provide the Franchise Tax Board with an application for relief from contract voidability in a form and manner prescribed by the Franchise Tax Board.
(2)Include on the application the period for which relief is requested in accordance with subdivision (b).
(3)File any tax returns required to be filed under this part with the Franchise Tax Board, including returns for the period for which relief is requested.
(4)Pay any tax, additions to tax, penalties, interest, and any other amounts owing to the Franchise Tax Board, including any liability attributable to the period for which relief is requested.
(5)Pay any penalty imposed under subdivision (b) for the period for which relief is requested.
(6)In the case of a taxpayer that applies for and enters into an approved voluntary disclosure agreement in accordance with Article 8 (commencing with Section 19191) of Chapter 4 of Part 10.2, for purposes of this section, the taxpayer shall be considered to have met the requirements of paragraphs (3), (4), and (5) if the taxpayer fulfills to the satisfaction of the Franchise Tax Board all the specifications of the voluntary disclosure agreement within the meaning of paragraph (2) of subdivision (d) of Section 19191 and if the Franchise Tax Board has not found that any of the circumstances described in Section 19194 has rendered the voluntary disclosure agreement null and void.
(b)(1)Except as provided in paragraph (2), both of the following shall apply:
(A)The period for which relief is requested shall begin on the date that one of the taxpayers taxable years begins and ends on the date that relief is granted.
(B)The Franchise Tax Board shall assess a daily penalty equal to one hundred dollars ($100) for each day of the period for which relief from voidability is granted, but not to exceed a total penalty equal to the amount of the tax for the period for which relief is requested.
(2)If an application for relief from voidability is filed for a period in which an application for revivor has been filed and the certificate of revivor has been issued, all of the following shall apply:
(A)The period for which relief is requested shall begin on the date the taxpayers powers, rights, and privileges had been suspended or forfeited and ends on the date relief is granted.
(B)The Franchise Tax Board shall assess a daily penalty equal to one hundred dollars ($100) for each day of the period for which relief from voidability is granted, but not to exceed a total penalty equal to that amount of the tax that would be imposed under Sections 17941 and 17942 or Section 23151 and, except as provided in subparagraph (C), that penalty shall be equal to no less than the amount of the minimum tax provided under Section 17941 or 23153 for the period for which relief is requested.
(C)In the case of an exempt organization or trust subject to Article 2 (commencing with Section 23731) of Chapter 4 (the tax on unrelated business taxable income), the daily penalty provided in subparagraph (B) shall not exceed a total penalty equal to the amount of tax imposed upon its unrelated business taxable income for the period for which relief is requested.
(3)Any penalty imposed under this subdivision shall, subject to Section 23305.2, be due and payable on demand by the Franchise Tax Board.
(c)(1)Upon satisfaction of the conditions specified in subdivision (a), including through the application of Section 23305.2, the following shall apply:
(A)All contracts entered into during the period for which relief is granted that have not been rescinded by a final court order pursuant to Section 23304.5 may be enforced in the same manner and to the same extent, with regard to both the parties to the contract and any third parties, as if the contract had never been voidable.
(B)Any sale, transfer, or exchange of real property in California during the period for which relief is granted and which the taxpayer at that time was not entitled to sell, transfer, or exchange by reason of subdivision (d) of Section 23302 and which has not been rescinded by a final court order pursuant to Section 23304.5, shall be as valid as if the taxpayer had not been subject to subdivision (d) of Section 23302 at the time of the sale, transfer, or exchange.
(2)Upon being granted relief from voidability, the Franchise Tax Board shall certify that relief to the taxpayer in a form and manner as prescribed by the Franchise Tax Board. The certificate shall be issued or mailed to the taxpayer, or as directed by the taxpayer, and shall indicate the period for which relief is granted.
(d)The fact that a certificate of relief from voidability was issued pursuant to this section and the information contained on that certificate shall be subject to public disclosure. The certificate shall be prima facie evidence of the relief from voidability for contracts entered into during the period of relief stated on the certificate and the certificate may be recorded in the office of the county recorder of any county of this state.
(e)Subject to limitations set forth in Section 17 of Chapter 926 of the Statutes of 1990, a taxpayer that received a certificate of revivor between January 1, 1990, and January 1, 1991, may apply for relief from voidability under this section.
SEC. 8.Section 23305a of the Revenue and Taxation Code is amended to read:23305a.Before the certificate of revivor is issued by the Franchise Tax Board, it shall obtain from the Secretary of State an endorsement upon the application of the fact that the name of the taxpayer then meets the requirements of subdivision (b) of Section 201 or subdivision (b) of Section 17701.08 of the Corporations Code in the case of a domestic taxpayer or of subdivision (b) of Section 2106 or Section 17708.05 of the Corporations Code in the case of a foreign taxpayer that has qualified to do business. The reference to amendment of the articles of incorporation to set forth a new name contained in Sections 23301, 23301.5, and 23775 includes in the case of a foreign taxpayer the filing of an amended statement and designation to set forth its new name or to set forth an assumed name under subdivision (b) of Section 2106 or Section 17708.05 of the Corporations Code. Upon the issuance of the certificate by the Franchise Tax Board the taxpayer therein named shall become reinstated but the reinstatement shall be without prejudice to any action, defense or right which has accrued by reason of the original suspension or forfeiture, except that contracts which were voidable pursuant to Section 23304.1, but which have not been rescinded pursuant to Section 23304.5, may have that voidability cured in accordance with Section 23305.1. The certificate of revivor shall be prima facie evidence of the reinstatement and the certificate may be recorded in the office of the county recorder of any county of this state.
SEC. 9.Section 23305b of the Revenue and Taxation Code is amended to read:23305b.Notwithstanding Section 23305, the Franchise Tax Board may revive a taxpayer to good standing without full payment of the taxes, penalties, and interest due if it determines that the revivor will improve the prospects for collection of the full amount due. This revivor may be limited as to time or may limit the functions the revived taxpayer can perform, or both. The taxpayers powers, rights, and privileges may again be suspended or forfeited if the Franchise Tax Board determines that the prospects for collection of the full amount due have not been improved by the revivor of the taxpayer.
SEC. 10.Section 23305c of the Revenue and Taxation Code is amended to read:23305c.(a)Upon issuance of the certificate of revivor, the Franchise Tax Board shall transmit to the Secretary of State the revived taxpayers name and its entity number.
(b)The taxpayers name and number, the fact that the taxpayers powers, rights, and privileges have been revived and the effective date of the revivor shall be a matter of public record.
(c)If the Franchise Tax Board determines that a suspension or forfeiture was in error by the Franchise Tax Board, the Franchise Tax Board shall, in connection with the revivor, indicate that the taxpayer is restored. The status of the restored taxpayer shall be retroactive to the date of suspension or forfeiture as if there had been no suspension or forfeiture.
(d)If the Franchise Tax Board determines that the mailing of the 60-day demand notice referred to in subdivision (d) of Section 23304.1 was in error or that the Franchise Tax Boards original determination as to compliance with the 60-day demand notice was in error, the Franchise Tax Boards revised conclusions also shall be part of the public record referred to in that subdivision.
SEC. 11.Section 23305e of the Revenue and Taxation Code is amended to read:23305e.(a)The Franchise Tax Board may provide letters of good standing, verifying a taxpayers status for doing business in California, at a charge reflecting the reasonable costs to the department of responding to these requests.
(b)Fees received under this section shall be handled in accordance with Section 19604.
SEC. 12.Section 1.5 of this bill incorporates amendments to Section 19008 of the Revenue and Taxation Code proposed by both this bill and Senate Bill 516. That section of this bill shall only become operative if (1) both bills are enacted and become effective on or before January 1, 2024, (2) each bill amends Section 19008 of the Revenue and Taxation Code, and (3) this bill is enacted after Senate Bill 516, in which case Section 1 of this bill shall not become operative.
(a)The Franchise Tax Board may, in cases of financial hardship, as determined by the Franchise Tax Board, allow a taxpayer to enter into installment payment agreements with the Franchise Tax Board to make full or partial payment of taxes due, plus applicable interest and penalties over the life of the installment period. Failure by a taxpayer to comply fully with the terms of the installment payment agreement shall render the agreement null and void, unless the Franchise Tax Board determines that the failure was due to a reasonable cause, and the total amount of tax, interest, and all penalties shall be immediately due and payable. any taxpayer under which that taxpayer is allowed to make payment of any liability imposed or collected under Part 10 (commencing with Section 17001), Part 11 (commencing with Section 23001), or this part, including any additions to tax, interest, penalties, fees, and any other amounts relating to the imposed liability, in installment payments, pursuant to the agreement, if the Franchise Tax Board determines that the agreement will facilitate full or partial collection of the liability.
(b)In the case of a liability for tax of an individual under Part 10 (commencing with Section 17001) or this part, the Franchise Tax Board shall enter into an agreement to accept the full payment of the tax liability in installments if, as of the date the individual offers to enter into the agreement, all of the following apply:
(1)The aggregate amount of the liability (determined without regard to interest, penalties, additions to the tax tax, and additional amounts) does not exceed ten twenty-five thousand dollars ($10,000). ($25,000).
(2)The taxpayer (and, if the liability relates to a joint return, the taxpayers spouse) has not during any of the preceding five taxable years done any of the following:
(A)Failed to file any return of tax liability imposed under Part 10 (commencing with Section 17001) or this part.
(B)Failed to pay any tax required to be shown on the return. (C)Entered into(B)Failed to satisfy any term of an installment agreement under this section for payment of any tax liability imposed by Part 10 (commencing with Section 17001) or this part.
(3)The Franchise Tax Board determines that the taxpayer is financially unable to pay the liability in full when due, and the taxpayer submits any information as the Franchise Tax Board may require to make this determination.
(4)The agreement requires full payment of the liability within three five years.
(5)The taxpayer agrees to comply with the provisions of this part and Part 10 (commencing with Section 17001) for the period the agreement is in effect.
(c)(1)(A)Failure by a taxpayer to comply fully with the terms of the installment payment agreement shall render the agreement null and void, unless the Franchise Tax Board determines that the failure was due to a reasonable cause, and the total amount of tax, interest, and all penalties shall be immediately due and payable. Except in any case where the Franchise Tax Board finds collection of the tax to which an installment payment agreement relates to be in jeopardy, or there is a mutual consent to terminate, alter, or modify the agreement, the agreement shall not be considered null and void, or otherwise terminated, unless both of the following occur:
(1)(i)A notice of termination is provided to the taxpayer not later than 30 days before the date of termination.
(2)(ii)The notice includes an explanation of why the Franchise Tax Board intends to terminate the agreement.
(B)This paragraph shall apply only to agreements entered into before January 1, 2024.
(2)(A)(i)The Franchise Tax Board may alter, modify, or terminate an agreement entered into under this section if any of the following apply:
(I)Information that the taxpayer provided to the Franchise Tax Board before the date the agreement was entered into was inaccurate or incomplete.
(II)The Franchise Tax Board determines that the collection of any liability to which an agreement under this section relates is in jeopardy.
(III)The Franchise Tax Board determines that the financial condition of a taxpayer with whom the Franchise Tax Board has entered into an agreement has significantly changed.
(IV)The taxpayer fails to make an installment payment at the time the installment payment is due under the agreement.
(V)The taxpayer fails to file a required tax return under this part or pay any other liability at the time that the liability is due.
(VI)The taxpayer fails to provide a financial condition update upon the Franchise Tax Boards request.
(ii)The Franchise Tax Board may modify or alter an agreement under this section to add a liability that the taxpayer fails to pay at the time that the liability is due.
(iii)If a taxpayer is currently in an installment agreement under subdivision (a) or (b), the Franchise Tax Board may require financial hardship to alter or modify the installment agreement.
(iv)(I)Except as provided in subclause (II), the Franchise Tax Board shall not alter, modify, or terminate any agreement under this paragraph unless both of the following occur:
(ia)A notice of the alteration, modification, or termination is provided to the taxpayer not later than 30 days before the date of that action.
(ib)The notice includes an explanation of the rationale of the Franchise Tax Board for altering, modifying, or terminating the agreement.
(II)In any case where the Franchise Tax Board finds collection of the liability to which an installment payment agreement relates to be in jeopardy, the Franchise Tax Board may terminate the installment agreement and issue demand for immediate payment of the liability or the deficiency declared to be in jeopardy.
(B)This paragraph shall apply only to agreements entered into on or after January 1, 2024.
(d)No levy may be issued on the property or rights to property of any person with respect to any unpaid tax: liability:
(1)During the period that an offer by the taxpayer for an installment agreement under this section for payment of the unpaid tax liability is pending with the Franchise Tax Board.
(2)If the offer is rejected by the Franchise Tax Board, during the 30 days thereafter and, if a request for review of the rejection is filed within the 30 days, during the period that the review is pending.
(3)During the period that the installment agreement for payment of the unpaid tax liability is in effect.
(4)If the agreement is terminated by the Franchise Tax Board, during the 30 days thereafter (and, if a request for review of the termination is filed within the 30 days, during the period that the review is pending).
(5)This subdivision shall not apply with respect to any of the following:
(A)Any unpaid tax liability if either of the following occurs:
(i)The taxpayer files a written notice with the Franchise Tax Board that waives the restriction imposed by this subdivision on levy with respect to the tax. liability.
(ii)The Franchise Tax Board finds that the collection of that tax liability is in jeopardy.
(B)Any levy that was first issued before the date that the applicable proceeding under this subdivision commenced.
(C)At the discretion of the Franchise Tax Board, any unpaid tax liability for which the taxpayer makes an offer of an installment agreement subsequent to a rejection of an offer of an installment agreement with respect to that unpaid tax liability (or to any review thereof).
(D)The period of limitation under Section 19371 shall be suspended for the period during which the Franchise Tax Board is prohibited under this subdivision from making a levy.
(e)The Taxpayers Rights Advocate shall establish procedures for an independent departmental administrative review for the rejection of the offer of an installment payment and for installment payment agreements that are rendered null and void, or otherwise terminated under this section, for taxpayers that request that review. This administrative review shall not be subject to Chapter 4.5 (commencing with Section 11400) of Part 1 of Division 3 of the Government Code. Unless review is requested by the taxpayer within 30 days of the date of rejection of the offer of an installment agreement or termination of the installment agreement, this administrative review shall not stay collection of the tax liability to which the installment payment agreement relates.
(f)In the case of an agreement entered into by the Franchise Tax Board under subdivision (a) for partial payment of a tax liability, the The Franchise Tax Board shall review the agreement a representative sample of existing installment agreements entered into under this section at least once every two years. years to ensure taxpayers are in compliance with the terms of the agreement.
(g)(1)In the case of any taxpayer that is making payments to the Franchise Tax Board under an informal payment arrangement that was in existence prior to the effective date of the act adding this subdivision, that informal payment arrangement, for purposes of this section, shall be treated as an installment payment agreement that was entered into on the later of the following:(A)January 1, 2005.(B)The date on which the arrangement was established by the Franchise Tax Board.(2)In any case where the date determined under the rules of paragraph (1) is a date prior to February 1, 2005, the amount due under the informal payment arrangement as of February 1, 2005, shall be treated as an installment payment agreement amount as of the start of the amnesty program within the meaning of Section 19738.(3)Section 19591 does not apply to either of the following:(A)Informal payment arrangements treated as installment payment agreements under paragraph (1).(B)Installment payment agreements authorized by the amendments made by the act adding this subdivision that were entered into prior to July 1, 2005, or the effective date of the act adding this subdivision, whichever occurs later.(g)(1)The Franchise Tax Board may prescribe regulations as necessary or appropriate to carry out the purposes of this section.
(2)The Administrative Procedure Act (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, guideline, or any other guidance established or issued by the Franchise Tax Board pursuant to this section.
SEC. 2.Section 23301 of the Revenue and Taxation Code is amended to read:23301.Except for the purposes of filing an application for exempt status or amending the articles of incorporation or organization as necessary either to perfect that application or to set forth a new name, the corporate powers, rights and privileges of a domestic taxpayer may be suspended, and the exercise of the corporate powers, rights and privileges of a foreign taxpayer in this state may be forfeited, if any of the following conditions occur:
(a)If any tax, penalty, or interest, or any portion thereof, that is due and payable under Chapter 4 (commencing with Section 19001) of Part 10.2, or under this part, either at the time the return is required to be filed or on or before the 15th day of the ninth month following the close of the taxable year, is not paid on or before 6 p.m. on the last day of the 12th month after the close of the taxable year.
(b)If any tax, penalty, or interest, or any portion thereof, due and payable under Chapter 4 (commencing with Section 19001) of Part 10.2, or under this part, upon notice and demand from the Franchise Tax Board, is not paid on or before 6 p.m. on the last day of the 11th month following the due date of the tax.
(c)If any liability, or any portion thereof, which is due and payable under Article 7 (commencing with Section 19131) of Chapter 4 of Part 10.2, is not paid on or before 6 p.m. on the last day of the 11th month following the date that the tax liability is due and payable.
SEC. 3.Section 23301.5 of the Revenue and Taxation Code is amended to read:23301.5.Except for the purposes of filing an application for exempt status or amending the articles of incorporation or organization as necessary either to perfect that application or to set forth a new name, the corporate powers, rights, and privileges of a domestic taxpayer may be suspended, and the exercise of the corporate powers, rights, and privileges of a foreign taxpayer in this state may be forfeited, if a taxpayer fails to file a tax return required by this part.
SEC. 4.Section 23301.6 of the Revenue and Taxation Code is amended to read:23301.6.Sections 23301, 23301.5, and 23775 shall apply to a foreign taxpayer only if the taxpayer is qualified or registered to do business in California. A taxpayer that is required under Section 2105 or 17708.02 of the Corporations Code to qualify or register to do business shall not be deemed to have qualified or registered to do business for purposes of this article unless the taxpayer has in fact qualified or registered with the Secretary of State.
SEC. 5.Section 23302 of the Revenue and Taxation Code is amended to read:23302.(a)Forfeiture or suspension of a taxpayers powers, rights, and privileges pursuant to Section 23301, 23301.5, or 23775 shall occur and become effective only as expressly provided in this section in conjunction with Section 21020, which requires notice prior to the suspension of a taxpayers corporate powers, rights, and privileges.
(b)The notice requirements of Section 21020 shall also apply to any forfeiture of a taxpayers corporate powers, rights, and privileges pursuant to Section 23301, 23301.5, or 23775 and to any voidability pursuant to subdivision (d) of Section 23304.1.
(c)The Franchise Tax Board shall transmit the names of taxpayers to the Secretary of State as to which the suspension or forfeiture provisions of Section 23301, 23301.5, or 23775 are or become applicable, and the suspension or forfeiture therein provided for shall thereupon become effective. The certificate of the Secretary of State shall be prima facie evidence of the suspension or forfeiture.
(d)If a taxpayers powers, rights, and privileges are forfeited or suspended pursuant to Section 23301, 23301.5, or 23775, without limiting any other consequences of such forfeiture or suspension, the taxpayer shall not be entitled to sell, transfer, or exchange real property in California during the period of forfeiture or suspension.
SEC. 6.Section 23303 of the Revenue and Taxation Code is amended to read:23303.Notwithstanding the provisions of Section 23301 or 23301.5, any corporation taxpayer that transacts business or receives income within the period of its suspension or forfeiture shall be subject to tax under the provisions of this chapter.
SEC. 7.Section 23305.1 of the Revenue and Taxation Code is amended to read:23305.1.(a)A taxpayer may make application to the Franchise Tax Board for relief from the voidability provisions of Section 23304.1. To be relieved from voidability, the taxpayer shall do all of the following:
(1)Provide the Franchise Tax Board with an application for relief from contract voidability in a form and manner prescribed by the Franchise Tax Board.
(2)Include on the application the period for which relief is requested in accordance with subdivision (b).
(3)File any tax returns required to be filed under this part with the Franchise Tax Board, including returns for the period for which relief is requested.
(4)Pay any tax, additions to tax, penalties, interest, and any other amounts owing to the Franchise Tax Board, including any liability attributable to the period for which relief is requested.
(5)Pay any penalty imposed under subdivision (b) for the period for which relief is requested.
(6)In the case of a taxpayer that applies for and enters into an approved voluntary disclosure agreement in accordance with Article 8 (commencing with Section 19191) of Chapter 4 of Part 10.2, for purposes of this section, the taxpayer shall be considered to have met the requirements of paragraphs (3), (4), and (5) if the taxpayer fulfills to the satisfaction of the Franchise Tax Board all the specifications of the voluntary disclosure agreement within the meaning of paragraph (2) of subdivision (d) of Section 19191 and if the Franchise Tax Board has not found that any of the circumstances described in Section 19194 has rendered the voluntary disclosure agreement null and void.
(b)(1)Except as provided in paragraph (2), both of the following shall apply:
(A)The period for which relief is requested shall begin on the date that one of the taxpayers taxable years begins and ends on the date that relief is granted.
(B)The Franchise Tax Board shall assess a daily penalty equal to one hundred dollars ($100) for each day of the period for which relief from voidability is granted, but not to exceed a total penalty equal to the amount of the tax for the period for which relief is requested.
(2)If an application for relief from voidability is filed for a period in which an application for revivor has been filed and the certificate of revivor has been issued, all of the following shall apply:
(A)The period for which relief is requested shall begin on the date the taxpayers powers, rights, and privileges had been suspended or forfeited and ends on the date relief is granted.
(B)The Franchise Tax Board shall assess a daily penalty equal to one hundred dollars ($100) for each day of the period for which relief from voidability is granted, but not to exceed a total penalty equal to that amount of the tax that would be imposed under Sections 17941 and 17942 or Section 23151 and, except as provided in subparagraph (C), that penalty shall be equal to no less than the amount of the minimum tax provided under Section 17941 or 23153 for the period for which relief is requested.
(C)In the case of an exempt organization or trust subject to Article 2 (commencing with Section 23731) of Chapter 4 (the tax on unrelated business taxable income), the daily penalty provided in subparagraph (B) shall not exceed a total penalty equal to the amount of tax imposed upon its unrelated business taxable income for the period for which relief is requested.
(3)Any penalty imposed under this subdivision shall, subject to Section 23305.2, be due and payable on demand by the Franchise Tax Board.
(c)(1)Upon satisfaction of the conditions specified in subdivision (a), including through the application of Section 23305.2, the following shall apply:
(A)All contracts entered into during the period for which relief is granted that have not been rescinded by a final court order pursuant to Section 23304.5 may be enforced in the same manner and to the same extent, with regard to both the parties to the contract and any third parties, as if the contract had never been voidable.
(B)Any sale, transfer, or exchange of real property in California during the period for which relief is granted and which the taxpayer at that time was not entitled to sell, transfer, or exchange by reason of subdivision (d) of Section 23302 and which has not been rescinded by a final court order pursuant to Section 23304.5, shall be as valid as if the taxpayer had not been subject to subdivision (d) of Section 23302 at the time of the sale, transfer, or exchange.
(2)Upon being granted relief from voidability, the Franchise Tax Board shall certify that relief to the taxpayer in a form and manner as prescribed by the Franchise Tax Board. The certificate shall be issued or mailed to the taxpayer, or as directed by the taxpayer, and shall indicate the period for which relief is granted.
(d)The fact that a certificate of relief from voidability was issued pursuant to this section and the information contained on that certificate shall be subject to public disclosure. The certificate shall be prima facie evidence of the relief from voidability for contracts entered into during the period of relief stated on the certificate and the certificate may be recorded in the office of the county recorder of any county of this state.
(e)Subject to limitations set forth in Section 17 of Chapter 926 of the Statutes of 1990, a taxpayer that received a certificate of revivor between January 1, 1990, and January 1, 1991, may apply for relief from voidability under this section.
SEC. 8.Section 23305a of the Revenue and Taxation Code is amended to read:23305a.Before the certificate of revivor is issued by the Franchise Tax Board, it shall obtain from the Secretary of State an endorsement upon the application of the fact that the name of the taxpayer then meets the requirements of subdivision (b) of Section 201 or subdivision (b) of Section 17701.08 of the Corporations Code in the case of a domestic taxpayer or of subdivision (b) of Section 2106 or Section 17708.05 of the Corporations Code in the case of a foreign taxpayer that has qualified to do business. The reference to amendment of the articles of incorporation to set forth a new name contained in Sections 23301, 23301.5, and 23775 includes in the case of a foreign taxpayer the filing of an amended statement and designation to set forth its new name or to set forth an assumed name under subdivision (b) of Section 2106 or Section 17708.05 of the Corporations Code. Upon the issuance of the certificate by the Franchise Tax Board the taxpayer therein named shall become reinstated but the reinstatement shall be without prejudice to any action, defense or right which has accrued by reason of the original suspension or forfeiture, except that contracts which were voidable pursuant to Section 23304.1, but which have not been rescinded pursuant to Section 23304.5, may have that voidability cured in accordance with Section 23305.1. The certificate of revivor shall be prima facie evidence of the reinstatement and the certificate may be recorded in the office of the county recorder of any county of this state.
SEC. 9.Section 23305b of the Revenue and Taxation Code is amended to read:23305b.Notwithstanding Section 23305, the Franchise Tax Board may revive a corporation taxpayer to good standing without full payment of the taxes, penalties, and interest due if it determines that the revivor will improve the prospects for collection of the full amount due. This revivor may be limited as to time or may limit the functions the revived corporation taxpayer can perform, or both. The corporate taxpayers powers, rights, and privileges may again be suspended or forfeited if the Franchise Tax Board determines that the prospects for collection of the full amount due have not been improved by the revivor of the corporation. taxpayer.
SEC. 10.Section 23305c of the Revenue and Taxation Code is amended to read:23305c.(a)Upon issuance of the certificate of revivor, the Franchise Tax Board shall transmit to the Secretary of State the revived taxpayers name and its corporate entity number.
(b)The taxpayers name and number, the fact that the taxpayers corporate powers, rights, and privileges have been revived and the effective date of the revivor shall be a matter of public record.
(c)If the Franchise Tax Board determines that a suspension or forfeiture was in error by the Franchise Tax Board, the Franchise Tax Board shall, in connection with the revivor, indicate that the taxpayer is restored. The status of the restored taxpayer shall be retroactive to the date of suspension or forfeiture as if there had been no suspension or forfeiture.
(d)If the Franchise Tax Board determines that the mailing of the 60-day demand notice referred to in subdivision (d) of Section 23304.1 was in error or that the Franchise Tax Boards original determination as to compliance with the 60-day demand notice was in error, the Franchise Tax Boards revised conclusions also shall be part of the public record referred to in that subdivision.
SEC. 11.Section 23305e of the Revenue and Taxation Code is amended to read:23305e.(a)The Franchise Tax Board may provide letters of good standing, verifying a corporations taxpayers status for doing business in California, at a charge reflecting the reasonable costs to the department of responding to these requests.
(b)Fees received under this section shall be handled in accordance with Section 19604.
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Date
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Status
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| Sep 22, 2023 | Chaptered by Secretary of State - Chapter 209, Statutes of 2023. |
| Sep 22, 2023 | Approved by the Governor. |
| Sep 13, 2023 | Enrolled and presented to the Governor at 3 p.m. |
| Sep 7, 2023 | Senate amendments concurred in. To Engrossing and Enrolling. (Ayes 75. Noes 0. Page 3074.). |
| Sep 7, 2023 | Assembly Rule 77 suspended. (Page 3011.) |
| Sep 6, 2023 | In Assembly. Concurrence in Senate amendments pending. May be considered on or after September 8 pursuant to Assembly Rule 77. |
| Sep 6, 2023 | Read third time. Passed. Ordered to the Assembly. (Ayes 40. Noes 0. Page 2397.). |
| Aug 24, 2023 | Ordered to third reading. |
| Aug 24, 2023 | From Consent Calendar. |
| Aug 22, 2023 | Read second time. Ordered to Consent Calendar. |
| Aug 21, 2023 | From committee: Be ordered to second reading file pursuant to Senate Rule 28.8 and ordered to Consent Calendar. |
| Aug 14, 2023 | From committee chair, with author's amendments: Amend, and re-refer to committee. Read second time, amended, and re-referred to Com. on APPR. |
| Jul 26, 2023 | In committee: Set, first hearing. Hearing canceled at the request of author. |
| Jul 13, 2023 | From committee: Do pass and re-refer to Com. on APPR with recommendation: To Consent Calendar. (Ayes 8. Noes 0.) . Re-referred to Com. on APPR. |
| Jun 14, 2023 | Referred to Com. on GOV. & F. |
| Jun 1, 2023 | In Senate. Read first time. To Com. on RLS. for assignment. |
| Jun 1, 2023 | Read third time. Passed. Ordered to the Senate. (Ayes 79. Noes 0. Page 2136.) |
| May 18, 2023 | Read second time. Ordered to third reading. |
| May 18, 2023 | Joint Rule 62(a), file notice suspended. (Page 1580.) |
| May 18, 2023 | From committee: Do pass. (Ayes 15. Noes 0.) (May 18). |
| May 17, 2023 | In committee: Set, first hearing. Referred to APPR. suspense file. |
| Apr 25, 2023 | From committee: Do pass and re-refer to Com. on APPR. (Ayes 11. Noes 0.) (April 24). Re-referred to Com. on APPR. |
| Apr 18, 2023 | In committee: Set, first hearing. Referred to REV. & TAX. suspense file. |
| Mar 23, 2023 | Referred to Com. on REV. & TAX. |
| Mar 17, 2023 | From printer. May be heard in committee April 16. |
| Mar 16, 2023 | Read first time. To print. |
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Date
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Description
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Location
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Votes
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| Sep 7, 2023 | AB 1765 Revenue and Taxation Concurrence in Senate Amendments By IRWIN | Assembly Floor |
Passed |
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| Sep 6, 2023 | Assembly 3rd Reading AB1765 REV. & TAX. (Irwin) By Skinner | Senate Floor |
Passed |
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| Jul 12, 2023 | Do pass, but first be re-referred to the Committee on [Appropriations] with the recommendation: To Consent Calendar | Senate Standing Committee on Governance and Finance |
Passed |
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| Jun 1, 2023 | AB 1765 Revenue and Taxation Assembly Third Reading By IRWIN | Assembly Floor |
Passed |
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| May 18, 2023 | Do pass. | Assembly Standing Committee on Appropriations |
Passed |
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| Apr 24, 2023 | Do pass and be re-referred to the Committee on [Appropriations] | Assembly Standing Committee on Revenue and Taxation |
Passed |
This list shows positions taken on this bill by organizations on the date displayed, which is linked to the original source.
Positions by individuals are not included.
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Organization
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Position
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Date
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| California Society Of Enrolled Agents | ** Support |
CONCURRENCE IN SENATE AMENDMENTS
CSA1 Bill Id:AB 1765
Author:(Committee on Revenue and Taxation)
As Amended Ver:August 14, 2023
Majority vote
SUMMARY
Advances two proposals drafted by the Franchise Tax Board (FTB), with technical modifications, that do both of the following: 1) expands the FTB's authority to enter into installment agreements with taxpayers who have outstanding tax liabilities; and, 2) updates terminology to ensure equal treatment for different types of Limited Liability Companies (LLCs).
Senate Amendments
Add chaptering language to address any conflicts with SB 516 (Skinner) of the current session.
COMMENTS
- Installment agreements: Current law requires the FTB to enter into installment agreements of no longer than three years with taxpayers whose personal income tax liability does not exceed $10,000, provided that those taxpayers have filed all prior year returns and commit to remain in compliance with the terms of the installment agreement. For taxpayers with liabilities in excess of $10,000, the FTB is not required to enter into an installment agreement. At their discretion, the FTB has generally entered into an installment agreement for up to five years with the taxpayer's self-attestation of a financial hardship if their liability is less than $25,000. For liabilities of $25,000 or more, the FTB asks for documentation to verify a financial hardship.
This bill adopts the FTB's proposal, with technical modifications, to amend the current statutory authority to allow more taxpayers the right to enter into an installment agreement with the FTB if they meet specified requirements and extends the time for full payment of an installment agreement in certain situations. Beginning in 2024, the FTB would be required to enter into installment agreements of no more than five years with taxpayers whose personal income tax liability is less than $25,000. Additionally, this bill clarifies the FTB's authority to alter or modify installment agreements in certain situations to help taxpayers continue their installment agreements when a breach of the original terms has taken place, such as the taxpayer incurring additional liabilities or payment defaults.
The FTB has found that expediting the process of entering taxpayers into installment agreements increases the likelihood that the liability will be paid in full. The FTB contends that the proposed modifications to the overall installment agreement process will enhance the taxpayer experience by expanding the scope of taxpayers with the right to enter into an installment agreement, as well as provide needed flexibility so that installment agreements are not revoked due to the taxpayer's financial hardship.
- Conditional Revivors for Limited Liability Companies (LLCs): Under current statutory authority, corporations and LLCs classified as associations, if suspended, are granted an opportunity to revive without payment in full of outstanding taxes and fees if the FTB determines that the revivor will improve collection prospects. LLCs classified as partnerships or disregarded entities, however, are not provided the same opportunity because the definition of "corporation" does not include those entities.
There are many reasons why a business may be suspended by the FTB, the Secretary of State (SOS), or by both. A business may be suspended by the FTB for failing to file a return or failing to pay taxes, penalties, fees, or interest. A business may be suspended by the SOS for failing to file a timely Statement of Information.
This bill adopts the FTB's proposal to amend the relevant sections in the R&TC to include all LLCs by removing the term "corporation" or "corporate," and replacing those terms with the terms "taxpayer" or "entity". The proposed changes would provide equal treatment amongst all LLCs seeking a revivor, regardless of whether they are classified as an association, partnership, or disregarded entity. FTB expects this change to increase taxpayer compliance, improve accounts receivable collections, and reduce taxpayer burden.
According to the Author
The Assembly Revenue & Taxation Committee provided the following statement in support of this bill:
This bill advances two proposals drafted by the FTB, with technical modifications, that will improve personal income and corporation tax administration, provide additional flexibility for taxpayers to use installment agreements, and ensure equal treatment for similarly situated taxpayers.
Arguments in Support
Writing in support of this bill, the California Society of Enrolled Agents, notes, in part:
The California Society of Enrolled Agents (CSEA), supports the committee's Assembly Bill 1765, which would extend the conditional revivor process to limited liability companies as current law already allows for other types of corporate entities... The Conditional Revivor policy is important as it allows California businesses to reclaim legal status while increasing the likelihood of FTB collection of those delinquent taxes. If not for this policy, businesses who could not full pay to qualify for revivor status would have limited options (continue in business illegally, shut down the business, file bankruptcy, etc.) all of which would likely leave the delinquent taxes unpaid. The proposal is a step toward conformity for LLCs and would benefit taxpayers.
Arguments in Opposition
None on file.
FISCAL COMMENTS
According to the Assembly Appropriations Committee:
- General Fund revenue gain of approximately $9.2 million in fiscal year (FY) 2024-25 and $9.4 million in FY 2025-26 related to this bill's LLC provisions.
FTB notes the proposed modifications to the installment payment agreements process would have no impact on the state's income tax revenue. While this bill may result in changes in the amount or timing of collection activity, FTB does not expect a measurable change.
- Minor and absorbable costs to FTB to update administrative procedures.
VOTES:
ASM REVENUE AND TAXATION: 11-0-0
YES: Irwin, Wallis, Bains, Grayson, Pacheco, Jim Patterson, Petrie-Norris, Luz Rivas, Ta, Valencia, Zbur
ASM APPROPRIATIONS: 15-0-1
YES: Holden, Megan Dahle, Bryan, Calderon, Wendy Carrillo, Dixon, Mike Fong, Hart, Lowenthal, Mathis, Papan, Pellerin, Sanchez, Weber, Ortega
ABS, ABST OR NV: Robert Rivas
ASSEMBLY FLOOR: 79-0-1
YES: Addis, Aguiar-Curry, Alanis, Alvarez, Arambula, Bains, Bauer-Kahan, Bennett, Berman, Boerner, Bonta, Bryan, Calderon, Juan Carrillo, Wendy Carrillo, Cervantes, Chen, Connolly, Megan Dahle, Davies, Dixon, Essayli, Flora, Mike Fong, Vince Fong, Friedman, Gallagher, Garcia, Gipson, Grayson, Haney, Hart, Holden, Hoover, Irwin, Jackson, Jones-Sawyer, Kalra, Lackey, Lee, Low, Lowenthal, Maienschein, Mathis, McCarty, McKinnor, Muratsuchi, Stephanie Nguyen, Ortega, Pacheco, Papan, Jim Patterson, Joe Patterson, Pellerin, Petrie-Norris, Quirk-Silva, Ramos, Reyes, Luz Rivas, Robert Rivas, Rodriguez, Blanca Rubio, Sanchez, Santiago, Schiavo, Soria, Ta, Ting, Valencia, Villapudua, Waldron, Wallis, Ward, Weber, Wicks, Wilson, Wood, Zbur, Rendon
ABS, ABST OR NV: Gabriel
SENATE FLOOR: 40-0-0
YES: Allen, Alvarado-Gil, Archuleta, Ashby, Atkins, Becker, Blakespear, Bradford, Caballero, Cortese, Dahle, Dodd, Durazo, Eggman, Glazer, Gonzalez, Grove, Hurtado, Jones, Laird, Limón, McGuire, Menjivar, Min, Newman, Nguyen, Niello, Ochoa Bogh, Padilla, Portantino, Roth, Rubio, Seyarto, Skinner, Smallwood-Cuevas, Stern, Umberg, Wahab, Wiener, Wilk
UPDATED
VERSION: August 14, 2023
CONSULTANT: Wesley Whitaker / REV. & TAX. / (916) 319-2098 FN: 0001848
SENATE RULES COMMITTEE Office of Senate Floor Analyses (916) 651-1520 Fax: (916) 327-4478 | AB 1765 |
THIRD READING
Bill No: AB 1765
Author: Committee on Revenue and Taxation
Amended: 8/14/23 in Senate
Vote: 21
SENATE GOVERNANCE & FIN. COMMITTEE: 8-0, 7/12/23
AYES: Caballero, Seyarto, Blakespear, Dahle, Durazo, Glazer, Skinner, Wiener
SENATE APPROPRIATIONS COMMITTEE: Senate Rule 28.8
ASSEMBLY FLOOR: 79-0, 6/1/23 - See last page for vote
SUBJECT: Income tax administration: installment agreements, suspension, forfeiture, and revivor
SOURCE: Author
DIGEST:
This bill expands Franchise Tax Board’s authority to enter into installment agreements with taxpayers and allows all limited liability corporations to seek revivor status equally.
ANALYSIS:
Existing law:
- Authorizes the Franchise Tax Board (FTB) to enter into installment agreements (IA) with taxpayers to make full or partial payments on taxes owed, including applicable interests and penalties.
- To enter into an IA, a taxpayer must:
- Have personal income tax liabilities of $10,000 or less (unless FTB determines the taxpayer is facing a financial hardship).
- Indicate an inability to pay the debt in full.
- Have filed prior year returns.
- Agree to completely pay all taxes and penalties within three years.
- Commit to remain in compliance with tax laws in the future.
- This serves as a self-attestation from the taxpayer, and if the taxpayer attests they meet the above-listed criteria, FTB must approve the agreement.
- FTB is required to review partial payment IAs at least once every two years.
- FTB can terminate an IA as long as it gives a taxpayer 30 day notice and an explanation as to why it is terminating the agreement.
- An IA cannot be considered null and void unless FTB considers the agreement to be in jeopardy.
- A taxpayer and the FTB can also mutually agree to terminate, alter, or modify an IA.
- To enter into an IA, a taxpayer must:
- Provides that suspended corporations and limited liability corporations (LLC) classified as associations can revive their status to good standing without having to fully pay all outstanding taxes and fees if FTB determines the revivor will improve its ability to collect those outstanding taxes and fees.
This bill:
- Clarifies that FTB’s may enter into IA’s with taxpayers if it determines the agreement will facilitate full or partial collection of the liability.
- Increases the monetary thresholds for individuals who don’t have to demonstrate financial hardship to pay their taxes and fees owed in full from $10,000 to $25,000, beginning January 1, 2024.
- Increases the maximum length of an IA from three years to five years, also beginning January 1, 2024.
- Expands FTB’s authority to alter, modify, and terminate IA entered into on or after January 1, 2024 and issue a demand for immediate payment. FTB must provide notice and explanation to the taxpayer at least 30 days in advance.
- Replaces the word “corporation” with “taxpayer” and adds appropriate cross-references in various sections in Revenue & Tax Code, allowing LLCs classified as partnerships or disregarded entities to be treated the same as LLCs classified as associations.
Comments
- According to the FTB, “The proposed changes in AB 1765, with regard to installment agreements (IAs), would make it easier for a taxpayer to qualify for IA for liabilities up to and including $25,000 by allowing a taxpayer to submit an application for an IA, which is presumed to be proof of the taxpayer’s inability to pay the liability in full and the taxpayer’s compliance with other requirements. This bill would increase the amount of liability and the length of the payment period of the IAs that FTB is required to enter and ultimately reduce barriers to enter into the process. FTB’s experience is that the sooner a taxpayer enters into an IA, the more likely they are to pay their liability; and as more time passes, the collection rate decreases, and it can become more expensive for the FTB to pursue collection activity. The proposed modifications to the overall IA process would enhance the taxpayer experience by expanding the scope of taxpayers with the right to enter into an IA.
“The proposed changes related to revivors for Limited Liability Companies (LLC’s) would provide equal treatment amongst all LLC’s seeking a revivor. This would increase taxpayer compliance, improve accounts receivable collections, and reduce taxpayer burden.”
- Current law requires FTB to enter into IAs when a taxpayer has less than $10,000 in tax liabilities and requires the money to be repaid in three years. At its discretion, FTB can, but is not required to, enter into IA’s with a five-year payment option for taxpayers with liabilities up to $25,000 if the taxpayer self-attests to facing a financial hardship. For liabilities over $25,000, a taxpayer is required to submit documentation to verify financial hardship if they want to enter into an IA. This bill requires FTB to enter into all IA’s under $25,000 of outstanding liabilities, but retains FTB discretion with regard to liabilities over $25,000.
- This bill will give more taxpayers the right to enter into IAs with FTB if they meet the specified requirements. Since it extends the time for full payment from three years to five years, taxpayers can have lower payments. This bill allows FTB to enter into IAs for more taxpayers without requiring financial hardship documentation from taxpayers, which should expedite the process of entering into IAs, and in return increase the likelihood taxpayers will be able to pay off their liabilities in full.
- By replacing the terms “corporation” or “corporate” with the terms “taxpayer” or “entity” in relevant sections of the RTC, it treats all LLC’s the same regardless how they are classified. In return, it facilitates the process for any LLC seeking revivor status. FTB expects this change to increase taxpayer compliance and improve the prospects of collections.
Related/Prior Legislation
SB 516 (Skinner, 2023) seeks to allow taxpayers to enter into an IA by submitting a request to FTB via mail, online, or by telephone. The bill also clarifies if a taxpayer fails to fully comply with the terms of the IA, the taxpayer has at least 60 days to cure the failure before the IA is terminated.
FISCAL EFFECT: Appropriation: No Fiscal Com.: Yes Local: No
According to the Assembly Appropriations Committee, FTB estimates General Fund revenue gains of $9.2 million in fiscal year (FY) 2024-2025 and $9.4 million in FY 2025-2026.
SUPPORT: (Verified 8/23/23)
California Society of Enrolled Agents
OPPOSITION: (Verified 8/23/23)
None received
ARGUMENTS IN SUPPORT: According to California Society of Enrolled Agents: “Since 1884, Enrolled Agents (EAs) have been federally licensed and regulated by the Department of the Treasury. EAs are governed by Treasury Circular 230 in their practice before the IRS and must meet a strict code of ethics and continuing education. EAs advise, represent and oversee tax issues for individuals, partnerships, corporations, estates, trusts, and any entities with tax reporting requirements.
“The Conditional Revivor policy is important as it allows California businesses to reclaim legal status while increasing the likelihood of FTB collection of those delinquent taxes. If not for this policy, businesses who could not full pay to qualify for revivor status would have limited options (continue in business illegally, shut down the business, file bankruptcy, etc.) all of which would likely leave the delinquent taxes unpaid.
“The proposal is a step towards conformity for LLCs and would benefit taxpayers. CSEA supports AB 1765. CSEA is a resource to the state tax agencies and the legislature for tax related matters. Thank you for considering CSEA’s position.”
ASSEMBLY FLOOR: 79-0, 6/1/23
AYES: Addis, Aguiar-Curry, Alanis, Alvarez, Arambula, Bains, Bauer-Kahan, Bennett, Berman, Boerner, Bonta, Bryan, Calderon, Juan Carrillo, Wendy Carrillo, Cervantes, Chen, Connolly, Megan Dahle, Davies, Dixon, Essayli, Flora, Mike Fong, Vince Fong, Friedman, Gallagher, Garcia, Gipson, Grayson, Haney, Hart, Holden, Hoover, Irwin, Jackson, Jones-Sawyer, Kalra, Lackey, Lee, Low, Lowenthal, Maienschein, Mathis, McCarty, McKinnor, Muratsuchi, Stephanie Nguyen, Ortega, Pacheco, Papan, Jim Patterson, Joe Patterson, Pellerin, Petrie-Norris, Quirk-Silva, Ramos, Reyes, Luz Rivas, Robert Rivas, Rodriguez, Blanca Rubio, Sanchez, Santiago, Schiavo, Soria, Ta, Ting, Valencia, Villapudua, Waldron, Wallis, Ward, Weber, Wicks, Wilson, Wood, Zbur, Rendon
NO VOTE RECORDED: Gabriel
Prepared by: Itzel Vargas / GOV. & F. / (916) 651-4119
8/24/23 11:16:57
**** END ****
SENATE COMMITTEE ON GOVERNANCE AND FINANCE
Senator Anna M. Caballero, Chair
2023 - 2024 Regular
Bill No: | AB 1765 | Hearing Date: | 7/12/23 |
Author: | Committee on Revenue and Taxation | Tax Levy: | No |
Version: | 3/16/23 | Fiscal: | Yes |
Consultant: | Vargas | ||
Income tax administration: installment agreements, suspension, forfeiture, and revivor
Expands Franchise Tax Board’s authority to enter into installment agreements with taxpayers and allows all limited liability corporations to seek revivor status equally.
Background
Installment Agreements. Current law gives the Franchise Tax Board (FTB) the authority to enter into installment agreements (IA) with taxpayers to make full or partial payments on taxes owed, including applicable interests and penalties. To enter into an IA, a taxpayer must:
Have personal income tax liabilities of $10,000 or less (unless FTB determines the taxpayer is facing a financial hardship).
Indicate an inability to pay the debt in full.
Have filed prior year returns.
Agree to completely pay all taxes and penalties within three years.
Commit to remain in compliance with tax laws in the future.
This serves as a self-attestation from the taxpayer, and if the taxpayer attests they meet the above-listed criteria, FTB must approve the agreement. In addition, FTB is required to review partial payment IAs at least once every two years.
An IA cannot be considered null and void unless FTB considers the agreement to be in jeopardy. FTB can terminate an IA as long as it gives a taxpayer 30 day notice and an explanation as to why it is terminating the agreement. A taxpayer and the FTB can also mutually agree to terminate, alter, or modify an IA.
A taxpayer with more than $10,000 in outstanding tax liability can enter an IA with the FTB if the taxpayer can demonstrate financial hardship. FTB can either request the taxpayer provide a self-attestation regarding the financial hardship or the FTB can require the taxpayer to provide proof on their IA application of a financial hardship.
Revivor. Current law provides that suspended corporations and limited liability corporations (LLCs) classified as associations can revive their status to good standing without having to fully pay all outstanding taxes and fees if FTB determines the revivor will improve its ability to collect those outstanding taxes and fees. LLCs can be suspended by the FTB or Secretary of State (SOS) or by both. The FTB may suspended a business for failing to file a return or failing to pay taxes, penalties, fees, or interests. The SOS may suspend a business for failing to timely submit a Statement of Information. LLCs classified as partnerships or disregarded entities do not have the option to reclaim legal status through revivor and instead have limited options to continue their business because the statute only refers to “corporations.”
The FTB wants to expedite the process of entering into IAs and classify all LLCs seeking revivor equally.
Proposed Law
Assembly Bill 1765 makes several changes to FTB’s IA authority, including to clarify that FTB may enter into IAs with taxpayers if it determines the agreement will facilitate full or partial collection of the liability. The bill increases the monetary thresholds for individuals who don’t have to demonstrate financial hardship to pay their taxes and fees owed in full from $10,000 to $25,000, beginning January 1, 2024. It also increases the maximum length of an IA from three years to five years.
AB 1765 expands FTB’s authority to alter, modify, and terminate IA in cases where:
- The taxpayer provided inaccurate or incomplete information when creating the agreement.
- Collection of any liability is in jeopardy.
- A taxpayer’s financial condition has significantly changed.
- A taxpayer failed to make installment payment.
- A taxpayer failed to file required tax returns or pay any other liability.
- A taxpayer failed to provide financial condition updates to FTB upon request.
For IAs entered into on or after January 1, 2024, the bill prevents the FTB from altering, modifying, or terminating any IA unless:
- A notice is provided to the taxpayer not later than 30 days before the date of action; and
- A notice includes an explanation from FTB.
Should any of the above occur, this bill allows FTB to terminate the IA and issue a demand for immediate payment. This bill requires FTB to review a sample that is representative of the existing IAs at least once every two years to ensure taxpayers are complying with the agreements. This bill also deletes outdated provisions relating to informal payment arrangements entered prior to February 1, 2005.
Additionally, AB 1765 replaces the word “corporation” with “taxpayer” and adds appropriate cross-references in various sections in Revenue & Tax Code, allowing LLCs classified as partnerships or disregarded entities to be treated the same as LLCs classified as associations. As a result, the bill treats all LLC’s equally in terms of their ability to revive their status without having to fully pay all outstanding taxes and fees if FTB determines the revivor will improve its ability to collect those outstanding taxes and fees.
State Revenue Impact
FTB estimates General Fund revenue gains of $9.2 million in fiscal year (FY) 2024-2025 and $9.4 million in FY 2025-2026.
Comments
1. Purpose of the bill. According to the FTB, “The proposed changes in AB 1765, with regard to installment agreements (IAs), would make it easier for a taxpayer to qualify for IA for liabilities up to and including $25,000 by allowing a taxpayer to submit an application for an IA, which is presumed to be proof of the taxpayer’s inability to pay the liability in full and the taxpayer’s compliance with other requirements. This bill would increase the amount of liability and the length of the payment period of the IAs that FTB is required to enter and ultimately reduce barriers to enter into the process. FTB’s experience is that the sooner a taxpayer enters into an IA, the more likely they are to pay their liability; and as more time passes, the collection rate decreases, and it can become more expensive for the FTB to pursue collection activity. The proposed modifications to the overall IA process would enhance the taxpayer experience by expanding the scope of taxpayers with the right to enter into an IA.
The proposed changes related to revivors for Limited Liability Companies (LLC’s) would provide equal treatment amongst all LLC’s seeking a revivor. This would increase taxpayer compliance, improve accounts receivable collections, and reduce taxpayer burden.”
2. In compliance. Current law requires FTB to enter into IAs when a taxpayer has less than $10,000 in tax liabilities and requires the money to be repaid in three years. At its discretion, FTB can, but is not required to, enter into IA’s with a five-year payment option for taxpayers with liabilities up to $25,000 if the taxpayer self-attests to facing a financial hardship. For liabilities over $25,000, a taxpayer is required to submit documentation to verify financial hardship if they want to enter into an IA. This bill requires FTB to enter into all IA’s under $25,000 of outstanding liabilities, but retains FTB discretion with regard to liabilities over $25,000.
3. The more the merrier. This bill will give more taxpayers the right to enter into IAs with FTB if they meet the specified requirements. Since it extends the time for full payment from three years to five years, taxpayers can have lower payments. This bill allows FTB to enter into IAs for more taxpayers without requiring financial hardship documentation from taxpayers, which should expedite the process of entering into IAs, and in return increase the likelihood taxpayers will be able to pay off their liabilities in full.
4. Under the same umbrella. By replacing the terms “corporation” or “corporate” with the terms “taxpayer” or “entity” in relevant sections of the RTC, it treats all LLC’s the same regardless how they are classified. In return, it facilitates the process for any LLC seeking revivor status. FTB expects this change to increase taxpayer compliance and improve the prospects of collections.
5. Related legislation. The Committee approved SB 516 (Skinner) earlier this year, which seeks to allow taxpayers to enter into an IA by submitting a request to FTB via mail, online, or by telephone. This bill also clarifies if a taxpayer fails to fully comply with the terms of the IA, the taxpayer has at least 60 days to cure the failure before the IA is terminated. The measure is currently pending in the Assembly Appropriations Committee.
Assembly Actions
Assembly Revenue and Taxation Committee: 11-0
Assembly Appropriations Committee : 15-0
Assembly Floor: 79-0
Support and Opposition
(7/7/23)
Support: California Society of Enrolled Agents
Opposition: None received.
-- END --
ASSEMBLY THIRD READING
ATR Bill Id:AB 1765
Author:(Committee on Revenue and Taxation)
As Introduced Ver:March 16, 2023
Majority vote
SUMMARY
Advances two proposals drafted by the Franchise Tax Board (FTB), with technical modifications, that do both of the following: 1) expands the FTB's authority to enter into installment agreements with taxpayers who have outstanding tax liabilities; and, 2) updates terminology to ensure equal treatment for different types of Limited Liability Companies (LLCs).
Major Provisions
- Clarifies that the FTB may enter into an installment agreement with a taxpayer who has an outstanding liability if the FTB determines that the agreement will facilitate full or partial collection of the liability and allows the FTB to alter, modify, or terminate an installment agreement entered into on or after January 1, 2024 if specified criteria are met.
- Increases, from $10,000 to $25,000, the threshold of outstanding tax liability under which the FTB is required to enter into an installment agreement with a taxpayer and increases, from three to five years, the maximum length of the installment agreement between the FTB and a qualifying taxpayer, beginning January 1, 2024.
- Allows, for installment agreements entered into on or after January 1, 2024, the FTB to terminate the installment agreement and issue demand for immediate payment of the liability or the deficiency in any case where the FTB finds collection of the liability to which an installment payment agreement relates to be in jeopardy, provided that the FTB provides a notice and explanation of the rationale for the change at least 30 days in advance.
- Replaces the word "corporation" with "taxpayer" and adds appropriate cross-references in various sections of the Revenue & Taxation Code (R&TC) to provide equal opportunity to receive a conditional revivor for LLCs classified as partnerships or disregarded entities as is currently provided to LLCs classified as associations.
COMMENTS
Installment agreements: Current law requires the FTB to enter into installment agreements of no longer than three years with taxpayers whose personal income tax liability does not exceed $10,000, provided that those taxpayers have filed all prior year returns and commit to remain in compliance with the terms of the installment agreement. For taxpayers with liabilities in excess of $10,000, the FTB is not required to enter into an installment agreement. At their discretion, the FTB has generally entered into an installment agreement for up to five years with the taxpayer's self-attestation of a financial hardship if their liability is less than $25,000. For liabilities of $25,000 or more, the FTB asks for documentation to verify a financial hardship.
This bill adopts the FTB's proposal, with technical modifications, to amend the current statutory authority to allow more taxpayers the right to enter into an installment agreement with the FTB if they meet specified requirements and extends the time for full payment of an installment agreement in certain situations. Beginning in 2024, the FTB would be required to enter into installment agreements of no more than five years with taxpayers whose personal income tax liability is less than $25,000. Additionally, this bill clarifies the FTB's authority to alter or modify installment agreements in certain situations to help taxpayers continue their installment agreements when a breach of the original terms has taken place, such as the taxpayer incurring additional liabilities or payment defaults.
The FTB has found that expediting the process of entering taxpayers into installment agreements increases the likelihood that the liability will be paid in full. The FTB contends that the proposed modifications to the overall installment agreement process will enhance the taxpayer experience by expanding the scope of taxpayers with the right to enter into an installment agreement, as well as provide needed flexibility so that installment agreements are not revoked due to the taxpayer's financial hardship.
Conditional Revivors for Limited Liability Companies (LLCs): Under current statutory authority, corporations and LLCs classified as associations, if suspended, are granted an opportunity to revive without payment in full of outstanding taxes and fees if the FTB determines that the revivor will improve collection prospects. LLCs classified as partnerships or disregarded entities, however, are not provided the same opportunity because the definition of "corporation" does not include those entities.
There are many reasons why a business may be suspended by the FTB, the Secretary of State (SOS), or by both. A business may be suspended by the FTB for failing to file a return or failing to pay taxes, penalties, fees, or interest. A business may be suspended by the SOS for failing to file a timely Statement of Information.
This bill adopts the FTB's proposal to amend the relevant sections in the R&TC to include all LLCs by removing the term "corporation" or "corporate," and replacing those terms with the terms "taxpayer" or "entity". The proposed changes would provide equal treatment amongst all LLCs seeking a revivor, regardless of whether they are classified as an association, partnership, or disregarded entity. FTB expects this change to increase taxpayer compliance, improve accounts receivable collections, and reduce taxpayer burden.
According to the Author
The Assembly Revenue & Taxation Committee provided the following statement in support of this bill:
This bill advances two proposals drafted by the FTB, with technical modifications, that will improve personal income and corporation tax administration, provide additional flexibility for taxpayers to use installment agreements, and ensure equal treatment for similarly situated taxpayers.
Arguments in Support
Writing in support of this bill, the California Society of Enrolled Agents, notes, in part:
The California Society of Enrolled Agents (CSEA), supports the committee's Assembly Bill 1765, which would extend the conditional revivor process to limited liability companies as current law already allows for other types of corporate entities... The Conditional Revivor policy is important as it allows California businesses to reclaim legal status while increasing the likelihood of FTB collection of those delinquent taxes. If not for this policy, businesses who could not full pay to qualify for revivor status would have limited options (continue in business illegally, shut down the business, file bankruptcy, etc.) all of which would likely leave the delinquent taxes unpaid. The proposal is a step toward conformity for LLCs and would benefit taxpayers.
Arguments in Opposition
None on file
FISCAL COMMENTS
According to the Assembly Appropriations Committee:
- General Fund revenue gain of approximately $9.2 million in fiscal year (FY) 2024-25 and $9.4 million in FY 2025-26 related to this bill's LLC provisions.
FTB notes the proposed modifications to the installment payment agreements process would have no impact on the state's income tax revenue. While this bill may result in changes in the amount or timing of collection activity, FTB does not expect a measurable change.
- Minor and absorbable costs to FTB to update administrative procedures.
VOTES
ASM REVENUE AND TAXATION: 11-0-0
YES: Irwin, Wallis, Bains, Grayson, Pacheco, Jim Patterson, Petrie-Norris, Luz Rivas, Ta, Valencia, Zbur
ASM APPROPRIATIONS: 15-0-1
YES: Holden, Megan Dahle, Bryan, Calderon, Wendy Carrillo, Dixon, Mike Fong, Hart, Lowenthal, Mathis, Papan, Pellerin, Sanchez, Weber, Ortega
ABS, ABST OR NV: Robert Rivas
UPDATED
VERSION: March 16, 2023
CONSULTANT: Wesley Whitaker / REV. & TAX. / (916) 319-2098 FN: 0000680
Date of Hearing: May 17, 2023
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Chris Holden, Chair
ABPCA Bill Id:AB 1765
Author:(Committee on Revenue and Taxation) – As Introduced Ver:March 16, 2023
Policy Committee: | Revenue and Taxation | Vote: | 11 - 0 |
|
| ||
|
|
Urgency: No State Mandated Local Program: No Reimbursable: No
SUMMARY:
This bill expands the authority of the Franchise Tax Board (FTB) to enter into installment payment agreements.
Specifically, this bill:
- Requires FTB to enter into an installment payment agreement if the taxpayer’s liability does not exceed $25,000, increased from $10,000, and requires full repayment of liability within five years, increased from three years.
- Authorizes, for installment payment agreements entered into on or after January 1, 2024, FTB to alter, modify, or terminate an agreement under certain conditions.
- Requires FTB to biennially review a representative sample of existing installment agreements to ensure taxpayers are in compliance with agreement terms.
- Applies existing suspension, forfeiture, and revivor procedures to limited liability companies (LLCs) classified as partnerships or disregarded entities by replacing references to a “corporation” with a “taxpayer.”
FISCAL EFFECT:
- General Fund revenue gain of approximately $9.2 million in fiscal year (FY) 2024-25 and $9.4 million in FY 2025-26 related to this bill’s LLC provisions.
FTB notes the proposed modifications to the installment payment agreements process would have no impact on the state’s income tax revenue. While this bill may result in changes in the amount or timing of collection activity, FTB does not expect a measurable change.
- Minor and absorbable costs to FTB to update administrative procedures.
COMMENTS:
- Purpose. Committee bills are generally put forth to make technical and non-controversial changes to law. This bill is supported by the California Society of Enrolled Agents, which explains:
The Conditional Revivor policy is important as it allows California businesses to reclaim legal status while increasing the likelihood of FTB collection of those delinquent taxes. If not for this policy, businesses who could not full pay to qualify for revivor status would have limited options (continue in business illegally, shut down the business, file bankruptcy, etc.) all of which would likely leave the delinquent taxes unpaid.
The proposal is a step towards conformity for LLCs and would benefit taxpayers.
- Installment Agreements. Existing law requires FTB to enter into an installment agreement of no longer than three years with a taxpayer whose personal income tax liability does not exceed $10,000, provided the taxpayer has filed all prior year returns and commits to remain in compliance with the agreement’s terms. At FTB’s discretion, FTB can enter into an installment agreement for up to five years with the taxpayer’s self-attestation of a financial hardship if the taxpayer’s liability is less than $25,000. This bill codifies this practice as a requirement and clarifies FTB’s authority to alter or modify installment agreements in certain situations to help taxpayers continue their installment agreements when a breach of the original terms occurs. FTB has found that expediting the process of entering taxpayers into installment agreements increases the likelihood that the liability will be paid in full.
- Conditional Revivor Policy. Existing law grants suspended corporations and LLCs classified as associations the opportunity to revive without payment in full of outstanding taxes and fees if FTB determines the revivor will improve collection prospects. This bill conforms the opportunity to LLCs classified as partnerships or disregarded entities.
Analysis Prepared by: Irene Ho / APPR. / (916) 319-2081
Date of Hearing: April 24, 2023
ASSEMBLY COMMITTEE ON REVENUE AND TAXATION
Jacqui Irwin, Chair
ABPCA Bill Id:AB 1765 (
Author:Committee on Revenue and Taxation) – As Introduced Ver:March 16, 2023
SUSPENSE
Majority vote. Fiscal committee.
SUBJECT: Income tax administration: installment agreements, suspension, forfeiture, and revivor
SUMMARY: Advances two proposals drafted by the Franchise Tax Board (FTB), with technical modifications, that do both of the following: (1) expands the FTB's authority to enter into installment agreements with taxpayers who have outstanding tax liabilities; and, (2) updates terminology to ensure equal treatment for different types of Limited Liability Companies (LLCs). Specifically, this bill:
- Clarifies that the FTB may enter into an installment agreement with a taxpayer who has an outstanding liability if the FTB determines that the agreement will facilitate full or partial collection of the liability.
- Increases, from $10,000 to $25,000, the threshold of outstanding tax liability under which the FTB is required to enter into an installment agreement with a taxpayer, beginning January 1, 2024.
- Increases, from three to five years, the maximum length of the installment agreement between the FTB and a taxpayer with outstanding tax liability of less than $25,000, beginning January 1, 2024.
- Allows the FTB to alter, modify, or terminate an installment agreement entered into on or after January 1, 2024, if any of the following apply:
- Information that the taxpayer provided to the FTB before the date the agreement was entered into was inaccurate or incomplete;
- The FTB determines that the collection of any liability to which an agreement relates is in jeopardy;
- The FTB determines that the financial condition of a taxpayer with whom the FTB has entered into an agreement has significantly changed;
- The taxpayer fails to make an installment payment at the time the installment payment is due under the agreement;
- The taxpayer fails to file a required tax return or pay any other liability at the time that the liability is due; or,
- The taxpayer fails to provide a financial condition update upon the FTB's request.
- Provides, for installment agreements entered into on or after January 1, 2024, that the FTB shall not alter, modify, or terminate any installment agreement unless both of the following occur:
- A notice of the alteration, modification, or termination is provided to the taxpayer not later than 30 days before the date of that action; and,
- The notice includes an explanation of the rationale of the FTB for altering, modifying, or terminating the agreement.
- Allows, for installment agreements entered into on or after January 1, 2024, the FTB to terminate the installment agreement and issue demand for immediate payment of the liability or the deficiency in any case where the FTB finds collection of the liability to which an installment payment agreement relates to be in jeopardy.
- Authorizes the FTB to modify or alter an installment agreement to add a liability that the taxpayer fails to pay at the time that the liability is due and authorizes the FTB to require evidence of financial hardship to alter or modify the installment agreement.
- Authorizes the FTB to prescribe regulations as necessary or appropriate to carry out the purposes outlined above and provides that the Administrative Procedure Act does not apply to any standard, criterion, procedure, determination, rule, notice, guideline, or any other guidance established or issued by the FTB relating to these installment agreements.
- Requires the FTB to review a representative sample of existing installment agreements at least once every two years, instead of reviewing all installment agreements at least once every two years.
- Deletes outdated provisions relating to informal payment arrangements entered into prior to February 1, 2005.
- Replaces the word "corporation" with "taxpayer" and adds appropriate cross-references in various sections of the Revenue & Taxation Code (R&TC) to provide equal opportunity to receive a conditional revivor for LLCs classified as partnerships or disregarded entities as is currently provided to LLCs classified as associations.
EXISTING LAW:
- Authorizes the FTB to enter into an installment agreement with a taxpayer upon either a determination of financial hardship, and allows the FTB to terminate the installment agreement and issue demand for immediate payment of the liability or the deficiency in any case where the FTB finds collection of the liability to which an installment payment agreement relates to be in jeopardy. (R&TC Section 19008(a).)
- Requires the FTB to enter into an installment agreement with a taxpayer if all of the following apply:
- The aggregate amount of the liability does not exceed $10,000;
- The taxpayer has not failed to file a return, pay required taxes, or entered into a prior installment agreement in the five preceding years;
- The FTB determines that the taxpayer is financially unable to pay the liability in full when due, and the taxpayer submits any information as the FTB may require to make this determination;
- The installment agreement requires full payment of the liability within three years; and,
- The taxpayer agrees to comply with all applicable provisions of state law and the terms of the installment agreement. (R&TC Section 19008(b).)
- Requires the FTB to provide a notice of termination at least 30 days prior to terminating an installment agreement and for this notice to include an explanation of why the FTB is terminating the installment agreement, except in cases where there is mutual consent to terminate, alter, or modify the agreement, or the FTB finds collection of the tax to which an installment payment agreement relates to be in jeopardy. (R&TC Section 19008(c).)
- Requires the FTB to review each installment agreement at least once every two years. (R&TC Section 19008(f).)
- Provides that corporations and LLCs classified as associations, if suspended, are granted an opportunity to revive without payment in full of outstanding taxes and fees if the FTB determines that the revivor will improve collection prospects. (R&TC Section 23305a et seq.)
FISCAL EFFECT: The FTB estimates General Fund revenue gains of $9.2 million in fiscal year (FY) 2024-25 and $9.4 million in FY 2025-26.
COMMENTS:
- Writing in support of this bill, the California Society of Enrolled Agents, notes, in part:
The California Society of Enrolled Agents (CSEA), supports the committee’s Assembly Bill 1765, which would extend the conditional revivor process to limited liability companies as current law already allows for other types of corporate entities... The Conditional Revivor policy is important as it allows California businesses to reclaim legal status while increasing the likelihood of FTB collection of those delinquent taxes. If not for this policy, businesses who could not full pay to qualify for revivor status would have limited options (continue in business illegally, shut down the business, file bankruptcy, etc.) all of which would likely leave the delinquent taxes unpaid. The proposal is a step toward conformity for LLCs and would benefit taxpayers.
- Installment agreements: Current law requires the FTB to enter into installment agreements of no longer than three years with taxpayers whose personal income tax liability does not exceed $10,000, provided that those taxpayers have filed all prior year returns and commit to remain in compliance with the terms of the installment agreement. For taxpayers with liabilities in excess of $10,000, the FTB is not required to enter into an installment agreement. At their discretion, the FTB has generally entered into an installment agreement for up to five years with the taxpayer's self-attestation of a financial hardship if their liability is less than $25,000. For liabilities of $25,000 or more, the FTB asks for documentation to verify a financial hardship.
This bill adopts the FTB's proposal, with technical modifications, to amend the current statutory authority to allow more taxpayers the right to enter into an installment agreement with the FTB if they meet specified requirements and extends the time for full payment of an installment agreement in certain situations. Beginning in 2024, the FTB would be required to enter into installment agreements of no more than five years with taxpayers whose personal income tax liability is less than $25,000. Additionally, this bill clarifies the FTB's authority to alter or modify installment agreements in certain situations to help taxpayers continue their installment agreements when a breach of the original terms has taken place, such as the taxpayer incurring additional liabilities or payment defaults.
The FTB has found that expediting the process of entering taxpayers into installment agreements increases the likelihood that the liability will be paid in full. The FTB contends that the proposed modifications to the overall installment agreement process will enhance the taxpayer experience by expanding the scope of taxpayers with the right to enter into an installment agreement, as well as provide needed flexibility so that installment agreements are not revoked due to the taxpayer's financial hardship.
- Conditional Revivors for Limited Liability Companies (LLCs): Under current statutory authority, corporations and LLCs classified as associations, if suspended, are granted an opportunity to revive without payment in full of outstanding taxes and fees if the FTB determines that the revivor will improve collection prospects. LLCs classified as partnerships or disregarded entities, however, are not provided the same opportunity because the definition of "corporation" does not include those entities.
There are many reasons why a business may be suspended by the FTB, the Secretary of State (SOS), or by both. A business may be suspended by the FTB for failing to file a return or failing to pay taxes, penalties, fees, or interest. A business may be suspended by the SOS for failing to file a timely Statement of Information.
This bill adopts the FTB's proposal to amend the relevant sections in the R&TC to include all LLCs by removing the term "corporation" or "corporate," and replacing those terms with the terms "taxpayer" or "entity". The proposed changes would provide equal treatment amongst all LLCs seeking a revivor, regardless of whether they are classified as an association, partnership, or disregarded entity. FTB expects this change to increase taxpayer compliance, improve accounts receivable collections, and reduce taxpayer burden.
REGISTERED SUPPORT / OPPOSITION:
Support
California Society of Enrolled Agents
Opposition
None on file
Analysis Prepared by: Wesley Whitaker / REV. & TAX. / (916) 319-2098
Date of Hearing: April 17, 2023
ASSEMBLY COMMITTEE ON REVENUE AND TAXATION
Jacqui Irwin, Chair
ABPCA Bill Id:AB 1765 (
Author:Committee on Revenue and Taxation) – As Introduced Ver:March 16, 2023
Majority vote. Fiscal committee.
SUBJECT: Income tax administration: installment agreements, suspension, forfeiture, and revivor
SUMMARY: Advances two proposals drafted by the Franchise Tax Board (FTB), with technical modifications, that do both of the following: (1) expands the FTB's authority to enter into installment agreements with taxpayers who have outstanding tax liabilities; and, (2) updates terminology to ensure equal treatment for different types of Limited Liability Companies (LLCs). Specifically, this bill:
- Clarifies that the FTB may enter into an installment agreement with a taxpayer who has an outstanding liability if the FTB determines that the agreement will facilitate full or partial collection of the liability.
- Increases, from $10,000 to $25,000, the threshold of outstanding tax liability under which the FTB is required to enter into an installment agreement with a taxpayer, beginning January 1, 2024.
- Increases, from 3 to 5 years, the maximum length of the installment agreement between the FTB and a taxpayer with outstanding tax liability of less than $25,000, beginning January 1, 2024.
- Allows the FTB to alter, modify, or terminate an installment agreement entered into on or after January 1, 2024, if any of the following apply:
- Information that the taxpayer provided to the FTB before the date the agreement was entered into was inaccurate or incomplete;
- The FTB determines that the collection of any liability to which an agreement relates is in jeopardy;
- The FTB determines that the financial condition of a taxpayer with whom the FTB has entered into an agreement has significantly changed;
- The taxpayer fails to make an installment payment at the time the installment payment is due under the agreement;
- The taxpayer fails to file a required tax return or pay any other liability at the time that the liability is due; or,
- The taxpayer fails to provide a financial condition update upon the FTB's request.
- Provides, for installment agreements entered into on or after January 1, 2024, that the FTB shall not alter, modify, or terminate any installment agreement unless both of the following occur:
- A notice of the alteration, modification, or termination is provided to the taxpayer not later than 30 days before the date of that action; and,
- The notice includes an explanation of the rationale of the FTB for altering, modifying, or terminating the agreement.
- Allows, for installment agreements entered into on or after January 1, 2024, the FTB to terminate the installment agreement and issue demand for immediate payment of the liability or the deficiency in any case where the FTB finds collection of the liability to which an installment payment agreement relates to be in jeopardy.
- Authorizes the FTB to modify or alter an installment agreement to add a liability that the taxpayer fails to pay at the time that the liability is due and authorizes the FTB to require evidence of financial hardship to alter or modify the installment agreement.
- Authorizes the FTB to prescribe regulations as necessary or appropriate to carry out the purposes outlined above and provides that the Administrative Procedure Act does not apply to any standard, criterion, procedure, determination, rule, notice, guideline, or any other guidance established or issued by the FTB relating to these installment agreements.
- Requires the FTB to review a representative sample of existing installment agreements at least once every two years, instead of reviewing all installment agreements at least once every two years.
- Deletes outdated provisions relating to informal payment arrangements entered into prior to February 1, 2005.
- Replaces the word "corporation" with "taxpayer" and adds appropriate cross-references in various sections of the Revenue & Taxation Code (R&TC) to provide equal opportunity to receive a conditional revivor for LLCs classified as partnerships or disregarded entities as is currently provided to LLCs classified as associations.
EXISTING LAW:
- Authorizes the FTB to enter into an installment agreement with a taxpayer upon either a determination of financial hardship, and allows the FTB to terminate the installment agreement and issue demand for immediate payment of the liability or the deficiency in any case where the FTB finds collection of the liability to which an installment payment agreement relates to be in jeopardy. (R&TC Section 19008(a).)
- Requires the FTB to enter into an installment agreement with a taxpayer if all of the following apply:
- The aggregate amount of the liability does not exceed $10,000;
- The taxpayer has not failed to file a return, pay required taxes, or entered into a prior installment agreement in the five preceding years;
- The FTB determines that the taxpayer is financially unable to pay the liability in full when due, and the taxpayer submits any information as the FTB may require to make this determination;
- The installment agreement requires full payment of the liability within three years; and,
- The taxpayer agrees to comply with all applicable provisions of state law and the terms of the installment agreement. (R&TC Section 19008(b).)
- Requires the FTB to provide a notice of termination at least 30 days prior to terminating an installment agreement and for this notice to include an explanation of why the FTB is terminating the installment agreement, except in cases where there is mutual consent to terminate, alter, or modify the agreement, or the FTB finds collection of the tax to which an installment payment agreement relates to be in jeopardy. (R&TC Section 19008(c).)
- Requires the FTB to review each installment agreement at least once every two years. (R&TC Section 19008(f).)
- Provides that corporations and LLCs classified as associations, if suspended, are granted an opportunity to revive without payment in full of outstanding taxes and fees if the FTB determines that the revivor will improve collection prospects. (R&TC Section 23305a et seq.)
FISCAL EFFECT: The FTB estimates General Fund revenue gains of $9.2 million in fiscal year (FY) 2024-25 and $9.4 million in FY 2025-26.
COMMENTS:
- Installment agreements: Current law requires the FTB to enter into installment agreements of no longer than three years with taxpayers whose personal income tax liability does not exceed $10,000, provided that those taxpayers have filed all prior year returns and commit to remain in compliance with the terms of the installment agreement. For taxpayers with liabilities in excess of $10,000, the FTB is not required to enter into an installment agreement. At their discretion, the FTB has generally entered into an installment agreement for up to five years with the taxpayer's self-attestation of a financial hardship if their liability is less than $25,000. For liabilities of $25,000 or more, the FTB asks for documentation to verify a financial hardship.
This bill adopts the FTB's proposal, with technical modifications, to amend the current statutory authority to allow more taxpayers the right to enter into an installment agreement with the FTB if they meet specified requirements and extends the time for full payment of an installment agreement in certain situations. Beginning in 2024, the FTB would be required to enter into installment agreements of no more than five years with taxpayers whose personal income tax liability is less than $25,000. Additionally, this bill clarifies the FTB's authority to alter or modify installment agreements in certain situations to help taxpayers continue their installment agreements when a breach of the original terms has taken place, such as the taxpayer incurring additional liabilities or payment defaults.
The FTB has found that expediting the process of entering taxpayers into installment agreements increases the likelihood that the liability will be paid in full. The FTB contends that the proposed modifications to the overall installment agreement process will enhance the taxpayer experience by expanding the scope of taxpayers with the right to enter into an installment agreement, as well as provide needed flexibility so that installment agreements are not revoked due to the taxpayer's financial hardship.
- Conditional Revivors for Limited Liability Companies (LLCs): Under current statutory authority, corporations and LLCs classified as associations, if suspended, are granted an opportunity to revive without payment in full of outstanding taxes and fees if the FTB determines that the revivor will improve collection prospects. LLCs classified as partnerships or disregarded entities, however, are not provided the same opportunity because the definition of "corporation" does not include those entities.
There are many reasons why a business may be suspended by the FTB, the Secretary of State (SOS), or by both. A business may be suspended by the FTB for failing to file a return or failing to pay taxes, penalties, fees, or interest. A business may be suspended by the SOS for failing to file a timely Statement of Information.
This bill adopts the FTB's proposal to amend the relevant sections in the R&TC to include all LLCs by removing the term "corporation" or "corporate," and replacing those terms with the terms "taxpayer" or "entity". The proposed changes would provide equal treatment amongst all LLCs seeking a revivor, regardless of whether they are classified as an association, partnership, or disregarded entity. FTB expects this change to increase taxpayer compliance, improve accounts receivable collections, and reduce taxpayer burden.
REGISTERED SUPPORT / OPPOSITION:
Support
None on file
Opposition
None on file
Analysis Prepared by: Wesley Whitaker / REV. & TAX. / (916) 319-2098
Discussed in Hearing
1MIN
Assembly Floor
51SEC
Senate Floor
1MIN
Assembly Floor
2MIN
Assembly Standing Committee on Revenue and Taxation
Bill Author
Bill Co-Author(s):