2005 California Revenue and Taxation Code Sections 18501-18572 Article 1. Individuals and Fiduciaries

18501.  (a) Every individual taxable under Part 10 (commencing with
Section 17001) shall make a return to the Franchise Tax Board,
stating specifically the items of the individual's gross income from
all sources and the deductions and credits allowable, if the
individual has any of the following for the taxable year:
   (1) An adjusted gross income from all sources in excess of eight
thousand dollars ($8,000), if single.
   (2) An adjusted gross income from all sources in excess of sixteen
thousand dollars ($16,000), if married.
   (3) A gross income from all sources in excess of ten thousand
dollars ($10,000), if single, and twenty thousand dollars ($20,000),
if married, regardless of the amount of adjusted gross income.
   (4) In the case of an individual described in Section 63(c)(5) of
the Internal Revenue Code, relating to limitation on basic standard
deduction in the case of certain dependents, a gross income from all
sources that exceeds the amount of the standard deduction allowed
under that section.
   (b) If a husband and wife have for the taxable year an adjusted
gross income from all sources in excess of sixteen thousand dollars
($16,000) or a gross income from all sources in excess of twenty
thousand dollars ($20,000), each shall make a return or the income of
each shall be included on a single joint return as otherwise
provided in this article.
   (c) For any individual described in paragraph (1) or (2), the
Franchise Tax Board shall recompute the amounts provided in
subdivision (b) and paragraphs (1) to (3), inclusive, of subdivision
(a) as follows:
   (1) For any individual eligible to claim the credit described in
subdivision (c) of Section 17054, the Franchise Tax Board shall
increase the income amounts described in subdivision (b) and
paragraphs (1) to (3), inclusive, of subdivision (a), as adjusted by
subdivision (d), by the quotient provided by dividing the credit
described in subdivision (c) of Section 17054, as adjusted in
subdivision (i) of Section 17054, by 2 percent.
   (2) For any individual or married couple eligible to claim the
credit described in subdivision (d) of Section 17054, the Franchise
Tax Board shall increase the income amounts described in subdivision
(b) or paragraphs (1) to (3), inclusive, of subdivision (a), as
adjusted by subdivision (d), by the quotient provided by dividing
each credit described in subdivision (d) of Section 17054, as
adjusted in subdivision (i) of Section 17054, by the following:
   (A) If the individual or married couple is not eligible to claim
the credit allowed in subdivision (c) of Section 17054, 3 percent for
the first dependent credit and 4 percent for the second dependent
credit, if any.
   (B) If the individual or married couple is eligible to claim the
credit allowed in subdivision (c) of Section 17054, 4 percent for the
first dependent credit and 5 percent for the second dependent
credit, if any.
   (d) For each taxable year beginning on or after January 1, 1996,
the Franchise Tax Board shall recompute the income amounts prescribed
in paragraphs (1) to (3), inclusive, of subdivision (a) and in
subdivision (b), as follows:
   (1) The Department of Industrial Relations shall transmit annually
to the Franchise Tax Board the percentage change in the California
Consumer Price Index for all items from June of the prior calendar
year to June of the current calendar year, no later than August 1 of
the current calendar year.
   (2) The Franchise Tax Board shall do both of the following:
   (A) Compute an inflation adjustment factor by adding 100 percent
to the percentage change figure that is furnished pursuant to
paragraph (1) and dividing the result by 100.
   (B) Multiply the income amounts for the preceding taxable year by
the inflation adjustment factor determined in subparagraph (A) and
round off the resulting products to the nearest one dollar ($1).
   (e) The changes to subdivision (c) made by the act adding this
subdivision shall apply to each taxable year beginning on or after
January 1, 1999.
18505.  Every fiduciary (except a receiver appointed by authority of
law in possession of only a part of the property of an individual)
taxable under Part 10 (commencing with Section 17001) shall make a
return, which shall contain or be verified by a written declaration
that it is made under the penalties of perjury, for any of the
following taxpayers for whom he or she acts, stating specifically the
items of gross income of the taxpayer and the deductions and credits
allowed for the taxable year:
   (a) Every individual having an adjusted gross income from all
sources in excess of eight thousand dollars ($8,000), if single.
   (b) Every individual having an adjusted gross income from all
sources in excess of sixteen thousand dollars ($16,000), if married.
   (c) Every individual having a gross income from all sources in
excess of ten thousand dollars ($10,000), if single, and twenty
thousand dollars ($20,000), if married, regardless of the amount of
adjusted gross income.
   (d) Every estate  having a net income  from all sources in excess
of one thousand dollars ($1,000).
   (e) Every trust (not treated as a corporation under Section 23038)
having a net income from all sources in excess of one hundred
dollars ($100).
   (f) Every estate or trust (not treated as a corporation under
Section 23038) having a gross income from all sources in excess of
ten thousand dollars ($10,000), regardless of the amount of the net
income.
   (g) Every decedent, for the year in which death occurred, and for
prior years, if returns for those years should have been filed but
have not been filed by the decedent, under the rules and regulations
that the Franchise Tax Board may prescribe.
18505.3.  If an individual is deceased, the return of that
individual required under Section 18501 shall be made by his or her
executor, administrator, or other person charged with property of
that decedent.
18505.6.  If an individual is unable to make a return required under
Section 18501, the return of that individual shall be made by a duly
authorized agent, his or her committee, guardian, fiduciary, or
other person charged with the care of the person or property of the
individual.  The preceding sentence shall not apply in the case of a
receiver appointed by authority of law in possession of only a part
of the property of an individual.
18506.  A trust that qualifies under Section 401(a) of the Internal
Revenue Code and which is exempt is not required to file a return
unless it changes the character of its organization, the purpose for
which it was organized, or its method of operation or unless the
trust has unrelated business taxable income.  Where an exempt trust
has unrelated business taxable income which exceeds one thousand
dollars ($1,000) it shall file a return, verified by an executive
officer under penalties of perjury in the form prescribed by the
Franchise Tax Board on or before the 15th day of the fourth month
following the close of the taxable year.
18508.  (a) Returns of an estate, a trust, or an estate of an
individual under Chapter 7 or Chapter 11 of Title 11 of the United
States Code shall be made by the fiduciary thereof.
   (b) Under the rules and regulations that the Franchise Tax Board
may prescribe, a return made by one of two or more joint fiduciaries
shall be sufficient  compliance with the requirements of Section
18501. A return made pursuant to this subdivision shall contain a
statement that the fiduciary has sufficient knowledge of the affairs
of the person for whom the return is made to enable him or her to
make the return, and that the return is, to the best of his or her
knowledge and belief, true and correct.
18509.  Any fiduciary required to make a return under Section 18505
is subject to all the provisions of Part 10 (commencing with Section
17001) and this part that apply to individuals.
18510.  (a) (1) The Franchise Tax Board shall revise the returns
required to be filed pursuant to this article, Article 2 (commencing
with Section 18601), Section 18633, Section 18633.5, and Article 3
(commencing with Section 23771) of Chapter 4 of Part 11 in a form and
manner approved by the State Board of Equalization, to allow a
person to report and pay qualified use tax in accordance with the
provisions of Section 6452.1.
   (2) Within 10 working days of receiving from the Franchise Tax
Board the returns described in paragraph (1), the State Board of
Equalization shall do either of the following:
   (A) Approve the form and manner of the returns and notify the
Franchise Tax Board of this approval.
   (B) Submit comments to the Franchise Tax Board regarding changes
to the returns that shall be incorporated before the State Board of
Equalization approves the form and manner of the returns.
   (b) Any payments and credits shown on the return, together with
any other credits associated with that person's account, of a person
that elects to report qualified use tax on an acceptable tax return
shall be applied in the following order:
   (1) Taxes imposed under Part 10 (commencing with Section 17001) or
Part 11 (commencing with Section 23001), including penalties and
interest, if any, imposed under this part.
   (2) Qualified use tax as reported on the acceptable tax return, in
accordance with Section 6452.1.
   (c) The Franchise Tax Board shall transfer the qualified use tax
received pursuant to Section 6452.1, and any information the State
Board of Equalization deems necessary for its administration of the
use tax, to the State Board of Equalization within 60 days from the
date the use tax is received or the acceptable tax return is
processed, whichever is later.
   (d) This section shall be operative for returns filed for taxable
years on and after January 1, 2003, and ending on or before December
31, 2009, and as of that date becomes inoperative, unless a later
enacted statute extends the operation of this section.
18511.  (a) The Franchise Tax Board shall revise information
accompanying the returns required to be filed pursuant to this
article, Article 2 (commencing with Section 18601), Section 18633,
Section 18633.5, and Article 3 (commencing with Section 23771) of
Chapter 4 of Part 11 to include information that informs taxpayers of
their obligation to report and pay use taxes on their purchases of
tangible personal property that are subject to the use tax imposed
pursuant to Chapter 3 (commencing with Section 6201) of Part 7 and
the benefit of paying the use taxes prior to the expiration of
Section 6487.06.
   (b) This section shall remain in effect only until January 1,
2008, and as of that date is repealed.
18521.  (a) (1) Except as otherwise provided in this section, an
individual shall use the same filing status that he or she used on
his or her federal income tax return filed for the same taxable year.
   (2) If the Franchise Tax Board determines that the filing status
used on the taxpayer's federal income tax return was incorrect, the
Franchise Tax Board may, under Section 19033 (relating to deficiency
assessments), revise the return to reflect a correct filing status.
   (3) If either spouse was a nonresident for any portion of the
taxable year, a husband and wife who file a joint federal income tax
return shall be required to file a joint nonresident return.
   (b) In the case of an individual who is not required to file a
federal income tax return for the taxable year, that individual may
use any filing status on the return required under this part that he
or she would be eligible to use on a federal income tax return for
the same taxable year if a federal income tax return was required.
   (c) Notwithstanding subdivision (a), a husband and wife may file
separate returns under this part if either spouse was either of the
following during the taxable year:
   (1) An active member of the armed forces or any auxiliary branch
thereof.
   (2) A nonresident for the entire taxable year who had no income
from a California source.
   (d) Except for taxpayers described in subdivision (c), for any
taxable year with respect to which a joint return has been filed, a
separate return shall not be made by either spouse after the period
for either to file a separate return has expired.
   (e) No joint return shall be made if the husband and wife have
different taxable years; except that if their taxable years begin on
the same day and end on different days because of the death of either
or both, then a joint return may be made with respect to the taxable
year of each.  The above exception shall not apply if the surviving
spouse remarries before the close of his or her taxable year, or if
the taxable year of either spouse is a fractional part of a year
under Section 443(a) of the Internal Revenue Code.
   (f) In the case of the death of one spouse or both spouses the
joint return with respect to the decedent may be made only by the
decedent's executor or administrator; except that, in the case of the
death of one spouse, the joint return may be made by the surviving
spouse with respect to both that spouse and the decedent if no return
for the taxable year has been made by the decedent, no executor or
administrator has been appointed, and no executor or administrator is
appointed before the last day prescribed by law for filing the
return of the surviving spouse.  If an executor or administrator of
the decedent is appointed after the making of the joint return by the
surviving spouse, the executor or administrator may disaffirm the
joint return by making, within one year after the last day prescribed
by law for filing the return of the surviving spouse, a separate
return for the taxable year of the decedent with respect to which the
joint return was made, in which case the return made by the survivor
shall constitute his or her separate return.
18522.  If an individual has filed a separate return for a taxable
year for which a joint return could have been made by him or her and
his or her spouse  under Section  18521, and the time prescribed for
filing the return for that taxable year has expired, that individual
and his or her spouse may nevertheless make a joint return for that
taxable year, provided a joint federal income tax return is made
under the provisions of Section 6013(b) of the Internal Revenue Code.
  A joint return filed by the husband and wife in that case shall
constitute the return of the husband and wife for that taxable year,
and all payments, credits, refunds, or other repayments made or
allowed with respect to the separate return of either spouse for that
taxable year shall be taken into account in determining the extent
to which the tax based upon the joint return has been paid.
18523.  If a joint return is made under Section 18522, any election
(other than the election to file a separate return) made by either
spouse in his or her separate return for the taxable year with
respect to the treatment of any income, deduction, or credit of the
spouse shall not be changed in the making of the joint return where
the election would have been irrevocable if the joint return had not
been made.
18524.  If a joint return is made under Section 18522 after the
death of either spouse, the return with respect to the decedent may
be made only by his or her executor or administrator.
18526.  A joint return may not be made under Section 18522 in any of
the following situations:
   (a) After the expiration of four years from the last date
prescribed by law for filing the return for the taxable year
(determined without regard to any extension of time granted to either
spouse).
   (b) After there has been mailed to either spouse, with respect to
the taxable year, a notice of deficiency under Section 19033, if the
spouse, as to that notice, files a protest under Section 19041 or
appeal under Section 19045.
   (c) After either spouse has commenced a suit in any court for the
recovery of any part of the tax for that taxable year.
   (d) After either spouse has entered into a closing agreement under
Section 19441 with respect to the taxable year.
18527.  For the purposes of Article 1 (commencing with Section
19301) of Chapter 6 (relating to refunds and credits), a joint return
made under Section 18522 shall be deemed to have been filed on the
last date prescribed for filing the return for the taxable year
(determined without regard to any extension of time granted to either
spouse).
18528.  (a) For the purposes of Sections 19057 to 19067, inclusive
(relating to period of limitations upon assessment and collection),
and for the purposes of Section 19131 (relating to delinquent
returns), a joint return made under Section 18522 shall be deemed to
have been filed  as follows:
   (1) Where both spouses filed separate returns prior to making the
joint return, on the date the last separate return was filed (but not
earlier than the last date prescribed by this part for filing the
return of either spouse).
   (2) Where one spouse filed a separate return prior to the making
of the joint return, and the other spouse had eight thousand dollars
($8,000) or less of adjusted gross income from all sources and ten
thousand dollars ($10,000) or less of gross income from all sources
for the taxable year, on the date of the filing of the separate
return (but not earlier than the last date prescribed by this part
for the filing of the separate return).
   (3) Where only one spouse filed a separate return prior to the
making of a joint return and the other spouse had an adjusted gross
income from all sources in excess of eight thousand dollars ($8,000)
or a gross income from all sources in excess of ten thousand dollars
($10,000) for the taxable year, on the date of the filing of the
joint return.
   (b) For purposes of Article 1 (commencing with Section 19301) of
Chapter 6, a joint return made under Section 18522 shall be deemed to
have been filed on the later of the last date prescribed by this
part for filing the return for the taxable year (determined without
regard to any extension of time granted to either spouse) or the date
the later timely filed separate return was filed.
18529.  If a joint return is made under Section 18522, the period of
limitations provided in Sections 19057 to 19067, inclusive, on the
making of assessments and collecting taxes shall with respect to that
return include one year immediately after the date of the filing of
the joint return (computed without regard to Section 18528).
18530.  Where the amount shown as the tax by the husband and wife on
a joint return made under Section 18522 exceeds the aggregate of the
amounts shown as the tax upon the separate return of each spouse,
each of the following shall apply:
   (a) If any part of the excess is attributable to negligence or
intentional disregard of rules and regulations (but without intent to
defraud) at the time of the making of the separate return, then 20
percent of the total amount of the excess shall be assessed,
collected and paid, in lieu of the 20 percent addition to the tax
provided in subdivision (a) of Section 19164.
   (b) If any part of the excess is attributable to fraud with intent
to evade tax at the time of the making of the separate return, then
75 percent of the total amount of the excess shall be assessed,
collected and paid, in lieu of the 75 percent addition to the tax
provided in subdivision (b) of Section 19164.
18531.  For the purposes of Chapter 9 (commencing with Section
19701) which relates to criminal penalties in the case of fraudulent
returns, the term "return" includes a separate return filed by a
spouse with respect to a taxable year for which a joint return is
made under Section 18522 after the filing of the separate return.
18531.5.  For purposes of Section 443 of the Internal Revenue Code,
where the husband and wife have different taxable years because of
the death of either spouse, the joint return shall be treated as if
the taxable years of both spouses ended on the date of the closing of
the surviving spouse's taxable year.
18532.  For the purposes of this article, each of the following
shall apply:
   (a) The status as husband and wife of two individuals having
taxable years beginning on the same day shall be determined as
follows:
   (1) If both have the same taxable year, then as of the close of
that year.
   (2) If one dies before the close of the taxable year of the other,
then as of the time of the death.
   (b) An individual who is legally separated from his or her spouse
under a decree of divorce or of separate maintenance shall not be
considered as married.
   (c) If a joint return is made, the tax shall be computed on the
aggregate income and the liability with respect to the tax shall be
joint and several.
18533.  (a) (1) Notwithstanding subdivision (a) and the first
sentence of subdivision (b) of Section 19006:
   (A) An individual who has made a joint return may elect to seek
relief under the procedures prescribed under subdivision (b), and
   (B) If the individual is eligible to elect the application of
subdivision (c), the individual may, in addition to any election
under subparagraph (A), elect to limit the individual's liability for
any deficiency with respect to the joint return in the manner
prescribed under subdivision (c).
   (2) Any determination under this section shall be made without
regard to community property laws.
   (b) (1) Under procedures prescribed by the Franchise Tax Board,
if--   (A) A joint return has been made under this chapter for a
taxable year,   (B) On that return there is an understatement of tax
attributable to erroneous items of one individual filing the joint
return,   (C) The other individual filing the joint return
establishes that in signing the return he or she did not know of, and
had no reason to know of, that understatement,   (D) Taking into
account all facts and circumstances, it is inequitable to hold the
other individual liable for the deficiency in tax for that taxable
year attributable to that understatement, and   (E) The other
individual elects (in the form and manner as the Franchise Tax Board
may prescribe) the benefits of this subdivision not later than the
date that is two years after the date the Franchise Tax Board has
begun collection activities with respect to the individual making the
election, then the other individual shall be relieved of liability
for tax (including interest, penalties, and other amounts) for that
taxable year to the extent that the liability is attributable to that
understatement.
   (2) If an individual who, but for subparagraph (C) of paragraph
(1), would be relieved of liability under paragraph (1), establishes
that in signing the return the individual did not know, and had no
reason to know, the extent of the understatement, then the individual
shall be relieved of liability for tax (including interest,
penalties, and other amounts) for that taxable year to the extent
that the liability is attributable to the portion of the
understatement of which that individual did not know and had no
reason to know.
   (3) For purposes of this subdivision, the term "understatement"
has the meaning given to that term by Section 6662(d)(2)(A) of the
Internal Revenue Code.
   (c) (1) Except as provided in this subdivision, if an individual
who has made a joint return for any taxable year elects the
application of this subdivision, the individual's liability for any
deficiency that is assessed with respect to the return may not exceed
the portion of the deficiency properly allocable to the individual
under subdivision (d).
   (2) Except as provided in clause (ii) of subparagraph (A) of
paragraph (3) or subparagraph (C) of paragraph (3), each individual
who elects the application of this subdivision shall have the burden
of proof with respect to establishing the portion of any deficiency
allocable to that individual.
   (3) (A) (i) An individual shall only be eligible to elect the
application of this subdivision if--
   (I) At the time the election is filed, that individual is no
longer married to, or is legally separated from, the individual with
whom that individual filed the joint return to which the election
relates, or
   (II) That individual was not a member of the same household as the
individual with whom the joint return was filed at any time during
the 12-month period ending on the date the election is filed.
   (ii) If the Franchise Tax Board demonstrates that assets were
transferred between individuals filing a joint return as part of a
fraudulent scheme by those individuals, an election under this
subdivision by either individual shall be invalid (and subdivision
(a) and the first sentence of subdivision (b) of Section 19006 shall
apply to the joint return).
   (B) An election under this subdivision for any taxable year shall
be made not later than two years after the date on which the
Franchise Tax Board has begun collection activities with respect to
the individual making the election.
   (C) If the Franchise Tax Board demonstrates that an individual
making an election under this subdivision had actual knowledge, at
the time the individual signed the return, of any item giving rise to
a deficiency (or portion thereof) that is not allocable to the
individual under subdivision (d), that election may not apply to that
deficiency (or portion).  This subparagraph does not apply where the
individual with actual knowledge establishes that the individual
signed the return under duress.
   (4) (A) Notwithstanding any other provision of this subdivision,
the portion of the deficiency for which the individual electing the
application of this subdivision is liable (without regard to this
paragraph) shall be increased by the value of any disqualified asset
transferred to the individual.
   (B) For purposes of this paragraph--
   (i) The term "disqualified asset" means any property or right to
property transferred to an individual making the election under this
subdivision with respect to a joint return by the other individual
filing the joint return if the principal purpose of the transfer was
the avoidance of tax or payment of tax.
   (ii) (I) For purposes of clause (i), except as provided in
subclause (II), any transfer that is made after the date that is one
year before the date on which the first notice of proposed assessment
under Article 3 (commencing with Section 19031) of Chapter 4 is sent
shall be presumed to have as its principal purpose the avoidance of
tax or payment of tax.
   (II) Subclause (I) does not apply to any transfer pursuant to a
decree of divorce or separate maintenance or a written instrument
incident to that decree or to any transfer that an individual
establishes did not have as its principal purpose the avoidance of
tax or payment of tax.
   (d) For purpose of subdivision (c)--
   (1) The portion of any deficiency on a joint return allocated to
an individual shall be the amount that bears the same ratio to the
deficiency as the net amount of items taken into account in computing
the deficiency and allocable to the individual under paragraph (3)
bears to the net amount of all items taken into account in computing
the deficiency.
   (2) If a deficiency (or portion thereof) is attributable to--
   (A) The disallowance of a credit, or
   (B) Any tax (other than tax imposed by Section 17041 or 17062)
required to be included with the joint return, and the item is
allocated to one individual under paragraph (3), that deficiency (or
portion) shall be allocated to that individual.  Any item so
allocated may not be taken into account under paragraph (1).
   (3) For purposes of this subdivision--
   (A) Except as provided in paragraphs (4) and (5), any item giving
rise to a deficiency on a joint return shall be allocated to
individuals filing the return in the same manner as it would have
been allocated if the individuals had filed separate returns for the
taxable year.
   (B) Under rules prescribed by the Franchise Tax Board, an item
otherwise allocable to an individual under subparagraph (A) shall be
allocated to the other individual filing the joint return to the
extent the item gave rise to a tax benefit on the joint return to the
other individual.
   (C) The Franchise Tax Board may provide for an allocation of any
item in a manner not prescribed by subparagraph (A) if the Franchise
Tax Board establishes that the allocation is appropriate due to fraud
of one or both individuals.
   (4) If an item of deduction or credit is disallowed in its
entirety solely because a separate return is filed, the disallowance
shall be disregarded and the item shall be computed as if a joint
return had been filed and then allocated between the spouses
appropriately.
   (5) If the liability of a child of a taxpayer is included on a
joint return, that liability shall be disregarded in computing the
separate liability of either spouse and that liability shall be
allocated appropriately between the spouses.
   (e) (1) In the case of an individual who elects to have
subdivision (b) or (c) apply--
   (A) (i) The determination of the Franchise Tax Board as to whether
the liability is to be revised as to one individual filing the joint
return shall be made not less than 30 days after notification of the
other individual filing the joint return.
   (ii) Any action taken under this section shall be treated as
though it were action on a protest taken under Section 19044 and
shall become final upon the expiration of 30 days from the date that
notice of the action is mailed to both individuals filing the joint
return, unless, within that 30-day period, the individual making the
election under subdivision (b) or (c) appeals the determination to
the board as provided in clause (iii) or the other individual filing
the joint return appeals the determination to the board as provided
in Section 19045.
   (iii) The individual making the election under subdivision (b) or
(c) may appeal the determination of the Franchise Tax Board of the
appropriate relief available to the individual under this section if
that appeal is filed during the 30-day period prescribed in clause
(ii) and the appeal shall be treated as an appeal to the board under
Section 19045.  Notwithstanding the preceding sentence, the
individual making the election under subdivision (b) or (c) may
appeal to the board at any time after the date that is six months
after the date the election is filed with the Franchise Tax Board and
before the close of the 30-day period prescribed in clause (ii).
   (B) Except as otherwise provided in Section 19081 or 19082, no
levy or proceeding in court shall be made, begun, or prosecuted
against the individual making an election under subdivision (b) or
(c) for collection of any assessment to which the election relates
until the expiration of the 30-day period described in clause (ii) of
subparagraph (A), or, if an appeal to the board has been filed under
clause (iii) or Section 19045, until the decision of the board has
become final.
   (2) The running of the period of limitations in Section 19371 on
the collection of the assessment to which the petition under
subparagraph (A) of paragraph (1) relates shall be suspended for the
period during which the Franchise Tax Board is prohibited by
subparagraph (B) of paragraph (1) from collecting by levy or a
proceeding in court and for 60 days thereafter.
   (3) (A) Except as provided in subparagraph (B), notwithstanding
any other law or rule of law (other than Article 6 (commencing with
Section 19441) of Chapter 6), a credit or refund shall be allowed or
made to the extent attributable to the application of this section.
   (B) In the case of any election under subdivision (b) or (c), if a
decision of the board in any prior proceeding for the same taxable
year has become final, that decision shall be conclusive except with
respect to the qualification of the individual for relief that was
not an issue in that proceeding.  The exception contained in the
preceding sentence does not apply if the board determines that the
individual participated meaningfully in the prior proceeding.
   (f) Under procedures prescribed by the Franchise Tax Board, if
taking into account all the facts and circumstances, it is
inequitable to hold the individual liable for any unpaid tax or any
deficiency (or any portion of either), and relief is not available to
the individual under subdivision (b) or (c), the Franchise Tax Board
may relieve the individual of that liability.
   (g) (1) The Franchise Tax Board may prescribe regulations
providing methods for allocation of items other than the methods
under paragraph (3) of subdivision (d).
   (2) It is the intent of the Legislature that, in construing this
section and any other sections that are specifically cross-referenced
in this section, any regulations that may be promulgated by the
Secretary of the Treasury under Section 6015 of the Internal Revenue
Code, as amended by Public Law 105-206, shall apply to the extent
that those regulations do not conflict with this section or with any
regulations that may be promulgated by the Franchise Tax Board.
   (h) (1) Except as provided in paragraph (2), the amendments made
by Section 5 of Chapter 931 of the Statutes of 1999, shall apply to
any liability for tax arising after October 10, 1999, and any
liability for tax arising on or before that date but remaining unpaid
as of that date.
   (2) The period specified under subparagraph (E) of paragraph (1)
of subdivision (b) or subparagraph (B) of paragraph (3) of
subdivision (c) does not expire before the date that is four years
after the date of the first collection activity after October 10,
1999.
   (i) (1) An individual who has made a joint return and has been
granted relief under Section 6015 of the Internal Revenue Code,
relating to joint and several liability with respect to a federal
joint income tax return, shall be eligible for relief under this
section if all of the following conditions are satisfied:
   (A) The individual requests relief under this section.
   (B) The facts and circumstances that apply to the understatement
and liabilities for which the relief is requested are the same facts
and circumstances that applied to the understatement and liabilities
for which that individual was granted relief under Section 6015 of
the Internal Revenue Code.
   (C) The individual requesting relief under this subdivision
furnishes the Franchise Tax Board with a copy of the federal
determination granting that individual relief under Section 6015 of
the Internal Revenue Code.  If the federal determination does not
clearly identify the issues and liabilities for which the individual
was granted relief under Section 6015 of the Internal Revenue Code,
the Franchise Tax Board may request, from the individual requesting
relief, any supporting documentation reasonably necessary to
substantiate that the issues and liabilities for which relief is
requested under this section are the same as the issues and
liabilities for which the individual received relief under Section
6015 of the Internal Revenue Code.
   (2) This subdivision does not apply if, prior to the expiration of
the 30-day period described in clause (i) of subparagraph (A) of
paragraph (1) of subdivision (e), the other individual that filed the
joint return for which the relief is requested under this
subdivision submits information to the Franchise Tax Board that
indicates that relief should not be granted.  For purposes of this
paragraph, "information that indicates that relief should not be
granted" is limited to the following:
   (A) Information that indicates that the facts and circumstances
that apply to the understatement and liabilities for which the relief
is requested are not the same facts and circumstances that applied
to the understatement and liabilities for which that individual was
granted relief under Section 6015 of the Internal Revenue Code.
   (B) Information that indicates that there has not been a federal
determination granting relief under Section 6015 of the Internal
Revenue Code or that the federal determination granting relief under
Section 6015 of the Internal Revenue Code has been modified, altered,
withdrawn, canceled, or rescinded.
   (C) Information indicating that the other individual, as described
in the first sentence of this paragraph, did not have the
opportunity to participate, within the meaning of Section 6015 of the
Internal Revenue Code and the regulations thereunder, in the federal
administrative or judicial proceeding that resulted in relief under
Section 6015 of the Internal Revenue Code.
   (j) If, prior to the date the Franchise Tax Board issues its
determination with respect to a request for relief under this
section, the individual requesting relief demonstrates to the
Franchise Tax Board that a request for relief has been filed with the
Internal Revenue Service pursuant to Section 6015 of the Internal
Revenue Code and demonstrates that the request for relief involves
the same facts and circumstances as the request for relief that is
pending before the Franchise Tax Board, the Franchise Tax Board may
not deny relief with respect to that request, in whole or in part,
until federal action on the request for relief under Section 6015 of
the Internal Revenue Code is final.
   (k) The provisions of subdivisions (i) and (j) shall apply to both
of the following:
   (1) Any tax liability that becomes final on or after the effective
date of the act adding subdivisions (i) and (j) to this section.
   (2) Any unpaid tax liability that became final prior to the
effective date of the act adding subdivisions (i) and (j) to this
section.
   (l) An individual may not be granted relief under this section if
a court has revised the tax liability in a proceeding for dissolution
of the marriage in accordance with subdivision (b) of Section 19006.
   (m) This section shall cease to be operative on January 1, 2009,
and as of that date is repealed.
18533.  (a) (1) Notwithstanding subdivision (a) and the first
sentence of subdivision (b) of Section 19006:
   (A) An individual who has made a joint return may elect to seek
relief under the procedures prescribed under subdivision (b), and
   (B) If the individual is eligible to elect the application of
subdivision (c), the individual may, in addition to any election
under subparagraph (A), elect to limit the individual's liability for
any deficiency with respect to the joint return in the manner
prescribed under subdivision (c).
   (2) Any determination under this section shall be made without
regard to community property laws.
   (b) (1) Under procedures prescribed by the Franchise Tax Board,
if--   (A) A joint return has been made under this chapter for a
taxable year,   (B) On that return there is an understatement of tax
attributable to erroneous items of one individual filing the joint
return,   (C) The other individual filing the joint return
establishes that in signing the return he or she did not know of, and
had no reason to know of, that understatement,   (D) Taking into
account all facts and circumstances, it is inequitable to hold the
other individual liable for the deficiency in tax for that taxable
year attributable to that understatement, and   (E) The other
individual elects (in the form and manner as the Franchise Tax Board
may prescribe) the benefits of this subdivision not later than the
date that is two years after the date the Franchise Tax Board has
begun collection activities with respect to the individual making the
election, then the other individual shall be relieved of liability
for tax (including interest, penalties, and other amounts) for that
taxable year to the extent that the liability is attributable to that
understatement.
   (2) If an individual who, but for subparagraph (C) of paragraph
(1), would be relieved of liability under paragraph (1), establishes
that in signing the return the individual did not know, and had no
reason to know, the extent of the understatement, then the individual
shall be relieved of liability for tax (including interest,
penalties, and other amounts) for that taxable year to the extent
that the liability is attributable to the portion of the
understatement of which that individual did not know and had no
reason to know.
   (3) For purposes of this subdivision, the term "understatement"
has the meaning given to that term by Section 6662(d)(2)(A) of the
Internal Revenue Code.
   (c) (1) Except as provided in this subdivision, if an individual
who has made a joint return for any taxable year elects the
application of this subdivision, the individual's liability for any
deficiency that is assessed with respect to the return may not exceed
the portion of the deficiency properly allocable to the individual
under subdivision (d).
   (2) Except as provided in clause (ii) of subparagraph (A) of
paragraph (3) or subparagraph (C) of paragraph (3), each individual
who elects the application of this subdivision shall have the burden
of proof with respect to establishing the portion of any deficiency
allocable to that individual.
   (3) (A) (i) An individual shall only be eligible to elect the
application of this subdivision if--
   (I) At the time the election is filed, that individual is no
longer married to, or is legally separated from, the individual with
whom that individual filed the joint return to which the election
relates, or
   (II) That individual was not a member of the same household as the
individual with whom the joint return was filed at any time during
the 12-month period ending on the date the election is filed.
   (ii) If the Franchise Tax Board demonstrates that assets were
transferred between individuals filing a joint return as part of a
fraudulent scheme by those individuals, an election under this
subdivision by either individual shall be invalid (and subdivision
(a) and the first sentence of subdivision (b) of Section 19006 shall
apply to the joint return).
   (B) An election under this subdivision for any taxable year shall
be made not later than two years after the date on which the
Franchise Tax Board has begun collection activities with respect to
the individual making the election.
   (C) If the Franchise Tax Board demonstrates that an individual
making an election under this subdivision had actual knowledge, at
the time the individual signed the return, of any item giving rise to
a deficiency (or portion thereof) that is not allocable to the
individual under subdivision (d), that election does not apply to
that deficiency (or portion).  This subparagraph does not apply where
the individual with actual knowledge establishes that the individual
signed the return under duress.
   (4) (A) Notwithstanding any other provision of this subdivision,
the portion of the deficiency for which the individual electing the
application of this subdivision is liable (without regard to this
paragraph) shall be increased by the value of any disqualified asset
transferred to the individual.
   (B) For purposes of this paragraph--
   (i) The term "disqualified asset" means any property or right to
property transferred to an individual making the election under this
subdivision with respect to a joint return by the other individual
filing the joint return if the principal purpose of the transfer was
the avoidance of tax or payment of tax.
   (ii) (I) For purposes of clause (i), except as provided in
subclause (II), any transfer that is made after the date that is one
year before the date on which the first notice of proposed assessment
under Article 3 (commencing with Section 19031) of Chapter 4 is sent
shall be presumed to have as its principal purpose the avoidance of
tax or payment of tax.
   (II) Subclause (I) does not apply to any transfer pursuant to a
decree of divorce or separate maintenance or a written instrument
incident to that decree or to any transfer that an individual
establishes did not have as its principal purpose the avoidance of
tax or payment of tax.
   (d) For purpose of subdivision (c)--
   (1) The portion of any deficiency on a joint return allocated to
an individual shall be the amount that bears the same ratio to the
deficiency as the net amount of items taken into account in computing
the deficiency and allocable to the individual under paragraph (3)
bears to the net amount of all items taken into account in computing
the deficiency.
   (2) If a deficiency (or portion thereof) is attributable to--
   (A) The disallowance of a credit, or
   (B) Any tax (other than tax imposed by Section 17041 or 17062)
required to be included with the joint return, and the item is
allocated to one individual under paragraph (3), that deficiency (or
portion) shall be allocated to that individual.  Any item so
allocated may not be taken into account under paragraph (1).
   (3) For purposes of this subdivision--
   (A) Except as provided in paragraphs (4) and (5), any item giving
rise to a deficiency on a joint return shall be allocated to
individuals filing the return in the same manner as it would have
been allocated if the individuals had filed separate returns for the
taxable year.
   (B) Under rules prescribed by the Franchise Tax Board, an item
otherwise allocable to an individual under subparagraph (A) shall be
allocated to the other individual filing the joint return to the
extent the item gave rise to a tax benefit on the joint return to the
other individual.
   (C) The Franchise Tax Board may provide for an allocation of any
item in a manner not prescribed by subparagraph (A) if the Franchise
Tax Board establishes that the allocation is appropriate due to fraud
of one or both individuals.
   (4) If an item of deduction or credit is disallowed in its
entirety solely because a separate return is filed, the disallowance
shall be disregarded and the item shall be computed as if a joint
return had been filed and then allocated between the spouses
appropriately.
   (5) If the liability of a child of a taxpayer is included on a
joint return, that liability shall be disregarded in computing the
separate liability of either spouse and that liability shall be
allocated appropriately between the spouses.
   (e) (1) In the case of an individual who elects to have
subdivision (b) or (c) apply--
   (A) (i) The determination of the Franchise Tax Board as to whether
the liability is to be revised as to one individual filing the joint
return shall be made not less than 30 days after notification of the
other individual filing the joint return.
   (ii) Any action taken under this section shall be treated as
though it were action on a protest taken under Section 19044 and
shall become final upon the expiration of 30 days from the date that
notice of the action is mailed to both individuals filing the joint
return, unless, within that 30-day period, the individual making the
election under subdivision (b) or (c) appeals the determination to
the board as provided in clause (iii) or the other individual filing
the joint return appeals the determination to the board as provided
in Section 19045.
   (iii) The individual making the election under subdivision (b) or
(c) may appeal the determination of the Franchise Tax Board of the
appropriate relief available to the individual under this section if
that appeal is filed during the 30-day period prescribed in clause
(ii) and the appeal shall be treated as an appeal to the board under
Section 19045.  Notwithstanding the preceding sentence, the
individual making the election under subdivision (b) or (c) may
appeal to the board at any time after the date that is six months
after the date the election is filed with the Franchise Tax Board and
before the close of the 30-day period prescribed in clause (ii).
   (B) Except as otherwise provided in Section 19081 or 19082, no
levy or proceeding in court shall be made, begun, or prosecuted
against the individual making an election under subdivision (b) or
(c) for collection of any assessment to which the election relates
until the expiration of the 30-day period described in clause (ii) of
subparagraph (A), or, if an appeal to the board has been filed under
clause (iii) or Section 19045, until the decision of the board has
become final.
   (2) The running of the period of limitations in Section 19371 on
the collection of the assessment to which the petition under
subparagraph (A) of paragraph (1) relates shall be suspended for the
period during which the Franchise Tax Board is prohibited by
subparagraph (B) of paragraph (1) from collecting by levy or a
proceeding in court and for 60 days thereafter.
   (3) (A) Except as provided in subparagraph (B), notwithstanding
any other law or rule of law (other than Article 6 (commencing with
Section 19441) of Chapter 6), a credit or refund shall be allowed or
made to the extent attributable to the application of this section.
   (B) In the case of any election under subdivision (b) or (c), if a
decision of the board in any prior proceeding for the same taxable
year has become final, that decision shall be conclusive except with
respect to the qualification of the individual for relief that was
not an issue in that proceeding.  The exception contained in the
preceding sentence does not apply if the board determines that the
individual participated meaningfully in the prior proceeding.
   (f) Under procedures prescribed by the Franchise Tax Board, if
taking into account all the facts and circumstances, it is
inequitable to hold the individual liable for any unpaid tax or any
deficiency (or any portion of either), and relief is not available to
the individual under subdivision (b) or (c), the Franchise Tax Board
may relieve the individual of that liability.
   (g) (1) The Franchise Tax Board may prescribe regulations
providing methods for allocation of items other than the methods
under paragraph (3) of subdivision (d).
   (2) It is the intent of the Legislature that, in construing this
section and any other sections that are specifically cross-referenced
in this section, any regulations that may be promulgated by the
Secretary of the Treasury under Section 6015 of the Internal Revenue
Code, as amended by Public Law 105-206, shall apply to the extent
that those regulations do not conflict with this section or with any
regulations that may be promulgated by the Franchise Tax Board.
   (h) (1) Except as provided in paragraph (2), the amendments made
by Section 5 of Chapter 931 of the Statutes of 1999 shall apply to
any liability for tax arising after October 10, 1999, and any
liability for tax arising on or before that date but remaining unpaid
as of that date.
   (2) The period specified under subparagraph (E) of paragraph (1)
of subdivision (b) or subparagraph (B) of paragraph (3) of
subdivision (c) does not expire before the date that is four years
after the date of the first collection activity after October 10,
1999.
   (i) An individual may not be granted relief under this section if
a court has revised the tax liability in a proceeding for dissolution
of the marriage in accordance with subdivision (b) of Section 19006.
   (j) This section shall become operative on January 1, 2009.
18534.  (a) Under regulations prescribed by the Franchise Tax Board,
if:
   (1) An individual does not file a joint return for any taxable
year,
   (2) That individual does not include in gross income for that
taxable year an item of community income properly includable therein,
   (3) The individual establishes that he or she did not know of, and
had no reason to know of, that item of community income, and
   (4) Taking into account all facts and circumstances, it is
inequitable to include that item of community income in that
individual's gross income, then, for purposes of Part 10 (commencing
with Section 17001) and this part, that item of community income
shall be included in the gross income of the other spouse (and not in
the gross income of the individual).
   Under procedures prescribed by the Franchise Tax Board, if, taking
into account all the facts and circumstances, it is inequitable to
hold the individual liable for any unpaid tax or any deficiency (or
any portion of either) attributable to any item for which relief is
not available under the preceding sentence, the Franchise Tax Board
may relieve the individual of that liability.
   (b) The Franchise Tax Board may disallow the benefits of any
community property law to any taxpayer with respect to any income if
that taxpayer acted as if solely entitled to that income and failed
to notify the taxpayer's spouse before the due date (including
extensions) for filing the return for the taxable year in which the
income was derived of the nature and amount of that income.
   (c) It is the intent of the Legislature that, in construing this
section, any regulations that may be promulgated by the Secretary of
the Treasury under Section 66(c) of the Internal Revenue Code, as
amended by Public Law 105-206, shall apply to the extent that those
regulations do not conflict with this section or with any regulations
that may be promulgated by the Franchise Tax Board.
   (d) The amendments made by the act adding this subdivision shall
apply to any liability for tax arising after the effective date of
the act adding this subdivision and any liability for tax arising on
or before that date but remaining unpaid as of that date.
18535.  (a) In lieu of electing nonresident partners filing a return
pursuant to Section 18501 or 18507, the Franchise Tax Board may,
pursuant to requirements and conditions set forth in forms and
instructions, provide for the filing of a group return for electing
nonresident partners by a partnership doing business in, or deriving
income from, sources in California.  The tax rate or rates applicable
to each electing partner's distributive share shall be the highest
marginal rate or rates provided by Part 10 (commencing with Section
17001).  Except as provided in subdivision (b), no deductions shall
be allowed except those necessary to determine each partner's
distributive share, and no credits shall be allowed except those
directly attributable to the partnership.  As required by the
Franchise Tax Board, the partnership as agent for the electing
partners shall make the payments of tax, additions to tax, interest,
and penalties otherwise required to be paid by the electing partners.
   (b) Deductions provided by Chapter 5 (commencing with Section
17501) of Part 10, attributable to earned income of a partner derived
from a partnership filing a group return on behalf of electing
nonresident partners under subdivision (a), shall be allowed if the
partner certifies, in the form and manner as the Franchise Tax Board
may prescribe, that he or she has no earned income from any other
source.
   (c) This section shall also be applicable to a nonresident
shareholder of a corporation which is treated as an "S corporation"
under Chapter 4.5 (commencing with Section 23800) of Part 11.  In
that case, the provisions of subdivisions (a) and (b) are modified to
refer to"shareholder or shareholders" in lieu of "partners" and to
"S corporation" in lieu of "partnership."
   (d) This section shall also be applicable to a nonresident person
with a membership or economic interest in a limited liability
company, registered limited liability partnership, or foreign limited
liability partnership, which is classified as a partnership for
California tax purposes.  In that case, the provisions of
subdivisions (a) and (b) are modified to refer to "holders of a
membership or economic interest" in lieu of "partners" and to
"limited liability companies" in lieu of "partnerships," and
"partnerships" shall include registered limited liability
partnerships and foreign limited liability partnerships.
   (e) The Franchise Tax Board may adjust the income of an electing
nonresident taxpayer included in a group return filed under this
section to properly reflect income under Part 10 (commencing with
Section 17001), including Chapter 11 thereof (commencing with Section
17951), this part (commencing with Section 18401), and Part 11
(commencing with Section 23001), including Chapter 17 thereof
(commencing with Section 25101).
18542.  Notwithstanding any other provision of law, the Franchise
Tax Board may design tax returns to provide for the designation of
contributions to specified funds, as otherwise provided by law, on a
separate schedule which shall be attached to the primary return form.
18551.  Section 13021 of the Unemployment Insurance Code sets forth
requirements for the filing of returns and payment of tax by every
employer required to withhold any personal income tax on wages.
18566.  Returns filed under this article on the basis of the
calendar year shall be filed on or before the 15th day of April
following the close of the calendar year.  Returns made on the basis
of a fiscal year shall be filed on or before the fifteenth day of the
fourth month following the close of the fiscal year.
18567.  (a) The Franchise Tax Board may grant a reasonable extension
of time for filing any return, declaration, statement or other
document required by Part 10 (commencing with Section 17001) or this
part in the manner and form as the Franchise Tax Board may determine.
  Except for a taxpayer residing or traveling abroad, no extension
shall be for more than six months.  In the case of a taxpayer
residing or traveling abroad, returns shall be filed no later than
the 15th day of the sixth month following the close of the taxable
year, unless the requirements for extension have been fulfilled on or
before that date.
   (b) An extension of time granted pursuant to this section is not
an extension of time for payment of tax required to be paid on or
before the due date of the return without regard to extension.
Underpayment of tax penalties shall be imposed as provided by law
without regard to any extension granted under this section.
   (c) A reasonable extension for payment of tax required by this
part may be granted by the Franchise Tax Board whenever in its
judgment good cause exists.
18570.  (a) In the case of an individual who is serving as a member
of the armed forces of the United States or any auxiliary branch
thereof, or the merchant marine, beyond the boundaries of the United
States, the Franchise Tax Board shall automatically grant, without
application being made therefor, an extension of time, free from
interest and penalties, for filing the return (except income withheld
at source), for payment of the tax (except income withheld at
source), for taking any of the steps required by Sections 19041,
19045, 19306, 19324, and 19331, until 180 days after his or her
return to the United States.
   (b) "United States," as used in subdivision (a), means the 50
states of the United States and the District of Columbia.
   (c) This section shall also apply to the spouse of any individual
described in subdivision (a).
18571.  (a) The provisions of Section 7508 of the Internal Revenue
Code, relating to time for performing certain acts postponed by
reason of service in a combat zone or contingency operation, shall
apply except as otherwise provided.
   (b) Section 7508(e)(1) of the Internal Revenue Code, relating to
tax in jeopardy, etc., is modified to refer to jeopardy assessments
and liens authorized under this part, in lieu of the references to
Section 6851 and Chapter 70 or 71 of the Internal Revenue Code.
   (c) Notwithstanding Section 17034, this section shall be operative
without regard to taxable years and shall be operative with respect
to any actions specified in Section 18570 that are required or
permitted to be taken on or after August 2, 1990.
18572.  Section 7508A of the Internal Revenue Code, relating to
postponement of certain tax-related deadlines, shall apply, except as
otherwise provided.