2005 California Revenue and Taxation Code Sections 19191-19194 Entities

19191.  (a) The Franchise Tax Board may enter into a voluntary
disclosure agreement with any qualified entity, qualified
shareholder, qualified member, or qualified beneficiary as defined in
Section 19192, that is binding on both the Franchise Tax Board and
the qualified entity, qualified shareholder, qualified member, or
qualified beneficiary.
   (b) The Franchise Tax Board shall do all of the following:
   (1) Provide guidelines and establish procedures for qualified
entities and their qualified shareholders, qualified members, or
qualified beneficiaries to apply for voluntary disclosure agreements.
   (2) Accept applications on an anonymous basis from qualified
entities and their qualified shareholders, qualified members, or
qualified beneficiaries for voluntary disclosure agreements.
   (3) Implement procedures for accepting applications for voluntary
disclosure agreements through the National Nexus Program administered
by the Multistate Tax Commission.
   (4) For purposes of considering offers from qualified entities and
their qualified shareholders, qualified members, or qualified
beneficiaries to enter into voluntary disclosure agreements, take
into account the following criteria:
   (A) The nature and magnitude of the qualified entity's previous
presence and activity in this state and the facts and circumstances
by which the nexus of the qualified entity or qualified shareholder,
qualified member, or qualified beneficiary's was established.
   (B) The extent to which the weight of the factual circumstances
demonstrates that a prudent business person exercising reasonable
care would conclude that the previous activities and presence in this
state were or were not immune from taxation by this state by reason
of Public Law 86-272 or otherwise.
   (C) Reasonable reliance on the advice of a person in a fiduciary
position or other competent advice that the qualified entity or
qualified shareholder, qualified member, or qualified beneficiary
activities were immune from taxation by this state.
   (D) Lack of evidence of willful disregard or neglect of the tax
laws of this state on the part of the qualified entity or qualified
shareholder, qualified member, or qualified beneficiary.
   (E) Demonstrations of good faith on the part of the qualified
entity.
   (F) Benefits that will accrue to the state by entering into a
voluntary disclosure agreement.
   (5) Act on any application of a voluntary disclosure agreement
within 120 days of receipt.
   (6) Enter into voluntary disclosure agreements with qualified
entities, qualified shareholders, qualified members, or qualified
beneficiaries, as authorized in subdivision (a) and based on the
criteria set forth in paragraph (4).
   (c) Before any voluntary disclosure agreement becomes binding, the
Franchise Tax Board, itself, shall approve the agreement in the
following manner:
   (1) The Executive Officer and Chief Counsel of the Franchise Tax
Board shall recommend and submit the voluntary disclosure agreement
to the Franchise Tax Board for approval.
   (2) Each voluntary disclosure agreement recommendation shall be
submitted in a manner as to maintain the anonymity of the taxpayer
applying for the voluntary disclosure agreement.
   (3) Any recommendation for approval of a voluntary disclosure
agreement shall be approved or disapproved by the Franchise Tax
Board, itself, within 45 days of the submission of that
recommendation to the board.
   (4) Any recommendation of a voluntary disclosure agreement that is
not either approved or disapproved by the board within 45 days of
the submission of that recommendation shall be deemed approved.
   (5) Disapproval of a recommendation of a voluntary disclosure
agreement shall be made only by a majority vote of the Franchise Tax
Board.
   (6) The members of the Franchise Tax Board shall not participate
in any voluntary disclosure agreement except as provided in this
subdivision.
   (d) The voluntary disclosure agreement entered into by the
Franchise Tax Board and the qualified entity, qualified shareholder,
qualified member, or qualified beneficiary as provided for in
subdivision (a) shall to the extent applicable specify that:
   (1) The Franchise Tax Board shall with respect to a qualified
entity, qualified shareholder, qualified member, or qualified
beneficiary, except as provided in paragraph (4), (6), or (9) of
subdivision (a) of Section 19192:
   (A) Waive its authority under this part, Part 10 (commencing with
Section 17001), or Part 11 (commencing with Section 23001) to assess
or propose to assess taxes, additions to tax, fees, or penalties with
respect to each taxable year ending prior to six years from the
signing date of the voluntary disclosure agreement.
   (B) With respect to each of the six taxable years ending
immediately preceding the signing date of the voluntary disclosure
agreement, based on its discretion, agree to waive any or all of the
following:
   (i) Any penalty related to a failure to make and file a return, as
provided in Section 19131.
   (ii) Any penalty related to a failure to pay any amount due by the
date prescribed for payment, as provided in Section 19132.
   (iii) Any addition to tax related to an underpayment of estimated
tax, as provided in Section 19136.
   (iv) Any penalty related to Section 6810 or subdivision (a) of
Section 8810 of the Corporations Code, as provided in Section 19141.
   (v) Any penalty related to a failure to furnish information or
maintain records, as provided in Section 19141.5.
   (vi) Any addition to tax related to an underpayment of tax imposed
under Part 11 (commencing with Section 23001), as provided in
Section 19142.
   (vii) Any penalty related to a partnership required to file a
return under Section 18633, as provided in Section 19172.
   (viii) Any penalty related to a failure to file information
returns, as provided in Section 19183.
   (ix) Any penalty related to relief from contract voidability, as
provided in Section 23305.1.
   (2) The qualified entity, qualified shareholder, qualified member,
or qualified beneficiary shall:
   (A) With respect to each of the six taxable years ending
immediately preceding the signing date of the written agreement:
   (i) Voluntarily and fully disclose on the qualified entity's
application all material facts pertinent to the qualified entity's,
shareholder's, member's, or beneficiary's liability for any taxes
imposed under Part 10 (commencing with Section 17001) or Part 11
(commencing with Section 23001).
   (ii) Except as provided in paragraph (3), within 30 days from the
signing date of the voluntary disclosure agreement:
   (I) File all returns required under this part, Part 10 (commencing
with Section 17001), or Part 11 (commencing with Section 23001).
   (II) Pay in full any tax, interest, fee, and penalties (other than
those penalties specifically waived by the Franchise Tax Board under
the terms of the voluntary disclosure agreement) imposed under this
part, Part 10 (commencing with Section 17001), or Part 11 (commencing
with Section 23001) in a manner as may be prescribed by the
Franchise Tax Board.  Paragraph (1) of subdivision (f) of Section
25153 shall not apply to qualified entities admitted into the
voluntary disclosure program.
   (B) Agree to comply with all franchise and income tax laws of this
state in subsequent taxable years by filing all returns required and
paying all amounts due under this part, Part 10 (commencing with
Section 17001), or Part 11 (commencing with Section 23001).
   (3) The Franchise Tax Board may extend the time for filing returns
and paying amounts due to 120 days from the signing date of the
voluntary disclosure agreement.
   (e) The amendments to this section made by Chapter 954 of the
Statutes of 1996 shall apply to taxable years beginning on or after
January 1, 1997.
   (f) The amendments to this section made by Chapter 543 of the
Statutes of 2001 shall apply to voluntary disclosure agreements
entered into on or after January 1, 2002.
   (G) The amendments to this section made by the act adding this
subdivision shall apply to voluntary disclosure agreements entered
into on or after January 1, 2005.
19192.  For purposes of this article, the following terms have the
following meanings:
   (a) (1) "Qualified entity" means an entity that is all of the
following:
   (A) A corporation, as defined in Section 23038, a limited
liability company, as defined in subdivision (d) of Section 17941, or
a qualified trust, as defined in paragraph (7).
   (B) An entity, including any predecessors to the entity, that
previously has never filed a return with the Franchise Tax Board
pursuant to this part, Part 10 (commencing with Section 17001), or
Part 11 (commencing with Section 23011).
   (C) An entity, including any predecessors to the entity, that
previously has not been the subject of an inquiry by the Franchise
Tax Board with respect to liability for any of the taxes imposed
under Part 10 (commencing with Section 17001) or Part 11 (commencing
with Section 23001).
   (D) An entity that voluntarily comes forward prior to any
unilateral contact from the Franchise Tax Board, makes application
for a voluntary disclosure agreement in a form and manner prescribed
by the Franchise Tax Board, and makes a full and accurate statement
of its activities in this state for the six immediately preceding
taxable years.
   (2) (A) Notwithstanding paragraph (1), a qualified entity does not
include any of the following:
   (i) An entity that is organized and existing under the laws of
this state.
   (ii) An entity that is qualified or registered with the office of
the Secretary of State.
   (iii) An entity that maintains and staffs a permanent facility in
this state.
   (B) For purposes of this paragraph, the storing of materials,
goods, or products in a public warehouse pursuant to a public
warehouse contract does not constitute maintaining a permanent
facility in this state.
   (3) "Qualified shareholder" means an individual that is all of the
following:
   (A) A nonresident on the signing date of the voluntary disclosure
agreement.
   (B) A shareholder of an "S" corporation (defined in Section 23800)
that has applied for a voluntary disclosure agreement under this
article under which all material facts pertinent to the shareholder's
liability would be disclosed on that"S" corporation's voluntary
disclosure agreement as required under clause (i) of subparagraph (A)
of paragraph (2) of subdivision (d) of Section 19191.
   (4) Notwithstanding paragraph (3), subparagraph (B) of paragraph
(1) of subdivision (d) of Section 19191 shall not apply to any of the
six taxable years immediately preceding the signing date that the
qualified shareholder was a California resident required to file a
California tax return, nor to any penalties or additions to tax
attributable to income other than the California source income from
the "S" corporation that filed an application under this article.
   (5) "Qualified member" means an individual, corporation, or
limited liability company that is all of the following:
   (A) (i) In the case of an individual, is a nonresident on the
signing date of the voluntary disclosure agreement.
   (ii) In the case of a corporation or limited liability company, is
not either of the following:
   (I) Organized under the laws of this state.
   (II) Qualified or registered with the office of the Secretary of
State.
   (B) A member of a limited liability company that has applied for a
voluntary disclosure agreement under this article under which all
material facts pertinent to the member's liability would be disclosed
on that limited liability company's voluntary disclosure agreement
as required under clause (i) of subparagraph (A) of paragraph (2) of
subdivision (d) of Section 19191.
   (6) Notwithstanding paragraph (5), in the case of a qualified
member who is an individual, subparagraph (B) of paragraph (1) of
subdivision (d) of Section 19191 shall not apply to any of the six
taxable years immediately preceding the signing date that the
qualified member was a California resident required to file a
California tax return, nor to any penalties or additions to tax
attributable to income other than the California source income from
the limited liability company that filed an application under this
article.
   (7) "Qualified trust" means a trust that meets both of the
following:
   (A) (i) The administration of the trust has never been performed
in California.
   (ii) For purposes of this subparagraph, administrative activities
performed in California would be deemed to be performed outside of
California if those activities were inconsequential to the overall
administration of the trust.
   (B) For six taxable years ending immediately preceding the signing
date of the voluntary disclosure agreement, the trust has had no
resident beneficiaries (other than a beneficiary whose interest in
that trust is contingent:  a beneficiary's trust interest is not
contingent if the trust has made any distribution to the resident
beneficiary at any time during the six taxable years ending
immediately preceding the signing date of the voluntary disclosure
agreement).
   (8) "Qualified beneficiary" means an individual who is all of the
following:
   (A) A nonresident on the signing date of the voluntary disclosure
agreement and a nonresident during each of the six taxable years
ending immediately preceding the signing date of the voluntary
disclosure agreement.
   (B) A beneficiary of a qualified trust that has applied for a
voluntary disclosure agreement under this article under which all
material facts pertinent to the beneficiary's liability would be
disclosed on that trust's voluntary disclosure agreement as required
under clause (i) of subparagraph (A) of paragraph (2) of subdivision
(d) of Section 19191.
   (9) Notwithstanding paragraph (8), subparagraph (B) of paragraph
(1) of subdivision (d) of Section 19191 shall not apply to any
penalties or additions to tax attributable to income other than
income from the trust that filed an application under this article.
   (b) "Signing date" of the voluntary disclosure agreement means the
date on which a person duly authorized by the Franchise Tax Board
signs the agreement.
   (c) The amendments to this section made by Chapter 954 of the
Statutes of 1996 shall apply to taxable years beginning on or after
January 1, 1997.
   (d) The amendments to this section made by Chapter 543 of the
Statutes of 2001 shall apply to voluntary disclosure agreements
entered into on or after January 1, 2002.
   (e) The amendments to this section made by the act adding this
subdivision shall apply to voluntary disclosure agreements entered
into on or after January 1, 2005.
19193.  Nothing in this article shall be construed to mean that by
accepting and signing a voluntary disclosure agreement the Franchise
Tax Board abdicates the right and authority to examine returns and
determine the correct amount of tax for any of the taxable years
covered by the voluntary disclosure period agreed upon and to assess
any additional tax, penalty, or interest owed as a result of that
examination.
19194.  (a) Notwithstanding any other provision of this article, a
voluntary disclosure agreement shall be null and void in the event
that the Franchise Tax Board finds that with respect to the agreement
any of the following circumstances exist:
   (1) The qualified entity has misrepresented any material fact in
applying for the voluntary disclosure agreement or in entering into
the agreement.
   (2) The qualified entity fails to file any returns for any taxable
year covered by the voluntary disclosure period agreed upon on or
before the due date prescribed under the terms of the agreement in
accordance with paragraph (2) of subdivision (d) of Section 19191.
   (3) (A) The qualified entity fails to pay in full any tax, fee,
penalty, or interest due within the time prescribed under the terms
of the voluntary disclosure agreement in accordance with paragraph
(2) of subdivision (d) of Section 19191 or to pay any installments
thereof due within the time prescribed under the terms of an
installment payment arrangement in accordance with subparagraph (B).
   (B) The Franchise Tax Board may enter into an installment payment
arrangement, which shall include provisions for interest, in lieu of
the full payment required under paragraph (2) of subdivision (d) of
Section 19191.  Failure by the qualified entity to comply with the
terms of the installment payment arrangement shall also render the
voluntary disclosure arrangement null and void.
   (4) The tax shown by the qualified entity on its tax return filed
for any taxable year covered by the voluntary disclosure agreement,
including any amount shown on a qualified amended return, as defined
in Section 1.6664-2(c)(3) of Title 26 of the Code of Federal
Regulations, understates by 10 percent or more the tax imposed under
either Part 10 (commencing with Section 17001) or Part 11 (commencing
with Section 23001) and the qualified entity cannot demonstrate to
the satisfaction of the Franchise Tax Board that a good-faith effort
was made to accurately compute the tax.
   (5) The qualified entity fails to begin to prospectively comply
with all franchise and income tax laws of this state as agreed upon
under the terms of the voluntary disclosure agreement in accordance
with paragraph (2) of subdivision (d) of Section 19191.
   (b) In the event that the Franchise Tax Board finds that the
qualified entity has failed to comply under any of the circumstances
which render the voluntary disclosure agreement null and void as set
forth in subdivision (a), the limitation on assessment for any
taxable years and the waiver of any penalties as provided for in
paragraph (1) of subdivision (d) of Section 19191 shall not be
binding on the Franchise Tax Board.