Is the Franchise Tax Board assessing penalties against taxpayers on abusive tax schemes?
Yes. We assess penalties appropriate to the facts and circumstances of each case. For abusive tax schemes, we assess the accuracy related penalty unless the taxpayer shows reasonable cause existed for their position. For non-corporate taxpayers, to be excused from the accuracy related penalty, the taxpayer must have a reasonable basis for his or her reporting position or substantial authority must exist which includes a reasonable belief the tax treatment is more likely than not the proper treatment. See Treasury Regulations sections 1.6662-3 and 1.6664 and California Revenue and Taxation Code section 19164. Generally, Franchise Tax Board and Internal Revenue Service auditors have found the defenses of substantial authority or reasonable cause are not relevant. Therefore, assessment of the accuracy related penalty is frequently appropriate.
Related Questions
- How many cases has the Franchise Tax Board identified with abusive tax schemes and what is the associated revenue?
- When did the Franchise Tax Board begin identifying and auditing this new generation of abusive tax schemes?
- Is the Franchise Tax Board assessing penalties against taxpayers on abusive tax schemes?
