California Code of Regulations › Title 18 - Public Revenues › Division 3 - Franchise Tax Board › Chapter 3.5 - Bank and Corporation Tax › Subchapter 17 - Allocation of Income › Article 1 - General Provisions › Section 25112 - Penalties for Failure to Supply Information or Documents

Current through Register 2024 Notice Reg. No. 28, July 12, 2024
(a) Penalty for failure to furnish
					 information.
(1) In general. If a corporation
					 making a water's-edge election under Revenue and Taxation Code section
					 25110
					 fails to furnish any information described in Revenue and Taxation Code section
					 25112,
					 subdivision (b), within 60 days of a written request by an auditor or attorney
					 of the Franchise Tax Board, such corporation shall pay a penalty of $1,000 for
					 each taxable year with respect to which such information is not timely
					 furnished. Additional monetary penalties of up to $24,000, for a total penalty
					 of $25,000, may be assessed if the failure to furnish information
					 continues.
(2) Basis for assessing
					 penalty.
(A) Taxable year. The penalty is
					 assessed with respect to each taxable year for which the request is made. A
					 single request for information may apply to several years and a failure to
					 furnish information in response to such request may give rise to a penalty for
					 each taxable year covered by the request. Requests may be made for information
					 for more than one taxable year during a calendar year or twelve-month period. A
					 failure to furnish information may give rise to a penalty for each taxable year
					 in spite of the fact that penalties are assessed for two or more taxable years
					 during a calendar year or twelve-month period.
(B) Failure to furnish. The penalty is
					 assessed for a failure to furnish information, not for each failure to furnish
					 information nor for each item of information or document not furnished. The
					 penalty applies to each individual corporation required to file under the
					 Corporation Tax Law to which the written request is directed. Filing Schedule
					 R-7, Election to File a Single Return, shall not relieve each of the entities
					 upon whose behalf such election is filed from liability for such
					 penalty.
(C) Substantial nature.
					 The failure to supply information must be of a substantial nature which may be
					 demonstrated either by the potential significance or the quantity of the item
					 or items not supplied.
(3) Notice. The corporation must be informed
					 in the written request for information that it is subject to the penalty
					 provided for in Revenue and Taxation Code section
					 25112,
					 subdivision (a), before the penalty may be assessed. A corporation shall
					 normally only be advised that it may be subject to the penalty provided for in
					 Revenue and Taxation Code section
					 25112,
					 subdivision (a), if it has previously failed to provide the information
					 requested, whether specifically or generally. The notice shall set forth the
					 basis upon which prior responses have been unsatisfactory.
(4) Increase in penalty for continued failure
					 after notification. If a failure described in subsection (a)(1) of this
					 regulation continues for more than 90 days after the date on which a bureau
					 director or a supervising counsel mails notice of such failure to the reporting
					 corporation, that corporation shall pay a penalty of $1,000, in addition to the
					 penalty imposed by Revenue and Taxation Code section
					 25112,
					 subdivision (a), and subsection (a)(1) of this regulation, for each 30-day
					 period (or fraction thereof) during which such failure continues after such
					 90-day period has expired. The additional penalty imposed by Revenue and
					 Taxation Code section
					 25112,
					 subdivision (c), and described in this paragraph shall be limited to a maximum
					 of $24,000 for the failure for each taxable year.
(5) Reasonable cause.
(A) Time. For purposes of Revenue and
					 Taxation Code section
					 25112,
					 subdivision (a), the time prescribed for furnishing information under
					 subsection (a)(1) of this regulation, and the beginning of the 90-day period
					 after mailing of notice by the bureau director or supervising counsel under
					 subsection (a)(4) of this regulation, shall be treated as being not earlier
					 than the last day on which reasonable cause existed for failure to furnish the
					 information. Absent a showing by the taxpayer, it shall be presumed that
					 reasonable cause did not exist for failure to submit the requested information
					 as of the date of the request provided for in subsection (a).
(B) Tolling. The sixty-day and ninety-day
					 time periods shall be tolled during the period of time for which the question
					 of reasonable cause is under review.
(C) Showing. To show that reasonable cause
					 existed for failure to furnish information as required by Revenue and Taxation
					 Code section
					 25112,
					 the reporting corporation must make an affirmative showing of all facts alleged
					 as reasonable cause for such failure in a written statement containing a
					 declaration that it is made under the penalties of perjury. The statement must
					 be filed with the bureau director or supervising counsel who signed the notice
					 of failure. Such bureau director or supervising counsel shall determine whether
					 the failure to furnish information was due to reasonable cause, and if so, the
					 period of time for which such reasonable cause existed. The taxpayer shall be
					 notified of the determination.
(D)
					 Destruction or retention. Destruction of a document, or failure to maintain
					 information, if occurring in the normal course of business, is reasonable cause
					 for failure to furnish information for purposes of penalties asserted under
					 Revenue and Taxation Code section
					 25112,
					 subdivisions (a) and (c), unless the document or information is otherwise
					 required to be maintained by Article 1.5 of Chapter 17 of the Corporation Tax
					 Law.
(E) Location. Location of a
					 document or information in a foreign country may provide reasonable cause for
					 not supplying the document or information for a period of time not to exceed 90
					 days.
(6) Other
					 penalties. The information required by Revenue and Taxation Code section
					 25112,
					 subdivision (b), and which may be requested under Revenue and Taxation Code
					 section
					 25112
					 must be furnished even though it may not ultimately affect the amount of any
					 tax due under the Corporation Tax Law. For criminal penalties for failure to
					 file a return and filing a false or fraudulent return, see Revenue and Taxation
					 Code sections
					 19706,
					 19701
					 and
					 19705.
(7) Manner of assessing.
(A) Initial penalty. The penalty provided for
					 in Revenue and Taxation Code section
					 25112,
					 subdivision (a), shall be assessed in a manner similar to the assessment of
					 additional tax and all rights, duties and remedies shall apply.
(B) Additional amounts. The additional
					 penalties provided for in Revenue and Taxation Code section
					 25112,
					 subdivision (c), shall be assessed in a manner similar to the assessment of
					 additional tax except that a notice need not be issued until the full penalty
					 has accrued, or 45 days after the failure to submit has been cured. The protest
					 and pursuit of other remedies provided with respect to the penalty provided for
					 in Revenue and Taxation Code section
					 25112,
					 subdivision (a), shall not stay the accruing and assessment of penalties
					 pursuant to subdivision (c) of such section. If it is ultimately determined
					 that the penalty provided for in Revenue and Taxation Code section
					 25112,
					 subdivision (a), should not be assessed, any penalty asserted under Revenue and
					 Taxation Code section
					 25112,
					 subdivision (c), shall be withdrawn and refunded, if paid, with interest as
					 otherwise required by law.