Tax News

CCH (cch.taxgroup.com) reports:

Taxpayers who are required to disclose a reportable transaction or a listed transaction for California corporate franchise, income or personal income tax purposes and who have not previously filed IRS Form 8886, Reportable Transaction Disclosure Statement, or any successor form, or who filed an incomplete Form 8886, are being allowed until September 29, 2007, to file a complete form with the California Franchise Tax Board (FT. If a taxpayer is required to file a disclosure statement and fails to do so by the deadline, the FTB will assess a penalty under Rev. & Tax. Code Sec. 19772 for failure to disclose a reportable or listed transaction. The penalty is $15,000 for each failure to disclose a reportable transaction and $30,000 for each failure to disclose a listed transaction. Taxpayers filing a disclosure statement in response to this announcement need only file a statement with the FTB's Abusive Tax Shelter Unit (ATSU), and need not file an amended return to make the disclosure. These taxpayers should write "FTB Notice 2007-3" in red on the top of their Form 8866.
Federal regulations provide that the disclosure statement is due when the taxpayer files an original or amended return for each year that reflects the taxpayer's participation in a reportable transaction. Also, for the initial year for which a disclosure statement is filed for a particular reportable transaction, the taxpayer must also send a duplicate copy to the federal Office of Tax Shelter Analysis. For California purposes, the general rule is that Form 8866 must be attached to the taxpayer's original or amended return for each taxable year for which the taxpayer participates in a reportable transaction. Also, for disclosure statements filed for the initial year of participation, the taxpayer must mail a copy of the disclosure to the FTB's ATSU.
A Form 8866 containing a statement that information will be provided upon request is not considered a complete disclosure statement. Also, if a taxpayer fails to file a copy of the disclosure statement with the FTB's ATSU for the initial year of participation at the same time the taxpayer files the disclosure statement with the taxpayer's return, the taxpayer will not be considered to have complied with the disclosure requirements.
Subscribers to CCH Tax Research NetWork may view the text of the notice.
FTB Notice 2007-3 , California Franchise Tax Board, July 31, 2007.