Tax News

CCH (cch.taxgroup.com) reports:

  The California Franchise Tax Board (FT has issued guidance on procedural issues relating to the payment of tax and filing of amended returns for the 2003-2007 taxable years for taxpayers to reduce or avoid imposition of the large corporation franchise and income tax understatement penalty imposed under Rev. and Tax. Code Sec. 19138. Sec. 19138 imposes a penalty equal to 20% of the entire amount of the understatement if a corporation has an understatement of tax in excess of $1 million. Sec. 19138 is effective December 19, 2008, and operative for taxable years beginning on or after January 1, 2003, for which the statute of limitations on assessment had not expired as of December 19, 2008. Details of the legislation were previously reported. (TAXDAY, 2008/10/02, S.2)

  For the 2003-2007 taxable years, Sec. 19138(b) allows a taxpayer to file an amended return and pay the tax shown on the amended return by May 31, 2009, in order to treat the tax shown on the amended return as tax shown on the original return for purposes of the penalty. This action will increase the taxpayer's self-assessed tax base against which the understatement of tax is measured to reduce the taxpayer's exposure to the penalty for these years.