Closing the gap: transparency, ease-of-use, tax gap are 2006 priorities.

• Author: Ascierto, Jerry
• Position: Tax amnesty penalty - Franchise Tax Board's plans

Franchise Tax Board Interim Executive Officer Will Bush kicked off CalCPA's 2005 FTB Liaison meeting by outlining his vision for 2006, which includes making the FTB's rulemaking processes more transparent and its services more user-friendly.

Bush also wants the FTB to adopt new procedures to solicit more input from stakeholders in shaping new regulations. He'd also like to transform the FTB's services into a "one-and-done" process by bolstering its responsiveness to taxpayers and shortening the time frames of the audit, protest and appeals processes.

He noted that while the FTB has unveiled a number of initiatives aimed at reducing the tax gap, it will now focus on correcting its root causes.

"For me, the tax gap has been an ongoing issue for the last two to three decades," Bush said. "This is the first time the FTB, or perhaps any tax organization, has done strategic planning focused on the tax gap. Planning sessions have begun with a goal of having a report to our board by February."

Amnesty Update

Cathy Cleek, prior chief of the FTB's filling division, discussed the 2005 Tax Amnesty Program, which brought in about $700 million and $3.5 billion in protective claims.

Of the 832 taxpayers involved, 111 were corporations, accounting for $3 billion of all protective claims.

The program was enacted by SB 1100, but "there were some unintended consequences of the bill," she said. "We went back to the author of the amnesty legislation, Judy Chu, and worked with her on an amnesty clean-up bill."

The recently passed AB 911 addresses such unintended consequences, by:

* Allowing underpayments for amnesty-eligible years to be offset by overpayments from other years for purposes of computing the amnesty payment;

* Establishing a 20-year statute of limitations to collect income of franchise tax balances due from taxpayers, and thereafter extinguish the liability to pay such balances by abating the tax;

* Allowing the FTB to extinguish certain inactive taxpayer debts;

* Repealing the provision that requires taxpayers who participate in amnesty to pay any tax due for the 2005 and 2006 taxable years to avoid having the benefits of amnesty revoked and the penalty imposed; and

* Making technical clarifications of certain amnesty provisions.

Additionally, the FTB's collections department implemented a four-month pilot program Sept. 1 "to allow individuals to go into an installment agreement if they're able to pay the debt within five years. Our current...