Franchise Tax Board: voluntary disclosure agreements.

Existing law with respect to voluntary disclosure by business entities requires a voluntary disclosure agreement entered into by the Franchise Tax Board and a qualified entity, qualified shareholder, qualified member, or qualified beneficiary to specify that the Franchise Tax Board shall, with respect to the qualified entity, qualified shareholder, qualified member, or qualified beneficiary for each of the 6 taxable years ending immediately preceding the signing date of the agreement, waive specified penalties, including a specified penalty for a partnership failing to make certain returns. Existing law defines a qualified beneficiary to include a beneficiary of a qualified trust. Existing law defines a qualified trust as a trust that has not been administered in California and that does not have any resident beneficiaries for the 6 taxable years ending immediately preceding the signing date of the voluntary disclosure agreement. Existing law defines "qualified beneficiary" to mean an individual who is a nonresident on the signing date of the voluntary disclosure agreement and each six taxable years thereafter and who is a beneficiary of a qualified trust that has applied for a voluntary disclosure agreement, as specified. This bill would expand the specification requirement to apply to voluntary disclosure agreements between the Franchise Tax Board and a qualified partner. The bill would expand the types of partnership penalties waived to include a penalty related to the failure of a limited liability company classified as a partnership to make specified returns and would waive a penalty related to "S" corporations that fail to make specified returns. This bill would also eliminate the exclusion from a qualified trust of a trust with resident beneficiaries. The bill would add the additional requirement to the definition of "qualified beneficiary" of being a beneficiary with a contingent or noncontingent interest in the qualified trust. The bill would define "qualified partner" and "qualified partnership." The bill would apply these changes to voluntary disclosure agreements entered into on or after January 1, 2018.