Income tax administration: installment agreements, suspension, forfeiture, and revivor.

(1) Existing law requires the Franchise Tax Board to administer the levy and collection of taxes pursuant to the Personal Income Tax Law and the Corporation Tax Law, and establishes procedures for the collection of those taxes. Existing law authorizes the Franchise Tax Board, in cases of financial hardship, to allow a taxpayer to enter into an installment payment agreement with the Franchise Tax Board for the full or partial payment of the amount of the taxpayer's tax liability, as specified. Under existing law, failure by a taxpayer to comply fully with the terms of an installment payment agreement renders the agreement null and void, except as specified, and makes the total amount of tax, interest, and penalties immediately due and payable. This bill would expand the authority of the Franchise Tax Board to enter into these installment payment agreements to include all liabilities imposed pursuant to the specified tax laws that the board administers. Under the bill, the application of the existing noncompliance provisions would be limited to installment payment agreements entered into before January 1, 2024. The bill, for installment payment agreements entered into on or after January 1, 2024, would add revised noncompliance provisions that, among other things, authorize the Franchise Tax Board, under certain conditions, to alter or modify an agreement to add a liability that the taxpayer has failed to pay while the agreement is in effect. In the case of a liability for tax of an individual under the Personal Income Tax Law or the laws related to the administration of franchise and income tax laws, existing law requires the Franchise Tax Board to enter into an installment payment agreement if, among other conditions, the taxpayer's liability does not exceed $10,000, as specified, and full repayment of liability is required within 3 years. Those conditions also exclude an agreement if, in the preceding 5 taxable years, the taxpayer has failed to pay a tax or has entered into a similar installment agreement, as specified. This bill would raise the cap on the taxpayer's liability to $25,000, and would extend the maximum time for full repayment to 5 years. The bill would also revise the conditions related to the taxpayer's most recent 5 taxable year history by removing the exclusion of a taxpayer who has failed to pay a tax and, instead, excluding an agreement with a taxpayer who has failed to satisfy the terms of a similar installment agreement. Existing law requires the Franchise Tax Board every 2 years to review an installment agreement that is for the partial payment of a liability. This bill would revise that biennial duty to be, instead, a review of a representative sample of existing installment agreements, as specified. The bill would authorize the Franchise Tax Board to prescribe regulations as necessary to implement the installment payment agreement provisions. The bill would make conforming and nonsubstantive changes. (2) Existing law authorizes the suspension or forfeiture of certain corporate powers, rights, and privileges of a taxpayer for failure to file a tax return or pay delinquent taxes, penalties, or interest. Existing law authorizes the Franchise Tax Board to issue a certificate of revivor for a taxpayer that has suffered the suspension or forfeiture if the taxpayer, among other requirements, pays certain taxes, penalties, and interest. Existing law also authorizes the Franchise Tax Board to revive a corporation to good standing without full payment if it will improve the prospects for collection, as prescribed. Existing law generally defines "taxpayer," for purposes of these and other suspension, forfeiture, and revivor provisions, as either a corporation subject to the franchise tax or a limited liability company, as specified. This bill would apply the above-described provisions relating to suspension, forfeiture, and revivor to taxpayers, as defined above to include limited liability companies, as well as corporations. The bill would make conforming changes to other related provisions. (3) This bill would incorporate additional changes to Section 19008 of the Revenue and Taxation Code proposed by SB 516 to be operative only if this bill and SB 516 are enacted and this bill is enacted last.