Bill Text: CA SB526 | 2015-2016 | Regular Session | Amended

NOTE: There are more recent revisions of this legislation. Read Latest Draft

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Bill Title: Personal income taxes: joint returns: court orders: relief from liability.

Spectrum: Partisan Bill (Republican 2-0)

Status: (Vetoed) 2016-11-30 - Last day to consider Governor's veto pursuant to Joint Rule 58.5. [SB526 Detail]

Download: California-2015-SB526-Amended.html

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BILL NUMBER: SB 526	AMENDED
	BILL TEXT

	AMENDED IN ASSEMBLY  JANUARY 13, 2016
	AMENDED IN ASSEMBLY  JANUARY 4, 2016
	AMENDED IN SENATE  MAY 18, 2015
	AMENDED IN SENATE  APRIL 14, 2015

INTRODUCED BY   Senators Fuller and Runner

                        FEBRUARY 26, 2015

   An act to amend Section 19006 of the Revenue and Taxation Code,
relating to taxation.


	LEGISLATIVE COUNSEL'S DIGEST


   SB 526, as amended, Fuller. Personal income taxes: joint returns:
court orders: relief from liability.
   Existing law generally provides that the spouse or partner who
controls the disposition of or who receives or spends community
 income   income,  as well as the spouse
who is taxable on the  income   income,  is
liable for the payment of the taxes imposed by the Personal Income
Tax Law on that income, and that whenever a joint income tax return
is filed by spouses or registered domestic partners the liability for
the tax is joint and several. Existing law allows, under specified
conditions, a court in a proceeding for dissolution of marriage to
revise the income tax liabilities on a joint return of spouses or
registered domestic partners, but prohibits revisions to relieve a
spouse or domestic partner of tax liability on income earned by or
subject to the exclusive management and control of the spouse or
domestic partner. Existing law also provides that the order revising
tax liability is not effective if the gross income reportable on the
return exceeds $150,000 or the amount of the tax liability the spouse
is relieved of exceeds $7,500, except as specified.
   This bill would instead provide that an order revising tax
liability may relieve a spouse or domestic partner of tax liability
on income earned by or subject to the exclusive management and
control of that spouse or domestic partner, except if assets or
liabilities are transferred between the individuals filing the joint
return for the principal purpose of avoidance of the payment of tax
or as part of a fraudulent scheme by those individuals or that
liability is uncollectible  and,   or if, 
within 3 years of when the court order is effective, specified
conditions  also  apply. This bill would also
instead provide that the order revising tax liability is not
effective if the gross income reportable on the return exceeds
$200,000 or the amount of the tax liability the spouse is relieved of
exceeds $10,000, except as specified, and would require those
amounts to be recomputed annually beginning on January 1, 
2017,   2018,  as specified. The bill would apply
to court orders served or acknowledged on or after the effective date
of this bill.
   Vote: majority. Appropriation: no. Fiscal committee: yes.
State-mandated local program: no.


THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:

  SECTION 1.  Section 19006 of the Revenue and Taxation Code is
amended to read:
   19006.  (a) The spouse who controls the disposition of or who
receives or spends community income as well as the spouse who is
taxable on the income is liable for the payment of the taxes imposed
by Part 10 (commencing with Section 17001) on that income.
   (b) (1) Whenever a joint return is filed by a husband and wife,
the liability for the tax on the aggregate income is joint and
several.
   (2) The amount of liability on a joint return may not be reduced,
but  the individual responsible for all or part of that
liability may be revised by  a court in a proceeding for
dissolution of the marriage  may determine the individual
responsible for all or part of the liability,  provided the
order revising tax liability on the joint return:
   (A) Must separately state the income tax liabilities for the
taxable years for which revision of tax liability is granted.
   (B) Shall not revise a tax liability that has been fully paid
prior to the effective date of the order; however, any unpaid amount
may be revised.
   (C) Shall become effective when the Franchise Tax Board is served
with or acknowledges receipt of the order.
   (D) (i) Shall not be effective if the gross income reportable on
the return exceeds two hundred thousand dollars ($200,000) or the
amount of tax liability the spouse is relieved of exceeds ten
thousand dollars ($10,000), unless a tax revision clearance
certificate is obtained from the Franchise Tax Board and filed with
the court.
   (ii) Beginning on January 1,  2017,   2018,
 and annually thereafter, the amounts specified in clause (i)
shall be recomputed in accordance with subparagraph (B) of paragraph
(3) of subdivision (b) of Section 19442, modified by substituting
"January 1,  2017"   2018   "  for
"January 1, 2004."
   (E) Shall not be effective to relieve a spouse of the tax
liability on income earned by or subject to the exclusive management
and control of that spouse if either of the following applies:
   (i) Assets or liabilities are transferred between the individuals
filing the joint return for the principal purpose of avoidance of the
payment of tax or as part of a fraudulent scheme by those
individuals.
   (ii) That liability is uncollectible and, within three years of
the date the court order is effective pursuant to subparagraph (C),
either of the following also applies:
   (I) The spouse obligated to pay that liability pursuant to the
court order files for bankruptcy and that liability is discharged in
bankruptcy.
   (II) The spouse obligated to pay that liability pursuant to the
court order becomes a nonresident.
   (c) Notwithstanding subdivision (a) or paragraph (1) of
subdivision (b), whenever a joint return is filed by a husband and
wife and the tax liability is not fully paid, that liability,
including interest and penalties, may be revised by the Franchise Tax
Board as to one spouse.
   (1) However, the liability shall not be revised:
   (A) To relieve a spouse of tax liability on income earned by or
subject to the exclusive management and control of the spouse. The
liability of the spouse for the tax, penalties, and interest due for
the taxable year shall be in the same ratio to total tax, penalties,
and interest due for the taxable year as the income earned by or
subject to the management and control of the spouse is to total gross
income reportable on the return.
   (B) To relieve a spouse of liability below the amount actually
paid on the liability prior to the granting of relief, including
credit from any other taxable year available for application to the
liability.
   (2) The liability may be revised only if the spouse whose
liability is to be revised establishes that he or she did not know
of, and had no reason to know of, the nonpayment at the time the
return was filed. For purposes of this paragraph, "reason to know"
means whether or not a reasonably prudent person would have had
reason to know of the nonpayment.
   (3) The determination of the Franchise Tax Board as to whether the
liability is to be revised as to one spouse shall be made not less
than 30 days after notification of the other spouse and shall be
based upon whether, under all of the facts and circumstances
surrounding the nonpayment, it would be inequitable to hold the
spouse requesting revision liable for the nonpayment. Any action
taken under this section shall be treated as though it were action on
a protest taken under Section 19044 and shall become final upon the
expiration of 30 days from the date that notice of the action is
mailed to both spouses, unless, within that 30-day period, one or
both spouses appeal the determination to the board as provided in
Section 19045.
   (4) This subdivision shall apply to all taxable years subject to
the provisions of this part, but shall not apply to any taxable year
which has been closed by a statute of limitations, res judicata, or
otherwise.
   (d) For purposes of this section, the determination of the spouse
to whom items of gross income are attributable shall be made without
regard to community property laws.
   (e) The amendments made to this section by the act adding this
subdivision shall apply to court orders served or acknowledged on or
after the effective date of that act.