SACRAMENTO — The Franchise Tax Board announced results from the state’s second tax Voluntary Compliance Initiative (VCI2) and the news is good.
According to preliminary numbers, VCI 2 raised $350 million with $293 million received in cash and an added $57 million expected by June 15, 2012, from installment payments. This initiative was estimated to raise $270 million from taxpayers who had unreported offshore income or who participated in abusive tax avoidance transactions.
Similar to an amnesty program, VCI 2 allowed taxpayers who underreported their California income tax liabilities, through the use of abusive tax avoidance transactions or offshore financial arrangements, to amend their returns for 2010 and prior tax years and obtain a waiver of most penalties. More than 1,000 taxpayers participated. Individual taxpayers comprised more than 90 percent of participation. Business taxpayers paid more than $100 million in added tax and interest. Payments from individuals, estates, and trusts make up the difference.
Taxpayers who were eligible for VCI 2 because of their involvement with abusive tax avoidance transactions but did not to participate are subject to audit for 12 years with large penalties such as the 40 percent Noneconomic Substance Transaction penalty and a 50 or 100 percent interest-based penalty.
VCI 2 ended on Oct. 31. Final payments are due by June 15, 2012.