(a) A penalty shall be imposed for filing a frivolous return and shall be determined in accordance with Section 6702 of the Internal Revenue Code, except as otherwise provided.
(b) Section 6702 of the Internal Revenue Code shall be applied to returns required to be filed under this part.
(c) Section 6702 of the Internal Revenue Code is modified as follows:
(1) (A) By substituting the phrase “tax imposed under Part 10 (commencing with Section 17001), Part 11 (commencing with Section 23001), or this part” for the phrase “tax imposed by this title” contained therein.
(B) By substituting the phrase “frivolous or is based on a position that the Franchise Tax Board has identified as frivolous under subdivision (d) of Section 19179” for the term “frivolous” contained therein.
(C) By substituting the phrase “reflects a desire to delay or impede the administration of federal income tax laws as determined by the Secretary of the Treasury or the administration of the tax imposed under Part 10 (commencing with Section 17001), Part 11 (commencing with Section 23001), or this part as determined by the Franchise Tax Board” for the phrase “reflects a desire to delay or impede the administration of Federal tax laws” contained therein.
(D) By substituting the phrase “is based on a position which the Secretary of the Treasury has identified as frivolous under Section 6702(c) of the Internal Revenue Code or the Franchise Tax Board has identified as frivolous under subdivision (d)” for the phrase “is based on a position which the Secretary has identified as frivolous under subsection (c).”
(E) By substituting the phrase “If the Franchise Tax Board provides a person with notice that a submission is a specified frivolous submission and the person withdraws that submission within 30 days after the notice, the penalty imposed under Section 6702(b)(1) of the Internal Revenue Code does not apply with respect to that submission” for the phrase “If the Secretary provides a person with notice that a submission is a specified frivolous submission and such person withdraws such submission within 30 days after such notice, the penalty imposed under paragraph (1) shall not apply with respect to such submission.”
(2) Section 6702(b)(2)(B) of the Internal Revenue Code shall not apply and, in lieu thereof, the phrase “specified submission” means any of the following:
(A) A protest under Section 19041.
(B) A request for a hearing under Section 19044.
(C) An application under any of the following sections:
(i) Section 19008, relating to agreements for payment of tax liability in installments.
(ii) Section 19443, relating to compromises.
(iii) Section 21004, relating to actions of the Taxpayers’ Rights Advocate.
(iv) Section 21015.5, relating to a request for review prior to levy.
(d) (1) The Franchise Tax Board shall prescribe (and periodically revise) a list of positions which the Secretary of the Treasury for federal income tax purposes or the Franchise Tax Board has identified as being frivolous for purposes of this section.
(2) Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code does not apply to any standard, criterion, procedure, determination, rule, notice, or guideline established or prescribed by the Franchise Tax Board pursuant to paragraph (1).
(e) (1) The Chief Counsel of the Franchise Tax Board may rescind all or any portion of any penalty imposed by this section if both of the following apply:
(A) Imposing the penalty would be against equity and good conscience.
(B) Rescinding the penalty would promote compliance with the requirements of this part and Part 10 (commencing with Section 17001) or Part 11 (commencing with Section 23001) and effective tax administration.
(2) The exercise of authority under paragraph (1) shall be at the sole discretion of the Chief Counsel of the Franchise Tax Board and may not be delegated.
(3) Notwithstanding any other law or rule of law, any determination under this subdivision may not be reviewed in any administrative or judicial proceeding.
(f) The penalties imposed by this section shall be in addition to any other penalty provided by law.
(Amended by Stats. 2010, Ch. 14, Sec. 50. (SB 401) Effective January 1, 2011.)