AB 2498 Summary

• Establishes a voluntary compliance initiative from January 1, 2011 to April 15, 2011 for taxpayers to avoid penalties on abusive tax avoidance transactions used in taxable years before January 1, 2011 by filing amended returns and paying taxes owed.

• Removes the reasonable cause exception for avoiding underpayment penalties when the underpayment results from an abusive tax avoidance transaction, and increases penalties for aiding and abetting tax understatement from $1,000/$10,000 to $10,000/$100,000.

• Extends the statute of limitations for assessing deficiencies related to abusive tax avoidance transactions from 8 to 12 years after a return is filed.

• Makes penalties imposed by the Franchise Tax Board for promoting abusive tax shelters grounds for revocation, suspension, or refusal to renew professional licenses for accountants, attorneys, and tax preparers (tax preparers prohibited from conducting business for 5 years).

• Adds interest penalties equal to 100% of interest owed for taxpayers with deficiencies from abusive tax avoidance transactions contacted by the Franchise Tax Board, reducible to 50% if amended returns are filed before notice of proposed assessment.