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Results for California's Tax Amnesty Programs

The Franchise Tax Board has run two successful programs to recover past-due state tax revenues. The first one, the Voluntary Compliance Initiative (VCI) was aimed at collecting taxes owed by taxpayers who had used abusive tax shelters to illegally reduce their tax bills. The Tax Amnesty program was aimed at bringing other taxpayers back into the system and collecting the taxes they owed to California.

Summary of VCI and Amnesty ($ in Billions)
  Total Payments Expected to
be Refunded
Expected to
be Retained
VCI $1.4 $0.1 $1.3
Amnesty $4.3 $1.1 $3.2
TOTALS $5.7 $1.2 $4.5

The result of these two programs is $5.7 billion to the state. We estimate that $1.2 billion of these funds will be refunded to taxpayers after their cases are fully resolved. We expect to retain $4.5 billion. This figure includes money that would have been received in later years even without VCI or amnesty, but that was accelerated into the VCI or amnesty time frame. It also includes, potentially, some new money that would not have been received in the absence of VCI or amnesty.

VCI Program Details ($ in Billions)
  Expected to be Retained
  Number of
Participants
Total
Payments
Expected to
be Refunded
Accelerated from
Future Years
“New”
Money
Total
Retained
VCI 1,202 $1.4 $0.1 $0.6 $0.7 $1.3

The VCI ran from January 1 to April 15, 2004. Taxpayers filed 2,289 amended returns for tax years 1990 through 2002. Of the $1.4 billion in cash received, we expect to retain $1.3 billion and return $100 million to taxpayers when their disputes are finalized. Of the $1.3 billion we expect to retain, $600 million came from taxpayers who were already under audit or were in the dispute process, which makes these monies accelerated from future years. The $700 million cash balance is new revenue that the State would not have otherwise collected.

Amnesty Program Details ($ in Billions)
  Number of Participants Payments
Amnesty 173,674 $.714
Protective Claims 863 $3.623
Total Revenue 174,551 $4.337

The Tax Amnesty program ran from February 1, 2005, through March 31, 2005.

More than $3.6 billion came from taxpayers filing protective claims. Protective claims are payments of amounts taxpayers estimated might be owed in connection with ongoing or anticipated audits, protests, appeals, and legal settlements. Also, see Protective Claims Detail.