Did your client fail to report a reportable transaction?
Or a listed transaction?
If any of your clients participated in a reportable transaction or listed transaction, they are required to file Internal Revenue Service (IRS) Form 8886, "Reportable Transaction Disclosure Statement," with FTB. They must complete Form 8886 in its entirety according to the form instructions and Treasury Regulation 1.6011-4(d), and attach it to the original or amended return for each taxable year that they participated in a reportable transaction or listed transaction.1 Additionally, for any disclosure statement filed for the first time, your clients are required to mail a copy of Form 8886 to our Abusive Tax Shelter Unit (ATSU) at the following address:
|US mail:||Courier service delivery,
or private courier mail:
|ATSU 398 MS F385
FRANCHISE TAX BOARD
PO BOX 1673
SACRAMENTO CA 95812-9900
ATSU 398 MS F385
FRANCHISE TAX BOARD
9646 BUTTERFIELD WAY
SACRAMENTO CA 95827-9900
If your client fails to IRS Form 8886 with their California return, fails to file a complete Form 8886, and/or fails to file a separate Form 8886 for the first time, they will be subject to the Failure to Disclose Reportable and Listed Transaction Penalty under Revenue and Taxation Code (R&TC) Section 19772. The penalty for each failure to provide a disclosure statement, or to file a complete Form 8886 is $15,000 for reportable transactions, and $30,000 for listed transactions. Submitting a Form 8886 containing a statement that "information will be provided upon request" is not considered a complete disclosure statement, and will be deemed an incomplete filing.
However, FTB Notice 2007-3, released July 31, 2007, states that taxpayers have 60 calendar days from the Notice date to file complete disclosure statements for any transaction that should have been disclosed on or before July 31, 2007. If a client that is required to file a disclosure statement does not complete Form 8886 on or before the conclusion of the 60-day period, we will assess penalties as provided under R&TC section 19772.
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1 R&TC Section 18407 incorporates by reference Internal Revenue Code (IRC) Section 6011 and the regulations thereunder.