BILL NUMBER: AB 129 CHAPTERED
BILL TEXT
CHAPTER 411
FILED WITH SECRETARY OF STATE OCTOBER 11, 2009
APPROVED BY GOVERNOR OCTOBER 11, 2009
PASSED THE SENATE SEPTEMBER 4, 2009
PASSED THE ASSEMBLY SEPTEMBER 11, 2009
AMENDED IN SENATE SEPTEMBER 2, 2009
AMENDED IN SENATE AUGUST 27, 2009
AMENDED IN ASSEMBLY MAY 4, 2009
INTRODUCED BY Assembly Member Ma
JANUARY 16, 2009
An act to add Sections 7099.1 and 21028 to the Revenue and
Taxation Code, and to add Section 13019 to the Unemployment Insurance
Code, relating to taxation, and declaring the urgency thereof, to
take effect immediately.
LEGISLATIVE COUNSEL'S DIGEST
AB 129, Ma. Confidentiality: taxpayer communications.
Under existing law, the Employment Development Department, the
State Board of Equalization, and the Franchise Tax Board administer
various taxes and fees.
This bill in modified conformity with federal income tax laws
would, with respect to tax advice, require that certain protections
of confidentiality that apply to a communication between a client and
an attorney also apply to communications between a taxpayer and any
federally authorized tax practitioner that appears before those state
agencies to the extent that the communication would be considered a
privileged communication if it were made between a client and an
attorney.
This bill would declare that it is to take effect immediately as
an urgency statute.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. Section 7099.1 is added to the Revenue and Taxation
Code, to read:
7099.1. (a) (1) With respect to tax advice, the protections of
confidentiality that apply to a communication between a client and an
attorney, as set forth in Article 3 (commencing with Section 950) of
Chapter 4 of Division 8 of the Evidence Code, also shall apply to a
communication between a taxpayer and any federally authorized tax
practitioner to the extent the communication would be considered a
privileged communication if it were between a client and an attorney.
A federally authorized tax practitioner has the legal obligation and
duty to maintain confidentiality with respect to such communication.
(2) Paragraph (1) may only be asserted in any noncriminal tax
matter before the State Board of Equalization.
(3) For purposes of this section:
(A) "Federally authorized tax practitioner" means any individual
who is authorized under federal law to practice before the Internal
Revenue Service if the practice is subject to federal regulation
under Section 330 of Title 31 of the United States Code, as provided
by federal law as of January 1, 2000.
(B) "Tax advice" means advice given by an individual with respect
to a state tax matter, which may include federal tax advice if it
relates to the state tax matter. For purposes of this subparagraph,
"federal tax advice" means advice given by an individual within the
scope of his or her authority to practice before the federal Internal
Revenue Service on noncriminal tax matters.
(C) "Tax shelter" means a partnership or other entity, any
investment plan or arrangement, or any other plan or arrangement if a
significant purpose of that partnership, entity, plan, or
arrangement is the avoidance or evasion of federal income tax.
(b) The privilege under subdivision (a) shall not apply to any
written communication between a federally authorized tax practitioner
and a director, shareholder, officer, or employee, agent, or
representative of a corporation in connection with the promotion of
the direct or indirect participation of the corporation in any tax
shelter, or in any proceeding to revoke or otherwise discipline any
license or right to practice by any governmental agency.
(c) This section shall be operative for communications made on or
after the effective date of the act adding this section.
SEC. 2. Section 21028 is added to the Revenue and Taxation Code,
to read:
21028. (a) (1) With respect to tax advice, the protections of
confidentiality that apply to a communication between a client and an
attorney, as set forth in Article 3 (commencing with Section 950) of
Chapter 4 of Division 8 of the Evidence Code, also shall apply to a
communication between a taxpayer and any federally authorized tax
practitioner to the extent the communication would be considered a
privileged communication if it were between a client and an attorney.
A federally authorized tax practitioner has the legal obligation and
duty to maintain confidentiality with respect to such communication.
(2) Paragraph (1) may only be asserted in any noncriminal tax
matter before the Franchise Tax Board.
(3) For purposes of this section:
(A) "Federally authorized tax practitioner" means any individual
who is authorized under federal law to practice before the Internal
Revenue Service if the practice is subject to federal regulation
under Section 330 of Title 31 of the United States Code, as provided
by federal law as of January 1, 2000.
(B) "Tax advice" means advice given by an individual with respect
to a state tax matter, which may include federal tax advice if it
relates to the state tax matter. For purposes of this subparagraph,
"federal tax advice" means advice given by an individual within the
scope of his or her authority to practice before the federal Internal
Revenue Service on noncriminal tax matters.
(C) "Tax shelter" means a partnership or other entity, any
investment plan or arrangement, or any other plan or arrangement if a
significant purpose of that partnership, entity, plan, or
arrangement is the avoidance or evasion of federal income tax or the
avoidance or evasion of the tax imposed under Part 10 (commencing
with Section 17001) or Part 11 (commencing with Section 23001).
(b) The privilege under subdivision (a) does not apply to any
written communication between a federally authorized tax practitioner
and any person, or any director, officer, employee, agent, or
representative of the person, or any other person holding a capital
or profits interest in the person in connection with the promotion of
the direct or indirect participation of the person in any tax
shelter (as defined in Section 6662(d)(2)(C)(ii) of the Internal
Revenue Code as modified by substituting the phrase "income or
franchise tax" for "Federal income tax"), or in any proceeding to
revoke or otherwise discipline any license or right to practice by
any governmental agency.
(c) This section shall be operative for communications made on or
after the effective date of the act adding this section.
SEC. 2.5. Section 21028 is added to the Revenue and Taxation Code,
to read:
21028. (a) (1) With respect to tax advice, the protections of
confidentiality that apply to a communication between a client and an
attorney, as set forth in Article 3 (commencing with Section 950) of
Chapter 4 of Division 8 of the Evidence Code, also shall apply to a
communication between a taxpayer and any federally authorized tax
practitioner to the extent the communication would be considered a
privileged communication if it were between a client and an attorney.
A federally authorized tax practitioner has the legal obligation and
duty to maintain confidentiality with respect to such communication.
(2) Paragraph (1) may only be asserted in any noncriminal tax
matter before the Franchise Tax Board.
(3) For purposes of this section:
(A) "Federally authorized tax practitioner" means any individual
who is authorized under federal law to practice before the Internal
Revenue Service if the practice is subject to federal regulation
under Section 330 of Title 31 of the United States Code, as provided
by federal law as of January 1, 2000.
(B) "Tax advice" means advice given by an individual with respect
to a state tax matter, which may include federal tax advice if it
relates to the state tax matter. For purposes of this subparagraph,
"federal tax advice" means advice given by an individual within the
scope of his or her authority to practice before the federal Internal
Revenue Service on noncriminal tax matters.
(b) The privilege under subdivision (a) does not apply to any
written communication between a federally authorized tax practitioner
and any person, or any director, officer, employee, agent, or
representative of the person, or any other person holding a capital
or profits interest in the person in connection with the promotion of
the direct or indirect participation of the person in any abusive
tax avoidance transaction, as defined in Section 19777, or in any
proceeding to revoke or otherwise discipline any license or right to
practice by any governmental agency.
SEC. 3. Section 13019 is added to the Unemployment Insurance Code,
to read:
13019. (a) (1) With respect to tax advice, the protections of
confidentiality that apply to a communication between a client and an
attorney, as set forth in Article 3 (commencing with Section 950) of
Chapter 4 of Division 8 of the Evidence Code, also shall apply to a
communication between a taxpayer and any federally authorized tax
practitioner to the extent the communication would be considered a
privileged communication if it were between a client and an attorney.
(2) Paragraph (1) may only be asserted in any noncriminal tax
matter before the Employment Development Department.
(3) For purposes of this section:
(A) "Federally authorized tax practitioner" means any individual
who is authorized under federal law to practice before the Internal
Revenue Service if the practice is subject to federal regulation
under Section 330 of Title 31 of the United States Code, as provided
by federal law as of January 1, 2000.
(B) "Tax advice" means advice given by an individual with respect
to a state tax matter, which may include federal tax advice if it
relates to the state tax matter. For purposes of this subparagraph,
"federal tax advice" means advice given by an individual within the
scope of his or her authority to practice before the federal Internal
Revenue Service on noncriminal tax matters.
(C) "Tax shelter" means a partnership or other entity, any
investment plan or arrangement, or any other plan or arrangement if a
significant purpose of that partnership, entity, plan, or
arrangement is the avoidance or evasion of federal income tax.
(b) The privilege under subdivision (a) shall not apply to any
written communication between a federally authorized tax practitioner
and a director, shareholder, officer, or employee, agent, or
representative of a corporation in connection with the promotion of
the direct or indirect participation of the corporation in any tax
shelter, or in any proceeding to revoke or otherwise discipline any
license or right to practice by any governmental agency.
(c) This section shall be operative for communications made on or
after the effective date of the act adding this section.
SEC. 4. Section 2.5 of this bill shall only become operative if
(1) both SB 401 and this bill are enacted and become effective on or
before January 1, 2010, and (2) SB 401 amends Section 19777 of the
Revenue and Taxation Code to provide for a definition of "abusive tax
avoidance transaction," in which case Section 2 of this bill shall
remain operative only until the operative date of SB 401, at which
time Section 2.5 of this bill shall become operative.
SEC. 5. This act is an urgency statute necessary for the immediate
preservation of the public peace, health, or safety within the
meaning of Article IV of the Constitution and shall go into immediate
effect. The facts constituting the necessity are:
In order to ensure that these communications between taxpayers and
tax practitioners remain privileged, it is necessary that this act
take effect immediately.