Client Alerts

California Tax Voluntary Disclosure Initiative

July 21, 2011

Stephen Turanchik & Nancy Iredale

The State of California has recently enacted a Voluntary Compliance Initiative 2 (VCI 2) for taxpayers who underreported their California income tax liabilities, through the use of so-called abusive tax avoidance transactions or offshore financial arrangements, to amend their tax returns for 2010 and earlier. An abusive tax avoidance transaction is defined to include a:

1. Tax shelter;

2. Reportable transaction that is not adequately disclosed;

3. Listed transaction;

4. Gross misstatement; or

5. Transaction to which the California noneconomic substance transaction (NEST) penalty applies.

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