In 2005, the state of California offered a tax amnesty for the second time in nearly 20 years. While the state Franchise Tax Board anticipated it would receive an additional $600 million in revenues by forgiving “late fees,” the actual amount it has received to date exceeds $4.5 billion.
This four-and-a-half billion dollar sum is comprised of two sources: $825 million from individuals or companies with outstanding tax bills dating prior to 2003 and $3.7 billion primarily from corporations who were hoping to avoid new penalties that went into effect after this year’s amnesty period ended.
Among these new penalties are an interest-based fee of 50 percent of the interest owed on delinquent taxes and a provision which requires publicly held companies to inform shareholders of any unpaid tax bills.
Many of the corporations who paid into the $3.7 billion pool are challenging the state over these same tax penalties. Some estimate that the state will have to pay back nearly $1.8 billion of these contested funds in the coming year.
Amount anticipated from the tax amnesty: $600 million
Amount received to date: $4.5 billion
- Westly Launches Major Tax Amnesty Program, press release, State Controller Steve Westly (.PDF)
- “Westly expects $2 billion from tax amnesty,” The Sacramento Bee
- “Analysis: Tax windfall is wild card for budget,” The Sacramento Bee
- Budget battles turn up a notch, The San Jose Mercury News