Administration of income taxes: electronic remittance: penalty.
If AB 1397 is enacted, it will have implications for the way penalties are assessed for non-compliance with electronic payment requirements within California's tax framework. The legislation is designed to prevent what the authors consider harsh financial burdens placed on taxpayers who fail to make electronic payments for reasons beyond their control. By capping the penalty, the bill aims to foster a more fair taxation system, which is perceived to protect individuals from excessive financial repercussions while also maintaining state revenue integrity.
Assembly Bill 1397, introduced by Assembly Member Low, aims to amend Section 19011.5 of the California Revenue and Taxation Code to address penalties associated with electronic remittance of income taxes. Currently, taxpayers required to make electronic payments face a 1% penalty for any payment made by alternative means, which can lead to unreasonably high penalties when total tax liabilities are a concern. This bill seeks to cap this penalty at $25,000 per payment, thereby providing a more equitable and manageable framework for taxpayers with larger tax liabilities who might be affected by the previous uncapped penalties.
The sentiment around AB 1397 appears to be favorable among taxpayer advocates and some lawmakers who argue that it addresses a significant flaw in the current taxation regulations. Supporters believe that the cap is a necessary step towards creating a fairer tax system that aligns penalties with the actual harm caused to the state. However, there may be concerns from fiscal conservatives who prioritize funding state services and might view changes to penalty structures as a potential revenue loss.
One notable point of contention surrounding AB 1397 is the balance between penalizing non-compliance and ensuring that penalties are not overly punitive. Critics of the existing uncapped penalty system argue that it can lead to unjust outcomes, but opponents of the bill may contend that any alterations to penalty structures should be carefully scrutinized to ensure they do not compromise state revenue. The letter of intent specifying a review of the Revenue and Taxation Code to ensure penalties remain commensurate with violations adds yet another layer to the discussions that will unfold as this bill progresses through the legislative process.