Ca. Tax Lawyer September 2020, Volume 29, Number 2

A Proposal for First-Time Abatement of Timeliness Penalties1,2

By Kathy Freeman3 & Ovsep Akopchikyan4,5


This paper calls for a change in California law to automatically abate penalties imposed on a taxpayer for the failure to timely file a tax return or timely pay tax if the taxpayer has a demonstrated history of filing and paying on time. Federal law already contains an automatic penalty abatement program and our proposal is that California adopt an abatement program that is substantially similar to existing federal law.

The purpose of our proposal is to reduce the cost and distress to taxpayers who have an established history of filing and paying on time, and to reduce the amount of resources the California Franchise Tax Board (FTB) dedicates to reviewing penalty abatement requests, which are largely dependent on the facts and circumstances of each case. One of the policies underlying civil tax penalties is that they encourage voluntary compliance with tax laws. Imposing a timeliness penalty on a taxpayer that has a long history of filing and paying on time for an isolated incident probably does not do much to encourage voluntary compliance—at least that is one of the reasons supporting the federal program and the proposal here.

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