The Franchise Tax Board (FTB) announces it raised $350 million through the Voluntary Compliance Initiative 2 (VCI 2) program which recently concluded. Cash payments from more than 1,000 taxpayers in the amount of $293 million have already been paid to California, with another $57 million expected to be paid via installment payments through June 2012. This program complemented the IRS’ recent Offshore Voluntary Disclosure Initiative (OVDI) designed to allow taxpayers who participated in abusive tax avoidance transactions or offshore financial arrangements to come into compliance and properly report offshore accounts and assets.
Under the program, taxpayers had to amend their tax returns for 2010 and applicable past years in exchange for a waiver of most penalties. Most participants were individuals, comprising of 90% of the participants. Business taxpayers also contributed more than $100 million in tax and interest payments. Estates and trusts also account for a small portion of funds reported.
Taxpayers who did not participate in the program, if audited, will find themselves subject to a 12 year audit with significant penalties, including a 40% Noneconomic Substance Transaction penalty and an interest-based penalty of 50-100%.