Section 19164 - Exception to Penalty for Understatement of Tax Liability(a) The understatement determined pursuant to this section shall not include any amounts which are attributable to the taxpayer's good faith determination, whether based on the facts or unresolved legal issues, of either: (1) the components which are a part of one or more unitary businesses for purposes of determining the income derived from or attributable to this state pursuant to Section 25101, or(2) amounts which are attributable to the classification of an item as business or nonbusiness income for purposes of Article 2 of Chapter 17 of this part.(b) However, an understatement determined pursuant to this section shall include:(1) Amounts resulting from the adjustment of any item which has been treated by the taxpayer in a manner which is inconsistent with a prior final administrative determination under this part or with a prior final decision of a court of this state or of the United States with respect to the treatment of that item under the same or substantially similar circumstances by that taxpayer or by that taxpayer's predecessor.(2) Amounts resulting from the adjustment of any item if the taxpayer's treatment of that item differs from that previously reflected in the return or report for the immediately preceding income tax year under the same or substantially similar circumstances by the taxpayer or a predecessor of the taxpayer.(c) For the purposes of this regulation, a prior final administrative determination shall be a decision of the Board of Equalization or Franchise Tax Board action on a protest in those cases in which the taxpayer is specifically notified as to the disposition of the particular issue.(d) A statement in or attached to the return or report revealing the manner in which the income apportioned or allocated to California has been determined (e.g., the identification of the combined group and the treatment of intercompany transactions) shall constitute adequate disclosure for purposes of this section.(e) Understatements shall be determined pursuant to this section commencing with respect to returns filed for income years beginning on or after January 1, 1983.Cal. Code Regs. Tit. 18, § 19164
1. New section filed 10-4-83 as an emergency; effective upon filing (Register 83, No. 41). A Certificate of Compliance must be transmitted to OAL within 120 days or emergency language will be repealed on 2-1-84.
2. Repealed by operation of Government Code Section 11346.1(g) (Register 84, No. 13).
3. New section filed 3-21-84 as an emergency; effective upon filing (Register 84, No. 13). A Certificate of Compliance must be transmitted to OAL within 120 days or emergency language will be repealed on 7-19-84.
4. Certificate of Compliance filed 5-30-84 (Register 84, No. 22).
5. Change without regulatory effect renumbering former section 25934.4 to section 19164 filed 11-23-98 pursuant to section 100, title 1, California Code of Regulations (Register 98, No. 48). Note: Authority cited: Section 26422, Revenue and Taxation Code. Reference: Section 25934.4, Revenue and Taxation Code.
1. New section filed 10-4-83 as an emergency; effective upon filing (Register 83, No. 41). A Certificate of Compliance must be transmitted to OAL within 120 days or emergency language will be repealed on 2-1-84.
2. Repealed by operation of Government Code Section 11346.1(g) (Register 84, No. 13).
3. New section filed 3-21-84 as an emergency; effective upon filing (Register 84, No. 13). A Certificate of Compliance must be transmitted to OAL within 120 days or emergency language will be repealed on 7-19-84.
4. Certificate of Compliance filed 5-30-84 (Register 84, No. 22).
5. Change without regulatory effect renumbering former section 25934.4 to section 19164 filed 11-23-98 pursuant to section 100, title 1, California Code of Regulations (Register 98, No. 48).