An act to amend Sections 19011 and Section 19011.5 of the Revenue and Taxation Code, relating to taxation.
Summary
SB 591 revises California Franchise Tax Board rules for taxpayers who are required to make certain tax payments by electronic funds transfer or other electronic means. Under existing law, a failure to use the required electronic payment method can trigger a penalty equal to 10% of the payment for corporate taxpayers and 1% of the payment for individual taxpayers. This bill changes those penalties, for payments made on or after January 1, 2026, to a flat $100 penalty for a first violation and $500 for each subsequent violation, while preserving the ability to avoid penalties for reasonable cause and the Franchise Tax Board’s authority to grant waivers in appropriate cases.
The bill applies to both corporate and individual taxpayers who exceed existing payment or total tax liability thresholds and are therefore subject to mandatory electronic remittance. It also clarifies the meaning of “electronically remit” and “pay by phone” for individual taxpayers, confirming that the Franchise Tax Board may use its electronic payment applications, including phone-based payment options when available. The measure does not change the underlying thresholds that trigger mandatory electronic payment; it changes only the penalty structure and related administration for noncompliance.
Impact
SB 591 would amend Sections 19011 and 19011.5 of the Revenue and Taxation Code. Its main legal effect is to replace percentage-based penalties with fixed-dollar penalties for taxpayers who fail to comply with mandatory electronic funds transfer requirements, beginning with payments made on or after January 1, 2026. The bill preserves existing waiver and reasonable-cause provisions, and it leaves intact the Franchise Tax Board’s authority to prescribe payment procedures and determine when taxpayers may discontinue electronic payments after falling below threshold levels. The bill affects corporate taxpayers, individual taxpayers, and the Franchise Tax Board’s enforcement and administrative practices.
Sentiment
The available voting history suggests broad support for the bill at the committee and floor levels, with unanimous or near-unanimous votes in the recorded actions and no recorded opposition in the provided materials. The bill’s findings emphasize fairness, integrity of the tax system, and penalties that are commensurate with the violation, which aligns with the apparent policy rationale behind the change. The measure was nevertheless held in committee and under submission at one point, indicating some procedural caution or unresolved fiscal/administrative review rather than overt ideological opposition.
Contention
The main policy issue is whether penalties for failing to use required electronic payment methods should remain percentage-based or be converted to fixed-dollar amounts. Supporters appear to favor the bill’s framing that penalties should be more proportionate and predictable, especially for smaller or inadvertent violations. Potential concerns would likely come from fiscal or tax administration perspectives: a flat penalty may reduce deterrence for larger payments, while also lowering penalties for some high-dollar noncompliance. The bill’s waiver provisions and reasonable-cause exception appear designed to address those concerns, and no specific opposition is reflected in the provided vote record.
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