Gary Amico + Associates

The global financial crisis has had a substantial impact on both State and local government revenues. In fact, the City of Vallejo, California declared bankruptcy in 2008. With continuing recession and the constraints imposed upon cities by Proposition 218, many cities revenue raising options are limited. For this reason, expect the following trends for 2009:

More cities will utilize the AB 63 program. This program allows the California Franchise Tax to share certain financial information about you and/or your company with local municipalities. This allows the cities to identify non-filing taxpayers. If you or your company is not registered in the city where it does business or is doing business in several cities, it is likely that you will be contacted.
Cities will increase their audit activity in 2009. This will include hiring more auditors and/or hiring outside consultants to conduct audits. These audits will likely address classification, tax rate, and apportionment issues.
We expect to see increased statute of limitations periods as well as the increased imposition of penalties. In late 2008, the City of Los Angeles extended its statute of limitations for non-filing taxpayers to 8 years. In addition, changes to the penalty provisions were made.
Coupled with the increased tax discovery programs and statutory periods, we expect to see tax amnesty programs enacted in early 2009 which may waive penalties for non-filers or underpaid taxpayers. We expect the City of Los Angeles to enact a tax amnesty program in 2009. Once enacted, we will post additional information about this program. In addition, local cities may look more favorably upon taxpayers who voluntarily come forward and register for the payment of taxes.