RE Withholding Guide

Q&A

Law

18661.  When necessary to make effective the provisions of this
article or Article 4 (commencing with Section 18631), the name and
address of the recipient of income shall be furnished upon demand of
the person paying the income.

18662.  (a) The Franchise Tax Board may, by regulation, require any
person, in whatever capacity acting (including lessees or mortgagors
of real or personal property, fiduciaries, employers, and any officer
or department of the state or any political subdivision or agency of
the state, or any city organized under a freeholder's charter, or
any political body not a subdivision or agency of the state), having
the control, receipt, custody, disposal, or payment of items of
income specified in subdivision (b), to withhold an amount,
determined by the Franchise Tax Board to reasonably represent the
amount of tax due when the items of income are included with other
income of the taxpayer, and to transmit the amount withheld to the
Franchise Tax Board at the time as it may designate.

   (b) The items of income referred to in subdivision (a) are
interest, dividends, rents, prizes and winnings, premiums, annuities,
emoluments, compensation for services, including bonuses,
partnership income or gains, and other fixed or determinable annual
or periodical gains, profits, and income.

   (c) The Franchise Tax Board may authorize the tax under
subdivision (a) to be deducted and withheld from the interest upon
any securities the owners of which are not known to the withholding
agent.

   (d) Any person failing to withhold from any payments any amounts
required by subdivision (a) to be withheld is liable for the amount
withheld or the amount of taxes due from the person to whom the
payments are made to an extent not in excess of the amounts required
to be withheld, whichever is greater, unless it is shown that the
failure to withhold is due to reasonable cause.

   (e) (1) In the case of any disposition of a California real
property interest by an individual, the transferee (including for
this purpose any intermediary or accommodator in a deferred exchange)
shall be required to withhold an amount equal to 31/3 percent of the
sales price of the California real property conveyed.

   (2) Notwithstanding any other provision of this subdivision, all
of the following shall apply:

   (A) No transferee shall be required to withhold any amount under
this subdivision unless the sales price of the California real
property conveyed exceeds one hundred thousand dollars ($100,000).

   (B) No transferee (other than an intermediary or an accommodator
in a deferred exchange) shall be required to withhold any amount
under this subdivision unless written notification of the withholding
requirements of this subdivision has been provided by the real
estate escrow person.

   (C) No transferee shall be required to withhold under this
subdivision when the transferee is a corporate beneficiary under a
mortgage or beneficiary under a deed of trust and the California real
property is acquired in judicial or nonjudicial foreclosure or by a
deed in lieu of foreclosure.

   (D) No transferee shall be required to withhold any amount under
this subdivision if the transferee, in good faith and based upon all
the information of which he or she has knowledge, relies on a written
certificate executed by the transferor, certifying under penalty of
perjury, that the California real property being conveyed is the
principal residence of the transferor (within the meaning of Section
121 of the Internal Revenue Code).

   (E) (i) No transferee (including for this purpose any intermediary
or accommodator in a deferred exchange) shall be required to
withhold any amount under this subdivision if the transferee, in good
faith and based on all the information of which he or she has
knowledge, relies on a written certificate executed by the
transferor, certifying under penalty of perjury, that the California
real property being conveyed is exchanged, or will be exchanged, for
property of like kind (within the meaning of Section 1031 of the
Internal Revenue Code), but only to the extent of the amount of the
gain not required to be recognized for California income tax purposes
under Section 1031 of the Internal Revenue Code.

   (ii) Clause (i) shall not apply to the extent that any exchange
does not qualify for nonrecognition treatment for California income
tax purposes under Section 1031 of the Internal Revenue Code, in
whole or in part, due to the failure of the transaction to comply
with the provisions of Section 1031(a)(3) of the Internal Revenue
Code, relating to requirement that property be identified and that
exchange be completed not more than 180 days after transfer of the
exchanged property.

   (iii) In any case where clause (ii) applies, the transferee
(including for this purpose any intermediary or accommodator in a
deferred exchange) shall be required to notify the Franchise Tax
Board in writing within 10 days of the expiration of the statutory
periods specified in Section 1031(a)(3) of the Internal Revenue Code
and shall thereafter remit the applicable withholding amounts
determined under this subdivision in accordance with paragraph (4).

   (F) No transferee shall be required to withhold any amount under
this subdivision if the transferee, in good faith and based on all
the information of which he or she has knowledge, relies on a written
certificate executed by the transferor, certifying under penalty of
perjury, that the California real property has been compulsorily or
involuntarily converted (within the meaning of Section 1033 of the
Internal Revenue Code) and that the transferor intends to acquire
property similar or related in service or use so as to be eligible
for nonrecognition of gain for California income tax purposes under
Section 1033 of the Internal Revenue Code.

   (G) No transferee shall be required to withhold any amount under
this subdivision if the transferee, in good faith and based on all
the information which he or she has knowledge, relies on a written
certificate executed by the transferor, certifying under penalty of
perjury, that the transaction will result in a loss for California
income tax purposes.

   (3) (A) In the case of any transaction otherwise subject to this
subdivision that qualifies as an "installment sale" (within the
meaning of Section 453(b) of the Internal Revenue Code) for
California income tax purposes, the provisions of this subdivision
may, upon the irrevocable written election of the transferee, be
separately applied to each payment to be made under the terms of the
installment sale agreement between the parties.

   (B) For purposes of subparagraph (A), subparagraph (A) of
paragraph (2) shall not apply to each individual payment to be
received under the terms of the installment sale agreement.

   (C) The election under this paragraph shall be made at the time,
and in the form and manner, specified by the Franchise Tax Board in
forms and instructions, except that the form shall, at a minimum,
include the requirement specified in subparagraph (D) of this
paragraph.

   (D) The election under this paragraph shall only be valid if the
transferee agrees to withhold and remit from each installment payment
the amount specified under this subdivision in the form and manner,
and at the time, specified in paragraph (4).

   (4) Amounts withheld and payments made in accordance with this
subdivision shall be reported and remitted to the Franchise Tax Board
in the form and manner and at the time specified by the Franchise
Tax Board.

   (5) For purposes of this subdivision, "California real property
interest" means an interest in real property located in California
and defined in Section 897(c)(1)(A)(i) of the Internal Revenue Code.

   (6) For purposes of this subdivision, "real estate escrow person"
means any of the following persons involved in the real estate
transaction:

   (A) The person (including any attorney, escrow company, or title
company) responsible for closing the transaction.

   (B) If no other person described in subparagraph (A) is
responsible for closing the transaction, then any other person who
receives and disburses the consideration or value for the interest or
property conveyed.

   (7) (A) Unless the real estate escrow person provides "assistance,"
it shall be unlawful for any real estate escrow person to charge any
customer for complying with the requirements of this subdivision.

   (B) For purposes of this paragraph, "assistance" includes, but is
not limited to, helping the parties clarify with the Franchise Tax
Board the issue of whether withholding is required under this
subdivision or, upon request of the parties, withholding an amount
under this subdivision and remitting that amount to the Franchise Tax
Board.

   (C) For purposes of this paragraph, "assistance" does not include
providing the written notification of the withholding requirements of
this subdivision.

   (D) In a case where the real estate escrow person provides
"assistance" in complying with the withholding requirements of this
subdivision, it shall be unlawful for the real estate escrow person
to charge any customer a fee that exceeds forty-five dollars ($45).

   (8) For purposes of this subdivision, "sales price" means the sum
of all of the following:

   (A) The cash paid, or to be paid, but excluding for this purpose
any stated or unstated interest or original issue discount (as
determined under Sections 1271 through 1275, inclusive, of the
Internal Revenue Code).

   (B) The fair market value of other property transferred, or to be
transferred.

   (C) The outstanding amount of any liability assumed by the
transferee or to which the California real property interest is
subject immediately before and after the transfer.

   (f) (1) In the case of any disposition of a California real
property interest by a person (but not a partnership as determined in
accordance with Subchapter K of Chapter 1 of Subtitle A of the
Internal Revenue Code, or a corporation, or an individual), when the
return required to be filed with the Secretary of the Treasury under
Section 6045(e) of the Internal Revenue Code indicates, or the
authorization for the disbursement of the transaction's funds
instructs, that the funds be disbursed either to a transferor with a
last known street address outside the boundaries of this state at the
time of the transfer of the title to the California real property or
to the financial intermediary of the transferor, the transferee
shall be required to withhold an amount equal to 31/3 percent of the
sales price of the California real property conveyed.

   (2) In the case of any disposition of a California real property
interest by a corporation, the transferee shall be required to
withhold an amount equal to 31/3 percent of the sales price of the
California real property conveyed, if the corporation immediately
after the transfer of the title to the California real property has
no permanent place of business in California.  For purposes of this
subdivision, a corporation has no permanent place of business in
California if all of the following apply:

   (A) It is not organized and existing under the laws of California.

   (B) It does not qualify with the office of the Secretary of State
to transact business in California.

   (C) It does not maintain and staff a permanent office in
California.

   (3) Notwithstanding any other provision of this subdivision, all
of the following shall apply:

   (A) No transferee shall be required to withhold any amount under
this subdivision if the sales price of the California real property
conveyed does not exceed one hundred thousand dollars ($100,000).

   (B) No transferee shall be required to withhold any amount under
this subdivision unless written notification of the withholding
requirements of this subdivision has been provided by the real estate
escrow person.

   (C) No transferee shall be required to withhold under this
subdivision when the transferor is a bank acting as trustee other
than a trustee of a deed of trust.

   (D) No transferee shall be required to withhold under this
subdivision when the transferee is a corporate beneficiary under a
mortgage or beneficiary under a deed of trust and the California real
property is acquired in judicial or nonjudicial foreclosure or by a
deed in lieu of foreclosure.

   (E) No transferee shall be required to withhold any amount under
this subdivision if the transferee, in good faith and based on all
the information of which he or she has knowledge, relies on a written
certificate executed by the transferor, certifying under penalty of
perjury that the transferor is a corporation with a permanent place
of business in California.

   (4) (A) At the request of the transferor, the Franchise Tax Board
may authorize that a reduced amount or no amount be withheld under
this subdivision if the Franchise Tax Board determines that to
substitute a reduced amount or no amount shall not jeopardize the
collection of tax imposed by Part 10 (commencing with Section 17001)
or Part 11 (commencing with Section 23001).  If the transferor
provides documentation sufficient for the Franchise Tax Board to
determine the actual gain required to be recognized on the
transaction, the Franchise Tax Board may authorize a reduced amount
based on the amount of the gain, as determined, which will result in
a sum which is substantially equivalent to the amount of tax
reasonably estimated to be due under Part 10 (commencing with Section
17001) or Part 11 (commencing with Section 23001) from the inclusion
of the gain in the gross amount of the transferor.

   (B) Within 45 days after receiving a request that a reduced amount
or no amount be withheld, the Franchise Tax Board shall either
authorize a reduced amount or no amount, or deny the request.

   (C) In the case where the parties to the transaction are
requesting that a reduced amount or no amount be withheld and the
response by the Franchise Tax Board to the request has not been
received at the time title to the California real property is
transferred, the parties may direct the real estate escrow person to
hold in trust for 45 days the amount required to be withheld under
this subdivision.  The parties shall instruct the real estate escrow
person that at the end of 45 days the real estate escrow person shall
remit the amount withheld to the Franchise Tax Board in accordance
with this section, unless the Franchise Tax Board has authorized that
a reduced amount or no amount be withheld.

   (5) Amounts withheld and payments made in accordance with this
subdivision shall be reported and remitted to the Franchise Tax Board
in the form and at the time as the Franchise Tax Board shall
determine.

   (6) "California real property interest" means an interest in real
property located in California and defined in Section 897(c)(1)(A)(i)
of the Internal Revenue Code.

   (7) For purposes of this subdivision, "financial intermediary"
means an agent for the purpose of receiving and transferring funds to
a principal.

   (8) For purposes of this subdivision, "real estate escrow person"
means any of the following persons involved in the real estate
transaction:

   (A) The person (including any attorney, escrow company, or title
company) responsible for closing the transaction.

   (B) If no other person described in subparagraph (A) is
responsible for closing the transaction, then any other person who
receives and disburses the consideration or value for the interest or
property conveyed.

   (9) (A) Unless the real estate escrow person provides "assistance,"
it shall be unlawful for any real estate escrow person to charge any
customer for complying with the requirements of this subdivision.

   (B) For purposes of this paragraph, "assistance" includes, but is
not limited to, helping the parties clarify with the Franchise Tax
Board the issue of whether withholding is required under this
subdivision, helping the parties request that the Franchise Tax Board
authorize a reduced amount or no amount be withheld under this
subdivision, or, upon request of the parties, withholding an amount
under this subdivision and remitting the amount to the Franchise Tax
Board.

   (C) For purposes of this paragraph, "assistance" does not include
providing the written notification of the withholding requirements of
this subdivision, or providing the certification that the transferor
is a corporation with a permanent place of business in California.

   (D) In a case where the real estate escrow person provides
"assistance" in complying with the withholding requirements of this
subdivision, it shall be unlawful for the real estate escrow person
to charge any customer a fee that exceeds forty-five dollars ($45).

   (10) For purposes of this subdivision, "sales price" means the sum
of all of the following:

   (A) The cash paid, or to be paid.  The term "cash paid, or to be
paid" does not include stated or unstated interest or original issue
discount (as determined by Sections 1271 to 1275, inclusive, of the
Internal Revenue Code).

   (B) The fair market value of other property transferred, or to be
transferred.

   (C) The outstanding amount of any liability assumed by the
transferee or to which the California real property interest is
subject immediately before and after the transfer.

   (g) Whenever any person has withheld any amount pursuant to this
section, the amount so withheld shall be held in trust for the State
of California.  The amount of the fund shall be assessed, collected,
and paid in the same manner and subject to the same provisions and
limitations (including penalties) as are applicable with respect to
the taxes imposed by Part 10 (commencing with Section 17001), Part 11
(commencing with Section 23001), or this part.

   (h) Withholding shall not be required under this section with
respect to wages, salaries, fees, or other compensation paid by a
corporation for services performed in California for that corporation
to a nonresident corporate director for director services, including
attendance at a board of directors' meeting.

   (i) In the case of any payment described in subdivision

(h), the person making the payment shall do each of the following:

   (1) File a return with the Franchise Tax Board at the time and in
the form and manner specified by the Franchise Tax Board.

   (2) Provide the payee with a statement at the time and in the form
and manner specified by the Franchise Tax Board.

   (j) (1) The amendments to this section made by the act adding this
subdivision shall only apply to dispositions of California real
property interests that occur on or after January 1, 2003.

   (2) In the case of any payments received on or after January 1,
2003, pursuant to an installment sale agreement relating to a
disposition occurring before January 1, 2003, the amendments to this
section made by the act adding this subdivision shall not apply to
those payments.



18663.  (a) The Franchise Tax Board shall annually (or more often if
necessary) prepare and make available to the Employment Development
Department, wage withholding tables that shall be used by every
employer making payment of any wages to a resident employee for
services performed either within or without this state; or to a
nonresident employee for services performed in this state, to deduct
and withhold from those wages for each payroll period, a tax computed
in a manner as to produce, so far as practicable, with due regard to
the credits for personal exemptions allowable under Section 17054, a
sum that is substantially equivalent to the amount of tax reasonably
estimated to be due under Part 10 (commencing with Section 17001)
resulting from the inclusion in the gross income of the employee the
wages which were subject to withholding.

   (b) (1) For supplemental wages paid on or after January 1, 1992,
the rate of withholding that may be applied to supplemental wages in
lieu of the wage withholding tables specified in subdivision (a)
shall be 6 percent.
   (2) For purposes of this subdivision, "supplemental wages"
includes, but is not limited to, bonus payments, overtime payments,
commissions, sales awards, back pay including retroactive wage
increases, and reimbursements for nondeductible moving expenses that
are paid for the same or a different period, or without regard to a
particular period.
   (c) For stock options and bonus payments that constitute wages
paid on or after January 1, 2002, the rate of withholding that may be
applied to those stock options and bonus payments in lieu of the
wage withholding tables specified in subdivision (a) shall,
notwithstanding subdivision (b), be 9.3 percent.



18665.  Unless otherwise specifically provided, the provisions of
any law effecting changes in withholding shall apply to withholding
in the calendar year succeeding the year the provision was chaptered,
or in the calendar year the provision is operative, whichever is
later.



18666.  (a) Section 1446 of the Internal Revenue Code shall apply to
the extent that the amounts represent income from California
sources, except as otherwise provided.
   (b) (1) The rate of tax referred to in Section 1446(b)(2)(A) of
the Internal Revenue Code shall be the maximum tax rate specified in
Section 17041, rather than the rate specified in Section 1 of the
Internal Revenue Code.
   (2) The rate of tax referred to in Section 1446(b)(2)(B) of the
Internal Revenue Code shall be the rate specified in Section 23151,
23181, or 23183, as applicable, rather than the rate specified in
Section 11 of the Internal Revenue Code.




18667.  The Franchise Tax Board may require employers to submit
copies of income tax withholding exemption certificates.  If the
Franchise Tax Board determines that a certificate is invalid for
state income tax purposes, the Franchise Tax Board shall notify the
employer and the affected employee of its determination.  An employee
who disagrees with the Franchise Tax Board's determination may
request review of the determination by filing a written petition in
the form and within the time prescribed by the Franchise Tax Board.
After review, the Franchise Tax Board shall give written notification
of its decision to both the employer and the employee.




18668.  (a) Every person required under this article to deduct and
withhold any tax is hereby made liable for that tax, to the extent
provided by this section and, insofar as they are not inconsistent
with this article, all the provisions of this part relating to
penalties, interest, assessment, and collections shall apply to
persons subject to this part, and for these purposes any amount
required to be deducted and paid to the Franchise Tax Board under
this article shall be considered the tax of the person.  Any person
who fails to withhold from any payments any amount required to be
withheld under this article is liable for the amount withheld or the
amount of taxes due from the taxpayer to whom the payments are made
but not in excess of the amount required to be withheld, whichever is
more, unless it is shown that the failure to withhold is due to
reasonable cause.

   (b) If any amount required to be withheld under this article is
not paid to the Franchise Tax Board on or before the due date
required by regulations, interest shall be assessed at the adjusted
annual rate established pursuant to Section 19521, computed from the
due date to the date paid.

   (c) Whenever any person has withheld any amount pursuant to this
article, the amount so withheld shall be held to be a special fund in
trust for the State of California.

   (d) In lieu of the amount provided for in subdivision (a), unless
it is shown that the failure to withhold is due to reasonable cause,
whenever any transferee is required to withhold any amount pursuant
to subdivision (e) or (f) of Section 18662, the transferee is liable
for the greater of the following amounts for failure to withhold only
after the transferee, as specified, is notified in writing of the
requirements under subdivision (e) or (f) of Section 18662:

   (1) Five hundred dollars ($500).

   (2) Ten percent of the amount required to be withheld under
subdivision (e) or (f) of Section 18662.

   (e) (1) Unless it is shown that the failure to notify is due to
reasonable cause, the real estate escrow person shall be liable for
the amount specified in subdivision (d), when written notification of
the withholding requirements of subdivision (e) or (f) of Section
18662 is not provided to the transferee (other than a transferee that
is an intermediary or accommodator in a deferred exchange) and the
California real property disposition is subject to withholding under
subdivision (e) or (f) of Section 18662.

   (2) The real estate escrow person shall provide written
notification to the transferee (other than a transferee that is an
intermediary or accommodator in a deferred exchange) in substantially
the same form as follows:

   "In accordance with Section 18662 of the Revenue and Taxation
Code, a buyer may be required to withhold an amount equal to 31/3
percent of the sales price in the case of a disposition of California
real property interest by either:

   1. A seller who is an individual or when the disbursement
instructions authorize the proceeds to be sent to a financial
intermediary of the seller, OR

   2. A corporate seller that has no permanent place of business in
California.

   The buyer may become subject to penalty for failure to withhold an
amount equal to the greater of 10 percent of the amount required to
be withheld or five hundred dollars ($500).

   However, notwithstanding any other provision included in the
California statutes referenced above, no buyer will be required to
withhold any amount or be subject to penalty for failure to withhold
if:

   1. The sales price of the California real property conveyed does
not exceed one hundred thousand dollars ($100,000), OR

   2. The seller executes a written certificate, under the penalty of
perjury, certifying that the seller is a corporation with a
permanent place of business in California, OR

   3. The seller, who is an individual, executes a written
certificate, under the penalty of perjury, of any of the following:

   A. That the California real property being conveyed is the seller'
s principal residence (within the meaning of Section 121 of the
Internal Revenue Code).

   B. That the California real property being conveyed is or will be
exchanged for property of like kind (within the meaning of Section
1031 of the Internal Revenue Code), but only to the extent of the
amount of gain not required to be recognized for California income
tax purposes under Section 1031 of the Internal Revenue Code.
   C. That the California real property has been compulsorily or
involuntarily converted (within the meaning of Section 1033 of the
Internal Revenue Code) and that the seller intends to acquire
property similar or related in service or use so as to be eligible
for nonrecognition of gain for California income tax purposes under
Section 1033 of the Internal Revenue Code.

   D. That the California real property transaction will result in a
loss for California income tax purposes.

   The seller is subject to penalty for knowingly filing a fraudulent
certificate for the purpose of avoiding the withholding requirement.

   The California statutes referenced above include provisions which
authorize the Franchise Tax Board to grant reduced withholding and
waivers from withholding on a case-by-case  basis for corporations or
other entities."

   (3) The real estate escrow person shall not be liable under this
subdivision, if the tax due as a result of the disposition of
California real property is paid by the original or extended due date
of the transferor's return for the taxable year in which the
disposition occurred.

   (4) The real estate escrow person and the transferee shall not be
liable under paragraph (1) or subdivision (d), if the failure to
withhold is the result of the real estate escrow person's reliance,
based on good faith and on all the information of which he or she has
knowledge, upon a written certificate executed by the transferor
under penalty of perjury certifying to any of the following:

   (A) Where the transferor is an individual:

   (i) That the California real property being conveyed is the
principal residence of the transferor within the meaning of Section
121 of the Internal Revenue Code.

   (ii) That the California real property being conveyed is or will
be exchanged for property of like kind within the meaning of Section
1031 of the Internal Revenue Code, but only to the extent of the
amount of gain not required to be recognized for California income
tax purposes under Section 1031 of the Internal Revenue Code.

   (iii) That the California real property has been compulsorily or
involuntarily converted, within the meaning of Section 1033 of the
Internal Revenue Code, and that the seller intends to acquire
property similar or related in service or use so as to be eligible
for nonrecognition of gain for California income tax purposes under
Section 1033 of the Internal Revenue Code.

   (iv) That the California real property transaction will result in
a loss for California income tax purposes.

   (B) Where the transferor is a corporation, that the transferor is
a corporation with a permanent place of business in California.

   (5) Any transferor who for the purpose of avoiding the withholding
requirements of subdivision (e) or (f) of Section 18662 knowingly
executes a false certificate pursuant to this subdivision shall be
liable for twice the amount specified in subdivision (d).

   (6) Unless the failure to notify is due to willful disregard of
the withholding requirements of subdivision (e) or (f) of Section
18662, the real estate escrow person shall not be liable under this
subdivision if the disposition of California real property occurs
prior to July 1, 1991.

   (f) The amount of tax required to be deducted and withheld under
this article shall be assessed, collected, and paid in the same
manner and subject to the same provisions and limitations (including
penalties) as are applicable with respect to the taxes imposed by
Part 10 (commencing with Section 17001) or Part 11 (commencing with
Section 23001).



18669.  (a) Whenever any payer required to deduct and withhold tax
under this article sells, transfers, dissolves, withdraws,
terminates, or otherwise disposes of the business or a substantial
portion of its assets, the successors (including assigns, purchasers,
heirs, distributees, beneficiaries, or other persons acquiring
either a substantial portion of the assets or the business) shall
withhold in trust a sufficient part of the purchase price or set
aside in trust money or property to cover the amount of the taxes
required to be withheld and any interest or penalties with respect
thereto which are due or unpaid by the payer.  The money, property or
portion of the purchase price shall be held in trust until a
certificate is issued by the Franchise Tax Board stating that no
amount of such tax, interest, or penalties are due or unpaid from the
payer.

   (b) Upon written request by the successor, the Franchise Tax Board
shall, within 60 days, issue a certificate or a statement showing
the amount of tax, interest, and penalties due from the payer.
Except as provided in subdivision (c), failure to issue a certificate
or statement within the 60-day period shall be deemed equivalent to
the issuance of a certificate stating that no tax, interest, or
penalties are due.  If the Franchise Tax Board issues a statement
showing that taxes, interest, and penalties are claimed to be due,
the amount stated therein (not in excess of the fair market value of
the assets or business acquired) shall be paid by the successor to
the Franchise Tax Board within (1) 30 days after the statement is
mailed or delivered to the successor, or (2) on the day the business
or assets are acquired, whichever occurs last.  If a request for a
certificate is not made by the successor, the amount of tax,
interest, or penalties due or unpaid by the payer shall be paid by
the successor to the Franchise Tax Board on the day the business or
assets are acquired.  If a successor fails to pay the amount required
by this section by the time prescribed in this subdivision, a
penalty of 10 percent of the amount payable shall be levied.

   (c) The issuance of a certificate stating that no taxes, interest,
and penalties are due, or the failure to issue the certificate or
statement within the period of 60 days shall not release the payer
from liability on account of any taxes, interest, and penalties then
or thereafter determined to be due from him or her, but shall release
the successor from any further liability on account of any such
taxes, interest, and penalties.  Payment by the successor pursuant to
subdivision (b) shall not release the payer from liability except to
the extent of the amount paid by the successor.

   (d) Any successor that fails to withhold money or other property
or fails to pay the amount or value of the property withheld as
provided in this section shall be personally liable for the payment
of the taxes, interest, and penalties due from the payer up to but
not exceeding the fair market value of the assets or business
acquired.  The Franchise Tax Board shall have all of the remedies for
collection against any successor that acquires the business or
substantially all the assets thereof of a payer as provided by this
part against any payer liable for taxes, interest, and penalties.
The time within which the obligation may be enforced against the
successor acquiring the business or substantially all the assets
thereof of a payer shall commence from (1) the date the successor
acquires the assets or business, (2) the date an assessment against
the successor payer becomes final, or (3) 31 days after the statement
is mailed or delivered to the successor if a certificate is
requested by the successor as provided in subdivision (b), whichever
of the three events is later.



18670.  (a) The Franchise Tax Board may by notice, served personally
or by first-class mail, require any employer, person, officer or
department of the state, political subdivision or agency of the
state, including the Regents of the University of California, a city
organized under a freeholders' charter, or a political body not a
subdivision or agency of the state, having in their possession, or
under their control, any credits or other personal property or other
things of value, belonging to a taxpayer or to an employer or person
who has failed to withhold and transmit amounts due pursuant to this
article, to withhold, from the credits or other personal property or
other things of value, the amount of any tax, interest, or penalties
due from the taxpayer or the amount of any liability incurred by that
employer or person for failure to withhold and transmit amounts due
from a taxpayer under this part and to transmit the amount withheld
to the Franchise Tax Board at the times that it may designate.
However, in the case of a depository institution, as defined in
Section 19(b) of the Federal Reserve Act (12 U.S.C.A. Sec. 461(b)(1)
(A)), amounts due from a taxpayer under this part shall be
transmitted to the Franchise Tax Board not less than 10 business days
from receipt of the notice.  To be effective, the notice shall state
the amount due from the taxpayer and shall be delivered or mailed to
the branch or office reported in information returns filed with the
Franchise Tax Board, or the branch or office where the credits or
other property is held, unless another branch or office is designated
by the employer, person, officer or department of the state,
political subdivision or agency of the state, including the Regents
of the University of California, a city organized under a freeholders'
charter or a political body not a subdivision or agency of the
state.

   (b) (1) At least 45 days before sending a notice to withhold to
the address indicated on the information return, the Franchise Tax
Board shall request a depository institution to do either of the
following:

   (A) Verify that the address on its information return is its
designated address for receiving notices to withhold.

   (B) Provide the Franchise Tax Board with a designated address for
receiving notices to withhold.

   (2) Once the depository institution has specified a designated
address pursuant to paragraph (1), the Franchise Tax Board shall send
all notices to that address unless the depository institution
provides notification of another address.  The Franchise Tax Board
shall send all notices to withhold to a new designated address 30
days after notification.

   (3) Failure to verify or provide a designated address within 30
days of receiving the request shall be deemed verification of the
address on the information return as the depository institution's
designated address.

   (c) Any corporation or person failing to withhold the amounts due
from any taxpayer and transmit them to the Franchise Tax Board after
service of the notice shall be liable for those amounts.  However, in
the case of a depository institution, if a notice to withhold is
mailed to the branch where the account is located or principal
banking office, the depository institution shall be liable for a
failure to withhold only to the extent that the accounts can be
identified in information normally maintained at that location in the
ordinary course of business.



18670.5.  (a) The Franchise Tax Board may by notice, served by
magnetic media, electronic transmission, or other electronic
technology, require any depository institution, as defined in Section
19 (b) of the Federal Reserve Act (12 U.S.C.A. Sec. 461(b)(1)(A)),
that the Franchise Tax Board, in its sole discretion, has reason to
believe may have in its possession, or under its control, any credits
or other personal property or other things of value, belonging to a
taxpayer, to withhold, from the credits or other personal property or
other things of value, the amount of any tax, interest, or penalties
due from the taxpayer and transmit that amount withheld to the
Franchise Tax Board at the times that it may designate, but not less
than 10 business days from receipt of the notice.  The notice shall
state the amount due from the taxpayer and shall be delivered or
transmitted to the branch or office reported in the information
returns filed with the Franchise Tax Board, or the branch or office
where the credits or other property is held, or other address
designated by that depository institution for purposes of the
Franchise Tax Board serving notice by magnetic media, electronic
transmission, or other electronic technology.

   (b) Any depository institution failing to withhold the amount due
from the taxpayer and to transmit that amount to the Franchise Tax
Board after the Franchise Tax Board provides notice to the depository
institution as authorized by subdivision (a) shall be liable for
those amounts only to the extent that the depository institution can
identify the account by magnetic media, electronic transmission, or
other electronic technology.

   (c) For purposes of this section, the term "address" shall include
telephone or modem number, facsimile number, or any other number
designated by the depository institution to receive data by
electronic means.


18671.  (a) Subject to the limitations in subdivisions (b) and (c),
the Franchise Tax Board, may, by notice, served personally or by
first-class mail, require any person, officer, department of the
state, or political subdivision or agency of the state including the
Regents of the University of California, a city organized under a
freeholder's charter, or a political body not a subdivision or agency
of the state, to withhold the amount of any tax, interest, or
penalties due from a taxpayer, or the amount due from an employer or
person who has failed to withhold and transmit amounts due pursuant
to this article, from any payments due the taxpayer, employer, or
person and from any payments becoming due the taxpayer, employer, or
person after receipt of the notice.  The amounts withheld shall be
transmitted to the Franchise Tax Board at those times as it may
designate.

   (b) The effect of a levy made pursuant to subdivision (a) shall be
continuous from the date the notice is received until the amount due
stated on the notice has been withheld, until the notice has been
withdrawn, or until one year after the date the notice is received,
whichever occurs first.

   (c) The amount required to be withheld pursuant to a notice issued
under subdivision (a) is the lesser of the amount due stated on the
notice, or either of the following:

   (1) If the taxpayer, employer, or person is not a natural person,
100 percent of the amount of each payment due or becoming due the
taxpayer, employer, or person during the period the levy is in effect
as provided in subdivision (b).

   (2) If the taxpayer, employer, or person is a natural person, 25
percent of the amount of each payment due or becoming due the
taxpayer, employer, or person during the period the levy is in effect
as provided in subdivision (b).

   (d) For purposes of this section, the term "payments" does not
include earnings as defined in subdivision (a) of Section 706.011 of
the Code of Civil Procedure or funds in a deposit account as defined
in paragraph (29) of subdivision (a) of Section 9102 of the
Commercial Code.  The term "payments" does include any of the
following:

   (1) Payments due for services of independent contractors,
dividends, rents, royalties, residuals, patent rights, or mineral or
other natural resource rights.

   (2) Payments or credits due or becoming due as a result of written
or oral contracts for services or sales whether denominated as
wages, salary, commission, bonus, or otherwise.

   (3) Any other payments or credits due or becoming due periodically
as a result of an enforceable obligation to the taxpayer, employer,
or person.



18672.  Any employer or person failing to withhold the amount due
from any taxpayer and to transmit the same to the Franchise Tax Board
after service of a notice pursuant to Section 18670 or 18671 is
liable for those amounts.


18673.  (a) Notwithstanding Article 7 (commencing with Section
706.151) of Chapter 5 of Title 9 of Part II of the Code of Civil
Procedure, if the Franchise Tax Board determines upon receiving
information from the taxpayer that his or her employer withheld
earnings for taxes pursuant to Article 4 (commencing with Section
19251) of Chapter 5 and failed to remit the withheld earnings to the
Franchise Tax Board, the employer shall be liable for the amount not
remitted.  The Franchise Tax Board's determination shall be based on
payroll documents or other substantiating evidence furnished by the
taxpayer.

   (b) Upon its determination, the Franchise Tax Board shall mail
notice to the employer at its last known address that upon failure to
remit the withheld earnings to the Franchise Tax Board within 15
days of the date of its notice to the employer, the employer shall be
liable for that amount which was withheld and not remitted.

   (c) If the employer fails to remit the amount withheld to the
Franchise Tax Board upon notice, that amount for which the employer
is liable shall be assessed, collected, and paid as though it were a
tax deficiency.  The amount may be assessed at any time prior to
seven years from the first day that the unremitted amount, in the
aggregate, was first withheld.  Interest shall accrue on that amount
from the first day that the unremitted amount, in the aggregate, was
first withheld.

   (d) When the assessment against the employer is final and due and
payable, the taxpayer's account shall be immediately credited with an
amount equal to that assessed amount as though it were a payment
received by the Franchise Tax Board on the first date that the
unremitted amount, in the aggregate, was first withheld by the
employer.

   (e) Collection against the taxpayer is stayed for both the
following amount and period:

   (1) An amount equal to the amount determined by the Franchise Tax
Board under subdivision (a).

   (2) The earlier of the time the credit is applied to the taxpayer'
s account pursuant to subdivision (d) or the assessment against the
employer is withdrawn or revised and the taxpayer is notified by the
Franchise Tax Board thereof.

   (f) If under this section an amount that was withheld and not
remitted to the Franchise Tax Board is final and due and payable by
the employer and credited to the taxpayer's account, this remedy
shall be the exclusive remedy for the taxpayer to recover that amount
from the employer.

   (g) This section shall not apply to debts, obligations, or other
amounts for which an earnings withholding order or assignment is
issued by the Franchise Tax Board pursuant to Article 5, 5.5, or 6 of
Chapter 5 or Section 10878.

   (h) This section shall apply to determinations made by the
Franchise Tax Board on or after the effective date of the act adding
this section.


18674.  (a) Any employer or person required to withhold and transmit
any amount pursuant to this article shall comply with the
requirement without resort to any legal or equitable action in a
court of law or equity.  Any employer or person paying to the
Franchise Tax Board any amount required by it to be withheld is not
liable therefor to the person from whom withheld unless the amount
withheld is refunded to the withholding agent.  However, if a
depository institution, as defined in 12 U.S.C. Sec. 461(b)(1)(A)
withholds and pays to the Franchise Tax Board pursuant to this
article any moneys held in a deposit account in which the delinquent
taxpayer and another person or persons have an interest, or in an
account held in the name of a third party or parties in which the
delinquent taxpayer is ultimately determined to have no interest, the
depository institution paying those moneys to the Franchise Tax
Board is not liable therefor to any of the persons who have an
interest in the account, unless the amount withheld is refunded to
the withholding agent.

   (b) In the case of a deposit account or accounts for which this
notice to withhold applies, the depository institution shall send a
notice by first-class mail to each person named on the account or
accounts included in the notice from the Franchise Tax Board,
provided that a current address for each person is available to the
institution.  This notice shall inform each person as to the reason
for the hold placed on the account or accounts, the amount subject to
being withheld, and the date by which this amount is to be remitted
to the Franchise Tax Board.  An institution may assess the account or
accounts of each person receiving this notice a reasonable service
charge not to exceed three dollars ($3).

   (c) Any employer or person required under this article to withhold
payments from a taxpayer may file an action in interpleader when a
bona fide dispute has arisen as to priority of lien between the tax
levied under this part and that of a federal taxing agency.



18675.  Any person from whom a tax is collected by withholding under
this article or under Section 13020 of the Unemployment Insurance
Code is entitled to the remedies set forth in Articles 1 (commencing
with Section 19301) and 3 (commencing with Section 19381) of Chapter
6.  Any refund of the tax under Chapter 6 (commencing with Section
19301) shall be made to the withholding agent instead of directly to
the taxpayer, if requested in writing by the withholding agent at the
time the amounts refundable were transmitted to the Franchise Tax
Board.


18676.  Whenever, under any provision of this article, service is
authorized upon the state of any notice to withhold, unless expressly
exempted from the provisions of this section, the service to be
effective must, in addition to any other requirements, be made on the
state agency owing the obligation prior to the time the agency
presents the claim for payment thereof to the Controller.



18677.  (a) For purposes of this article, if a lender, surety, or
other person, who is not an employer under those sections with
respect to an employee or group of employees, pays wages directly to
such an employee or group of employees, employed by one or more
employers, or to an agent on behalf of the employee or employees, the
lender, surety, or other person shall be liable in his or her own
person and estate to this state in a sum equal to the taxes (together
with interest) required to be deducted and withheld from the wages
by the employer.

   (b) If a lender, surety, or other person supplies funds to or for
the account of an employer for the specific purpose of paying wages
of the employees of the employer, with actual notice or knowledge
that the employer does not intend to or will not be able to make
timely payment or deposit of the amounts of tax required by this part
to be deducted and withheld by the employer from those wages, the
lender, surety, or other person shall be liable in his or her own
person and estate to the State of California in a sum equal to the
taxes (together with interest) which are not paid over to this state
by the employer with respect to the wages.  However, the liability of
the lender, surety, or other person shall be limited to an amount
equal to 25 percent of the amount so supplied to or for the account
of the employer for that purpose.

   (c) Any amounts paid to this state pursuant to this section shall
be credited against the liability of the employer.

Forms

FTB Nonresident Withholding RE Guide