California: San Francisco Offers Two New Programs to Help Proactive Taxpayers
Tax Development
In November 2024, San Francisco voters approved Proposition M, a comprehensive restructuring of San Francisco’s business tax system. The restructuring includes two new programs to help taxpayers. The Voluntary Disclosure and Compliance Program (VDCP) allows unregistered San Francisco businesses and others to come forward voluntarily and pay tax liabilities in exchange for a waiver of penalties and a limited lookback period for past due taxes. The Advance Written Determination (AWD) program provides clarity and predictability for businesses with questions relating to tax apportionment and business activity classification.
The VDCP is available to taxpayers that do not have a business registration certificate, have not filed returns, and have not been previously contacted by the Office of the Treasurer and Tax Collector regarding unreported taxes. The program covers city taxes, including business registration fees, gross receipts tax, commercial rents tax, transient occupancy tax, and more. See https://sftreasurer.org/voluntary-disclosure-compliance-program for the full list. This program will be especially useful for businesses that unexpectedly established nexus with the city, such as by hiring remote workers.
Taxpayers accepted into the program must register and submit all required filings and payments for the past six years. Those that apply and successfully complete the program will receive a waiver of penalties related to the taxes and other charges disclosed. All taxes due prior to the six-year lookback period will also be forgiven.
The AWD program allows taxpayers to request a written decision from the Office of the Treasurer and Tax Collector regarding an area of the law that needs clarification or a particular position taken by a taxpayer. However, the only issues considered will be apportionment and business activity classification. Hypothetical scenarios and issues currently under audit will not be considered. The AWD program accepts applications from March through October of each year through 2027, with applicants required to pay a $250 filing fee. The fee is refundable if the application is declined.
Taxpayers receiving an AWD may rely on that opinion in future tax years. But failure to follow the AWD in subsequent tax returns could subject the taxpayer to additional tax, penalties, and interest. AWD decisions will be redacted and published.
Both programs are running for the next three years. The programs offer businesses in San Francisco similar benefits to state-run Voluntary Disclosure Agreements and Private Letter Rulings. Voluntary Disclosure Agreements and Private Letter Rulings are popular programs that save taxpayers time and money by rewarding businesses that are proactive in addressing their tax situations.
The material presented in this communication is intended to provide general information only and should solely be seen as broad guidance and not directed to the particular facts or circumstances of any individual who may read this publication. No liability is accepted for acts or omissions taken in reliance upon the content of this piece. Before taking (or not taking) any action, readers should seek professional advice specific to their situation from Ryan, LLC or other tax professionals.