Form Ftb 638 - California Tax Shelter Resolution Initiative Election To Participate In Notice 2006-1 Page 2


INSTRUCTIONS FOR COMPLETING FTB 638 (California Tax Shelter Resolution
Initiative - Election to Participate in FTB Notice 2006-1)
2. File a California amended return reversing the
transaction(s) for which you are making an Election
The California Tax Shelter Resolution Initiative (California
to Participate under the California Initiative.
Initiative) is for taxpayers eligible to participate in, and
who fully complete the requirements of, the Internal
3. Execute a closing agreement with the Franchise Tax
Revenue Service (IRS) Settlement Initiative described in
Board, permanently resolving all tax, interest, and
Announcement 2005-80 and have underreported
penalty consequences associated with your
California tax liabilities due to transactions listed in
participation in any transaction listed in
Section 3 of IRS Announcement 2005-80.
Announcement 2005-80. Under this agreement, you
will not be able to file a claim for refund or appeal for
California taxpayers satisfying all requirements of the
any amounts paid under the California Initiative and
IRS Settlement Initiative and the California Initiative can
issues for which you elect to participate in this
avoid all penalty assessments except the accuracy-
initiative. In connection with the preparation of the
related penalty, which will be assessed at the percentage
closing agreement, the Franchise Tax Board may
rate specified in Section 3 of IRS Announcement
request additional information and documents
2005-80. California taxpayers can also claim transaction
relating to the transaction, such as marketing
costs paid, including professional and promoter fees, as
materials and tax opinion letters, which will be
an ordinary loss, provided these amounts have not been
required to be submitted at the time provided in
previously refunded to the taxpayer.
those requests.
4. Provide the Franchise Tax Board with a copy of the
Taxpayers that participated in the Voluntary Compliance
fully executed IRS closing agreement within 30 days
Initiative, pursuant to California Revenue & Taxation
of signing the IRS closing agreement.
Code (RTC) section 19752(b), commonly referred to as
5. Pay in full all taxes, interest and penalties due under
Option 2, have a right to file a claim for refund
the terms of the closing agreement at the time the
and appeal.
closing agreement is returned to the Franchise Tax
If you participated in the IRS Settlement Initiative with
Board. If you are unable to make full payment, you
respect to that transaction, you may also, if timely
may request an arrangement to pay under an
requested, participate in the California Initiative.
installment agreement. For more information,
However, to satisfy the requirements of the California
get the FTB 3567 Booklet from our website
Initiative, you will be required to enter into a closing
agreement waiving your right to file a claim for refund or
an appeal for any amounts paid under the California
Initiative and issues for which you elect to participate in
this initiative.
Send your completed form FTB 638 and all the
requested documents by mail or fax.
To participate in the California Initiative you must fully
complete the following requirements:
PO BOX 1673
SACRAMENTO CA 95812-1673
1. File an irrevocable Election to Participate in the
California Initiative (form FTB 638) with the Franchise
Tax Board not later than March 31, 2006, and attach
(916) 845-5267
a copy of IRS Form 13750, Election to Participate in
Announcement 2005-80 Settlement Initiative,
including all schedules (including, but not limited to,
Schedules A and B), for each transaction for which
To get more information about the California Tax Shelter
you are making an Election to Participate under the
Resolution Initiative get FTB Notice 2006-1 from our
California Initiative.
website at
Taxpayers who fail to provide the required
Assistance for persons with disabilities:
information with form FTB 638 will not be eligible to
We comply with the Americans with Disabilities Act.
participate in the Initiative.
Persons with hearing or speech impairments please
call TTY/TDD (800) 822-6268.
FTB 638 (NEW 01-2006) SIDE 2


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