The federal government and many of the states have offered limited tax relief and the promise of escaping criminal prosecution to those who voluntarily come forward and confess the tax sins of their past. California’s second voluntary compliance initiative (aka, VCI 2) was expected to bring in $270 million, and preliminary numbers suggest that it has done much better than that.
VCI 2 gave taxpayers who stashed money offshore or who engaged in abusive tax avoidance transactions an opportunity to amend their tax returns without penalties. The program raised $350 million from over 1000 taxpayers.
The Franchise Tax Board’s warning to those who did not participate:
Taxpayers who were eligible for VCI 2 because of their involvement with abusive tax avoidance transactions but did not to participate are subject to audit for 12 years with large penalties such as the 40 percent Noneconomic Substance Transaction penalty and a 50 or 100 percent interest-based penalty.