Bank Secrecy May Be Dead In California!


Senate Bill 86 is on its way to the governor’s desk and he is likely to sign it in days. Why is this a big deal and how does SB 86 kill bank secrecy, well contained in the bill is new Revenue & Taxation code section 19266. Section 19266 creates the Financial Institution Record Match System which will be administered by the Franchise Tax Board. The new law will create “A structure by which financial institutions, or their designated data processing agents, shall receive from the Franchise Tax Board, the file or files of delinquent debtors that the institution shall match with its own list of accountholders to identify delinquent account holders at the institution”. The rules and regulations by which the matching is to be implemented will be developed and implemented by the Franchise Tax Board. This new law will affect administration of trusts and estates, including spendthrift trusts, individuals, couples, partnerships, corporations and others. This is a very big deal! This first information exchange is scheduled to occur in April 2012 allowing time for development of the compliance system and rules and regulations.

The purpose of the legislation is to go after delinquent taxpayers. I don’t think that anyone can argue with the purpose or need to collect taxes that are due and owing. It is the approach that may cause some concern. The law will require “financial institutions subject to this section to provide to the Franchise Tax Board on a quarterly basis the name, record address, and other addresses, social security number or taxpayer identification number, and other identifying information for each delinquent debtor, as identified by the Franchise Tax Board by name and social security number or other taxpayer identification number, who maintains an account at the institution.”

Financial institutions are expressly prohibited from disclosing to a “depositor or an account holder, or a codepositor or coaccountholder, that the name address, social security number or other taxpayer identification number or other identifying information of that delinquent tax debtor has been received from or furnished to the Franchise Tax Board”.

Please see full article below for more information.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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