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Business Taxes Law Guide—Revision 2024

BTLG Table of Contents > Tax on Insurers Law > Chapter 5 > entire chapter

Tax on Insurers Law

Revenue and Taxation Code

Division 2. Other Taxes
Part 7. Insurance Taxation

Chapter 5. Payment and Collection


Article 1. Generally

Article 2. Interest and Penalties

Article 3. Suits for Taxes

Article 4. Recovery of Erroneous Refunds


Article 1. Generally

12601. Payment to Controller. [Repealed by Stats. 2013, Ch. 33 (SB 78) in effect June 27, 2013.]

12601. Payment to Controller. [Repealed by Stats. 2013, Ch. 33 (SB 78), effective January 1, 2015.]

12601. Payment to Controller. (a) Amounts of taxes, interest, and penalties not remitted to the commissioner with the original return of the insurer shall be payable to the Controller.

(b) This section shall become operative on July 1, 2013.

History—Added by Stats. 2013, Ch. 33 (SB 78), in effect June 27, 2013, but operative July 1, 2013.

12602. Electronic funds transfer. [Repealed by Stats. 2013, Ch. 33 (SB 78) in effect June 27, 2013.]

12602. Electronic funds transfer. [Repealed by Stats. 2013, Ch. 33 (SB 78), effective January 1, 2015.]

12602. Electronic funds transfer. (a) On and after January 1, 1994, and before January 1, 1995, each insurer whose annual taxes exceed fifty thousand dollars ($50,000) shall make payment by electronic funds transfer, as defined by Section 45 of the Insurance Code. On and after January 1, 1995, each insurer whose annual taxes exceed twenty thousand dollars ($20,000) shall make payment by electronic funds transfer. The insurer shall choose one of the acceptable methods described in Section 45 of the Insurance Code for completing the electronic funds transfer.

(b) Payment shall be deemed complete on the date the electronic funds transfer is initiated, if settlement to the state's demand account occurs on or before the banking day following the date the transfer is initiated. If settlement to the state's demand account does not occur on or before the banking day following the date the transfer is initiated, payment shall be deemed to occur on the date settlement occurs.

(c) (1) Any insurer required to remit taxes by electronic funds transfer pursuant to this section that remits those taxes by means other than an appropriate electronic funds transfer, shall be assessed a penalty in an amount equal to 10 percent of the taxes due at the time of the payment.

(2) If the Department of Insurance finds that an insurer's failure to make payment by an appropriate electronic funds transfer in accordance with subdivision (a) is due to reasonable cause or circumstances beyond the insurer's control, and occurred notwithstanding the exercise of ordinary care and in the absence of willful neglect, that insurer shall be relieved of the penalty provided in paragraph (1).

(3) Any insurer seeking to be relieved of the penalty provided in paragraph (1) shall file with the Department of Insurance a statement under penalty of perjury setting forth the facts upon which the claim for relief is based.

(d) This section shall become operative on July 1, 2013.

History—Added by Stats. 2013, Ch. 33 (SB 78), in effect June 27, 2013, but operative July 1, 2013.

Article 2. Interest and Penalties*

* Former Article 2, Suits for Taxes, was renumbered as Article 3 by Stats. 1961, p. 1988, operative January 1, 1962.

12631. Interest and penalty. [Repealed by Stats. 2013, Ch. 33 (SB 78) in effect June 27, 2013.]

12631. Interest and penalty. [Repealed by Stats. 2013, Ch. 33 (SB 78), effective January 1, 2015.]

12631. Interest and penalty. (a) Any insurer that fails to pay any tax, except a tax determined as a deficiency assessment by the board under Article 3 (commencing with Section 12421) of Chapter 4, within the time required, shall pay a penalty of 10 percent of the amount of the tax in addition to the tax, plus interest at the modified adjusted rate per month, or fraction thereof, established pursuant to Section 6591.5, from the due date of the tax until the date of payment.

(b) This section shall become operative on July 1, 2013.

History—Added by Stats. 2013, Ch. 33 (SB 78), in effect June 27, 2013, but operative July 1, 2013.

12631.5. Interest; daily basis. [Repealed by Stats. 2016, Ch. 264 (AB 2201), in effect January 1, 2017.]

12631.5. Interest; daily basis. (a) If the department finds, taking into account all facts and circumstances, that it is inequitable to compute interest at the modified adjusted rate per month or fraction thereof, as defined in subdivision (b) of Section 6591.5, interest shall be computed at the modified adjusted daily rate from the date on which the tax or prepayment was due until the date of payment, if all of the following occur:

(1) The payment of tax or prepayment was made one business day after the date the tax or prepayment was due.

(2) The person was granted relief from all penalties that applied to that payment of tax or prepayment.

(3) The person files a request for an adjustment.

(b) For purposes of this section, "modified adjusted daily rate" means the modified adjusted rate per annum as defined in subdivision (a) of Section 6591.5 determined on a daily basis by dividing the modified adjusted rate per annum by 365.

(c) For purposes of this section, "business day" means any day other than a Saturday, Sunday, or any day designated as a state holiday.

(d) This section shall not apply to any payment made pursuant to a deficiency determination, or a determination where no return has been filed.

(e) This section shall only apply to electronic payments or prepayments of taxes.

History—Added by Stats. 2016, Ch. 264 (AB 2201), in effect January 1, 2017. Stats. 2021, Ch. 432 (SB 824), in effect January 1, 2022, substituted "department" for "board" in subdivision (a); substituted "adjustment" for "oral hearing before the board" after "request for an" in paragraph (a)(3); deleted subdivision (c); and relettered former subdivisions (d), (e), and (f) as subdivisions (c), (d), and (e), respectively.

Note.—Sec. 1, Stats. 2010, Ch. 316 (SB 1028) provides the following: "It is the intent of the Legislature that California's penalty and interest provisions foster and maintain the current high level of compliance, provide appropriate costs and sanctions for noncompliance, and provide a reasonable and administrable degree of latitude for individual taxpayer circumstances and errors. It is the intent of the Legislature in enacting this act, that the State Board of Equalization strictly and narrowly apply its provisions on a case-by-case basis and only in special circumstances."

12632. Deficiency assessment; interest and penalty. [Repealed by Stats. 2013, Ch. 33 (SB 78) in effect June 27, 2013.]

12632. Deficiency assessment; interest and penalty. [Repealed by Stats. 2013, Ch. 33 (SB 78), effective January 1, 2015.]

12632. Deficiency assessment; interest and penalty. (a) An insurer that fails to pay any deficiency assessment when it becomes due and payable shall, in addition to the deficiency assessment, pay a penalty of 10 percent of the amount of the deficiency assessment, exclusive of interest and penalties. The amount of any deficiency assessment, exclusive of penalties, shall bear interest at the modified adjusted rate per month, or fraction thereof, established pursuant to Section 6591.5, from the date on which the amount, or any portion thereof, would have been payable if properly reported and assessed until the date of payment.

(b) This section shall become operative on July 1, 2013.

History—Added by Stats. 2013, Ch. 33 (SB 78), in effect June 27, 2013, but operative July 1, 2013.

12633. Penalty for failure to file return. When a deficiency assessment is made on the basis of a proposal submitted by the commissioner pursuant to Section 12423 a penalty of 10 percent of the amount of the deficiency assessment shall be added thereto.

History—Added by Stats. 1961, p. 1988, operative January 1, 1962.

12634. Negligence penalty. When a deficiency assessment is made on the basis of a proposal submitted by the commissioner pursuant to Section 12422 and any part of the deficiency is due to negligence or intentional disregard of this part or rules and regulation adopted to implement this part but without intent to defraud, a penalty of 10 percent of the amount of the deficiency assessment shall be added thereto.

History—Added by Stats. 1961, p. 1988, operative January 1, 1962.

12635. Fraud penalty. If any part of a deficiency for which a deficiency assessment is made is due to fraud, a penalty of 25 percent of the amount of the deficiency assessment in addition to any other penalties shall be added thereto.

History—Added by Stats. 1961, p. 1988, operative January 1, 1962.

12636. Excusable delay. [Repealed by Stats. 2013, Ch. 33 (SB 78) in effect June 27, 2013.]

12636. Excusable delay. [Repealed by Stats. 2013, Ch. 33 (SB 78), effective January 1, 2015.]

12636. Excusable delay. (a) If the board finds that an insurer's failure to make a timely return or payment is due to reasonable cause and to circumstances beyond the insurer's control, and which occurred despite the exercise of ordinary care and in the absence of willful neglect, the insurer may be relieved of the penalty provided by Section 12258, 12287, 12631, 12632, or 12633.

(b)Any insurer seeking to be relieved of the penalty shall file with the board a statement under penalty of perjury setting forth the facts upon which the claim for relief is based.

History—Added by Stats. 2013, Ch. 33 (SB 78), in effect June 27, 2013, but operative July 1, 2013. Stats. 2017, Ch. 561 (AB 1516), in effect January 1, 2018, deleted "12282," after "Section 12258," in subdivision (a); designated former second paragraph of subdivision (a) as subdivision (b); and deleted former subdivision (b).

12636.5. Application of payment to delinquent tax liabilities. [Repealed by Stats. 2013, Ch. 33 (SB 78) in effect June 27, 2013.]

12636.5. Application of payment to delinquent tax liabilities. [Repealed by Stats. 2013, Ch. 33 (SB 78), effective January 1, 2015.]

12636.5. Application of payment to delinquent tax liabilities. (a) Every payment on an insurer's or surplus line broker's delinquent annual tax shall be applied as follows:

(1) First, to any interest due on the tax.

(2) Second, to any penalty imposed by this part.

(3) The balance, if any, to the tax itself.

(b) This section shall become operative on July 1, 2013.

History—Added by Stats. 2013, Ch. 33 (SB 78), in effect June 27, 2013, but operative July 1, 2013.

12637. Interest rate. [Repealed by Stats. 1985, Ch. 20, effective July 1, 1985.]

12637. Relief from interest—disaster. If the board finds that a person's failure to make a timely return or payment was due to disaster, and occurred notwithstanding the exercise of ordinary care and the absence of willful neglect, the person may be relieved of interest provided for by Sections 12258, 12287, 12307, 12631, and 12632. Any person seeking to be relieved of interest shall file with the board a statement under penalty of perjury setting forth the facts upon which he or she bases his or her claim for relief.

History—Added by Stats. 1989, Ch. 14 of the First Extraordinary Session in effect November 7, 1989.

Article 3. Suits for Taxes

12676. Suit for collection of tax. At any time within four years after any amount of tax becomes due and payable, and at any time within two years after any deficiency assessment of tax becomes due and payable, the Controller may bring an action in the name of the State in a court of competent jurisdiction in any county or city and county in this State in which the Attorney General has an office to collect the delinquent taxes, together with interest, and penalties.

History—Stats. 1961, p. 1988, operative January 1, 1962, completely revised this section. The section previously provided for suit on or before April 30th of the year following the calendar year in which the taxes, interest or penalties became delinquent and for the suit to be brought in the County of Sacramento.

12677. Procedure. The provisions of the Code of Civil Procedure relating to service of summons, pleadings, proofs, trials, and appeals are applicable to an action brought pursuant to this article.

12678. Attorney General. The Attorney General shall prosecute the action.

12679. Service of summons. [Repealed by Stats. 2013, Ch. 33 (SB 78) in effect June 27, 2013.]

12679. Service of summons. [Repealed by Stats. 2013, Ch. 33 (SB 78), effective January 1, 2015.]

12679. Service of summons. (a) If an insurer's right to do business has been forfeited or its corporate powers suspended, service of summons may be made upon the persons designated by law to be served as agents or officers of the insurer, and these persons are the agents of the insurer for all purposes necessary in order to prosecute the action. In the case of corporations whose powers have been suspended, the persons constituting the board of directors may defend the action.

(b) This section shall become operative on July 1, 2013.

History—Added by Stats. 2013, Ch. 33 (SB 78), in effect June 27, 2013, but operative July 1, 2013.

12680. Writ of attachment. A writ of attachment may be issued in the action in the manner provided by Chapter 5 (commencing with Section 485.010) of Title 6.5 of Part 2 of the Code of Civil Procedure without the showing required by Section 485.010 of the Code of Civil Procedure.

History—Stats. 1961, p. 1989, operative January 1, 1962, repealed former Section 12680, which provided for trial of the action in the County of Sacramento, and renumbered former Section 12681 as Section 12680. Stats. 1974, Ch. 1516, effective January 1, 1975, deleted the statement that no bond or affidavit was required previous to the issuing of the attachment, and added the proviso that the writ of attachment may be issued in the described manner.

12681. Controller's certificate prima facie evidence. [Repealed by Stats. 2013, Ch. 33 (SB 78) in effect June 27, 2013.]

12681. Controller's certificate prima facie evidence. [Repealed by Stats. 2013, Ch. 33 (SB 78), effective January 1, 2015.]

12681. Controller's certificate prima facie evidence. (a) In the action, a certificate of the Controller or of the secretary of the board, showing unpaid taxes against an insurer is prima facie evidence of:

(1) The assessment of the taxes.

(2) The delinquency.

(3) The amount of the taxes, interest, and penalties due and unpaid to the state.

(4) That the insurer is indebted to the state in the amount of taxes, interest, and penalties appearing unpaid.

(5) That there has been compliance with all the requirements of law in relation to the assessment of the taxes.

(b) This section shall become operative on July 1, 2013.

History—Added by Stats. 2013, Ch. 33 (SB 78), in effect June 27, 2013, but operative July 1, 2013.

12682. Payment of judgment. Payment of the amount of the judgment recovered in the action shall be made to the Controller.

History—Stats. 1961, p. 1989, operative January 1, 1962, renumbered former Section 12682 as present Section 12681 and renumbered former Section 12683 as Section 12682.

Article 4. Recovery of Erroneous Refunds

12691. Erroneous refund; action. The Controller may recover any refund or part thereof which is erroneously made and any credit or part thereof which is erroneously allowed in an action brought in a court of competent jurisdiction in any county or city and county in this State in which the Attorney General has an office. The action shall be brought in the name of the State and the Attorney General shall prosecute the action.

History—Added by Stats. 1961, p. 1989, operative January 1, 1962.