Section 19504.5.
Cal. Revenue and Taxation Code - RTC § 19504.5.
in effect(a)
(1)
Except as provided in subdivision (b), no subpoena may be issued under this part and the Franchise Tax Board may not begin any action under Article 2 (commencing with Section 1180) of Chapter 2 of Part 1 of Division 3 of Title 2 of the Government Code to enforce any subpoena to produce or analyze any tax-related computer software source code.
(2)
Any software and related materials that are provided to the Franchise Tax Board under this part
shall be subject to the safeguards under subdivision (c).
(b)
(1)
Paragraph (1) of subdivision (a) shall not apply to any portion, item, or component of the tax-related computer software source code if all of the following apply:
(A)
The Franchise Tax Board is unable to otherwise reasonably ascertain the correctness of any item on a return from either of the following:
(i)
The taxpayer’s books, papers, records, or other data.
(ii)
The computer software executable code (and any modifications thereof) to which the source code relates and any associated data which, when executed, produces the output to ascertain the correctness of the item.
(B)
The Franchise Tax Board
identifies with reasonable specificity the portion, item, or component of the source code needed to verify the correctness of the item on the return.
(C)
The Franchise Tax Board determines that the need for the portion, item, or component of the source code with respect to the item outweighs the risks of unauthorized disclosure of trade secrets.
(2)
Paragraph (1) of subdivision (a) shall not apply to any of the following:
(A)
Any inquiry into any offense connected with the administration or enforcement of this part, Part 10 (commencing with Section 17001), Part 10.7 (commencing with Section 21001), or Part 11 (commencing with Section 23001).
(B)
Any tax-related computer software source code acquired or developed by the taxpayer or related person
primarily for internal use by the taxpayer or that person rather than for commercial distribution.
(C)
Any communications between the owner of the tax-related computer software source code and the taxpayer or related persons.
(D)
Any tax-related computer software source code which is required to be provided or made available pursuant to any other provision of this part, Part 10 (commencing with Section 17001), Part 10.7 (commencing with Section 21001), or Part 11 (commencing with Section 23001).
(3)
For purposes of paragraph (1), the Franchise Tax Board shall be treated as meeting the requirements of subparagraphs (A) and (B) of that paragraph if all of the following apply:
(A)
The Franchise Tax Board determines that it is not feasible to determine the
correctness of an item without access to the computer software executable code and associated data described in clause (ii) of subparagraph (A) of paragraph (1).
(B)
The Franchise Tax Board makes a formal request to the taxpayer for the code and data and to the owner of the computer software source code for the executable code.
(C)
The code and data are not provided within 180 days of that request.
(4)
In any proceeding brought under Article 2 (commencing with Section 1180) of Chapter 2 of Part 1 of Division 3 of Title 2 of the Government Code to enforce a subpoena issued under the authority of this subdivision, the court shall, at the request of any party, hold a hearing to determine whether the applicable requirements of this section have been met.
(c)
(1)
In any court proceeding to enforce a subpoena for any portion of software, the court may receive evidence and issue any order necessary to prevent the disclosure of trade secrets or other confidential information with respect to that software, including requiring that any information be placed under seal to be opened only as directed by the court.
(2)
Notwithstanding any other provision of this section, and in addition to any protections ordered pursuant to paragraph (1), in the case of software that comes into the possession or control of the Franchise Tax Board in the course of any examination with respect to any taxpayer, all of the following shall apply:
(A)
The software may be used only in connection with the examination of that taxpayer’s return, any protest or appeal by the taxpayer, any judicial proceeding and any appeals
therefrom, or any inquiry into any offense connected with the administration or enforcement of this part, Part 10 (commencing with Section 17001), Part 10.7 (commencing with Section 21001), or Part 11 (commencing with Section 23001).
(B)
The Franchise Tax Board shall provide, in advance, to the taxpayer and the owner of the software a written list of the names of all individuals who will analyze or otherwise have access to the software.
(C)
(i)
The software shall be maintained in a secure area or place, and in the case of computer software source code, shall not be removed from the owner’s place of business unless the owner permits, or a court orders, that removal.
(ii)
For purposes of clause (i), the owner shall make available any necessary equipment or materials for analysis of computer
software source code required to be conducted on the owner’s premises.
(D)
The software may not be copied except as necessary to perform an analysis, and the Franchise Tax Board shall number all copies made and certify in writing that no other copies have been or will be made.
(E)
At the end of the period during which the software may be used under subparagraph (A), both of the following apply:
(i)
The software and all copies thereof shall be returned to the person from whom they were obtained and any copies thereof made under subparagraph (D) on the hard drive of a machine or other mass storage device shall be permanently deleted.
(ii)
The Franchise Tax Board shall obtain from any person who analyzes or otherwise had access to that software a written
certification under penalty of perjury that all copies and related materials have been returned and that no copies were made of them.
(F)
The software may not be decompiled or disassembled.
(G)
(i)
The Franchise Tax Board shall provide to the taxpayer and the owner of any interest in the software, as the case may be, a written agreement, between the Franchise Tax Board and any person who is not an officer or employee of the State of California and who will analyze or otherwise have access to that software, which provides that the person agrees not to do either of the following:
(I)
Disclose the software to any person other than persons to whom the information could be disclosed for tax administration purposes under Section 19542.
(II)
Participate for two years in the development of software which is intended for a similar purpose as the software examined.
(ii)
The owner of any interest in the software shall be considered a party to any agreement described in clause (i).
(H)
The software shall be treated as return information for purposes of Section 19542.
(d)
For purposes of this section:
(1)
“Software” includes computer software source code and computer software executable code.
(2)
“Computer software source code” means all of the following:
(A)
The code written by a programmer using a programming language which is comprehensible to
appropriately trained persons and is not capable of directly being used to give instructions to a computer.
(B)
Related programmers’ notes, design documents, memoranda, and similar documentation.
(C)
Related customer communications.
(3)
“Computer software executable code” means both of the following:
(A)
Any object code, machine code, or other code readable by a computer when loaded into its memory and used directly by the computer to execute instructions.
(B)
Any related user manuals.
(4)
“Owner” includes, with respect to any software, the developer of the software.
(5)
A person shall be treated as related to another person if the persons are related persons under Section 267 or 707(b) of the Internal Revenue Code.
(6)
“Tax-related computer software source code” means the computer source code for any computer software program intended for accounting, tax return preparation or compliance, or tax planning.
(e)
This section and Section 19542.3 shall not apply to any software acquired or developed for internal use by the Franchise Tax Board.
(f)
This section shall apply to subpoenas issued, and software acquired, after the effective date of the act adding this section. In the case of any software acquired on or before the effective date of the act adding this section, the requirements of paragraph (2) of subdivision (a) shall apply after the 90th day after the effective
date of the act adding this section. The preceding sentence shall not apply to the requirement under clause (ii) of subparagraph (G) of paragraph (2) of subdivision (c).
References
referencesCal. Government Code - GOV § 1180.
referencesCal. Revenue and Taxation Code - RTC § 17001.
referencesCal. Revenue and Taxation Code - RTC § 21001.
referencesCal. Revenue and Taxation Code - RTC § 23001.
referencesCal. Revenue and Taxation Code - RTC § 19542.
referencesCal. Revenue and Taxation Code - RTC § 267.
referencesCal. Revenue and Taxation Code - RTC § 19542.3.
Source: CA Legislative Counsel Bulk DataURL: https://downloads.leginfo.legislature.ca.gov/pubinfo_2025.zipFetched: 6/27/2026