Can a trust that does not have resident trustees or beneficiaries be liable for income tax on the accumulated income of the trust?

McCulloch v. Franchise Tax Board , supra , 61 Cal.2d at pp. 189190, 37 Cal.Rptr. 636, 390 P.2d 412 [trusts incurred tax liability on its income earned "during each of the five prior years as it was earned "].) The trial court's ruling effectively eliminates this rule since a trust without resident trustees or beneficiaries will not be taxed on any annual accumulated income.

Second, section 17745 is only applicable "[i]f the trustee fails to pay the tax for the trust annually as it earns the income ...." ( McCulloch v. Franchise Tax Board , supra , 61 Cal.2d at pp. 191, 192 & fn. 4, 37 Cal.Rptr. 636, 390 P.2d 412 [interpreting former 18106, now current 17745]; see 17745, subd. (b) ["If no taxes have been paid on the current or accumulated income of the trust because the resident beneficiary's interest in the trust was contingent such income shall be taxable to the beneficiary when distributed or distributable to him or her"].) Rather than excusing a trust from making tax payments on its annual income, section 17745 is a mechanism to recover income if the trust fails to pay the appropriate amount of taxes.