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ASK THE EDD ATTORNEY – WHEN YOU OWE THE FTB - DON’T GET ON THEIR “LIST”

By Robert S. Schriebman

July 20, 2016

Introduction

This article will discuss the strange case of Ernest J. Franceschi, Jr. (Ernest) an attorney licensed to practice in California. Ernest owed the FTB a lot of money for failing to pay back taxes. In fact he owed so much that he made the FTB’s list of the 500 worst tax debtors whose names are published for all to see. Ernest tried to sue the FTB to remove his name from the list. He first filed suit in federal court and lost. He again filed suit in the California Supreme Court and was thrown out of court and fined $5,000 for bringing a "frivolous and groundless" action. In other words, he was fined because he wasted the court’s time.

In this article we will discuss Ernest’s case and the law allowing a person’s name to be made public for the non-payment of taxes.

Twice a year the FTB is allowed to publish the names of its most notorious tax deadbeats. There are people from all walks of life on this list including Hollywood celebrities.

The Strange Case Of Ernest J. Franceschi, Jr.

Ernest petitioned the superior court for a writ directing the then-serving members of California Franchise Tax Board (FTB) - Betty Yee, Jerome E. Horton, Michael Cohen, sued in their official capacities only – to cease publishing his name on the FTB’s list of the state’s "Top 500" income tax debtors (the List). In his petition, Ernest argued that publication of his name on the List violates his right of privacy. Ernest also argued that publishing his name on the List was unconstitutional. The FTB fought back arguing that publication of Ernest’s name on the List did not violate his privacy rights. The judge agreed and so did the California Court of Appeals, (July 8, 2016 Case No. B267719).

What Does The Law Say?

The "Top 500" list has now been held to be constitutional and not an invasion of anyone’s privacy. Section 19195 of the Revenue and Taxation Code requires the FTB to publish the List at least twice each year. (Rev. & Tax Code, § 19195) Under section 494.5 of the Business and Professions Code, when a state licensing agency, such as the Department of Motor Vehicles, receives a delinquency list containing the name of a taxpayer to whom the agency has issued a license, that agency is required to suspend the taxpayer’s license. (Bus. & Prof. Code, § 494.5)

Ernest is an attorney. The State Bar of California is exempt from mandatory suspension requirement but may recommend the suspension of a license if an attorney’s name is included on the list. (Bus. & Prof. Code, § 494.5) An attorney can be suspended or disbarred for tax crimes such as tax evasion or the failure to file tax returns.

Avoiding The List

In my practice I have learned that once you get on any kind of negative list for a state or federal agency it is almost impossible to clear your reputation. If you owe taxes and cannot fully pay them, the worst thing you can do is to bury your head like an Ostrich. Tax problems seem to have lives of their own. They grow like weeds. One year becomes two years. Two years become five years , and so on. You must be proactive. Contact the FTB, EDD, or IRS. Don’t wait for them to contact you. Nothing is more important than communication. Work out a monthly payment plan and stick to it. If you can’t do that ask to be treated as a hardship case and have collection efforts suspended. If you can come up with some money as a partial payment, consider an Offer in Compromise. You may even qualify to have your income taxes discharged through a Chapter 7 Bankruptcy proceeding.

But, above all else – avoid the List.

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Robert Schriebman has a successful practice in the Rolling Hills Estates area of Los Angeles County serving clients throughout California and the United States. He has successfully dedicated more than 40 years to helping individual taxpayers, business owners, CPAs, Enrolled Agents, and tax attorneys navigate the complicated tax systems of the federal and state governments.

Robert Schriebman has written the only 2 books ever published dealing with how California Employment Development Department (EDD) operates. See "California Tax Collection Practice and Procedures" and "California Taxation Practice and Procedure," both published by Commerce Clearing House.

Robert Schriebman has written over 20 books including the major manual used nationally by practitioners and the IRS, "IRS Tax Collection Procedures – A Manual for Practitioners" published by Commerce Clearing House.

Robert Schriebman has written over 20 books including the major manual used nationally by practitioners and the IRS, "IRS Tax Collection Procedures – A Manual for Practitioners" published by Commerce Clearing House in addition to the only 2 books ever published dealing with how California Employment Development Department (EDD) operates. See "California Tax Collection Practice and Procedures" and "California Taxation Practice and Procedure," both published by Commerce Clearing House.

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