Ask The California Employment Tax And Payroll Tax Attorney – May You Recover Money Damages From The FTB And CDTFA In The Office Of Tax Appeals?
By Robert S. Schriebman
2021
Introduction
May you recover money damages from the FTB and CDTFA in the Office of Appeals (OTA)? In 1988 the California Legislature enacted a series of statutes known as The Katz-Harris Taxpayers’ Bill of Rights Act (TBR). These provisions are found starting at § 21001 in the Revenue Taxation Code. Each California taxing agency has a TBR. If the FTB or CDTFA violates a taxpayer’s right, the wronged taxpayer may be able to receive money damages. However, there are no money damages available if the EDD commits a violation of its TBR.
May a wronged taxpayer go before the OTA and receive a money damage award? That was the issue to be decided for the first time by the OTA in the matter involving the Jacqueline Mairghread Patterson Trust case (OTA Case No. 20076320). In this article I will refer to the taxpayer as the “Trust.”
The Trust case involves a claim for refund for monies remitted to the FTB in a “1031 exchange.” The Trust received cash boot in the exchange and that had to be reported to the FTB. The withholding agent remitted $3,642 as required by law together with FTB Form 593-V, Payment Voucher. Unfortunately, the voucher did not have the Trust’s name or identification number. The agent should have also sent in FTB Form 593, Real Estate Withholding Tax Statement. By the time the Trust filed a claim for refund, it was too late.
The Trust sought money damages against the FTB for violation of an obscure provision of the TBR. Let’s look at how the OTA ruled.
The Trust Case
R&TC § 21025 mandates that the FTB must make a reasonable effort to notify the taxpayer within 60 days if it receives a payment that cannot be associated with that taxpayer. The Trust argument was that if properly notified, it could have timely filed a claim for refund. Remember that the withholding agent only sent in Form 593-V and should have also sent in Form 593. The FTB admitted it failed to timely notify the Trust that it also needed the 593 Form. So, the Trust wanted the FTB to reimburse them the amount of the refund claim.
The OTA ruled that R&TC § 21021(a) mandates that all claims for damages must be filed in the superior court, including actual damages and litigation costs. Therefore, the OTA had no jurisdiction to award any damages.
Conclusion
You cannot go to the OTA and petition them for any redress if either the FTB or CDTFA violates any provision of the TBR. There are no administrative or judicial remedies if the EDD violates its own TBR.
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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 50 years to helping individual taxpayers, business owners, CPAs, Enrolled Agents, and tax attorneys navigate the complicated tax systems of the federal and state governments. Mr. Schriebman is in private practice. He is not affiliated in any way with the EDD and he is not employed by the EDD or any other agency of the State of California.
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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