ASK THE CALIFORNIA EMPLOYMENT TAX AND PAYROLL TAX ATTORNEY – THE FRANCHISE TAX BOARD SETTLEMENT PROGRAM – PART 1
By Robert S. Schriebman 2021
The Franchise Tax Board (FTB), like the EDD, has a formal settlement program for administrative dispute resolution. The settlement procedures are set forth in R&TC § 19442. This is a very long code section and takes into account several different matters including a settlement resolution program. When compared to the EDD’s settlement program, the FTB’s version is more structured and attempts to adhere to a 9-month timeframe that will be discussed later in this article.
The FTB’s settlement program is designed to handle administrative civil tax matters that are in dispute, such as audit resolutions, hearings before the Office of Tax Appeals (OTA), and refund claim settlements. The FTB’s settlement program is not designed to handle matters of litigation in any state or federal court. The settlement program is neither designed to offer any concessions based on a taxpayer’s ability to pay, nor does it resolve offers in compromise.
In this Part 1, I will discuss the FTB settlement program in general. In Part 2, I will discuss what the FTB takes into consideration and the final approval process.
The FTB Settlement Program
The FTB settlement program is more structured than its EDD counterpart. For example, it is not uncommon for an EDD settlement matter to take over one year for resolution. The FTB, on the other hand, adheres to a strict 9-month process. That is to say, settlements are approved by the Settlement Bureau Director and Chief Counsel within 9 months from the settlement is submitted. A tentative settlement becomes final upon approval by the Board itself, or for small settlements by the FTB’s Executive Officer. After a settlement is submitted it takes about 7 months before initial approval by the Director of the Settlement Bureau and an additional month for approval by the Attorney General.
How an FTB Matter Gets to Settlement
Before the settlement process can be discussed, let’s talk about the basic FTB audit assessment process and audit appeals. When the FTB completes its examination, it issues a Notice of Proposed Assessment (NPA). At that point in time, a taxpayer under audit may challenge the assessment by filing a written Protest. After the Protest is filed, the FTB will hold an administrative hearing to consider the taxpayer’s position. If a resolution cannot be reached, the FTB will issue a Notice of Action (NA). This NA affirms or modifies the original assessment. If the taxpayer disagrees with the NA, the taxpayer has a right to appeal for a judge hearing with the OTA. A settlement request may be filed after the NA is issued or during the pendency of an OTA
hearing. Generally speaking, a settlement proposal cannot be submitted before these timeframes.
Form and Content of Settlement Proposal
If you wish to settle an administrative civil tax matter in dispute, such as an audit resolution, or claim for refund, the process begins by filing a written settlement proposal with the FTB. There is no specific form or format for a proposal, but the internal FTB rules require the following information:
1. Taxpayer’s name and current address (if no representative, also include the taxpayer’s telephone number and email address);
2. Representative’s name, current address, fax number, telephone number and email address;
3. Taxpayer’s social security number or taxpayer identification number;
4. Taxable year(s) involved;
5. Tax amount in dispute;
6. Present status of dispute (i.e., protest, appeal, or claim for refund);
7. Representative’s power of attorney;
8. Good faith settlement offer, including the grounds in support of the offer;
9. Identification and discussion of all issues in contention, including legal and factual grounds for positions taken by the taxpayer. Due to the expedited timeframes for the settlement program, a complete and full analysis must be included with the request; and
10. A listing of all NPAs and claim(s) for refund for the taxable years involved that are not part of the settlement request. Provide the present status of each NPA and claim for refund and the amount(s) involved.
Where to Send the Settlement Proposal
The written settlement proposal can be sent three ways:
1. Email: [email protected]
2. Mail: Director, Settlement Bureau, Mail Stop A270
Franchise Tax Board
P.O. Box 3070
Rancho Cordova, CA 95741-3070
(make sure you send by certified mail and get your receipt round-stamped.)
3. FAX: (916) 845-4747
In Part 2, I will discuss what happens after the FTB receives the settlement proposal and the procedures involved if the proposal is accepted or a settlement is negotiated.
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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