ASK THE EDD ATTORNEY- What Are Laches? Using the Concept of Laches to Prevent the EDD From Collecting an Ancient Debt
by Robert S. Schriebman
It seems that a week does not go by without calls from you inquiring about the EDD’s ability to collect a tax assessment that occurred in the early 1990s. People seem to be having the same problem with the FTB as well. One of the things we do when trying to help someone in this position is to contact the EDD to obtain a copy of the client’s internal file in order to determine how the liability arose and whether the EDD still has the original documents composing the ancient file. Most of the time, the EDD tells us that the file has been destroyed. The EDD collector is simply looking at data on his or her computer screen and basing that data on demands that the ancient debt be paid or the taxpayer suffer enforced collection action such as a bank account levy or wage garnishment.
I have written several articles earlier this year dealing with the topic of the EDD’s ability to collect old tax debts, but none of them has discussed the defense of laches. Laches is an ancient common-law equity concept. It is defined in Black’s Law Dictionary as a delay that results in a dereliction of duty, the results of which cause harm to a potentially innocent person. The word also means a lack of diligence and negligence.
In April 2013, the California Board of Equalization decided an income tax case involving what the taxpayer claimed to be a delayed assessment on the part of the FTB that caused him harm in the form of the accrual of excessive interest on his FTB assessment. He claimed that the FTB should have issued its assessment in a timely manner, and because of the delay he was forced to pay more interest than he felt he should pay. He argued that the FTB was guilty of laches.
The Board researched the issue and found that the concept of laches was discussed by the U.S. Tax Court in Decker v Commissioner, T.C. Memo 1995-38. The Tax Court held that, in deciding whether or not to apply the doctrine of laches, courts usually look at the following two factors: (1) an inexcusable delay or lack of diligence by the party against whom the doctrine is to be applied, and (2) prejudice to the other party caused by reliance on his or her opponent’s conduct.
The Tax Court also stated that the doctrine of laches is based on the injustice that could result from the enforcement of long-neglected rights or on the difficulty, if not the impossibility, of determining the truth of the underlying controversy in reaching justice between the parties.
I submit to you that when the EDD demands payment of an ancient debt after it has destroyed your original records this action puts you in a bad position. How can you prove the EDD is wrong?
I doubt if an EDD collector is going to be sympathetic to your laches argument. However, this argument should be raised when you fully pay your EDD debt and file a Claim for Refund. If your refund claim is denied you have a right to file a Refund Petition and seek a hearing before a judge where the argument of laches should be seriously taken into consideration.
An EDD lawyer, Robert Schriebman has a successful practice in the Rolling Hills Estates area of Los Angeles County serving clients throughout California and the United States.
As a trusted EDD attorney, Robert S. Schriebman has successfully dedicated more than 30 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 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 and 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.