ASK THE EDD LAWYER- WHAT HAPPENS TO MY CORPORATION IF IT BECOMES SUSPENDED FOR NON COMPLIANCE? HOW DO I OBTAIN A CERTIFICATE OF REVIVOR?
By Robert S. Schriebman
In late 2013 the Board of Equalization (BOE) issued a decision in the appeal of a corporation seeking a refund for 2007 corporate income taxes. It seems that the corporation filed a Claim for Refund with the BOE while it was under suspension for failure to timely file its 2007 tax return and to pay its taxes. While the corporation eventually filed the 2007 return and paid its taxes, the corporation did not obtain a Certificate of Revivor (CR) until the statute of limitations for filing refund claims had expired. The corporation argued that the CR related back in time and, therefore, made the Claim for Refund timely. The BOE ruled against the corporation and said that it was out of luck as far as the ability to file a valid Claim for Refund if that claim is filed after the statutory period has expired.
The BOE cited the case of Sade Shoe Co., Inc. v Oschin & Snyder (1990) 217 Cal.App.3d 1509. The Court of Appeal stated:
. . . when a suspended corporation commences an action during its suspension the statute of limitations continues to run . . .
If the statute of limitations runs out prior to revival of a corporation’s action, the corporation’s action will be time barred even if the complaint would otherwise have been timely . . .
A Claim for Refund filed while a corporation is under suspension in null and void. The corporation should have obtained the CR during the refund statute of limitations and then filed a new Claim for Refund before the expiration of the statute.
The rules are the same whether we are talking about FTB refund claims or EDD refund claims. A suspended corporation is a dead duck as far as its ability to transact business, file refund claims, or challenge an EDD assessment.
How to Obtain A Certificate Of Revivor
This is not an easy process. A Certificate of Revivor (CR) is issued by the Franchise Tax Board (FTB Form 2557). The FTB issues CRs under very limited circumstances. If the corporation can prove that it is currently involved in litigation the CR will be issued, but it is a hassle. There are forms provided by the FTB to apply for a CR. However, I have found that mailing the application form to the FTB or the Secretary of State and requesting a CR is not going to work. Your request is not turned down – you just do not hear anything further.
If the corporation is involved in litigation and needs a CR you must physically walk in to your local FTB office with original unfiled tax returns in hand and a cashier’s check for the balance due. Assuming you have done this you must also ask, on the spot, for a Certificate of Revivor. Have a seat in the waiting room and be prepared to wait for a considerable time period while the FTB consults with the Secretary of State who will grant permission to issue the CR. Your CR will have an official stamp showing that the CR you have in your hand is a valid Certificate of Revivor. You will then use the CR to prove that the corporation has now been resuscitated by operation of law. Copies of the CR should be attached to any court document or your Claim for Refund.
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, 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.