California Tax Board: 4058C
Content
MISSION OF THE FRANCHISE TAX BOARD
he purpose of the Franchise Tax Board is to collect the proper amount of tax revenue, and operate other programs entrusted to us, at the least cost; serve the public by continually improving the quality of our products and services, and perform in a manner warranting the highest degree of public confidence in our integrity, efficiency and fairness.
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STATEMENT OF PRINCIPLES OF TAX ADMINISTRATION
he primary function of the Franchise Tax Board is to administer the Revenue and Taxation Code. Tax policy for raising revenue is determined by elected officials. With this in mind, it is the duty of the Franchise Tax Board to carry out that policy by correctly applying the laws enacted by the Legislature, to determine the reasonable meaning of various Code provisions in light of the legislative purpose in enacting them; and to perform this work in a fair and impartial manner, with neither a government nor a taxpayer point of view. At the heart of administration is interpretation of the Code. It is the responsibility of each person in the Franchise Tax Board, charged with the duty of interpreting the law, to try to find the true meaning of the statutory provision and not to adopt a strained construction in the belief that he or she is “protecting the revenue.” The revenue is properly protected only when the true meaning of the statute is ascertained and applied. The Franchise Tax Board also has the responsibility of applying and administering the law in a reasonable, practical manner. Issues should only be raised when they have merit, never arbitrarily or for trading purposes. At the same time, employees should never hesitate to raise a meritorious issue. It is also important that care be exercised not to raise an issue or to ask a court to adopt a position inconsistent with an established Franchise Tax Board position. Administration should be both reasonable and vigorous. It should be conducted with as little delay as possible and with great courtesy and considerateness. It should never try to overreach, and should be reasonable within the bounds of law and sound administration. It should however, be vigorous in requiring compliance with law and it should be relentless in its attack on unreal tax devices and fraud.
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CALIFORNIA TAXPAYERS’ BILL OF RIGHTS
A COMPREHENSIVE GUIDE
CALIFORNIA FRANCHISE TAX BOARD
INTRODUCTION
he California Taxpayers’ Bill of Rights (Stats. 88, Ch. 1573) became law in 1988. This law codified many existing Franchise Tax Board procedures, established a Taxpayer Advocate, and clarified your rights as a California taxpayer and our obligations to you. On July 30, 1996, the federal Taxpayer Bill of Rights 2 (P.L.104-168) was passed, followed a few months later by, California’s Taxpayers’ Rights Conformity Legislation (Stats. 97, Ch. 600). California law contains numerous provisions that increase protection of taxpayers’ rights, including the most recently legislated Taxpayers’ Bill of Rights Act of 1999. This guide provides a general overview of the provisions contained in all of the Taxpayers’ Bill of Rights legislation to date. Each topic references a particular section of the Revenue and Taxation Code. We hope the information in this guide will give you a better understanding of our Taxpayers’ Bill of Rights legislation.
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CONTENTS
PART I PART II THE TAXPAYER ADVOCATE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¶ 1 TAXPAYER EDUCATION
Public Education Program . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Annual Report to the Legislature . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Annual Hearing Conducted by the Franchise Tax Board . . . . . . . . . . . . . . . . . . . . . . Explanation of Taxpayers’ Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¶2 ¶3 ¶4 ¶5
PART III
EVALUATING FTB EMPLOYEES
Prohibition of Employee Evaluation Based Upon Revenue Generated . . . . . . . . . . . ¶6 Evaluation of Employees Based Upon Public Contact . . . . . . . . . . . . . . . . . . . . . . . . ¶7
PART IV PART V
JOINT RETURNS
Joint Return Filed After Separate Return . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¶8
INFORMATION RETURNS
Phone Number on Information Returns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¶9 Reasonable Examination of Information Returns . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¶10
PART VI
COLLECTION PROCEDURES
Waiver of Early-Withdrawal Penalties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Employee Relief/Unremitted Withholdings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Installment Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Approval of Jeopardy Assessments and Termination Assessments . . . . . . . . . . . . . . Action for Release of Third-Party Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Procedures for Seizure of Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Procedures for Seizure of Residences or Businesses . . . . . . . . . . . . . . . . . . . . . . . . Offers in Compromise . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Release of Seized Property/Wages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Exemptions From Levy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Release of Erroneous Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Disclosure of Collection Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¶11 ¶12 ¶13 ¶14 ¶15 ¶16 ¶17 ¶18 ¶19 ¶20 ¶21 ¶22
PART VII
INTEREST
Extension of Interest-Free Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¶23 Abatement of Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¶24 Abatement of Interest/Disaster Areas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¶25
PART VIII
REIMBURSEMENT AND AWARDS
Recovery of Litigation Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Reimbursement of Fees/Expenses Related to State Board of Equalization Appeals . Erroneous Levy, Erroneous Processing Action, or Erroneous Collection Action . . . . . . Court Action Against the State . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Intentional Enticement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¶26 ¶27 ¶28 ¶29 ¶30
CONTENTS
PART IX NOTICES TO TAXPAYERS
Notice to Include Deadlines . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¶31 Suspension of Interest/Fail to Notify . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¶32 Notice of Interest Charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¶33 Procedures for Imposing Penalties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¶34 Explanation of Refund Disallowance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¶35 Notice of Contact of Third Parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¶36 Notification to Corporations Prior to Suspension . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¶37 Unassociated Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¶38 Annual Notice to Taxpayers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¶39
PART X
AMENDED RETURN CLAIMS FOR REFUND, PROTESTS AND APPEALS
Plan to Reduce Time Required for Amended Return Claims for Refund, Protests, and Appeals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¶40 Protest Hearings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¶41
PART XI PART XII
WRITTEN ADVICE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¶42 MISCELLANEOUS PROVISIONS
Innocent Spouse Relief . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¶43 Identification of Return Preparer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¶44 Taxpayer Motion to Quash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¶45 Extension of Statute of Limitations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¶46 Application of Regulations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¶47 Financial Status Audits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¶48 Software Trade Secrets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¶49 Whistleblower Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¶50 Prohibition of Non-Tax Investigations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¶51 Waiver of Specific Penalties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¶52 Private Delivery Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¶53 Privileged Taxpayer Communications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¶54
PART I
THE TAXPAYER ADVOCATE
¶1 Revenue and Taxation Code Section 21004
he Taxpayer Advocate reports directly to the Executive Officer of the Franchise Tax Board and is responsible for coordinating the resolution of taxpayer complaints and problems. If you have been unable to resolve your problems with us through normal channels, you can contact the Taxpayer Advocate Bureau. If a tax problem is causing or will cause you an irreparable loss, the advocate can arrange for a review of the case and, if appropriate, postpone enforcement action while the case is under review. You can contact the Taxpayer Advocate by: Mail: TAXPAYER ADVOCATE BUREAU PO BOX 157 RANCHO CORDOVA CA 95741-0157
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Telephone: (800) 883-5910 FAX: (916) 845-6614 Website: www.ftb.ca.gov
PART II
TAXPAYER EDUCATION
Revenue & Taxation Code
¶2 ¶3 ¶4 ¶5
Public Education Program . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Annual Report to the Legislature . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Annual Hearing Conducted by the Franchise Tax Board . . . . . . . . . . . . . . . Explanation of Taxpayers’ Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
21005 21006(a) 21006(b)(2) 21007
¶2
Public Education Program
R&TC Section 21005
e must develop and implement a program to inform you of the most common mistakes made when preparing tax returns and how to avoid these errors. We enhanced our ongoing public education program in response to the Taxpayers’ Bill of Rights. You can obtain help in avoiding the most common errors through information contained in the tax booklets, statewide press releases and educational programs such as Speakers’ Bureau, Volunteer Income Tax Assistance, and small business conferences. We also produce Tax News, a bi-monthly newsletter that gives tax practitioners information about errors made on returns, new laws, state income tax policies and procedures, and other information of interest to tax professionals. We charge $12 for an annual subscription to Tax News. The newsletter is available free on the Internet. We also have a service called Tax e-News, which provides educational information and hot news items to online subscribers.
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Taxpayers can get assistance by calling (800) 852-5711 (or, outside the U.S., call (916) 845-6500). Persons with hearing or speech impairments please call: TTY/TDD (800) 822-6268. Tax practitioners can call our Tax Practitioners’ Support Unit at (916) 845-7057. This unit works with the tax practitioner to resolve individual state income tax problems and to answer tax law questions. In addition, on our Website at www.ftb.ca.gov, taxpayers and tax practitioners can access or download press releases, frequently asked questions, tax forms, publications, and search the site for specific information using keywords.
¶3
Annual Report to the Legislature
R&TC Section 21006(a)
y October 1 of each year, we must submit to the Legislature an annual report that identifies recurrent taxpayer non-compliance issues. Part I of the report shows the volume of assessments for both personal income taxes and bank and corporation taxes indicated in sample data from the audit process. Part II shows taxpayer errors we detected during initial processing of the previous year’s tax returns. The report also outlines our strategies to improve compliance through changes in the law, improved training of our staff, enhanced communications with taxpayers and tax practitioners, and increased enforcement capabilities.
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¶4
Annual Hearing Conducted by the Franchise Tax Board
R&TC Section 21006(b)(2)
e must conduct an annual hearing where individual taxpayers and industry representatives may present proposals to clarify the California Revenue and Taxation Code. Proposals presented by the public generally fall into two categories: (1) changes to the Revenue and Taxation Code and (2) changes to administrative procedures. Our staff then prepares analyses of the proposed changes to the tax code and presents them to the three-member Franchise Tax Board at a subsequent meeting. The Board members decide whether to support the proposals as potential legislative changes. We also analyze administrative proposals. Once the analyses are complete, our staff typically contacts the presenters regarding the feasibility of implementing the proposals.
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¶5
Explanation of Taxpayers’ Rights
R&TC Section 21007
e must inform you, in simple, nontechnical language, of procedures and your remedies and rights during audit, appeal, and collection proceedings. We must include information regarding taxpayers’ rights in tax booklets. You can receive information about your rights as a taxpayer, how to protest/appeal, and how to contact the taxpayer advocate at various stages of the audit and/or collection process. These stages include the initial notice of audit, the notice of proposed additional tax, and all collection notices. We present this information in our brochures California Taxpayers' Bill of Rights (FTB 4058), California Taxpayers' Bill of Rights 2 (FTB 4063), and Highlights of California Taxpayers' Bill of Rights Act of 1999 (FTB 4064). You can request the brochures from: TAX FORMS REQUEST UNIT PO BOX 307 RANCHO CORDOVA CA 95741-0307 Our Website at: www.ftb.ca.gov
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PART III
EVALUATING FTB EMPLOYEES
Revenue & Taxation Code
¶6 ¶7
Prohibition of Employee Evaluation Based Upon Revenue Generated . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21008 Evaluation of Employees Based Upon Public Contact . . . . . . . . . . . . . . . . 21009
¶6
Prohibition of Employee Evaluation Based Upon Revenue Generated
R&TC Section 21008
he law prohibits us from evaluating employees based upon the revenue they produce through additional tax assessments or collections. We must annually submit a letter to the Legislature certifying that we did not evaluate employees based on revenue generated. Our management issued a policy statement to audit and collection employees reinforcing the prohibition of evaluating employees based on revenue produced. In addition, we excluded from department reports all references to amounts assessed or collected by individuals.
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¶7
Evaluation of Employees Based Upon Public Contact
R&TC Section 21009
e must develop and implement a program to evaluate an employee’s performance based on taxpayer contact. In response to this provision, our mission and values statements emphasize customer service, quality, and communication as specific goals for employee behavior. We stress the importance of these mission and values statements with all our employees. We created an employee evaluation form that reflects our mission and values statements. We evaluate candidates taking competitive exams administered by our department on their knowledge of and commitment to these values.
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PART IV
JOINT RETURNS
Revenue & Taxation Code
¶8
Joint Return Filed After Separate Return . . . . . . . . . . . . . . . . . . . . . . . . . . . 18522
¶8
Joint Return Filed After Separate Return
R&TC Section 18522
ou may discover after you file your tax return using the separate filing status, that it would be to your advantage to file jointly with your spouse. For tax years after 1996, under certain conditions, you can file an amended joint tax return even though you have not paid the full tax liability reflected on the separate return.
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PART V
INFORMATION RETURNS
Revenue & Taxation Code
¶9 ¶10
Phone Number on Information Returns . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18640 & 18648 Reasonable Examination of Information Returns . . . . . . . . . . . . . . . . . . . . 21024
¶9
Phone Number on Information Returns
R&TC Sections 18640 & 18648
e receive income information from third parties, such as payers of wages, interest, or dividends. We use this information to verify income and wage information you report on your income tax return. Third parties must now include their name, address, and telephone number when submitting information about you. As a result, you have direct access to individuals who submitted information to us, making it easier to resolve questions you may have about the data these sources sent to us.
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¶10
Reasonable Examination of Information Returns
R&TC Section 21024
f you file an appeal because you disagree with information provided to us by a third party, and you have fully cooperated with us in a reasonable attempt to resolve the discrepancy, we must prove that the tax we assessed is correct.
PART VI
COLLECTION PROCEDURES
Revenue & Taxation Code
¶11 ¶12 ¶13 ¶14 ¶15 ¶16 ¶17 ¶18 ¶19 ¶20 ¶21 ¶22
Waiver of Early-Withdrawal Penalties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17085.7 Employee Relief/Unremitted Withholdings . . . . . . . . . . . . . . . . . . . . . . . . . . 18673 Installment Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19008 Approval of Jeopardy Assessments and Termination Assessments . . . . . . 19084 Action for Release of Third-Party Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19226 Procedures for Seizure of Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19236 Procedures for Seizure of Residences or Businesses . . . . . . . . . . . . . . . . 19236 Offers in Compromise . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19443 Release of Seized Property/Wages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21016 Exemptions From Levy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21017 Release of Erroneous Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21019 Disclosure of Collection Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21023
¶11
Waiver of Early-Withdrawal Penalties
R&TC Section 17085.7
fter January 2000, if you become subject to an early withdrawal penalty because we take money from your retirement plan (including individual retirement accounts) to collect on your delinquent taxes, we will not assess an early withdrawal penalty for California purposes.
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¶12
Employee Relief/Unremitted Withholdings
R&TC Section 18673
e may order your employer to withhold and send us a portion of your wage to pay your delinquent taxes. If your employer withholds the amount we order but does not send it to us, the employer may be liable for the ordered amount, plus interest.
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¶13
Installment Agreements
R&TC Section 19008
f you cannot pay your tax liability in full, you may be eligible to make installment payments. When you enter into a payment arrangement with us, you must agree to file all required tax returns and pay all subsequent taxes promptly. If you break the arrangement, or if we do not mutually agree to a change in the arrangement, we will send you a notice 30 days before we terminate it. The notice will tell you that we are terminating the arrangement and the reason why. If we do not accept your offer of a payment arrangement, you can request that we review your offer and our denial of it. We cannot take collection action against you during this review process.
¶14
Approval of Jeopardy Assessments and Termination Assessments
R&TC Section 19084
f we issue a tax assessment because we believe collection of the tax is in jeopardy, our chief counsel or chief counsel’s delegate must approve the assessment.
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¶15
Action for Release of Third-Party Liens
R&TC Section 19226
f we attach your property through a lien because of someone else’s tax debt, you may obtain a release of that lien by posting a cash deposit or bond equal to the value of the interest we have in the property. Then, we will review the property value determination, and based on the results, we will either refund the bond or deposit to you or apply it to the other person’s debt.
¶16
Procedures for Seizure of Property
R&TC Section 19236
efore we can seize and sell your property to collect on your delinquent taxes, we must do all the following: • Verify your liability. • Determine whether we can use alternative collection methods. • Determine whether the proceeds from selling your property will reduce your tax debt.
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¶17
Procedures for Seizure of Residences or Businesses
R&TC Section 19236
e generally cannot sell your residential property if you owe $5,000 or less in delinquent taxes. In addition, we cannot sell your business property without getting approval from our assistant executive officer or assistant executive officer’s delegate. We cannot sell your personal residence without a court order.
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¶18
Offers in Compromise
R&TC Section 19443
f you cannot pay your tax liability in full and have exhausted all payment options, you can submit to us your best offer to pay. If you meet certain requirements and we agree to the amount you offer, we may reduce your liability to that amount.
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¶19
Release of Seized Property/Wages
R&TC Section 21016
f we issue a levy or file a lien in error, we must correct it. We are in error if we issue the levy or file the lien prematurely and do not follow our administrative procedures. We are also in error if you have an installment agreement in good standing with FTB to satisfy the tax liability for which we are issuing the levy or filing the lien, unless the levy is allowed by agreement. Under these circumstances, we will return your property if we have taken it. If we have filed a lien, we will send a copy of the notice of withdrawal to you. You can request that we send a notice of release to specified third parties. If we ordered your employer to withhold your earnings in order to pay delinquent taxes and we then find that your liability is not collectible, we must notify your employer to stop withholding your earnings.
¶20
Exemptions From Levy
R&TC Section 21017
e must adjust your exemptions from levy to reflect changes in the California Consumer Price Index whenever the change is more than 5 percent higher than the previous adjustment. FTB monitors the index and adjusts exemption amounts when appropriate to reflect any changes in it.
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¶21
Release of Erroneous Liens
R&TC Section 21019
f we file or record a lien in violation of our administrative procedures or in violation of the terms of a payment arrangement, we must release the lien as though we filed or recorded it in error. At least 30 days prior to recording or filing a tax lien, we must mail you a notice stating by what authority we are filing the lien, and what procedures are available to you to prevent us from filing it. The 30-day notice provision is not applicable where the collection of tax is determined to be in jeopardy. Generally, we have no more than 7 working days after the determination that we filed the lien in error to mail a release of the erroneous lien. We must send you a copy of the release, and if you request it, we will also mail a copy to the major credit reporting companies in the county where we filed the lien.
¶22
Disclosure of Collection Information
R&TC Section 21023
e keep confidential the information you provide us on your state income tax returns and the amounts you owe us. If, however, you are no longer married or living with your spouse and you previously filed a joint return with an amount due, we can tell you whether we have tried to collect from your spouse, the general nature of the collection activities and the amount we have collected.
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PART VII
INTEREST
Revenue & Taxation Code
¶23 ¶24 ¶25
Extension of Interest-Free Period
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19049, 19132, 19280 & 19290 Abatement of Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19104 Abatement of Interest/Disaster Areas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19109
¶23
Extension of Interest-Free Period
R&TC Sections 19049, 19132, 19280 & 19290
hen you receive a bill from us, you have 15 days to pay the amount due without accruing additional interest or an underpayment penalty.
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¶24
Abatement of Interest
R&TC Section 19104
e may cancel interest you owe if you can show that an unnecessary delay in our processing caused the interest or a delay in your payment. We may also cancel interest if you can show the interest accrued because we made an unreasonable error in performing certain kinds of acts. If we deny your request, you have the right to appeal our action.
¶25
Abatement of Interest/Disaster Areas
R&TC Section 19109
f you live in a presidentially declared disaster area or a California county or city which the Governor declares a disaster area, we may not require you to pay interest on a late tax return. To qualify, you must have suffered a disaster loss, and we must extend the due date for filing your return and paying your income tax.
PART VIII
REIMBURSEMENTS AND AWARDS
Revenue & Taxation Code
¶26 ¶27 ¶28 ¶29 ¶30
Recovery of Litigation Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19717 Reimbursement of Fees/Expenses Related to State Board of Equalization Appeals . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21013 Erroneous Levy, Erroneous Processing Action, or Erroneous Collection Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21018 Court Action Against the State . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21021 Intentional Enticement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21022
¶26
Recovery of Litigation Costs
R&TC Section 19717
f you win an action regarding your tax liability filed in a California court, you may have a right to reimbursement of reasonable litigation costs if we cannot substantially justify our position. Before you can request reimbursement, you must first exhaust all administrative remedies available to you.
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¶27
Reimbursement of Fees/Expenses Related to State Board of Equalization Appeals
R&TC Section 21013
f you appeal to the State Board of Equalization, you may have a right to reimbursement of reasonable fees and expenses if we cannot substantially justify our position. This applies to fees incurred from the date of the notice of proposed assessment or denial of a claim for refund.
¶28
Erroneous Levy, Erroneous Processing Action, or Erroneous Collection Action
R&TC Section 21018
e may reimburse you for charges you paid which were imposed by unrelated third-party businesses because of our erroneous levy, erroneous processing action, or erroneous collection action. You must meet the following criteria for reimbursement: • The erroneous levy, erroneous processing action, or erroneous collection action was caused by our error. • You responded to all our contacts before the erroneous levy, erroneous processing action, or erroneous collection action. • The unrelated third-party has not waived or reimbursed the charge. Reimbursed charges and fees would be limited to the usual and customary charges and fees imposed by the third-party in the ordinary course of business. Claims for reimbursement of these third-party fees must be made within 90 days from the date of the erroneous levy, erroneous processing action, or erroneous collection action.
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¶29
Court Action Against the State
R&TC Section 21021
ou can bring a court action against the State of California for damages if aggrieved by our employee’s reckless disregard of published procedures. The court may award actual and direct damages you sustained, as well as reasonable litigation costs except for losses caused by your own negligence or omission. However, if the court determines your action to be frivolous, it may impose a penalty up to $10,000.
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¶30
Intentional Enticement
R&TC Section 21022
ou can sue the state for damages and costs up to $500,000 if our staff intentionally entices your representative to provide information regarding your account in exchange for settling or compromising your representative’s tax.
PART IX
NOTICES TO TAXPAYERS
Revenue & Taxation Code
¶31 ¶32 ¶33 ¶34 ¶35 ¶36 ¶37 ¶38 ¶39
Notice to Include Deadlines . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19034, 19041 & 19045 Suspension of Interest/Fail to Notify . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19116 Notice of Interest Charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19117 Procedures for Imposing Penalties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19187 Explanation of Refund Disallowance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19323 Notice of Contact of Third Parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19504.7 Notification to Corporations Prior to Suspension . . . . . . . . . . . . . . . . . . . . . 21020 Unassociated Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21025 Annual Notice to Taxpayers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21026
¶31
Notice to Include Deadlines
R&TC Sections 19034, 19041& 19045
e must tell you the last date by which you can protest or appeal certain notices. We consider your protest or appeal to be timely if you file by that date.
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¶32
Suspension of Interest/Fail to Notify
R&TC Section 19116
e must send you a notice when we believe your individual tax return is not correct. The notice states your tax liability and the basis for that liability. If your return was timely filed, and if we do not send you a notice within 18 months of the date you filed your return or the date your return was due (whichever is later) we must suspend interest and certain penalties. The period of suspension begins at the end of the 18 months and ends after we provide you with a notice. Special rules apply if the Internal Revenue Service changes your tax liability.
¶33
Notice of Interest Charges
R&TC Section 19117
fter December 31, 2001, if you receive a notice from us that states an amount of interest that you must pay, the notice must include the section of law under which we imposed the interest and a description of how we computed the interest. Also, if you request it, we will provide you with the computation of the interest.
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¶34
Procedures for Imposing Penalties
R&TC Section 19187
fter December 31, 2001, if you receive a notice from us that imposes a penalty, the notice must include the name of the penalty, the section of law under which we imposed the penalty and a description of the penalty computation. Also, if you request it, we will provide you with a computation of the penalty.
¶35
Explanation of Refund Disallowance
R&TC Section 19323
fter April 7, 2000, if you file a claim for refund and we do not allow that refund, we must tell you the specific reason why we denied it.
¶36
Notice of Contact of Third Parties
R&TC Section 19504.7
e must send you a notice if we believe we may contact other people about your taxes. This first notice allows us to make contact with a third party for a 12-month period. If we wish to make contacts after that 12-month period, we will issue you another notice. If you ask, we will provide you with a record of the contacts. This notification does not apply to contacts you authorize.
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¶37
Notification to Corporations Prior to Suspension
R&TC Section 21020
t least 60 days prior to suspending a corporation, we must mail a notice (Final Notice Before Suspension/Forfeiture, FTB 4974) to that corporation stating the specific code section under which the suspension will occur and the date on which the suspension will take place.
¶38
Unassociated Payments
R&TC Section 21025
hen you send us a payment, you should also send the document that shows us where you want us to apply the payment. If we cannot associate your payment with your account, we must make a reasonable attempt to notify you within 60 days of our receipt of your payment.
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¶39
Annual Notice to Taxpayers
R&TC Section 21026
here is no statute of limitations on collecting delinquent accounts. As part of our automated billing cycle, we routinely send a series of notices that can include notices of taxes due, tax liens, and tax levies if you have an outstanding delinquent account. We must notify you at least once a year of any delinquent balance that you may owe.
PART X
AMENDED RETURN CLAIMS FOR REFUND, PROTESTS AND APPEALS
Revenue & Taxation Code
¶40 ¶41
Plan to Reduce Time Required for Amended Return Claims for Refund, Protests, and Appeals . . . . . . . . . . . . . . . . . . . . . . . . 21010 Protest Hearings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21011
¶40
Plan to Reduce Time Required for Amended Return Claims for Refund, Protests, and Appeals
R&TC Section 21010
he law required us to develop a plan by July 1, 1989, to reduce the time required to resolve protests, appeals, and amended return claims for refund. Our staff met with representatives from the California CPA Society, California Society of Enrolled Agents, State Bar of California, and other interested parties in February 1989 to present the plan mandated by legislation. We detailed time frames for various workloads in the plan, depending upon the category of the case and whether or not it required field audit involvement. We continue to emphasize resolution of issues at the audit level and try to achieve the goals specified in the plan.
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¶41
Protest Hearings
R&TC Section 21011
T
1) 2) 3)
he tax code mandates that:
We hold hearings at a reasonable time in a district office convenient to you whenever possible. We may record the hearing, but only if we give you prior notice. We will inform you prior to hearings that you have a right to representation at the hearing.
PART XI
WRITTEN ADVICE
¶42
Revenue & Taxation Code Section 21012
our reliance on erroneous written advice from us may, in some cases, cause us to cancel penalties and interest. In some cases, tax may be cancelled if the advice is requested and received prior to taking the contemplated action. Requests for written advice must include the name of the taxpayer and an identification number (social security number, corporation number, or federal employer identification number). We also require a complete statement of all the facts regarding the transaction or activity. Taxpayers or their tax representatives requesting written advice on behalf of a client must include a legal analysis and cite the authority for their position. We will not issue written advice under certain conditions. These include: • Sections of law where state and federal law are the same. • Questions of fact (residency, unity). • Issues that are currently in audit, protest, appeal, settlement, or litigation. Refer to Franchise Tax Board Chief Counsel Rulings Guidelines (FTB Notice 89-277) for more detail on how we provide written advice to taxpayers. You can obtain FTB Notice 89-277 by writing to the address listed below: REQUEST FOR WRITTEN ADVICE FRANCHISE TAX BOARD PO BOX 1720 RANCHO CORDOVA CA 95741-1720 The request should specify: “Taxpayers’ Bill of Rights - Request for Written Advice.”
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PART XII
MISCELLANEOUS PROVISIONS
Revenue & Taxation Code
¶43 ¶44 ¶45 ¶46 ¶47 ¶48 ¶49 ¶50 ¶51 ¶52 ¶53 ¶54
Innocent Spouse Relief . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18533,18534 & 19006 Identification of Return Preparer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18624 Taxpayer Motion to Quash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19064 Extension of Statute of Limitations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19067 Application of Regulations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19503 Financial Status Audits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19504 Software Trade Secrets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19504.5 & 19542.3 Whistleblower Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19546.5 Prohibition of Non-Tax Investigations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21014 Waiver of Specific Penalties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21015 Private Delivery Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21027 Privileged Taxpayer Communications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21028
¶43
Innocent Spouse Relief
R&TC Section 18533, 18534 & 19006
f your spouse underreported the amount of tax due on your jointly filed return, and you had no knowledge of the underreporting, we may not hold you responsible for payment of the deficiency. If you are no longer married to, are legally separated from or have been living apart from your spouse for at least 12 months, you may be able to limit your liability on a deficiency from a jointly filed return by electing separate liability. If you did not file a joint return with your spouse, and you received an assessment of tax on community income, we may not hold you responsible for the liability. If you have received a court ordered dissolution of marriage, we may not hold you responsible for payment of a deficiency or self-assessed liability resulting from a jointly filed return.
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¶44
Identification of Return Preparer
R&TC Section 18624
ax preparers must provide an identifying number when they prepare tax returns. When preparing a state return, preparers can now use the number they use on the federal return.
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¶45
Taxpayer Motion to Quash
R&TC Section 19064
o obtain taxpayer information, we may issue subpoenas to any person. If we subpoena you relating to your tax assessment and you file a motion to quash/stop the subpoena, certain statutes of limitations will not run while determination on the motion is pending. If we are unable to resolve an issue regarding a specific subpoena, we will suspend certain statutes of limitations relating to your tax matter from six months after the subpoena was served until the final resolution of the response to the subpoena.
¶46
Extension of Statute of Limitations
R&TC Section 19067
fter January 1, 2001, if we ask you to give us more than four years from the date of your tax return to assess additional tax, we must notify you of your right to refuse to extend, or your right to limit the extension to a particular time period.
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¶47
Application of Regulations
R&TC Section 19503
his section generally provides that for California laws enacted on or after January 1, 1998, regulations relating to those laws can apply retroactively only if we issue the regulation within 24 months of the date of enactment. For California laws enacting federal conformity on or after January 1, 1998, our regulation can apply retroactively only if we issue a regulation within 24 months of the publication date of a federal temporary or final regulation under a federal statute to which California conformed. The California Administrative Procedures Act governs our regulation process. As such, we must provide notice to the public of our intent to issue a particular regulation and provide a public hearing. Under our practice, before public notification under the Act, our staff conducts symposiums with affected industries to resolve controversial issues and bring matters of proposed regulation to the three-member Franchise Tax Board. Under the Administrative Procedures Act, the Office of Administrative Law reviews and approves our regulations. The Office of Administrative Law approves our regulations and files them with the Secretary of State. They are effective 30 days thereafter. We apply regulations, as well as rulings, retroactively for statutes enacted to January 1, 1998, unless we prescribe otherwise.
¶48
Financial Status Audits
R&TC Section 19504
hen auditing your tax return to determine if you have unreported income, we generally cannot ask questions that focus on your lifestyle, living standard, or other items unrelated to the preparation of your tax return.
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¶49
Software Trade Secrets
R&TC Sections 19504.5 & 19542.3
e cannot issue a subpoena in a civil action to produce or analyze any tax-related computer software source code unless we satisfy certain requirements. In addition, we provide safeguards to prevent improper disclosure by us of trade secrets or other confidential information with respect to any software that comes into our possession or control in connection with a tax return examination.
¶50
Whistleblower Disclosure
R&TC Section 19546.5
here is a California legislative committee to which any employee of ours who has access to income tax returns or return information can report possible misconduct or taxpayer abuse. Federal laws prohibit disclosure of information about federal tax forms.
¶51
Prohibition of Non-Tax Investigations
R&TC Section 21014
he law prohibits us from knowingly authorizing or conducting any investigation or surveillance for non-tax administration purposes except with respect to carrying out our statutory duties.
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¶52
Waiver of Specific Penalties
R&TC Section 21015
e have discretionary authority to either refrain from imposing or waive penalties authorized under section 19011 (Electronic Funds Transfer penalty), or subdivision (a) of section 19141.5 (IRS Form 5472/Record Maintenance penalty). We may use this authority only if your noncompliance did not jeopardize the best interests of the state and is not due to your willful neglect or intent not to comply. This section, effective January 1, 1996, applies only to Electronic Funds Transfer and IRS Form 5472/Record Maintenance penalties imposed after January 1, 1995.
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¶53
Private Delivery Services
R&TC Section 21027
e must treat items delivered by a private service, designated by the Secretary of the Treasury, as though you mailed them with the United States Postal Service. This means that we treat the dates recorded or marked on the items by a designated delivery service the same as postmarks by the U. S. Postal Service.
¶54
Privileged Taxpayer Communications
R&TC Section 21028
ou are entitled to the same protections of confidentiality for communication regarding tax advice you receive by any federally authorized tax practitioner that apply to privileged communication between a client and an attorney. The privilege would apply in any non-criminal tax matter before us and does not apply to written communications related to tax shelters.
FTB 4058 C (REV 04-2006)
he purpose of the Franchise Tax Board is to collect the proper amount of tax revenue, and operate other programs entrusted to us, at the least cost; serve the public by continually improving the quality of our products and services, and perform in a manner warranting the highest degree of public confidence in our integrity, efficiency and fairness.
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STATEMENT OF PRINCIPLES OF TAX ADMINISTRATION
he primary function of the Franchise Tax Board is to administer the Revenue and Taxation Code. Tax policy for raising revenue is determined by elected officials. With this in mind, it is the duty of the Franchise Tax Board to carry out that policy by correctly applying the laws enacted by the Legislature, to determine the reasonable meaning of various Code provisions in light of the legislative purpose in enacting them; and to perform this work in a fair and impartial manner, with neither a government nor a taxpayer point of view. At the heart of administration is interpretation of the Code. It is the responsibility of each person in the Franchise Tax Board, charged with the duty of interpreting the law, to try to find the true meaning of the statutory provision and not to adopt a strained construction in the belief that he or she is “protecting the revenue.” The revenue is properly protected only when the true meaning of the statute is ascertained and applied. The Franchise Tax Board also has the responsibility of applying and administering the law in a reasonable, practical manner. Issues should only be raised when they have merit, never arbitrarily or for trading purposes. At the same time, employees should never hesitate to raise a meritorious issue. It is also important that care be exercised not to raise an issue or to ask a court to adopt a position inconsistent with an established Franchise Tax Board position. Administration should be both reasonable and vigorous. It should be conducted with as little delay as possible and with great courtesy and considerateness. It should never try to overreach, and should be reasonable within the bounds of law and sound administration. It should however, be vigorous in requiring compliance with law and it should be relentless in its attack on unreal tax devices and fraud.
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CALIFORNIA TAXPAYERS’ BILL OF RIGHTS
A COMPREHENSIVE GUIDE
CALIFORNIA FRANCHISE TAX BOARD
INTRODUCTION
he California Taxpayers’ Bill of Rights (Stats. 88, Ch. 1573) became law in 1988. This law codified many existing Franchise Tax Board procedures, established a Taxpayer Advocate, and clarified your rights as a California taxpayer and our obligations to you. On July 30, 1996, the federal Taxpayer Bill of Rights 2 (P.L.104-168) was passed, followed a few months later by, California’s Taxpayers’ Rights Conformity Legislation (Stats. 97, Ch. 600). California law contains numerous provisions that increase protection of taxpayers’ rights, including the most recently legislated Taxpayers’ Bill of Rights Act of 1999. This guide provides a general overview of the provisions contained in all of the Taxpayers’ Bill of Rights legislation to date. Each topic references a particular section of the Revenue and Taxation Code. We hope the information in this guide will give you a better understanding of our Taxpayers’ Bill of Rights legislation.
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CONTENTS
PART I PART II THE TAXPAYER ADVOCATE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¶ 1 TAXPAYER EDUCATION
Public Education Program . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Annual Report to the Legislature . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Annual Hearing Conducted by the Franchise Tax Board . . . . . . . . . . . . . . . . . . . . . . Explanation of Taxpayers’ Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¶2 ¶3 ¶4 ¶5
PART III
EVALUATING FTB EMPLOYEES
Prohibition of Employee Evaluation Based Upon Revenue Generated . . . . . . . . . . . ¶6 Evaluation of Employees Based Upon Public Contact . . . . . . . . . . . . . . . . . . . . . . . . ¶7
PART IV PART V
JOINT RETURNS
Joint Return Filed After Separate Return . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¶8
INFORMATION RETURNS
Phone Number on Information Returns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¶9 Reasonable Examination of Information Returns . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¶10
PART VI
COLLECTION PROCEDURES
Waiver of Early-Withdrawal Penalties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Employee Relief/Unremitted Withholdings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Installment Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Approval of Jeopardy Assessments and Termination Assessments . . . . . . . . . . . . . . Action for Release of Third-Party Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Procedures for Seizure of Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Procedures for Seizure of Residences or Businesses . . . . . . . . . . . . . . . . . . . . . . . . Offers in Compromise . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Release of Seized Property/Wages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Exemptions From Levy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Release of Erroneous Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Disclosure of Collection Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¶11 ¶12 ¶13 ¶14 ¶15 ¶16 ¶17 ¶18 ¶19 ¶20 ¶21 ¶22
PART VII
INTEREST
Extension of Interest-Free Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¶23 Abatement of Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¶24 Abatement of Interest/Disaster Areas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¶25
PART VIII
REIMBURSEMENT AND AWARDS
Recovery of Litigation Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Reimbursement of Fees/Expenses Related to State Board of Equalization Appeals . Erroneous Levy, Erroneous Processing Action, or Erroneous Collection Action . . . . . . Court Action Against the State . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Intentional Enticement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¶26 ¶27 ¶28 ¶29 ¶30
CONTENTS
PART IX NOTICES TO TAXPAYERS
Notice to Include Deadlines . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¶31 Suspension of Interest/Fail to Notify . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¶32 Notice of Interest Charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¶33 Procedures for Imposing Penalties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¶34 Explanation of Refund Disallowance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¶35 Notice of Contact of Third Parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¶36 Notification to Corporations Prior to Suspension . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¶37 Unassociated Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¶38 Annual Notice to Taxpayers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¶39
PART X
AMENDED RETURN CLAIMS FOR REFUND, PROTESTS AND APPEALS
Plan to Reduce Time Required for Amended Return Claims for Refund, Protests, and Appeals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¶40 Protest Hearings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¶41
PART XI PART XII
WRITTEN ADVICE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¶42 MISCELLANEOUS PROVISIONS
Innocent Spouse Relief . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¶43 Identification of Return Preparer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¶44 Taxpayer Motion to Quash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¶45 Extension of Statute of Limitations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¶46 Application of Regulations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¶47 Financial Status Audits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¶48 Software Trade Secrets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¶49 Whistleblower Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¶50 Prohibition of Non-Tax Investigations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¶51 Waiver of Specific Penalties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¶52 Private Delivery Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¶53 Privileged Taxpayer Communications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¶54
PART I
THE TAXPAYER ADVOCATE
¶1 Revenue and Taxation Code Section 21004
he Taxpayer Advocate reports directly to the Executive Officer of the Franchise Tax Board and is responsible for coordinating the resolution of taxpayer complaints and problems. If you have been unable to resolve your problems with us through normal channels, you can contact the Taxpayer Advocate Bureau. If a tax problem is causing or will cause you an irreparable loss, the advocate can arrange for a review of the case and, if appropriate, postpone enforcement action while the case is under review. You can contact the Taxpayer Advocate by: Mail: TAXPAYER ADVOCATE BUREAU PO BOX 157 RANCHO CORDOVA CA 95741-0157
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Telephone: (800) 883-5910 FAX: (916) 845-6614 Website: www.ftb.ca.gov
PART II
TAXPAYER EDUCATION
Revenue & Taxation Code
¶2 ¶3 ¶4 ¶5
Public Education Program . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Annual Report to the Legislature . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Annual Hearing Conducted by the Franchise Tax Board . . . . . . . . . . . . . . . Explanation of Taxpayers’ Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
21005 21006(a) 21006(b)(2) 21007
¶2
Public Education Program
R&TC Section 21005
e must develop and implement a program to inform you of the most common mistakes made when preparing tax returns and how to avoid these errors. We enhanced our ongoing public education program in response to the Taxpayers’ Bill of Rights. You can obtain help in avoiding the most common errors through information contained in the tax booklets, statewide press releases and educational programs such as Speakers’ Bureau, Volunteer Income Tax Assistance, and small business conferences. We also produce Tax News, a bi-monthly newsletter that gives tax practitioners information about errors made on returns, new laws, state income tax policies and procedures, and other information of interest to tax professionals. We charge $12 for an annual subscription to Tax News. The newsletter is available free on the Internet. We also have a service called Tax e-News, which provides educational information and hot news items to online subscribers.
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Taxpayers can get assistance by calling (800) 852-5711 (or, outside the U.S., call (916) 845-6500). Persons with hearing or speech impairments please call: TTY/TDD (800) 822-6268. Tax practitioners can call our Tax Practitioners’ Support Unit at (916) 845-7057. This unit works with the tax practitioner to resolve individual state income tax problems and to answer tax law questions. In addition, on our Website at www.ftb.ca.gov, taxpayers and tax practitioners can access or download press releases, frequently asked questions, tax forms, publications, and search the site for specific information using keywords.
¶3
Annual Report to the Legislature
R&TC Section 21006(a)
y October 1 of each year, we must submit to the Legislature an annual report that identifies recurrent taxpayer non-compliance issues. Part I of the report shows the volume of assessments for both personal income taxes and bank and corporation taxes indicated in sample data from the audit process. Part II shows taxpayer errors we detected during initial processing of the previous year’s tax returns. The report also outlines our strategies to improve compliance through changes in the law, improved training of our staff, enhanced communications with taxpayers and tax practitioners, and increased enforcement capabilities.
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¶4
Annual Hearing Conducted by the Franchise Tax Board
R&TC Section 21006(b)(2)
e must conduct an annual hearing where individual taxpayers and industry representatives may present proposals to clarify the California Revenue and Taxation Code. Proposals presented by the public generally fall into two categories: (1) changes to the Revenue and Taxation Code and (2) changes to administrative procedures. Our staff then prepares analyses of the proposed changes to the tax code and presents them to the three-member Franchise Tax Board at a subsequent meeting. The Board members decide whether to support the proposals as potential legislative changes. We also analyze administrative proposals. Once the analyses are complete, our staff typically contacts the presenters regarding the feasibility of implementing the proposals.
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¶5
Explanation of Taxpayers’ Rights
R&TC Section 21007
e must inform you, in simple, nontechnical language, of procedures and your remedies and rights during audit, appeal, and collection proceedings. We must include information regarding taxpayers’ rights in tax booklets. You can receive information about your rights as a taxpayer, how to protest/appeal, and how to contact the taxpayer advocate at various stages of the audit and/or collection process. These stages include the initial notice of audit, the notice of proposed additional tax, and all collection notices. We present this information in our brochures California Taxpayers' Bill of Rights (FTB 4058), California Taxpayers' Bill of Rights 2 (FTB 4063), and Highlights of California Taxpayers' Bill of Rights Act of 1999 (FTB 4064). You can request the brochures from: TAX FORMS REQUEST UNIT PO BOX 307 RANCHO CORDOVA CA 95741-0307 Our Website at: www.ftb.ca.gov
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PART III
EVALUATING FTB EMPLOYEES
Revenue & Taxation Code
¶6 ¶7
Prohibition of Employee Evaluation Based Upon Revenue Generated . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21008 Evaluation of Employees Based Upon Public Contact . . . . . . . . . . . . . . . . 21009
¶6
Prohibition of Employee Evaluation Based Upon Revenue Generated
R&TC Section 21008
he law prohibits us from evaluating employees based upon the revenue they produce through additional tax assessments or collections. We must annually submit a letter to the Legislature certifying that we did not evaluate employees based on revenue generated. Our management issued a policy statement to audit and collection employees reinforcing the prohibition of evaluating employees based on revenue produced. In addition, we excluded from department reports all references to amounts assessed or collected by individuals.
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¶7
Evaluation of Employees Based Upon Public Contact
R&TC Section 21009
e must develop and implement a program to evaluate an employee’s performance based on taxpayer contact. In response to this provision, our mission and values statements emphasize customer service, quality, and communication as specific goals for employee behavior. We stress the importance of these mission and values statements with all our employees. We created an employee evaluation form that reflects our mission and values statements. We evaluate candidates taking competitive exams administered by our department on their knowledge of and commitment to these values.
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PART IV
JOINT RETURNS
Revenue & Taxation Code
¶8
Joint Return Filed After Separate Return . . . . . . . . . . . . . . . . . . . . . . . . . . . 18522
¶8
Joint Return Filed After Separate Return
R&TC Section 18522
ou may discover after you file your tax return using the separate filing status, that it would be to your advantage to file jointly with your spouse. For tax years after 1996, under certain conditions, you can file an amended joint tax return even though you have not paid the full tax liability reflected on the separate return.
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PART V
INFORMATION RETURNS
Revenue & Taxation Code
¶9 ¶10
Phone Number on Information Returns . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18640 & 18648 Reasonable Examination of Information Returns . . . . . . . . . . . . . . . . . . . . 21024
¶9
Phone Number on Information Returns
R&TC Sections 18640 & 18648
e receive income information from third parties, such as payers of wages, interest, or dividends. We use this information to verify income and wage information you report on your income tax return. Third parties must now include their name, address, and telephone number when submitting information about you. As a result, you have direct access to individuals who submitted information to us, making it easier to resolve questions you may have about the data these sources sent to us.
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¶10
Reasonable Examination of Information Returns
R&TC Section 21024
f you file an appeal because you disagree with information provided to us by a third party, and you have fully cooperated with us in a reasonable attempt to resolve the discrepancy, we must prove that the tax we assessed is correct.
PART VI
COLLECTION PROCEDURES
Revenue & Taxation Code
¶11 ¶12 ¶13 ¶14 ¶15 ¶16 ¶17 ¶18 ¶19 ¶20 ¶21 ¶22
Waiver of Early-Withdrawal Penalties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17085.7 Employee Relief/Unremitted Withholdings . . . . . . . . . . . . . . . . . . . . . . . . . . 18673 Installment Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19008 Approval of Jeopardy Assessments and Termination Assessments . . . . . . 19084 Action for Release of Third-Party Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19226 Procedures for Seizure of Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19236 Procedures for Seizure of Residences or Businesses . . . . . . . . . . . . . . . . 19236 Offers in Compromise . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19443 Release of Seized Property/Wages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21016 Exemptions From Levy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21017 Release of Erroneous Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21019 Disclosure of Collection Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21023
¶11
Waiver of Early-Withdrawal Penalties
R&TC Section 17085.7
fter January 2000, if you become subject to an early withdrawal penalty because we take money from your retirement plan (including individual retirement accounts) to collect on your delinquent taxes, we will not assess an early withdrawal penalty for California purposes.
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¶12
Employee Relief/Unremitted Withholdings
R&TC Section 18673
e may order your employer to withhold and send us a portion of your wage to pay your delinquent taxes. If your employer withholds the amount we order but does not send it to us, the employer may be liable for the ordered amount, plus interest.
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¶13
Installment Agreements
R&TC Section 19008
f you cannot pay your tax liability in full, you may be eligible to make installment payments. When you enter into a payment arrangement with us, you must agree to file all required tax returns and pay all subsequent taxes promptly. If you break the arrangement, or if we do not mutually agree to a change in the arrangement, we will send you a notice 30 days before we terminate it. The notice will tell you that we are terminating the arrangement and the reason why. If we do not accept your offer of a payment arrangement, you can request that we review your offer and our denial of it. We cannot take collection action against you during this review process.
¶14
Approval of Jeopardy Assessments and Termination Assessments
R&TC Section 19084
f we issue a tax assessment because we believe collection of the tax is in jeopardy, our chief counsel or chief counsel’s delegate must approve the assessment.
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¶15
Action for Release of Third-Party Liens
R&TC Section 19226
f we attach your property through a lien because of someone else’s tax debt, you may obtain a release of that lien by posting a cash deposit or bond equal to the value of the interest we have in the property. Then, we will review the property value determination, and based on the results, we will either refund the bond or deposit to you or apply it to the other person’s debt.
¶16
Procedures for Seizure of Property
R&TC Section 19236
efore we can seize and sell your property to collect on your delinquent taxes, we must do all the following: • Verify your liability. • Determine whether we can use alternative collection methods. • Determine whether the proceeds from selling your property will reduce your tax debt.
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¶17
Procedures for Seizure of Residences or Businesses
R&TC Section 19236
e generally cannot sell your residential property if you owe $5,000 or less in delinquent taxes. In addition, we cannot sell your business property without getting approval from our assistant executive officer or assistant executive officer’s delegate. We cannot sell your personal residence without a court order.
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¶18
Offers in Compromise
R&TC Section 19443
f you cannot pay your tax liability in full and have exhausted all payment options, you can submit to us your best offer to pay. If you meet certain requirements and we agree to the amount you offer, we may reduce your liability to that amount.
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¶19
Release of Seized Property/Wages
R&TC Section 21016
f we issue a levy or file a lien in error, we must correct it. We are in error if we issue the levy or file the lien prematurely and do not follow our administrative procedures. We are also in error if you have an installment agreement in good standing with FTB to satisfy the tax liability for which we are issuing the levy or filing the lien, unless the levy is allowed by agreement. Under these circumstances, we will return your property if we have taken it. If we have filed a lien, we will send a copy of the notice of withdrawal to you. You can request that we send a notice of release to specified third parties. If we ordered your employer to withhold your earnings in order to pay delinquent taxes and we then find that your liability is not collectible, we must notify your employer to stop withholding your earnings.
¶20
Exemptions From Levy
R&TC Section 21017
e must adjust your exemptions from levy to reflect changes in the California Consumer Price Index whenever the change is more than 5 percent higher than the previous adjustment. FTB monitors the index and adjusts exemption amounts when appropriate to reflect any changes in it.
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¶21
Release of Erroneous Liens
R&TC Section 21019
f we file or record a lien in violation of our administrative procedures or in violation of the terms of a payment arrangement, we must release the lien as though we filed or recorded it in error. At least 30 days prior to recording or filing a tax lien, we must mail you a notice stating by what authority we are filing the lien, and what procedures are available to you to prevent us from filing it. The 30-day notice provision is not applicable where the collection of tax is determined to be in jeopardy. Generally, we have no more than 7 working days after the determination that we filed the lien in error to mail a release of the erroneous lien. We must send you a copy of the release, and if you request it, we will also mail a copy to the major credit reporting companies in the county where we filed the lien.
¶22
Disclosure of Collection Information
R&TC Section 21023
e keep confidential the information you provide us on your state income tax returns and the amounts you owe us. If, however, you are no longer married or living with your spouse and you previously filed a joint return with an amount due, we can tell you whether we have tried to collect from your spouse, the general nature of the collection activities and the amount we have collected.
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PART VII
INTEREST
Revenue & Taxation Code
¶23 ¶24 ¶25
Extension of Interest-Free Period
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19049, 19132, 19280 & 19290 Abatement of Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19104 Abatement of Interest/Disaster Areas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19109
¶23
Extension of Interest-Free Period
R&TC Sections 19049, 19132, 19280 & 19290
hen you receive a bill from us, you have 15 days to pay the amount due without accruing additional interest or an underpayment penalty.
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¶24
Abatement of Interest
R&TC Section 19104
e may cancel interest you owe if you can show that an unnecessary delay in our processing caused the interest or a delay in your payment. We may also cancel interest if you can show the interest accrued because we made an unreasonable error in performing certain kinds of acts. If we deny your request, you have the right to appeal our action.
¶25
Abatement of Interest/Disaster Areas
R&TC Section 19109
f you live in a presidentially declared disaster area or a California county or city which the Governor declares a disaster area, we may not require you to pay interest on a late tax return. To qualify, you must have suffered a disaster loss, and we must extend the due date for filing your return and paying your income tax.
PART VIII
REIMBURSEMENTS AND AWARDS
Revenue & Taxation Code
¶26 ¶27 ¶28 ¶29 ¶30
Recovery of Litigation Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19717 Reimbursement of Fees/Expenses Related to State Board of Equalization Appeals . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21013 Erroneous Levy, Erroneous Processing Action, or Erroneous Collection Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21018 Court Action Against the State . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21021 Intentional Enticement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21022
¶26
Recovery of Litigation Costs
R&TC Section 19717
f you win an action regarding your tax liability filed in a California court, you may have a right to reimbursement of reasonable litigation costs if we cannot substantially justify our position. Before you can request reimbursement, you must first exhaust all administrative remedies available to you.
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¶27
Reimbursement of Fees/Expenses Related to State Board of Equalization Appeals
R&TC Section 21013
f you appeal to the State Board of Equalization, you may have a right to reimbursement of reasonable fees and expenses if we cannot substantially justify our position. This applies to fees incurred from the date of the notice of proposed assessment or denial of a claim for refund.
¶28
Erroneous Levy, Erroneous Processing Action, or Erroneous Collection Action
R&TC Section 21018
e may reimburse you for charges you paid which were imposed by unrelated third-party businesses because of our erroneous levy, erroneous processing action, or erroneous collection action. You must meet the following criteria for reimbursement: • The erroneous levy, erroneous processing action, or erroneous collection action was caused by our error. • You responded to all our contacts before the erroneous levy, erroneous processing action, or erroneous collection action. • The unrelated third-party has not waived or reimbursed the charge. Reimbursed charges and fees would be limited to the usual and customary charges and fees imposed by the third-party in the ordinary course of business. Claims for reimbursement of these third-party fees must be made within 90 days from the date of the erroneous levy, erroneous processing action, or erroneous collection action.
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¶29
Court Action Against the State
R&TC Section 21021
ou can bring a court action against the State of California for damages if aggrieved by our employee’s reckless disregard of published procedures. The court may award actual and direct damages you sustained, as well as reasonable litigation costs except for losses caused by your own negligence or omission. However, if the court determines your action to be frivolous, it may impose a penalty up to $10,000.
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¶30
Intentional Enticement
R&TC Section 21022
ou can sue the state for damages and costs up to $500,000 if our staff intentionally entices your representative to provide information regarding your account in exchange for settling or compromising your representative’s tax.
PART IX
NOTICES TO TAXPAYERS
Revenue & Taxation Code
¶31 ¶32 ¶33 ¶34 ¶35 ¶36 ¶37 ¶38 ¶39
Notice to Include Deadlines . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19034, 19041 & 19045 Suspension of Interest/Fail to Notify . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19116 Notice of Interest Charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19117 Procedures for Imposing Penalties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19187 Explanation of Refund Disallowance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19323 Notice of Contact of Third Parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19504.7 Notification to Corporations Prior to Suspension . . . . . . . . . . . . . . . . . . . . . 21020 Unassociated Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21025 Annual Notice to Taxpayers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21026
¶31
Notice to Include Deadlines
R&TC Sections 19034, 19041& 19045
e must tell you the last date by which you can protest or appeal certain notices. We consider your protest or appeal to be timely if you file by that date.
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¶32
Suspension of Interest/Fail to Notify
R&TC Section 19116
e must send you a notice when we believe your individual tax return is not correct. The notice states your tax liability and the basis for that liability. If your return was timely filed, and if we do not send you a notice within 18 months of the date you filed your return or the date your return was due (whichever is later) we must suspend interest and certain penalties. The period of suspension begins at the end of the 18 months and ends after we provide you with a notice. Special rules apply if the Internal Revenue Service changes your tax liability.
¶33
Notice of Interest Charges
R&TC Section 19117
fter December 31, 2001, if you receive a notice from us that states an amount of interest that you must pay, the notice must include the section of law under which we imposed the interest and a description of how we computed the interest. Also, if you request it, we will provide you with the computation of the interest.
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¶34
Procedures for Imposing Penalties
R&TC Section 19187
fter December 31, 2001, if you receive a notice from us that imposes a penalty, the notice must include the name of the penalty, the section of law under which we imposed the penalty and a description of the penalty computation. Also, if you request it, we will provide you with a computation of the penalty.
¶35
Explanation of Refund Disallowance
R&TC Section 19323
fter April 7, 2000, if you file a claim for refund and we do not allow that refund, we must tell you the specific reason why we denied it.
¶36
Notice of Contact of Third Parties
R&TC Section 19504.7
e must send you a notice if we believe we may contact other people about your taxes. This first notice allows us to make contact with a third party for a 12-month period. If we wish to make contacts after that 12-month period, we will issue you another notice. If you ask, we will provide you with a record of the contacts. This notification does not apply to contacts you authorize.
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¶37
Notification to Corporations Prior to Suspension
R&TC Section 21020
t least 60 days prior to suspending a corporation, we must mail a notice (Final Notice Before Suspension/Forfeiture, FTB 4974) to that corporation stating the specific code section under which the suspension will occur and the date on which the suspension will take place.
¶38
Unassociated Payments
R&TC Section 21025
hen you send us a payment, you should also send the document that shows us where you want us to apply the payment. If we cannot associate your payment with your account, we must make a reasonable attempt to notify you within 60 days of our receipt of your payment.
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¶39
Annual Notice to Taxpayers
R&TC Section 21026
here is no statute of limitations on collecting delinquent accounts. As part of our automated billing cycle, we routinely send a series of notices that can include notices of taxes due, tax liens, and tax levies if you have an outstanding delinquent account. We must notify you at least once a year of any delinquent balance that you may owe.
PART X
AMENDED RETURN CLAIMS FOR REFUND, PROTESTS AND APPEALS
Revenue & Taxation Code
¶40 ¶41
Plan to Reduce Time Required for Amended Return Claims for Refund, Protests, and Appeals . . . . . . . . . . . . . . . . . . . . . . . . 21010 Protest Hearings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21011
¶40
Plan to Reduce Time Required for Amended Return Claims for Refund, Protests, and Appeals
R&TC Section 21010
he law required us to develop a plan by July 1, 1989, to reduce the time required to resolve protests, appeals, and amended return claims for refund. Our staff met with representatives from the California CPA Society, California Society of Enrolled Agents, State Bar of California, and other interested parties in February 1989 to present the plan mandated by legislation. We detailed time frames for various workloads in the plan, depending upon the category of the case and whether or not it required field audit involvement. We continue to emphasize resolution of issues at the audit level and try to achieve the goals specified in the plan.
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¶41
Protest Hearings
R&TC Section 21011
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1) 2) 3)
he tax code mandates that:
We hold hearings at a reasonable time in a district office convenient to you whenever possible. We may record the hearing, but only if we give you prior notice. We will inform you prior to hearings that you have a right to representation at the hearing.
PART XI
WRITTEN ADVICE
¶42
Revenue & Taxation Code Section 21012
our reliance on erroneous written advice from us may, in some cases, cause us to cancel penalties and interest. In some cases, tax may be cancelled if the advice is requested and received prior to taking the contemplated action. Requests for written advice must include the name of the taxpayer and an identification number (social security number, corporation number, or federal employer identification number). We also require a complete statement of all the facts regarding the transaction or activity. Taxpayers or their tax representatives requesting written advice on behalf of a client must include a legal analysis and cite the authority for their position. We will not issue written advice under certain conditions. These include: • Sections of law where state and federal law are the same. • Questions of fact (residency, unity). • Issues that are currently in audit, protest, appeal, settlement, or litigation. Refer to Franchise Tax Board Chief Counsel Rulings Guidelines (FTB Notice 89-277) for more detail on how we provide written advice to taxpayers. You can obtain FTB Notice 89-277 by writing to the address listed below: REQUEST FOR WRITTEN ADVICE FRANCHISE TAX BOARD PO BOX 1720 RANCHO CORDOVA CA 95741-1720 The request should specify: “Taxpayers’ Bill of Rights - Request for Written Advice.”
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PART XII
MISCELLANEOUS PROVISIONS
Revenue & Taxation Code
¶43 ¶44 ¶45 ¶46 ¶47 ¶48 ¶49 ¶50 ¶51 ¶52 ¶53 ¶54
Innocent Spouse Relief . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18533,18534 & 19006 Identification of Return Preparer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18624 Taxpayer Motion to Quash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19064 Extension of Statute of Limitations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19067 Application of Regulations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19503 Financial Status Audits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19504 Software Trade Secrets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19504.5 & 19542.3 Whistleblower Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19546.5 Prohibition of Non-Tax Investigations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21014 Waiver of Specific Penalties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21015 Private Delivery Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21027 Privileged Taxpayer Communications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21028
¶43
Innocent Spouse Relief
R&TC Section 18533, 18534 & 19006
f your spouse underreported the amount of tax due on your jointly filed return, and you had no knowledge of the underreporting, we may not hold you responsible for payment of the deficiency. If you are no longer married to, are legally separated from or have been living apart from your spouse for at least 12 months, you may be able to limit your liability on a deficiency from a jointly filed return by electing separate liability. If you did not file a joint return with your spouse, and you received an assessment of tax on community income, we may not hold you responsible for the liability. If you have received a court ordered dissolution of marriage, we may not hold you responsible for payment of a deficiency or self-assessed liability resulting from a jointly filed return.
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¶44
Identification of Return Preparer
R&TC Section 18624
ax preparers must provide an identifying number when they prepare tax returns. When preparing a state return, preparers can now use the number they use on the federal return.
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¶45
Taxpayer Motion to Quash
R&TC Section 19064
o obtain taxpayer information, we may issue subpoenas to any person. If we subpoena you relating to your tax assessment and you file a motion to quash/stop the subpoena, certain statutes of limitations will not run while determination on the motion is pending. If we are unable to resolve an issue regarding a specific subpoena, we will suspend certain statutes of limitations relating to your tax matter from six months after the subpoena was served until the final resolution of the response to the subpoena.
¶46
Extension of Statute of Limitations
R&TC Section 19067
fter January 1, 2001, if we ask you to give us more than four years from the date of your tax return to assess additional tax, we must notify you of your right to refuse to extend, or your right to limit the extension to a particular time period.
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¶47
Application of Regulations
R&TC Section 19503
his section generally provides that for California laws enacted on or after January 1, 1998, regulations relating to those laws can apply retroactively only if we issue the regulation within 24 months of the date of enactment. For California laws enacting federal conformity on or after January 1, 1998, our regulation can apply retroactively only if we issue a regulation within 24 months of the publication date of a federal temporary or final regulation under a federal statute to which California conformed. The California Administrative Procedures Act governs our regulation process. As such, we must provide notice to the public of our intent to issue a particular regulation and provide a public hearing. Under our practice, before public notification under the Act, our staff conducts symposiums with affected industries to resolve controversial issues and bring matters of proposed regulation to the three-member Franchise Tax Board. Under the Administrative Procedures Act, the Office of Administrative Law reviews and approves our regulations. The Office of Administrative Law approves our regulations and files them with the Secretary of State. They are effective 30 days thereafter. We apply regulations, as well as rulings, retroactively for statutes enacted to January 1, 1998, unless we prescribe otherwise.
¶48
Financial Status Audits
R&TC Section 19504
hen auditing your tax return to determine if you have unreported income, we generally cannot ask questions that focus on your lifestyle, living standard, or other items unrelated to the preparation of your tax return.
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¶49
Software Trade Secrets
R&TC Sections 19504.5 & 19542.3
e cannot issue a subpoena in a civil action to produce or analyze any tax-related computer software source code unless we satisfy certain requirements. In addition, we provide safeguards to prevent improper disclosure by us of trade secrets or other confidential information with respect to any software that comes into our possession or control in connection with a tax return examination.
¶50
Whistleblower Disclosure
R&TC Section 19546.5
here is a California legislative committee to which any employee of ours who has access to income tax returns or return information can report possible misconduct or taxpayer abuse. Federal laws prohibit disclosure of information about federal tax forms.
¶51
Prohibition of Non-Tax Investigations
R&TC Section 21014
he law prohibits us from knowingly authorizing or conducting any investigation or surveillance for non-tax administration purposes except with respect to carrying out our statutory duties.
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¶52
Waiver of Specific Penalties
R&TC Section 21015
e have discretionary authority to either refrain from imposing or waive penalties authorized under section 19011 (Electronic Funds Transfer penalty), or subdivision (a) of section 19141.5 (IRS Form 5472/Record Maintenance penalty). We may use this authority only if your noncompliance did not jeopardize the best interests of the state and is not due to your willful neglect or intent not to comply. This section, effective January 1, 1996, applies only to Electronic Funds Transfer and IRS Form 5472/Record Maintenance penalties imposed after January 1, 1995.
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¶53
Private Delivery Services
R&TC Section 21027
e must treat items delivered by a private service, designated by the Secretary of the Treasury, as though you mailed them with the United States Postal Service. This means that we treat the dates recorded or marked on the items by a designated delivery service the same as postmarks by the U. S. Postal Service.
¶54
Privileged Taxpayer Communications
R&TC Section 21028
ou are entitled to the same protections of confidentiality for communication regarding tax advice you receive by any federally authorized tax practitioner that apply to privileged communication between a client and an attorney. The privilege would apply in any non-criminal tax matter before us and does not apply to written communications related to tax shelters.
FTB 4058 C (REV 04-2006)
