PART 10.7. TAXPAYERS' BILL OF RIGHTS [21001 - 21028]
( Heading for Part 10.7 (as added by Stats. 1988, Ch. 1573) added by Stats. 1990, Ch. 216, Sec. 100. )
This part shall be known and may be cited as the “Katz-Harris Taxpayers’ Bill of Rights Act.”
(Added by Stats. 1988, Ch. 1573, Sec. 2.)
The Legislature finds and declares that taxes are the most sensitive point of contact between citizens and their government, and that there is a delicate balance between revenue collection and freedom from government oppression. It is the intent of the Legislature to place guarantees in California law to ensure that the rights, privacy, and property of California taxpayers are adequately protected during the process of the assessment and collection of taxes.
The Legislature further finds that the California tax system is
based largely on self-assessment, and the development of understandable tax laws and taxpayers informed of those laws will improve both self-assessment and the relationship between taxpayers and government. It is the further intent of the Legislature to promote improved taxpayer self-assessment by improving the clarity of tax laws and efforts to inform the public of the proper application of those laws.
The Legislature further finds and declares that the purpose of any tax proceeding between the Franchise Tax Board and a taxpayer is the determination of the taxpayer’s correct tax liability. It is the intent of the Legislature that, in the furtherance of this purpose, the Franchise Tax Board may inquire into, and shall allow the taxpayer every opportunity to present, all relevant information pertaining to the taxpayer’s liability.
(Amended by Stats. 2001, Ch. 670, Sec. 3. Effective January 1, 2002.)
The Franchise Tax Board shall administer this part. Unless the context indicates otherwise, the provisions of this part shall apply to Part 10 (commencing with Section 17001) and Part 11 (commencing with Section 23001).
For purposes of this part, “board” means the Franchise Tax Board.
(Added by Stats. 1988, Ch. 1573, Sec. 2.)
For the purposes of this part, except as otherwise provided, the determination of whether an individual is an employee shall be governed by Article 1.5 (commencing with Section 2775) of Chapter 2 of Division 3 of the Labor Code.
(Added by Stats. 2020, Ch. 38, Sec. 5. (AB 2257) Effective September 4, 2020.)
(a) The board shall establish the position of the Taxpayers’ Rights Advocate. The advocate or his or her designee shall be responsible for coordinating resolution of taxpayer complaints and problems, including any taxpayer complaints regarding unsatisfactory treatment of taxpayers by board employees. The advocate shall report directly to the executive officer of the board.
(b) The advocate or his or her designee shall give highest priority to reviewing and taking prompt and appropriate action, including staying actions where taxpayers have suffered or will suffer irreparable loss as the result of board action. Applicable statutes of limitation shall be tolled during the pendency of a stay. Any penalties and interest which would otherwise accrue shall not be affected by the granting of a stay.
(c) (1) On and after January 1, 2016, the Taxpayers’ Rights Advocate, in coordination with the Chief Counsel of the Franchise Tax Board, shall provide relief pursuant to this subdivision and abate any penalties, fees, additions to tax, or interest assessed if it is determined that the penalties, fees, additions to tax, or interest that have been assessed, or any part thereof, is attributable to any of the following:
(A) Erroneous action or erroneous inaction by the board in processing documents filed or payments made by taxpayers.
(B) Unreasonable delay caused by the board.
(C) Erroneous written advice that does not qualify for relief under Section 21012.
(2) Relief shall be granted pursuant to this subdivision only if no significant aspect of that error or delay can be attributed to the taxpayer involved and relief is not available under any other provision of this part, Part 10 (commencing with Section 17001), Part 10.2 (commencing with Section 18401), or Part 11 (commencing with Section 23001), including any relief granted under any regulation or other administrative pronouncement of the board.
(3) (A) (i) Any relief granted pursuant to this subdivision in which the total reduction in penalties, fees, additions to tax, or interest exceeds five hundred dollars ($500) shall be submitted to the executive officer for concurrence.
(ii) The total relief granted pursuant to this subdivision to a taxpayer with respect to penalties, fees, additions to tax, or interest for a taxable year may not exceed ten thousand dollars ($10,000).
(iii) Beginning on January 1, 2017, and annually thereafter, the amount specified in clause (ii) shall be recomputed in accordance with subparagraph (B) of paragraph (3) of subdivision (b) of Section 19442, modified by substituting “January 1, 2017” for “January 1, 2004.”
(B) Whenever relief is granted under this subdivision, the
board itself shall be notified and there shall be placed on file for at least one year in the office of the executive officer of the board a public record with respect to that relief. The public record shall include the following:
(i) The taxpayer’s name.
(ii) The total amount involved.
(iii) The amount payable or refundable due to the error or delay.
(iv) A summary of why the relief is warranted.
(4) A refund may be paid as a result of relief granted under this subdivision only if the applicable statute of limitations, with respect to filing a claim for refund, remains open as of the date that the basis for providing relief, as authorized in subparagraphs (A) to (C), inclusive, of
paragraph (1), as determined by the board.
(d) No other entity may participate in the grant or denial of relief pursuant to this section.
(e) Notwithstanding any other law or rule of law, all determinations made under paragraph (1) of subdivision (c) shall not be subject to review in any administrative or judicial proceeding.
(f) (1) The amendments made by Section 1 of Chapter 349 of the Statutes of 2012 shall become operative on January 1, 2013.
(2) The amendments made by the act adding this paragraph shall become operative on January 1, 2016.
(Amended (as amended by Stats. 2012, Ch. 349, Sec. 1) by Stats. 2015, Ch. 541, Sec. 1. (SB 540) Effective January 1, 2016.)
(a) The board, in consultation with the Taxpayers’ Rights Advocate, shall develop and implement a taxpayer education and information program directed at, but not limited to, the following:
(1) Taxpayer or industry groups identified in the annual report described in Section 21006.
(2) Board audit and compliance staff.
(3) (A) Identifying forms, procedures, regulations, or laws which are confusing and lead to taxpayer
errors.
(B) Taking appropriate action, including recommending remedial legislation to change those items identified pursuant to subparagraph (A).
(b) The education and information program shall include all of the following:
(1) Communication with the taxpayer groups specified in Section 21006 which explains in simplified terms the most common errors made by the taxpayers or industry group and how those errors may be avoided or corrected.
(2) Participating in small business seminars and similar programs organized by state and local agencies.
(3) Revision of taxpayer educational materials currently produced by the board to explain in simplified terms the most common errors made by taxpayers
and how those errors may be avoided or corrected.
(4) Implementation of a continuing education program for audit personnel to include the application of new legislation to taxpayer activities and to minimize recurrent taxpayer noncompliance or inconsistency of administration.
(Added by Stats. 1988, Ch. 1573, Sec. 2.)
(a) The board shall perform annually a systematic identification of areas of recurrent taxpayer noncompliance and shall report its findings to the Legislature by January 15 of each year.
(b) As part of the identification process described in subdivision (a), the board shall do both of the following:
(1) Compile and analyze sample data from its audit process, including, but not limited to, all of the following:
(A) The statute or regulation violated by the taxpayer.
(B) The amount of tax involved.
(C) The industry or business engaged in by the taxpayer.
(D) The number of years covered in the audit period.
(E) Whether professional tax preparation assistance was utilized by the taxpayer.
(F) Whether income tax or bank and corporation tax returns were filed by the taxpayer.
(2) Conduct an annual hearing before the board itself where industry representatives and individual taxpayers are allowed to present their proposals on changes to the Personal Income Tax Law or the
Corporation Tax Law which may further facilitate achievement of the legislative findings.
(c) The board shall include in its report recommendations for improving taxpayer compliance and uniform administration, including, but not limited to, all of the following:
(1) Changes in statute or board regulations.
(2) Improvement of training of board personnel.
(3) Improvement of taxpayer communication and education.
(4) Increased enforcement capabilities.
(d) The board shall include in its report a summary of cases where relief was granted pursuant to subdivision (c) of Section 21004, including the nature of the error or delay, and
the steps taken by the board to remedy systemic issues that caused the error or delay.
(Amended by Stats. 2021, Ch. 66, Sec. 2. (AB 1582) Effective January 1, 2022.)
The board shall prepare and publish brief but comprehensive statements in simple and nontechnical language which explain procedures, remedies, and the rights and obligations of the board and taxpayers. As appropriate, these statements shall be provided to taxpayers with the initial notice of audit, the notice of proposed additional taxes, any subsequent notice of tax due, or other substantive notices. Additionally, the board shall include an appropriate statement in the tax booklets which are mailed annually to individuals and corporations. The board also shall
include an appropriate statement in the tax booklets informing taxpayers they may be requested by the board to furnish a copy of California or federal tax returns that are the subject of or related to a federal audit.
(Amended by Stats. 2000, Ch. 414, Sec. 3. Effective January 1, 2001.)
(a) The amount of revenue collected or assessed by the board shall not be used for any of the following:
(1) To evaluate individual officers or employees.
(2) To impose or suggest production quotas or goals.
(b) The board shall annually certify by letter to the Legislature that revenue collected or assessed is not used in a manner prohibited by subdivision (a).
(Added by Stats. 1988, Ch. 1573, Sec. 2.)
(a) The board shall develop and implement a program which will evaluate an individual employee’s or officer’s performance with respect to his or her contact with taxpayers. The development and implementation of the program shall be coordinated with the Taxpayers’ Rights Advocate.
(b) The board shall report to the Legislature on the implementation of this program in its annual report.
(Added by Stats. 1988, Ch. 1573, Sec. 2.)
No later than July 1, 1989, the board shall, in cooperation with the State Board of Equalization, the State Bar of California, the California Society of Certified Public Accountants, the Taxpayers’ Rights Advocate, and other interested taxpayer-oriented groups, develop a plan to reduce the time required to resolve amended return claims for refund, protests, and appeals. The plan shall include determination of standard time frames and special review of cases which take more time than the appropriate standard time frame.
(Added by Stats. 1988, Ch. 1573, Sec. 2.)
Procedures of the board, relating to protest hearings before board audit staff or legal staff, shall include all of the following:
(a) Any hearing shall be held at a reasonable time at a board office which is convenient to the taxpayer when possible.
(b) The hearing may be recorded only if prior notice is given to the taxpayer and the taxpayer is entitled to receive a copy of the recording.
(c) The taxpayer shall be informed prior to any hearing that he or she has a right to have present at the hearing his or her designated agent.
(Amended by Stats. 1994, Ch. 1243, Sec. 62. Effective September 30, 1994.)
(a) If a person’s failure to make a timely return or payment is due to the person’s reasonable reliance on written advice from the board, the person may be relieved of the taxes assessed or any interest, additions to tax, and penalties added thereto, as follows:
(1) Taxes shall only be relieved, and any interest, additions to tax, and penalties added thereto, if the person’s failure to make a timely return or payment was due to a person’s reasonable reliance on the written advice of a legal ruling by the chief counsel, and only if the board itself finds all the conditions
satisfied.
(2) In the event that the person relied on written advice of other than a chief counsel ruling, taxes shall not be relieved. Interest, additions to tax, and penalties may be waived if the board staff finds all the conditions satisfied.
(b) For purposes of subdivision (a), all of the following conditions shall be satisfied:
(1) The person or the person’s representative requested in writing that the board advise him or her whether a particular activity or transaction is subject to tax under the tax laws administered by that agency, and the specific facts and circumstances of the activity or transaction were fully described in the request. If the request is for a legal ruling, the request shall specifically so state.
(2) The board responded in
writing to the person regarding the written request for advice, stating whether or not the described activity or transaction is subject to tax, or stating the conditions under which the activity or transaction is subject to tax. In the case where a chief counsel ruling is issued, the ruling shall be signed by the chief counsel or his or her designee.
(3) In reasonable reliance on the board’s written advice, the person did not remit the tax due.
(4) The liability for taxes applied to a particular activity or transaction which occurred before the board rescinded or modified the advice so given, by sending written notice to the person of the rescinded or modified advice.
(5) The tax consequences expressed in the board’s written advice were not subsequently changed by any of the following:
(A) A change in statutory law or case law.
(B) A change in federal interpretation in cases where the board’s written advice was predicated upon federal interpretation.
(C) A change in material facts or circumstances relating to the taxpayer.
(c) Any person seeking relief under this section shall file with the board all of the following:
(1) A copy of the person’s written request to the board and a copy of the board’s written advice.
(2) A statement signed under penalty of perjury, setting forth the facts on which the claim is based.
(3) Any other information which
the board may require.
(d) Only the person making the written request shall be entitled to rely on the board’s written advice to that person.
(e) If written advice is issued pursuant to this section, it shall include a declaration that the tax consequences expressed in the advice may be subject to change for any of the reasons specified in paragraph (5) of subdivision (b) and that it is the duty of the taxpayer to be aware of any of these possible changes.
(f) This section does not apply if the taxpayer’s request for written advice pursuant to paragraph (1) of subdivision (b) contained a misrepresentation or omission of one or more material facts.
(g) For purposes of subdivision (a), the board shall waive only that portion of tax, penalties, interest,
and additions to tax attributable to the actions taken by the taxpayer after receipt of the written advice of the board which were in reasonable reliance on the written advice.
(h) Chief counsel rulings shall be issued as provided in published guidelines.
(Added by Stats. 1988, Ch. 1573, Sec. 2.)
(a) (1) Every taxpayer is entitled to be reimbursed for any reasonable fees and expenses related to an appeal before the State Board of Equalization if all of the following conditions are met:
(A) The taxpayer files a claim for the fee and expenses with the State Board of Equalization.
(B) The State Board of Equalization, in its sole discretion, finds that the action taken by the Franchise
Tax Board staff was unreasonable.
(2) For purposes of this section:
(A) Fees and expenses related to an appeal before the State Board of Equalization do not include fees and expenses incurred in cases where an appeal has been filed, but resolved before the Franchise Tax Board’s written statement of its position has been submitted to the State Board of Equalization.
(B) Fees may be awarded in excess of the fees paid or incurred if the fees are less than the reasonable fees because an individual representing the taxpayer is entitled to be reimbursed for no fee or for a fee which, taking into account all the facts and circumstances, is no more than a nominal fee. This subparagraph shall apply only if the award is paid to the individual or the individual’s employer.
(b) (1) To determine whether the Franchise Tax Board staff has been unreasonable, the State Board of Equalization shall consider whether the Franchise Tax Board has established that its position in the appeal was substantially justified.
(2) For purposes of paragraph (1), the position of the Franchise Tax Board shall be presumed not to be substantially justified if its staff did not follow its applicable published guidance in the appeal. This presumption may be rebutted.
(3) For purposes of paragraph (2), the term “applicable published guidance” means either of the following:
(A) A regulation, legal ruling, notice, information release, or announcement.
(B) Any chief counsel ruling or determination letter issued to a
taxpayer.
(c) The amount of reimbursed fees and expenses shall be determined by the State Board of Equalization and shall be limited to the following:
(1) Fees and expenses incurred after the date of a notice of proposed deficiency assessment or jeopardy assessment, or a denial of a claim for refund.
(2) If the State Board of Equalization finds that the Franchise Tax Board staff was unreasonable with respect to certain issues but reasonable with respect to other issues, the amount of reimbursed fees and expenses shall be limited to those which relate to the issues where the Franchise Tax Board staff was unreasonable.
(d) Any proposed determination by the State Board of Equalization pursuant to this section shall be available as a public record for at
least 10 days prior to the effective date of that determination.
(e) The amendments made by the act amending this subdivision are effective for fees and expenses incurred more than 180 days after the effective date of the act amending this subdivision.
(Amended by Stats. 1999, Ch. 931, Sec. 34. Effective October 10, 1999.)
(a) An officer or employee of the board acting in connection with any law administered by the board shall not knowingly authorize, require, or conduct any investigation of, or surveillance over, any person for nontax administration related purposes.
(b) Any person violating subdivision (a) shall be subject to disciplinary action in accordance with the State Civil Service Act, including dismissal from office or discharge from employment.
(c) This section shall not apply with respect to any otherwise lawful
investigation concerning organized crime activities.
(d) The provisions of this section are not intended to prohibit, restrict, or prevent the exchange of information where the person is being investigated for multiple violations which include income or franchise tax violations.
(e) For the purposes of this section:
(1) “Investigation” means any oral or written inquiry directed to any person, organization, or governmental agency.
(2) “Surveillance” means the monitoring of persons, places, or events by means of electronic interception, overt or covert observations, or photography, and the use of informants.
(f) This section shall not be construed to prohibit audits by the board on behalf of
the Fair Political Practices Commission for purposes of administering and enforcing the Political Reform Act of 1974 (Title 9 (commencing with Section 81000) of the Government Code). This section also shall not be construed to prohibit the board from carrying out its duties with respect to other nontax laws.
(Added by Stats. 1988, Ch. 1573, Sec. 2.)
(a) The board may either refrain from imposing or waive the penalties authorized under Section 19011 and subdivision (a) of Section 19141.5, where it is determined, on a case-by-case basis, that the failure to comply did not jeopardize the best interests of the state and is not due to any willful neglect or any intent not to comply.
(b) This section shall be operative for penalties that may be or were assessed or imposed on or after January 1, 1995.
(Added by Stats. 1995, Ch. 490, Sec. 4. Effective January 1, 1996.)
(a) (1) No levy may be made on any property or property right of any person unless the board has notified the person in writing of his or her rights as described in subparagraph (C) of paragraph (3) before the levy is made. Except as provided in subdivision (f), the notice shall be required only once for the taxable period to which the unpaid tax specified in subparagraph (A) of
paragraph (3) relates. The notice shall not be required if the unpaid tax for which notice would otherwise be required under this paragraph is consolidated for collection purposes with a preexisting unpaid tax for which notice has been given under this paragraph.
(2) The notice required by paragraph (1) shall be made by first-class mail to the address of record not less than 30 days before the day of the first levy with respect to the amount of the unpaid tax for the taxable period. Notice under paragraph (1) is not required if previous mail to the same address was returned undelivered with no forwarding address.
(3) The notice required under paragraph (1) shall specify, in simple and nontechnical terms, all of the following:
(A) The amount of unpaid tax.
(B) A telephone number to call in the event of any questions.
(C) The right of the person to request a review during the 30-day period described in paragraph (2).
(D) The proposed action or actions that may be taken by the Franchise Tax Board and the rights of the person with respect to the action or actions, including a brief statement that sets forth all of the following:
(i) The provisions of California law relating to levy and sale of property.
(ii) The procedures applicable to the levy and sale of property under California law.
(iii) The independent departmental administrative review available to the taxpayers with respect to the levy and sale and the procedures to obtain
that review.
(iv) The alternatives available to taxpayers that could prevent levy on property, including installment agreements under Section 19008.
(v) California legal requirements and procedures with respect to the release of levy.
(b) (1) The Taxpayers’ Rights Advocate shall establish procedures for an independent departmental administrative review for taxpayers who request review under subparagraph (C) of paragraph (3) of subdivision (a).
(2) A person shall be entitled to only one review under this section with respect to the taxable period to which the unpaid tax specified in subparagraph (A) of paragraph (3) of subdivision (a) relates.
(3) An independent
departmental administrative review under this subdivision shall be conducted by an officer or employee, or officers or employees, who have had no prior involvement with respect to the unpaid tax specified in subparagraph (A) of paragraph (3) of subdivision (a) before the first review under this section or Section 19225. A taxpayer may waive the requirement of this paragraph. Administrative review under this subdivision is not subject to Chapter 4.5 (commencing with Section 11400) of Part 1 of Division 3 of the Government Code.
(c) (1) The person or persons conducting the independent departmental administrative review shall obtain verification that the requirements of any applicable law or administrative procedures have been met by the board.
(2) The taxpayer may raise during the review any relevant issue relating to the unpaid tax or the lien, including any
of the following:
(A) Appropriate spousal defenses.
(B) Challenges to the appropriateness of collection actions.
(C) Offers of collection alternatives, that may include the posting of a bond, the substitution of other assets, an installment agreement, or an offer in compromise.
(3) The determination of the person or persons conducting the review under this subdivision shall take into consideration all of the following:
(A) The verification presented under paragraph (1).
(B) The issues raised under paragraph (2).
(C) Whether any proposed collection action
balances the need for the efficient collection of taxes with the legitimate concern of the person that any collection action not be more intrusive than necessary.
(4) An issue may not be raised during the review if:
(A) The issue was raised and considered at a previous review under this section or in any other administrative or judicial proceeding.
(B) The person seeking to raise the issue participated meaningfully in the review or proceeding.
(C) The issue meets the requirements of clause (i) or (ii) of Section 6702(b)(2)(A) of the Internal Revenue Code, as modified by Section 19179.
This paragraph does not apply to any issue with respect to a change in circumstances of that person that affects the
determination.
(d) If review is requested under subparagraph (C) of paragraph (3) of subdivision (a), the levy actions that are the subject of the requested review shall be suspended for the period during which the review is pending. In no event shall any period expire before the 15th day after the day upon which there is a final determination in the review.
(e) This section does not apply if the board has made a finding under Section 19081 or Section 19082 that the collection of tax is in jeopardy except that the taxpayer shall be given the opportunity for the review described in this section within a reasonable period of time after the levy.
(f) If the board holds in abeyance the collection of a liability imposed under Part 10 (commencing with Section 17001) or Part 10.2 (commencing with Section 18401), that is
final and otherwise due and payable, for a period in excess of six months from the date the hold is first placed on the account, the board shall thereafter mail to the taxpayer a notice prior to issuing a levy or filing or recording a notice of state tax lien.
(g) This section is operative for collection actions initiated after the date which is 180 days after the effective date of the act adding this section.
(h) Notwithstanding any other provision of this section, if the board determines that any portion of a request for review under this section meets the requirements of clause (i) or (ii) of Section 6702(b)(2)(A) of the Internal Revenue Code, as modified by Section 19179, then the Franchise Tax Board may treat that portion as if it were never submitted and that portion shall not be subject to any further administrative or judicial review.
(Amended by Stats. 2010, Ch. 14, Sec. 54. (SB 401) Effective January 1, 2011.)
(a) No levy may be made on the principal residence of any innocent investor or the proceeds from the sale or other transaction involving the principal residence of an innocent investor upon notification to the Franchise Tax Board that the residence is the principal residence of an innocent investor and substantiation of both of the following:
(1) The basis for that levy is an underpayment of any tax imposed under Part 10 (commencing with Section 17001) for any taxable year
ending on or before December 31, 2000, that is attributable to an abusive tax shelter.
(2) The principal residence is owned by an innocent investor.
(b) Any state tax lien recorded under Chapter 14 (commencing with Section 7150) of Division 7 of Title 1 of the Government Code, including a state tax lien described under Section 522(c)(2)(B) of Title 11 of the United States Code, relating to state tax liens after bankruptcy, on the principal residence of an innocent investor shall be released without satisfaction of the lien upon notification to the Franchise Tax Board that the residence is the principal residence of an innocent investor and substantiation of both of the following:
(1) The basis for that lien is an underpayment of any tax imposed under Part 10 (commencing with Section 17001) for any taxable year ending
on or before December 31, 2000, that is attributable to an abusive tax shelter.
(2) The owner of that principal residence is an innocent investor.
(c) For purposes of this section:
(1) “Abusive tax shelter” shall satisfy both of the following requirements:
(A) Be a potentially abusive tax shelter within the meaning of Section 6112 of the Internal Revenue Code.
(B) With respect to which either of the following has occurred:
(i) The Internal Revenue Service has imposed a penalty under Section 6700 or 6701 of the Internal Revenue Code.
(ii) The Franchise Tax Board
has imposed a penalty under Section 19177 or 19178.
(2) “Innocent investor” means any individual (or the spouse or former spouse of that individual) that satisfies each of the following requirements:
(A) Is liable for underpayment of any tax imposed under Part 10 (commencing with Section 17001) for any taxable year ending on or before December 31, 2000, that is attributable to ownership of an interest in an abusive tax shelter.
(B) Had no responsibility for the creation, promotion, operation, management, or control of the abusive tax shelter.
(C) During the tax years to which the underpayment described in subparagraph (A) relates, reasonably believed that the tax treatment of an item attributable to an abusive tax shelter was, more likely than not, the
proper tax treatment.
(3) “Principal residence” includes any property that qualifies as a declared homestead as defined in Section 704.910 of the Code of Civil Procedure.
(d) Notification required by this section shall be made in the manner prescribed in forms and instructions of the Franchise Tax Board.
(e) (1) If, after January 1, 2002, the Franchise Tax Board has received proceeds from the sale of a principal residence by either levy or the satisfaction of a lien, the amounts received shall be returned to the owner upon notification to the Franchise Tax Board that the residence was the principal residence of an innocent investor and substantiation as specified in subdivision (a) or (b). The notification shall be made in writing and shall be considered a request for the return of the proceeds
from the sale of the principal residence.
(2) If the Franchise Tax Board fails to mail notice of denial of the request for the return of the proceeds from the sale of the principal residence within six months after the date the request was submitted, the owner may, prior to the mailing of the notice of denial of the request, consider the request denied and may, in accordance with subdivision (f), bring an action against the Franchise Tax Board for the return of the proceeds from the sale of the principal residence.
(3) Amounts returned pursuant to paragraph (1) shall include interest at the adjusted annual rate established under Section 19521 from the date the amounts are received by the Franchise Tax Board until the date the amounts are returned.
(4) Any amounts required to be returned pursuant to this subdivision
shall first be credited against any amount due from the owner (other than an underpayment of tax described in subparagraph (A) of paragraph (2) of subdivision (c)) and the balance, if any, shall be returned to the owner.
(5) No amount may be credited or returned pursuant to this subdivision unless the notification and substantiation described in paragraph (1) occur before the expiration of the one-year period beginning on the date the proceeds are received by the Franchise Tax Board.
(f) (1) If the Franchise Tax Board denies a request for the return of the proceeds from the sale of a principal residence, the owner of the residence may bring an action against the Franchise Tax Board for the return, in whole or in part, of the proceeds the Franchise Tax Board received by levy or in satisfaction of a lien.
(2) The action described in paragraph (1) must be filed within one year from the date the proceeds are received by the Franchise Tax Board or within 90 days after the Franchise Tax Board notifies the owner of the denial of his or her request for the return of the proceeds from the sale of the principal residence, whichever period expires later.
(3) Except as otherwise provided in this subdivision, an action brought pursuant to this subdivision shall be governed by the provisions of law applicable to an action authorized under Section 19382.
(Amended by Stats. 2002, Ch. 664, Sec. 207. Effective January 1, 2003.)
(a) The board shall release any levy issued pursuant to Part 10.2 (commencing with Section 18401) on any property in the event of any circumstances deemed appropriate by the board, including, but not limited to, the following:
(1) The expense of the sale process to the state exceeds the liability for which the levy is made.
(2) The Taxpayers’ Rights Advocate orders the release of the levy upon his or her finding
that the levy threatens the health or welfare of the taxpayer or his or her spouse and dependents or family.
(3) The proceeds from the sale would not result in a reasonable reduction of the debt.
(4) The levy was issued not in accordance with administrative procedures.
(5) The taxpayer has entered into an installment payment agreement under Section 19008 to satisfy the tax liability for which the levy was made, unless that or another agreement allows for the levy.
(6) The release of the levy will facilitate the collection of the tax liability or will be in the best interest of the taxpayer and the state.
(b) The board shall not sell any seized property until it has first notified the
taxpayer in writing of the exemptions from levy under Chapter 4 (commencing with Section 703.010) of Title 9 of the Code of Civil Procedure.
(c) This section shall not apply to the seizure of any property as a result of a jeopardy assessment authorized by Article 5 (commencing with Section 19081) of Chapter 4 of Part 10.2.
(d) In the case of a levy on salary or wages payable to or received by the taxpayer, in accordance with Chapter 5 (commencing with Section 706.010) of Division 2 of Title 9 of the Code of Civil Procedure, upon agreement with the taxpayer that the tax is not collectible, the board shall release the levy as soon as practicable. This subdivision shall not apply if the debt for which the levy is issued has been discharged from collectibility pursuant to Section 16301.6 of the Government Code, except if the debt is satisfied.
(e) The amendments made by the act adding this subdivision are operative for salary or wages subject to levy on or after the effective date of the act adding this subdivision.
(Amended by Stats. 1999, Ch. 931, Sec. 35. Effective October 10, 1999.)
Exemptions from levy under Chapter 4 (commencing with Section 703.010) of Title 9 of the Code of Civil Procedure shall be adjusted for purposes of enforcing the collection of debts under Part 10 (commencing with Section 17001) or Part 11 (commencing with Section 23001) of Division 2 to reflect changes in the California Consumer Price Index whenever the change is more than 5 percent higher than any previous adjustment.
(Added by Stats. 1988, Ch. 1573, Sec. 2.)
(a) A person may file a claim with the board for reimbursement of charges or fees imposed on the person by an unrelated business entity as the direct result of an erroneous levy, erroneous processing action, or erroneous collection action by the board. Charges that may be reimbursed include an unrelated business entity’s usual and customary charge for complying with the levy instructions and reasonable charges for overdrafts that are a direct consequence of the erroneous levy, erroneous processing action, or erroneous collection action and
are paid by the person and not waived by the unrelated business entity or otherwise reimbursed. Each claimant applying for reimbursement shall file a claim with the board which shall be in such form as may be prescribed by the board. In order for the board to grant a claim, the board shall determine that all of the following conditions have been satisfied:
(1) The erroneous levy, erroneous processing action, or erroneous collection action was caused by an error made by the board.
(2) Prior to the erroneous levy, erroneous processing action, or erroneous collection action, the person responded to all contacts by the board and provided the board with any requested information or documentation sufficient to establish the person’s position. This provision may be waived by the board for reasonable cause.
(3) The charge or
fee has not been waived by the unrelated business entity or otherwise reimbursed.
(b) Claims pursuant to this section shall be filed within 90 days from the date of the erroneous levy, erroneous processing action, or erroneous collection action. Within 30 days from the date the claim is received, the board shall respond to the claim. If the board denies a claim, the claimant shall be notified in writing of the reason or reasons for the denial of the claim. The board may extend the period for filing a claim under this section.
(c) Charges and fees that may be reimbursed under the authority of this section are limited to the usual and customary charges and fees imposed by a business entity in the ordinary course of business.
(Amended by Stats. 2005, Ch. 349, Sec. 5. Effective January 1, 2006.)
(a) At least 30 days prior to the filing or recording of liens under Chapter 14 (commencing with Section 7150) or Chapter 14.5 (commencing with Section 7220) of Division 7 of Title 1 of the Government Code, the board shall mail to the taxpayer a preliminary notice. The notice shall specify the statutory authority of the board for filing or recording the lien, indicate the earliest date on which the lien may be filed or recorded, and state the remedies available to the taxpayer to prevent the filing or recording of the lien. In the event tax
liens are filed for the same liability in multiple counties, only one preliminary notice shall be sent.
(b) The lien shall not be filed or recorded if the taxpayer demonstrates to the board by substantial evidence, within 30 days after receiving the notice, that a filing or recording of a lien would be in error. The preliminary notice required by this section shall not apply to jeopardy assessments authorized by Article 5 (commencing with Section 19081) of Chapter 4 of Part 10.2.
(c) If after filing or recording the lien, the board determines that its action was in error, it shall mail a release to the taxpayer and the entity recording the lien as soon as possible, but not later than seven working days, after this determination or the receipt of the lien recording information, whichever is later. The release shall contain a statement that the lien was filed in error. If the
erroneous lien is obstructing a lawful transaction, the board shall immediately issue a release of lien to the appropriate party. Upon the request of the taxpayer, a copy of the release shall be mailed to the major credit reporting companies in the county where the lien was filed.
(d) The procedures described in subdivision (c) shall apply to liens that are filed or recorded in either of the following ways:
(1) Not in accordance with administrative procedures.
(2) After the taxpayer has entered into an installment payment agreement under Section 19008 to satisfy the tax liability for which the lien was filed or recorded, unless the agreement provides for the filing or recording of the lien.
(e) If after filing or recording the lien, the board determines
that a release of the lien will facilitate the collection of the tax liability or will be in the best interest of the taxpayer and the state, it shall mail a release of that lien to the taxpayer and the entity recording the lien. If the lien is obstructing a lawful transaction and its release will facilitate the collection of the tax liability, or will be in the best interest of the taxpayer and the state, the board shall immediately do both of the following:
(1) Issue a release of lien to the appropriate party.
(2) Upon the request of the taxpayer, mail a copy of the release to the credit reporting companies, financial institutions, or any creditor whose name and address is provided by the taxpayer.
(f) This section shall not limit the circumstances in which the Franchise Tax Board may release a lien. The Franchise
Tax Board may release a lien under any circumstances to facilitate the collection of the tax liability or, if that release is in the best interest of the taxpayer and state, and take any action associated with the release of that lien it deems appropriate.
(g) The amendments made by the act adding this subdivision are operative on or after January 1, 1998.
(Amended by Stats. 1997, Ch. 600, Sec. 16. Effective January 1, 1998.)
For the purposes of Part 11 (commencing with Section 23001) of Division 2 only, a taxpayer shall not be suspended pursuant to Section 23301, 23301.5, or 23775 unless the board has mailed a notice preliminary to suspension which indicates that the taxpayer will be suspended by a date certain pursuant to Section 23301, 23301.5, or 23775, as the case may be. The notice preliminary to suspension shall be mailed to the taxpayer at least 60 days before the date certain.
(Added by Stats. 1988, Ch. 1573, Sec. 2.)
(a) If any officer or employee of the board recklessly disregards board published procedures, a taxpayer aggrieved by that action or omission may bring an action for damages against the State of California in superior court.
(b) In any action brought under subdivision (a), upon a finding of liability on the part of the State of California,
the state shall be liable to the plaintiff in an amount equal to the sum of all of the following:
(1) Actual and direct monetary damages sustained by the plaintiff as a result of the actions or omissions.
(2) Reasonable litigation costs, as defined for purposes of Section 19717.
(c) In the awarding of damages under subdivision (b), the court shall take into consideration the negligence or omissions, if any, on the part of the plaintiff which contributed to the damages.
(d) Whenever it appears to the court that the taxpayer’s position in the proceedings brought under subdivision (a) is frivolous, the court may impose a penalty against the plaintiff in an amount not to exceed ten thousand dollars ($10,000). A penalty so imposed shall be paid upon notice
and demand from the board and shall be collected as a tax imposed under Part 10 (commencing with Section 17001) or Part 11 (commencing with Section 23001).
(Amended by Stats. 2016, Ch. 86, Sec. 290. (SB 1171) Effective January 1, 2017.)
(a) Except as provided in subdivision (f), if any officer or employee of the board intentionally settles the determination or compromises the collection of any tax due from an attorney, certified public accountant, or tax preparer (as defined in subdivision (b) of Section 19169) representing a taxpayer, in exchange for information conveyed by the taxpayer to the attorney, certified public accountant, or tax preparer for purposes of obtaining advice concerning the taxpayer’s tax liability, the taxpayer may bring a civil action for damages
against the State of California in superior court. The civil action shall be the exclusive remedy for recovering damages resulting from the acts described in this subdivision.
(b) In any action brought under subdivision (a), upon the finding of liability on the part of the defendant, the defendant shall be liable to the plaintiff in an amount equal to the lesser of five hundred thousand dollars ($500,000) or the sum of all the following:
(1) Actual, direct economic damages sustained by the plaintiff as a proximate result of the information disclosure.
(2) The costs of the action.
(c) Damages shall not include the taxpayer’s liability for any civil or criminal penalties or other losses attributable to incarceration or the imposition of other criminal
sanctions.
(d) Notwithstanding any other provision of law, an action to enforce liability created under this section may be brought without regard to the amount in controversy, and may be brought only within two years after the date the actions creating the liability would have been discovered by the exercise of reasonable care.
(e) Upon certification of the executive officer of the board, or the executive officer’s delegate, that criminal charges have been filed against the taxpayer, the court before which an action under this section is pending shall stay all proceedings with respect to the action, pending the resolution of those criminal charges. Certification authorized by this subdivision shall comply with the requirements of Section 19542.
(f) Subdivision (a) shall not apply to information conveyed to an
attorney, certified public accountant, or tax preparer for the purpose of perpetrating a fraud or crime.
(g) This section is operative for actions filed on or after January 1, 1998.
(Added by Stats. 1997, Ch. 600, Sec. 17. Effective January 1, 1998.)
(a) Notwithstanding Article 2 (commencing with Section 19542) of Chapter 7 of Part 10.2, if any amount with respect to a joint return is due and payable and the individuals filing the return are no longer married or no longer reside in the same household, the board shall, upon request in writing by either of these individuals, disclose in writing to the requesting individual whether the board has attempted to collect the amount due from the other individual, the general nature of the collection activities, and the amount collected.
(b) This section is operative for requests made on or after January 1, 1998.
(Added by Stats. 1997, Ch. 600, Sec. 18. Effective January 1, 1998.)
For appeals filed under Section 19045 or 19324, on or after January 1, 1998, the board shall have the burden of producing reasonable and probative information, in addition to the information described in subdivision (a), concerning the amount assessed if a taxpayer does both of the following:
(a) Asserts a reasonable dispute with respect to either of the following:
(1) An item of income reported on an information return filed with the
board pursuant to Section 18637, 18638, 18639, 18640, 18641, 18642, 18643, 18644, 18645, 18646, or 18647 by a third party.
(2) Wage information reported or furnished to the Employment Development Department and accessible to the board under subdivision (g) of Section 1088 of, or subdivision (e) of Section 13050 of, the Unemployment Insurance Code or an exchange of information agreement.
(b) Fully cooperates with the board, including, but not limited to, providing, within a reasonable period of time, access to and inspection of all witnesses, information, and documents within the control of the taxpayer as reasonably requested by the board.
(Added by Stats. 1997, Ch. 600, Sec. 19. Effective January 1, 1998.)
If a payment is received on or after January 1, 1998, by the board from a taxpayer and the board cannot associate the payment with the taxpayer, the board shall make reasonable efforts to notify the taxpayer of the inability within 60 days after the receipt of the payment.
(Added by renumbering Section 20125 by Stats. 2014, Ch. 71, Sec. 166. (SB 1304) Effective January 1, 2015.)
(a) Except as otherwise provided in subdivision (b), for taxable years beginning on or after January 1, 1998, the board shall, not less than annually, mail a written notice to each taxpayer who has a tax delinquent account of the amount of the tax delinquency as of the date of the notice.
(b) Subdivision (a) shall not apply to accounts where a previously
mailed notice to the address of record was returned to the board as undeliverable, or to accounts that are discharged from accountability pursuant to Article 2.5 (commencing with Section 12433) of Chapter 5 of Part 2 of Division 3 of Title 2 of the Government Code.
(Amended by Stats. 2017, Ch. 561, Sec. 238. (AB 1516) Effective January 1, 2018.)
(a) (1) For purposes of Part 10 (commencing with Section 17001), Part 10.2 (commencing with Section 18401), Part 11 (commencing with Section 23001), or this part or any other law that is applicable to the mailing of any returns, payments, or any other items required to be filed under Part 10 (commencing with Section 17001), Part 10.2 (commencing with Section 18401), Part 11 (commencing with Section 23001), or this part, any reference in Section 11003 of the Government Code to the United States mail shall be treated as
including a reference to any designated delivery service, and any reference in that section to a post office cancellation mark shall be treated as including a reference to any date recorded electronically by a designated delivery service, kept in the regular course of the designated delivery service’s business, or marks on the cover in which any item is to be delivered to the board that indicate the date on which the item was given to the designated delivery service for delivery.
(2) For purposes of this section, “designated delivery service” means any delivery service provided by a trade or business if that service is designated by the Secretary of the Treasury under the authority of Section 7502(f) of the Internal Revenue Code, as amended by Public Law 104-168.
(b) As revised by Treasury Decision 8932, January 10, 2001, regulations of the Secretary of the Treasury under the
authority of Section 7502(c)(2) of the Internal Revenue Code (relating to prima facie evidence of delivery and postmark date for electronic filing) shall be applicable for prima facie evidence of delivery and the postmark date for purposes of Part 10 (commencing with Section 17001), Part 10.2 (commencing with Section 18401), Part 11 (commencing with Section 23001), this part, or Section 11003 of the Government Code.
(Amended by Stats. 2001, Ch. 543, Sec. 20. Effective January 1, 2002.)
(a) (1) With respect to tax advice, the protections of confidentiality that apply to a communication between a client and an attorney, as set forth in Article 3 (commencing with Section 950) of Chapter 4 of Division 8 of the Evidence Code, also shall apply to a communication between a taxpayer and any federally authorized tax practitioner to the extent the communication would be considered a privileged communication if it were between a client
and an attorney. A federally authorized tax practitioner has the legal obligation and duty to maintain confidentiality with respect to such communication.
(2) Paragraph (1) may only be asserted in any noncriminal tax matter before the Franchise Tax Board.
(3) For purposes of this section:
(A) “Federally authorized tax practitioner” means any individual who is authorized under federal law to practice before the Internal Revenue Service if the practice is subject to federal regulation under Section 330 of Title 31 of the United States Code, as provided by federal law as of January 1, 2000.
(B) “Tax advice” means advice given by an individual with respect to a state tax matter, which may include federal tax advice if it relates to the state tax matter. For
purposes of this subparagraph, “federal tax advice” means advice given by an individual within the scope of his or her authority to practice before the federal Internal Revenue Service on noncriminal tax matters.
(C) “Tax shelter” means a partnership or other entity, any investment plan or arrangement, or any other plan or arrangement if a significant purpose of that partnership, entity, plan, or arrangement is the avoidance or evasion of federal income tax or the avoidance or evasion of the tax imposed under Part 10 (commencing with Section 17001) or Part 11 (commencing with Section 23001).
(b) The privilege under subdivision (a) does not apply to any written communication between a federally authorized tax practitioner and any person, or any director, officer, employee, agent, or representative of the person, or any other person holding a capital or profits interest in the
person in connection with the promotion of the direct or indirect participation of the person in any tax shelter (as defined in Section 6662(d)(2)(C)(ii) of the Internal Revenue Code as modified by substituting the phrase “income or franchise tax” for “Federal income tax”), or in any proceeding to revoke or otherwise discipline any license or right to practice by any governmental agency.
(c) This section shall be operative for communications made on or after the effective date of the act adding this section.
(Added by Stats. 2009, Ch. 411, Sec. 2. (AB 129) Effective October 11, 2009.)