california ftb and sbe procedure

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California FTB and SBE Procedure

Givner & Kaye, A Professional [email protected]

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A Professional [email protected]


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An Overview Of The EntireState

Administrative Process

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Settlement, though not

specifically on the chart, is theoretically

available at any time during

Audit, Protest and Appeal.

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The State Produces Many

Helpful Publications

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FTB Publication 985 –

Audit/Protest/Appeals

(The process)

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How The Audit Wraps Up

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You get a series of

Information Document Requests.

Note that the one on the right

is Number Eight!!!

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The Auditor presents his or her proposed conclusions in

an AIPS.

Depending upon your

response, there may be more

than one AIPS.

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You can respond to the

AIPS.

If you don’t convince the

auditor otherwise, you will get an NPA.

Page 1 of NPA.

You have 60 days to file a

Protest or else it goes final.

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Page 2 of NPA

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Settlement

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Settlement

Revenue & Taxation Code Section 19442(a): “It is the intent of the Legislature…theFranchise Tax Board…pursue settlements…with respect to civil tax matters in dispute that are thesubject of protests, appeals, or refund claims, consistent with a reasonable evaluation of the costsand risks associated with litigation….”

In 2005-2008 75% of cases submitted for settlement were accepted, and 70% of thosewere, in fact, settled. The FTB has been known to suggest settlements for some cases sent toProtest and Appeal.

Asking for settlement does not stop the clock, e.g., for filing a Protest or Appeal.Tolling only starts when the matter is accepted into settlement. After a case is settled, installmentpayments are not accepted.

Why request settlement? High income client. Major corporation. Quick resolution.Hazards of litigation. Availability of skilled FTB staff, e.g., Pat Bittner. Costs. Timing. Thesettlement personnel may not start dealing with your case for 3 – 4 months after it has beenaccepted into the program. However, when they get to it they will spend full time on it.

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Settlement [continued]

The reputation is that settlement will never make a deal better than 50%. The FTB willtell you that is not true, that there have been cases where the FTB has even conceded 70% or100%. However, they are rare.

When the matter is finished, it gets sent back to Protest to get processed and closed.

Settlement will not normally address future years.

Process for settling cases: (i) case is assigned to the settlement bureau staff; (ii)contact letter is sent out to the taxpayer’s representative; (iii) nondisclosure agreement is signed;(iv) case review, with sometimes a request for additional information; (v) settlement conference;(vi) settlement approved by the Director and Chief Counsel within 9 months or failure to reachagreement.

Post-Agreement Process: (i) taxpayer executes settlement agreement; (ii) full paymentof agreed amount; (iii) Attorney General review; (iv) FTB approval; (v) assigned bureau staffexecutes settlement agreement; and (vi) public record statement. If there is a request from thepublic for information about the settlement, the State only tells the taxpayer’s name, amount indispute and the amount agreed.

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FTB 2007-2 on the Settlement

Procedures

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Protest:

If You Don’t Like The Audit Result; Don’t Think Settlement Is A Good Alternative;

and Don’t Want To Pay The Tax (Yet) And Sue For A Refund.

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Page 1 of Taxpayer’s

Protest – filed within 60 days

of the NPA.

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Page 2 of Taxpayer’s

Protest

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The FTB’s Protest Personnel can

request information that it feels is

necessary for the matter. Taxpayer’s

are surprised because they thought information requests ended with the Audit.

Sample FTB Demand To Third Party For

Information During A Protest.

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Preliminary Determination

Letter In A Protest

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Sample Notice of Action – 30 Days To File with Board

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Acceptance of Taxpayer’s SBE

Appeal –Page 1

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Acceptance of Taxpayer’s SBE

Appeal –Page 2

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Sample request to taxpayer and FTB from SBE For Additional

information before Board

hearing.

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Sample Board Agenda for Culver City meeting.

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FTB Publication 81 – Franchise and Personal Income Tax

Appeals

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FTB Publication 143 –Your

Appeal Hearing Before The

Board

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Dismissal of Taxpayer’s SBE

Appeal. This happens

regularly if the only reason for the Appeal is to cause the IRS

statute of limitations to

run.

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Questions and Answers

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