On June 27, 2017, Governor Jerry Brown signed Assembly Bill 102 (AB 102) into law, ushering in sweeping changes to California’s longstanding tax system under the State Board of Equalization (BOE). AB 102 reassigns various tax administration functions from the BOE to two newly created agencies: the California Department of Tax and Fee Administration (CDTFA), and the California Office of Tax Appeals (OTA). Tentative emergency regulations, which are still in the process of being finalized, have been introduced to facilitate the transition. Unfortunately, these regulations may cause more confusion than they settle, and are likely to contain some unpleasant surprises for taxpayers. If you live or own a business in California, intend to appeal a tax penalty, or are already in the process of appealing a tax penalty, these changes could directly impact you. California taxpayers are advised to contact an experienced Los Angeles tax attorney for step-by-step guidance navigating the new regulations.
New Tax Appeal Regulations and Deadlines for California Taxpayers
Prior to the enactment of AB 102 (otherwise known as the Taxpayer Transparency and Fairness Act of 2017), the BOE carried out two broad responsibilities:
- Administering various state taxes, including business taxes, excise taxes, sales taxes, and use taxes.
- Functioning as California’s highest administrative appellate body for disputes concerning state taxes.
While the BOE will continue to carry out some of its traditional functions, such as administering alcohol taxes and adjusting California’s fuel tax rates, the passage of AB 102 marks a significant transfer of power from the BOE into the new agencies created by the Act, namely the OTA and CDTFA.
Effective July 1, 2017, excise, business, sales, and use taxes will be administered by the CDTFA, which also has the authority to impose certain fees. Effective January 1, 2018, the OTA will assume the BOE’s former role as tax tribunal, meaning that in the near future, a taxpayer who has a dispute pertaining to California taxes will file an appeal with the OTA rather than the BOE. Tax appeals before the OTA will be overseen by a panel of administrative law judges (ALJs), each of whom will have a legal background as a tax attorney.
In an effort to expedite the transition, on October 23, 2017 the OTA issued a tentative draft of emergency guidelines, which may be viewed in full here. The draft regulations draw upon several sources, including the California Administrative Procedure Act (APA), the former BOE Rules for Tax Appeals, and the American Bar Association.
While the new regulations retain elements of the prior regulations, there are also some significant changes, which could negatively impact taxpayers who lack familiarity with the updates, such as shortened deadlines. A few notable examples of changes to the new tax appeal regulations are enumerated below.
- Before the Act, taxpayers had up to 30 days from the end of the briefing to file a request for an oral hearing. Under the new regulations, all written requests for oral hearings must be submitted before the appellant’s reply brief.
- Before the Act, taxpayers had up to 90 days to “perfect” a franchise tax appeal, or ensure that the appeal contained all necessary information and signatures. Under the new regulations, the deadline will be shortened to just 60 days following the OTA date of notice.
- Once a taxpayer receives an OTA notice of an oral hearing, he or she must file a response within 15 days.
- Taxpayers may ask for prehearing conferences whether or not they have previously requested oral hearings.
For additional information, you may be interested in our previous article on California’s Taxpayer Transparency and Fairness Act of 2017. However, for personalized issue-specific guidance, you should speak with an experienced tax attorney as soon as possible.
Contact Our Los Angeles, CA Attorney-CPAs for Individuals and Businesses
Note that the aforementioned examples are non-exhaustive, nor do they affect all taxpayers identically. If you have any questions, however minor, concerning the new tax appeal procedures and how they might impact an anticipated or pending appeal, it is in your best interests to immediately review your rights and responsibilities as an appellant with an experienced Irvine tax attorney.
With offices conveniently located throughout the Los Angeles metropolitan area, the California tax lawyers of the Tax Law Office of David W. Klasing bring over 20 years of tax appeals experience to each matter we handle. Whether your question pertains to a dispute over California sales tax, concerns about a California employment tax audit, correcting a previous failure to file state income taxes, or a related financial matter, our trusted team of knowledgeable attorney-CPAs can assist you with strategic tax planning for businesses and individuals, ensure your compliance with municipal, state, and federal tax laws, and if necessary, provide aggressive tax appeals representation before an OTA panel of administrative law judges. To schedule a reduced-rate consultation concerning California tax compliance or tax appeals, contact the Tax Law Office of David W. Klasing online, or call us today at (800) 681-1295.
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Common issues when facing a sales tax audit; https://www.youtube.com/watch?v=yXVIXvUKxD0
