The California Franchise Tax Board (FTB) administers California state income and franchise tax laws for corporations, partnerships, Schedule C sole proprietorships, LLCs, and other business entities. Any entity “doing business” in California – broadly defined by R&TC § 23101 – is subject to filing tax returns and paying state tax. This includes the $800 annual franchise tax, which most corporations typically pay, as well as limited liability companies (LLCs). When a business fails to file or pay, the FTB has broad collection powers. California state law automatically creates a tax lien on all California property of a delinquent taxpayer. The FTB may then issue notices, assessments, and enforcement orders (wage garnishments, bank levies, asset seizures, etc.) to collect the debt. These tools can be applied directly to the business and, in some cases, to responsible individuals. In all cases, the FTB must follow the procedures set by California state law.
FTB Collection Authority, Notices, and Enforcement
Jurisdiction & Minimum Tax
Every corporation or LLC “doing business” in California (R&TC § 23101) owes returns plus at least the $800 minimum franchise tax; corporations pay tax on net income, and LLCs pay an annual fee.
Automatic Tax Lien
The moment a California business tax becomes delinquent, a statutory lien (R&TC § 19221) attaches to all California state real and personal property. The FTB perfects it by recording a Notice of State Tax Lien, which clouds the title for 10 years (renewable) and blocks easy sales or financing.
Notices & Assessments
- Demand for Tax Return – 30 days to file.
- Notice of Proposed Assessment (NPA) – FTB estimate with tax, penalties, interest; 60 days to file a written protest.
- Notice of Assessment – Becomes final if no protest (or after protest is denied); tax is now collectible.
- Final Notice of Intent to Levy/Lien – Gives roughly 30 days; paying within 15 days stops extra interest.
Taxpayers may protest an NPA, appeal an adverse FTB decision to the Office of Tax Appeals, or pay under protest and sue for a refund.
Levy Powers – Once an assessment is final, the FTB can issue Orders to Withhold (R&TC §§ 18670–18669):
- Bank levy – Account frozen for 10 business days, then funds remitted.
- Earnings Withholding Order – Continuous wage garnishment.
- Seizure of any property or rights held by third parties (vehicles, equipment, stock).
Additional Enforcement
- Court-ordered debt & Vehicle-Registration intercepts.
- 10 % collection-cost fee when levies/liens are issued (R&TC § 19013).
- Referral to private collection agencies (R&TC § 19377).
- Federal and state refund offsets (R&TC § 19377.5; Interagency Intercept Program).
Bottom line: the FTB’s arsenal—statutory liens, levies, garnishments, private collectors, and multi-agency offsets—can immobilize a business’s cash flow and assets almost immediately after a liability becomes final. Responsive protest, timely appeals, or negotiated payment solutions are essential to avoid paralyzing enforcement.
Risks of Aggressive FTB Collections – and Your Exit Ramps
Personal Exposure for Owners: If a corporation or LLC can’t pay, the FTB may pierce the veil and assess officers or shareholders personally—especially where funds were siphoned or corporate-personal accounts were mingled. Once evaluated, the FTB can garnish wages or levy personal bank accounts. Blocking such action requires immediate legal challenge to the “responsible person” finding and proof of proper payroll, compensation, and separateness.
Involuntary Suspension or Dissolution: Under R&TC §23301, a domestic corporation that stays delinquent for a year is automatically suspended; foreign entities are forfeited. A suspended company cannot enter contracts, defend lawsuits, or secure credit, and its officers face a $2,000 non-filing penalty. All past-due returns and taxes must be paid before the entity can be revived or dissolved.
Multi-Agency Pile-On: Delinquent Accounts are Routinely:
- Sent to private collection firms (R&TC §19377),
- Offset against federal or state refunds (R&TC §19377.5),
- Bundled with DMV, court fines, or child-support debts.
One unpaid tax can cascade into wage garnishments, bank levies, vehicle blocks, and refund intercepts across multiple agencies.
Paths to Resolution
- Installment Agreements: For business balances ≤ $25,000, the FTB will grant a 12-month plan (setup fee of $50) if all returns are filed and no levy is active. A federal/state tax lien usually secures the plan; interest keeps running, but new levies stop once payments begin.
- Offer in Compromise (OIC): When the business cannot ever pay in full, an OIC (Form 4905BE) can settle for less. Acceptance hinges on documented cash flow, assets, and future income. If approved, collection ceases, and liens are released upon lump-sum payment.
- Hardship Hold: Demonstrated short-term insolvency can pause enforcement. Financials (Form 3567) must prove that any payment would jeopardize the business’s survival. Interest and penalties accrue, but levies are suspended until the hardship lifts.
Most cases mix these tools—e.g., partial OIC plus installment terms. Missing paperwork or deadlines can kill relief, so early and precise submissions are vital.
Contact the Tax Law Offices of David W. Klasing if the FTB Comes After Your Business
When the Franchise Tax Board issues a Notice of Proposed Assessment, files a state tax lien, or threatens a bank levy, you still have powerful rights: 60 days to protest an NPA, 30 days to appeal an adverse Notice of Action to the Office of Tax Appeals, and—even after assessment—options to pay under protest and sue for refund or invoke the 20-year collections statute. Exercising those rights promptly can halt new levies, stop additional interest, and force the FTB to justify every dollar. Miss a deadline, sign an installment plan without protest, or pay a levy without objection, and you may waive key defenses—sometimes permanently.
At the tax law offices of David W. Klasing, our dual-licensed Tax Attorneys & CPAs convert those procedural protections into concrete results. We dissect FTB notices for legal flaws, prepare airtight protests, and, when warranted, appeal to OTA. If the FTB tries to pierce the corporate veil, we move fast to block personal assessments and quash officer levies. We craft installment agreements that fit real cash flow, assemble Offers in Compromise with forensic financials the FTB must accept, and secure hardship holds that pause enforcement while a viable resolution is built. Because we speak both the legal and accounting languages, we can pivot from challenging nexus or penalty computations to presenting the detailed ledgers that undercut the FTB’s collection narrative—without diluting privilege or slowing negotiations.
Don’t let an aggressive collector dictate terms. Call the tax law offices of David W. Klasing at (800) 681-1295 or book a confidential, reduced-rate consultation online HERE. We will map every protest and appeal deadline, shield your personal assets, and negotiate a settlement that keeps your company—and your peace of mind—intact.
