Sam Brotman, JD, LLM, MBA August 23, 2014 4 min read

California Interagency Offer in Compromise

California streamlined offer in compromise process where now a single application can be used for three different agencies The Board of Equalization (BOE), Employment Development Department (EDD) and Franchise Tax Board (FTB). The application is located at http://www.edd.ca.gov/pdf_pub_ctr/de999ca.pdf. Just like before, taxpayers can apply for offer in compromise program when they are unable to pay their full tax liabilities to the state. The program allows taxpayers to negotiate a reduced amount of their non-disputed tax liabilities. The state will consider an Offer In Compromise when it is unlikely that the tax liability can be collected in full and the amount offered reasonably reflects collection potential. However, previously California taxpayers had to submit a separate form to each of the three agencies. Now, they can submit a single interagency application with the state, and all three agencies will coordinate offer in compromise process among themselves. The form is available online at the California Tax Service Center (www.taxes.ca.gov), as well as at each of the three tax departments' Website's (BOE www.boe.ca.gov, EDD www.edd.ca.gov, FTB www.ftb.ca.gov). The individual agencies must still negotiate each Offer in Compromise separately for their respective taxes. For example, FTB will negotiate with taxpayer a state income tax liability and Board of Equalization will negotiate a sales or use tax liability.

Main requirements for application have not changed. Taxpayer will have to agree with the amount due and the amount due is final, and BOE determines you do not have, and will not have in the foreseeable future, the income, means or assets to pay the amount due in full.

Generally, respective agency rules regarding offer in compromise program did not change significantly. However, some recent changes have been made. For example, effective January 1, 2009, through January 1, 2018, the BOE will also consider an offer in compromise for open and active businesses that have not received reimbursement for the taxes, fees, or surcharges owed; successors of businesses that may have inherited tax liabilities form their predecessors; and consumers, who are not required to hold a seller's permit, but incurred a use tax liability. Certain conditions apply, however, like signing a collateral agreement prior to approval of an offer and agreeing to remain current on all tax returns filed during the succeeding five-year period.

Like before, three agencies will not initiate tax collection activity while offer is pending. Agencies will look at taxpayer's ability to pay, amount of equity in taxpayer's assets, present and future income and expenses, likely future change in circumstances, whether tax evasion or fraud is involved.Agencies can use both public and private sources of information to verify taxpayer's financial condition. If offer is approved, then all tax liens will be released.

Therefore, single application for all three agencies is a positive development, but the fact that three agencies still negotiate separately is probably a drawback.

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Sam Brotman, JD, LLM, MBA

Owner and Director of Legal
Brotman Law

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