Sam Brotman, JD, LLM, MBA August 24, 2014 3 min read

Franchise Tax Board Protest and Appeals – Part Two

Franchise Tax Board Protest Process

Taxpayers must file a Franchise Tax Board protest with the Franchise Tax Board, Protest Section, Sacramento, CA 95867. The protest can be filed either on FTB's Form 3531 PROTEST or in the form of a detailed letter.

The taxpayer can request an informal oral hearing conducted in Sacramento or at one of other FTB's California offices. If taxpayer does not request hearing, then Hearing Officer will send correspondence to protesting taxpayer to allow him or her submit information and documentation to determine whether the tax assessment is valid. After resolution of the dispute FTB sends to taxpayer a Notice of Action, where it notifies taxpayer of the decision. If the taxpayer disagrees with the decision, he or she can appeal to the State Board of Equalization or pay the assessed tax deficiency or file a claim for refund if he or she already paid.

Different Types of Franchise Tax Board Protest (Classification of Protests)

In most cases, a Franchise Tax Board protest is undocketed, although some are docketed. Docketed protests are those involving some legal question concerning assessed deficiency amount which has never been decided by court. A hearing must be requested for a protest to become docketed. Docketed protests are referred to FTB's Legal division which resolves it and forwards appropriate information for issuance of the Notice of Action.

An undocketed Franchise Tax Board protest usually does not meet requirements for docketed protests and are handled by the Protest Unit without referring them to Legal division. Sometimes undocketed Franchise Tax Board protests are returned back to auditor to gather additional information or documents. For example, such situations include assessments where the failure to furnish information penalty was issued or substantial documentation must be gathered.

If the taxpayer protests the federal tax adjustment, such case most likely will receive a code “PF” (Pending Federal), and will be referred to Protest Control Desk for processing. When the taxpayer sends in the final determination, his file is routed to Corporation Audit. Case is then assigned to an auditor, who will act on it taking into consideration final federal determination. The auditor then may reconsider the assessment and will present his or her findings to a taxpayer. If a hearing was requested in this case, the auditor's letter should ask if a hearing is still desired. The taxpayer does not have to remind of his or her desire to have an oral hearing and the auditor cannot discourage the taxpayer or the representative from exercising their right to an oral hearing.

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Sam Brotman, JD, LLM, MBA

Owner and Director of Legal
Brotman Law

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