It may be determined that a protest should be returned to originating auditor for further development. Further development implies gathering additional facts about the case. After sufficient facts are gathered, auditor makes his or her analysis and sends the case along with recommendations back to Protest Unit or Technical Resource Section within FTB. If taxpayer agrees with auditor’s recommendations then a Hearing Officer will issue the Notice of Action based on submitted recommendation. If the taxpayer and representative are not in agreement with the auditor’s recommendation, and they still require an oral hearing, the protest will be assigned to a Hearing Officer to conduct the oral hearing and resolve the case.
If a hearing was already requested by taxpayer in protest letter, then auditor at this stage should inquire if taxpayer still wants hearing. When communicating with a taxpayer, auditor is not allowed to discourage taxpayer from requesting oral hearing. A taxpayer has a right to hearing, and it is sufficient to request it only once in the protest letter.
There are certain requirements as to procedures followed by the auditor who is developing facts. First of all, auditor should review the case independently. If FTB withdraws Notice of Proposed Assessment (“NPA”), the auditor must notify taxpayer that a Notice of Action officially withdrawing the NPA will be issued in due course. If additional information is required from taxpayer, auditor must request it in writing. In the initial contact letter to taxpayer auditor must acknowledge the protest letter sent by taxpayer to FTB and auditor is not allowed to ask the taxpayer weather he or she wants to waive oral hearing at that time.
Once all facts are gathered auditor sends a position letter to taxpayer explaining auditor’s position, findings and relevant law. A letter must have a paragraph in the end that gives the taxpayer an opportunity to agree or disagree with the auditor’s position. If a hearing was requested, a separate paragraph should be included at the end of the letter that will allow the taxpayer or representative to waive the hearing. If any of the mentioned rules are broken by auditor (or by FTB), then it is better to promptly contact your tax attorney.
If the auditor has done the necessary additional work at protest, developed all the facts and communicated the legal analysis to the taxpayer and the taxpayer still does not agree with the auditor, the case must be referred to the Protest Unit as an unagreed case. The Hearing Officer assigned to the case will determine if a hearing is still required and will continue to work the protest case.
Even if the taxpayer agrees with auditor’s recommendation, except when recommendation stands for withdrawal of the additional tax assessment from FTB, but taxpayer has not waived in writing a hearing, the case is treated if it were an unagreed case and is referred to Protest Unit.