Notice Of Proposed Assessment - Franchise Tax Board

When an adjustment to a tax return results in additional tax, a Notice of Proposed Assessment (NPA) is issued.

A Notice of Proposed Assessment is issued to business entities on the basis of:

• Additional tax due based on an audit of an original or amended tax return.
• Internal Revenue Service information.
• Missing year tax returns.

Purpose of the Notice of Proposed Assessment

The purpose of the Notice of Proposed Assessment is to inform the business entity of the adjustment and to allow time to protest the assessment.

• Entities have 60 days to protest the validity of the Notice of Proposed Assessment.
• After 60 days, the Notice of Proposed Assessment becomes final; a Notice of Balance Due is then mailed stating that the tax, penalties, and interest assessed are considered due and payable 15 days from that notice date.

Usually the Franchise Tax Board generates a Notice of Balance Due (also known as the NPA final bill) within 30 days after assessment protest period. The purpose of the Notice of Balance Due (Notice of Proposed Assessment final bill) is to inform the entity that the assessment is due and payable 15 days from the notice date.

Franchise Tax Board staff must ensure that this process has occurred prior to taking collection actions.

No Provision for Extension 

Currently, there is no provision in the Revenue and Taxation Code for extensions of time for payment of tax due for a business entity. However, business entities may be faced with a financial hardship and be unable to pay in full all at once.

The Franchise Tax Board may consider payment deferral to allow business entities an opportunity to pay their debt in full. The business has to request it, and after reviewing the account history, Franchise Tax Board (FTB) staff will determine on a case-by-case basis if a request for payment deferral will be granted.

If payment of the full balance due will create a financial hardship, the Franchise Tax Board staff may allow payments. If a deferral is granted, involuntary collection actions should cease during this period, which may include a case hold.

Verifications

Franchise Tax Board staff will verify the following when reviewing file for deferral option:

• Account information (e.g., address, bank, telephone number, status)
• Whether all tax returns have been filed
• Whether additional balances have been discharged
• Pending Notices of Proposed Assessment (NPA)
• Any recent involuntary collection actions

 The Franchise Tax Board may also allow installment agreement in cases of financial hardship. Beginning January 1, 2005, a service fee of $20.00 will be added to the taxpayer's account.

For installment agreements, the Franchise Tax Board staff will verify the following:

• Business activity and type of business
• Account information (e.g., address, bank, telephone number, status)
• Whether all tax returns have been filed
• Whether additional balances have been discharged
• Pending Notices of Proposed Assessment (NPA)
• Recent involuntary collection actions
• Financial Statements (e.g., bank, profit/loss, accounts receivable, credit denial letter)
• Liens filed (or document why a lien was not filed)
• Whether the business entity was notified that a lien may be filed

Upon approval of an installment agreement, the collector must inform the taxpayer about $20 fee and issue business entity an Installment Agreement Acceptance Letter.

The Business Entities Installment Agreement Financial Statement is now online in a “fillable” format.

If taxpayer defaults on agreement then the Franchise Tax Board staff must issue an Installment Agreement Cancellation Notice. This notice must precede all involuntary collection actions by the Franchise Tax Board.