Sam Brotman, JD, LLM, MBA July 2, 2020 21 min read

Protesting and Appealing FTB Tax Assessments


Sam Brotman, JD, LLM, MBA

Owner and Director of Legal
Brotman Law


Requirements of a Valid Protest

            The California Revenue and Taxation Code provides that a taxpayer who disagrees with additional tax assessment can file with the Franchise Tax Board a written protest against the proposed additional tax. Protest letter must be filed with FTB within 60 days after notice of additional tax was mailed by FTB to taxpayer. Please note that clock starts ticking from the date of the notice mailing, not when taxpayer receives it. This letter notice is called the Notice of Proposed Assessment (NPA), and it contains a description of procedures to file a protest.

            In summary, the following criteria must be met before a letter will be recorded as a protest:

  1. The letter must be timely.
  2. The letter must state the taxpayer's name, account number, and tax year.
  3. The letter must state the basis of the protest.
  4. The corporation must be active, not suspended.

            An FTB employee compares the date the protest was received at Franchise Tax Board with the date of the NPA to determine that the protest was timely filed. Protests must be filed within 60 days of the date of the NPA. If the NPA was re-mailed to a better address, the 60-day period begins from the date the NPA was re-mailed. (The NPA copy will be stamped with "Re-mailed" and a date). If it is determined that the protest letter was timely, then the protest will be recorded. Untimely protests will only be treated as timely if the delay was caused by the Franchise Tax Board.

Recording a Protest.

            All correspondence to California Franchise Tax Board is forwarded to Protest Section, Protest Control Desk, Mail Stop D-12. Protest Technicians record the protest, update internal systems and send an acknowledgment letter to the taxpayer who sent the protest to FTB. After recording, protests are reviewed by a Protest Unit manager, supervisor or a designated employee, who determine if this protest case can be handled by the Protest Unit, must be returned to the Protest Section for additional work, or referred to FTB's legal department.

            A copy of the protest letter from taxpayer is sent to auditor who conducted initial examination of the taxpayer. Auditor may respond to a letter and can provide additional information to the hearing officer who is responsible for resolving the dispute with protesting taxpayer.

            Protest cases that lack enough information or are barred by statute of limitations (meaning that  established by statute time period during which a taxpayer can protest is over), may be returned to original unit in Protest Section for further development and consideration. Hearing officers can discuss the case in such circumstance. After completion, such case is returned to the Protest Unit along with a report for final determination. Then the auditor who conducted taxpayer's audit is contacted for discussion of the case and possible revisions or withdrawal of the case against the taxpayer. If the taxpayer or his or her representative disagree with audit's recommendation, the taxpayer and representative must be informed of the protest and appeal process.

Protest Process

            Taxpayers must file 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.

            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 Protests (Classification of Protests)

            Most protests are undocketed, and 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.

            Undocketed protests usually do not meet requirements for docketed protests and are handled by  the Protest Unit without referring them to Legal division. Sometimes undocketed 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 Auditor, who will act on it taking into consideration final federal determination. 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. 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.


            Process of Appealing FTB's Decision in Protest Dispute

Appeal Process

            The protester who wants to appeal FTB's decision, has 30 days to file appeal in writing from the day FTB mails Notice of Action letter. If taxpayer does not appeal within 30 days, the decision becomes final. FTB then sends taxpayer written demand for payment, and taxpayer must pay the amount demanded within 10 days from the day FTB mailed the demand letter.

            After taxpayer files his or her appeal, FTB and taxpayer will have an opportunity to provide additional information in support of their positions. An oral hearing will be conducted before the Board of Equalization, unless both FTB and taxpayer waive oral hearing. Once Board of Equalization makes its decision, both FTB and a taxpayer may request another hearing (rehearing) within 30 days of the decision. If no rehearing is requested, then the decision becomes final after the expiration of 30-day period.

            However, the decision is binding on FTB, but not on the taxpayer. A taxpayer can pay the tax, then file a claim for refund, and then appeal in California Superior Court. After the California Superior Court has rendered its decision, either the FTB or the taxpayer may file an appeal on the decision to the California Appellate Court and/or the California Supreme Court, and ultimately the U.S. Supreme Court.

            Claim for Refund

            The taxpayer may pay the tax deficiency demanded by FTB and then file a claim for refund any time during the protest process. If FTB denies claim for refund, taxpayer has 90 days from the mailing of the denial letter by FTB to file an appeal with the Board of Equalization (see above) or file a lawsuit in Superior Court. If the FTB does not take any action at all regarding filed claim for refund, taxpayer may still file a lawsuit in the Superior Court of California, despite the fact that the claim for refund was not officially denied by the FTB.

            Suspended Corporations.

            A suspended corporation is one that has had its corporate rights, privileges, and powers suspended by FTB or the Office of the Secretary of State (SOS). A corporation may be suspended for failing to file tax returns, pay taxes, pay assessments, or file the necessary documents with the SOS. Since a suspended corporation has no privileges or rights, it cannot file a protest or appeal while it is suspended. The taxpayer corporation must revive to good standing within the protest period or appeal period to have a timely protest.

Protest Returned for Further Development

            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.
Correction of Notices

            Sometimes Notice of Proposed Assessment may require corrections when new information is received from taxpayer. After a Notice of Proposed Assessment has been issued, and the taxpayer submits supplemental information leading to correction of the assessment, the FTB makes the correction. Depending on the circumstances, the assessment may be corrected by a second Notice of Action or a Notice of Revision; it may be withdrawn and a new NPA (Notice of Proposed Assessment) issued; or in the case of protested NPAs, it may be restored to protest status.

            If taxpayer does not protest the NPA, FTB must issue a Notice of Revision prior to the expiration of 60-day protest period or within the prescribed time if assessment is deferred, which can vary. Notice of Revision does not extend 60-day period for taxpayer to file his or her protest. The corrected additional tax may not be increased over the amount of the additional tax originally proposed.

            In the case when Notice of Proposed Assessment is protested by a taxpayer, and a Notice of Action has already been issued, FTB must mail a corrected Notice of Action within the 30-day appeal period. If FTB does not mail it within 30 days, then the assessment is restored to original status, which was protested by taxpayer. When FTB does mail the corrected notice, then taxpayer now has 30 days to appeal the corrected amount of assessment counting form the date printed on the corrected notice. In this case, the corrected additional tax may be increased over the amount shown in the notice of action, but may not exceed the amount of the additional tax originally proposed to be assessed.

            The Franchise Tax Board can withdraw Notice of Proposed Assessment and issue a correct one only if statute of limitations has not expired. 

            In lieu of issuing a corrected Notice of Action or a Notice of Revision, FTB's internal manual suggests that FTB withdraw the assessment and issue a corrected one when:

  1. The NPA contains a technical defect such as an error in the name, address, year, or

transposition of numbers.

  1. The supplementary information received form taxpayer introduces new items of income or

disallowance that may not be made a part of the corrected Notice of Action or Notice of


  1. The corrected amount of additional tax will exceed the original Notice of Action, Notice of Revision, or the original NPA.

"Sam is a wonderful, results-oriented and extremely knowledgeable and talented attorney, who really has 'heart' in working on behalf of his clients, and explains options in a straightforward, respectful manner. He has assisted us with great outcomes which have added to our quality of life. I would not hesitate to recommend Sam for his services as he is an ethical, personable and expert attorney in his field. You will likely not be disappointed with Sam's work ethic, approach and his efforts."

-Aileen Dwight, Licensed Clinical Social Worker & Psychotherapist

Last updated: July 8, 2024

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Sam Brotman, JD, LLM, MBA

Owner and Director of Legal
Brotman Law



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