How the State of California Locates Out of State Taxpayers and Their Assets

In addition to in-state collections actions, I want to talk to you briefly about out-of-state collections actions. So, California specifically is prohibited by and large from seizing assets in another state. There are jurisdictional restrictions from California going into a neighboring state and seizing an asset in that state. It violates federal law and it runs counter to the constitution. However, what the loophole that California uses to get around this is they target financial institutions and any other third parties that may have a foothold in California. So, for example, if I am a Texas resident and I have a Bank of America account in Texas with $50,000 in it, and I owe $50,000 to the State of California, in California, through Bank of America’s contact with California, can request that that money be levied. Any financial institution, any insurance company or retirement account or anything like that or employer that has a foothold within California can be subject to levy.

So, if the employer or the financial institution has any nexus with California, then California will try and track down that asset. It’s common in some circumstances for taxpayers to use local credit unions or community credit unions or bank accounts that are located entirely within a state outside of California. It’s a means of feeding collections. A lot of the times, this is a way to show assets. One way this doesn’t work though is with tax liens. So, a tax lien that is filed in California attaches to all real and personal properties that the taxpayer owns. So, if there is a title report conducted or anything like that, those tend to be picked up on the title report and California will assert a claim for sales of property and things like that. Although California is prohibited from collection the asset, a lot of the times, the title company or the seller or whomever – or the buyer or whomever won’t want to run a file with California. So, tax liens can be an exception to the rule that assets outside of the State of California aren’t subject to generally the collections. Up next.


Sam Brotman, JD, LLM, MBA

Owner and Director of Legal
Brotman Law