In last month’s issue, we highlighted some of the top questions from our liaison meetings with California Society of Enrolled Agents and CalCPA.
We wanted to share four more this month that we think will be of interest to you.
- Small Business Liaison
Recent legislation, Assembly Bill (AB) 657 (CH 2017-81, 7/21/17), requires a state agency that significantly regulates small business or that significantly impacts small business to prominently display the name and contact information of the small business liaison on the agency’s website, if the agency has a website. AB 657 also requires a state agency that significantly regulates small business or that significantly impacts small business to notify the Office of Small Business Advocate within the Governor’s Office of Business and Economic Development and the Department of General Services (DGS) of the name and contact information of the person or persons who have been designated as the agency’s small business liaison, on or before March 1, 2018.
Will FTB have a Small Business Liaison in addition to the Taxpayers’ Rights Advocate position?
We have had a Small Business Liaison (SBL) in place since 2006. The SBL is responsible for providing information to the small business community through presentations, publications, web content, and by answering small business related questions on our SBL phone line. The SBL reports to the Taxpayers’ Rights Advocate’s Office in the Education and Outreach Program Section. Our current SBL is Lucius Davis. We display the SBL information and phone number on our website under the Contact Us tab in the Small Business/Disabled Veteran Business Enterprise (SB/DVBE) section and under the Taxpayers’ Rights Advocates page in the Education and Outreach section. The SBL information is also listed on the California Tax Services Center (taxes.ca.gov) website under the
Contact Us tab. We will provide all the necessary information to the Governor’s Office and DGS as required.
In addition, we have a Small Business Advocate who is responsible for procurement and contract-related activities. Their contact information can also be found in the Small Business/Disabled Veteran Business Enterprise (SB/DVBE).
Small Business and Disabled Veteran Business Enterprise Services
DGS’ Office of Small Business and Disabled Veteran Business Enterprise Services (OSDS) certifies qualified small businesses (SB) in order to assist departments in meeting their annual statewide participation goal of 25 percent per Executive Order S-02-06. SB’s also receive a five percent bidding preference when competitively bidding on applicable state contracts. We are committed to making every effort to meet or exceed our 25 percent goal and encourage contracting with certified small businesses, for goods and/or services, whenever possible. For any questions please email our SB/DVBE Advocate Courtney Adams, or call 916.845.4385. Our SB/DVBE Advocate is also available to assist in any SB Prompt Payment Act issues.
DGS’ OSDS certifies qualified disabled veteran business enterprises (DVBE) for the State's three percent participation goal (per Executive Order D-43-01). We are committed to meet or exceed our three percent goal and encourages contracting with disabled veteran business enterprises, for goods and/or services, whenever possible. For any questions please email our SB/DVBE Advocate
Courtney Adams, or call 916.845.4385. Our SB/DVBE Advocate is also available to assist in any DVBE Prompt Payment Act
- Non-profit Administrative Dissolutions
AB 557 (CH 2015-363) authorized us to administratively dissolve a qualified nonprofit corporation that is suspended or forfeited for a period of more than 48 continuous months and is no longer in business. A 195-page list of over 8,500 suspended non-profit organizations was published to the Secretary of State’s (SOS) website on July 26, 2017. These non-profit organizations automatically dissolved after 60 days, September 2017.
The SOS webpage provides options to an organization on the list. One option is to pay taxes and penalties and return to active status. This includes filing the Statements of Information (SOI). The second option is to submit a written objection to our Exempt Organization Unit and receive a 90-day extension for us and the organization to work resolve their account.
Since non-profit organizations that have obtained tax-exempt status do not owe an $800 franchise or annual fee each year, what taxes would these non-profit organizations be paying if they chose the first option?
A nonprofit corporation’s exempt status is automatically revoked upon suspension. Accordingly, they are subject to the $800 annual minimum tax. As a general rule, all suspended corporations must pay taxes and penalties in order to revive to active status. Nonprofit corporations that have continued to operate for a valid exempt purpose are encouraged to apply (using Form 3500) to have their tax exempt status reinstated. Often this reinstatement retroactively covers the period the corporation was suspended, resulting in no minimum taxes due (although filing fees and penalties may still apply). Inactive nonprofit corporations are not entitled to exemption, and would be required to pay the $800 minimum tax in order to revive.
- Administrative Dissolutions for Business Entities
Since administrative dissolutions are not available to “for-profit” business entities, if some of these organizations never attained their tax-exempt status and so they owe taxes and penalties, why are they allowed to be administratively dissolved with unpaid tax and penalties?
Currently, administrative dissolution is only available for corporations organized as Nonprofit Public Benefit, Nonprofit Mutual Benefit, and Nonprofit Religious. The majority of these corporations subject to administrative dissolution had previously obtained tax-exempt status but were suspended and revoked for noncompliance in filings with us or the Secretary of State and have since become inactive. The taxes which have accrued since revocation for these corporations would have been exempt if the taxpayer had been in compliance, and therefore are abatable. Nonprofit corporations that never obtain tax-exempt status are in a similar situation and would be treated the same as if they were tax-exempt and revoked.
- Reassignment of Protest Officer
After a taxpayer files a protest with us, it is standard procedure for us to send a letter to the taxpayer advising them of the name of the newly-assigned protest hearing officer. Thereafter, the taxpayer can expect to receive a contact letter from the assigned hearing officer.
What are FTB’s procedures for notifying the taxpayer of a change in the assignment from one protest hearing officer to another? Who decides that a reassignment of the protest hearing officer should be made? What are the grounds for making the reassignment? How soon after the decision to reassign the protest should the taxpayer be notified of the change in assignment? Who is responsible for notifying the taxpayer – the originally-assigned protest officer or the newly-assigned protest officer? What relief, for example, abatement of interest expense, etc., is available to the taxpayer whose protest has been reassigned?
Typically, a protest case is reassigned based on staff changing positions, being no longer employed by the department or on leave of absence. When this occurs, the manager will review the status of the case and reassign it to a new hearing officer. When possible, the outgoing hearing officer will notify the taxpayer or representative that the case will need to be reassigned. Otherwise, the manager or the newly-assigned hearing officer will inform the taxpayer or representative that the case will or has been reassigned. The newly-assigned hearing officer will review the file and make contact within 30 days of reassignment to pick up where the prior hearing officer left off. We will work with the taxpayer and/or representative to ensure this process is seamless and to minimize any delays due to the reassignment of the case.
Additionally, for circumstances where there is an unreasonable error or delay due to a ministerial or managerial act by the hearing officer or staff involved with the case, interest attributable to the period of unreasonable delay may be subject to review for relief in accordance with Revenue and Taxation Code Section 19104 and, where appropriate, will be abated.