Taxpayers' Rights Advocate Equity Relief Taxpayers’ Bill of Rights Annual Report to the Legislature

The Taxpayers’ Rights Advocate, in coordination with the Chief Counsel and with concurrence of the Executive Officer, may grant relief (refer to limitations) from tax, fee, penalty, and interest caused by erroneous actions or inactions or unreasonable delay by FTB, when no other relief is available. In order for relief to be granted, the taxpayer must not have significantly caused the error or delay.

Senate Bill (SB) 540 (Stats. 2015, Ch. 541, Sec. 1), effective January 1, 2016:

  • Extended and made permanent the Taxpayers’ Rights Advocate (in coordination with Chief Counsel) tax, fee, penalty, and interest relief provisions.
  • Increased the relief limitation to $10,000, indexed annually for inflation.
  • Maintained the requirement for the concurrence by the Executive Officer with any relief granted in which the total reduction exceeds $500.

When relief is granted, the three-member Board shall be notified and a public record placed on file for at least one year.

During FY 2019/2020, equity relief was granted to one taxpayer in the amount of $7,899. The taxpayer filed a timely 2015 tax return on April 13, 2016, but they claimed estimated payments on that tax return that exceeded the taxpayer’s actual payments for 2015. Even though the taxpayer timely remitted the reported balance due shown on the tax return, because of the estimate discrepancy, the tax was underpaid and the late payment of tax was subject to penalties and interest. FTB held the processing of the tax return for further verification and failed to release the hold. As a result, a bill was not issued for approximately two years. FTB billed the taxpayer for the underpaid tax, the late-payment-of-tax penalty and interest on June 20, 2018. Due to the delay in processing and billing, the late payment of the tax penalty and interest accrued without the taxpayer’s knowledge of the liability. The delay was caused by erroneous inaction in processing the tax return, resulting in an unreasonable delay in sending notice of the amount due. Accordingly, FTB exercised its authority under R&TC Section 21004 to abate the penalty and interest, which accrued as a result of FTB’s error and delay. Program management plans to review staff workload and training to identify opportunities for improvement.