Improve Compliance and Uniform Administration Taxpayers’ Bill of Rights Annual Report to the Legislature

Legislative Proposals and Regulations

Changes in Statutes – Legislative Proposal Summary

In accordance with reporting requirements outlined in California Revenue and Taxation Code (R&TC) Section 21006(c)(1), the following are legislative proposals that have been approved by the three-member Board.

Legislative Proposals That Were Enacted Into Law:

Installment Agreements

Proposes to change FTB’s installment agreement (IA) authority by increasing the current dollar threshold and specified periods, and to allow for the modification of IAs in certain circumstances.

Conditional Revivor Provisions to Include Limited Liability Companies (LLCs)

Proposes to amend conditional revivor provisions to include LLCs in the application of reviving to “good standing without full payment of taxes, penalties, and interest” if the prospects for collection of the full amount due is improved by the revivor.

Both of the previous proposals were introduced by the Assembly Revenue & Taxation Committee as part of Assembly Bill (AB) 1765 on March 16, 2023. This bill was chaptered into law on September 22, 2023.

Legislative Proposals That Were Not Introduced Into Bills:

California Research Credit Modified Conformity to the Federal Alternative Simplified Credit (ASC) and Elimination of the Alternative Incremental Research Credit (AIRC)

Proposes to bring California into modified conformity with the federal ASC and would eliminate the AIRC.

Changes in Regulations

The laws administered by FTB broadly authorize the adoption of rules and regulations necessary for their enforcement. Occasionally, specific statutory provisions require us to adopt regulations. (For a list of regulations in progress, please refer to Appendix 3 — Regulations.)

Training of FTB Staff

FTB develops knowledgeable and engaged employees to improve the customer experience and accomplish FTB’s mission. Our goal is to provide the services and information taxpayers need to file accurate and timely tax returns and to only pay the proper amount of tax owed. Training begins with our employees’ first day on the job and continues throughout their FTB careers.

FTB staff receive accessibility training, while public-facing staff in our contact centers, public service counters, and collection programs receive extensive initial training, on-the-job training, and ongoing training, with programs tailored to the specific needs of each business area.

With the pandemic came the need to adjust the way we provided much of our training. This change included converting some historically “in-person” training to virtual or hybrid options. We also saw an increased demand for self-paced online training that we offer through FTB’s internal learning management system. We recently updated our online training content to expand options as well as provide a better overall experience for our employee users.

In 2023, the Accounts Receivable Management (ARM) Division focused on preparing for the replacement of its legacy collection system scheduled in early 2024. Replacing this system moves our siloed and aging compliance system onto the enterprise case management platform. ARM leadership has been involved in actively communicating to staff about the upcoming changes, and the impacts and benefits the system replacement will have to the collection programs. In addition, ARM’s training team is preparing for this change by readying the training team and creating new training curriculum based on new system designs. The training team has been successful training staff on smaller enhancements that have taken place and allowed the new system to demonstrate its benefits.

ARM has also prioritized our commitment to staff development and service by requiring all staff to complete Customer Service Certification Training annually. The training’s objective is to develop and strengthen skills to consistently deliver excellent customer service. The training is scenario-based and provides examples of different customer interactions and experiences that exist within the department. It also examines our skillsets and improves customer interaction through clear communication and active listening.

The Audit Division's staff also receive extensive training, which includes both classroom and virtual instruction and on-the-job training. The Audit Division's staff must have the knowledge needed to analyze tax returns, research complex issues, and effectively communicate their findings to taxpayers and authorized representatives. Having well-trained auditors reduces the burden audits place on taxpayers by shortening the completion time and improving the accuracy of the outcome.

The Audit Division continues to update the Pathways to Excellence portal, which is a knowledge transfer and training resource for staff. In simplistic terms, this portal maps out different “pathways” for staff development that combine technical education with other value-added learning experiences and collaboration opportunities. The portal is designed with one-stop shopping in mind and functions as a useful reference tool for the entire FTB organization.

Over this last year, the Filing Division provided training to over 600 new hire employees, including classes about personal income and business entity tax law, account resolution procedures, and improving our customer experience. Employees attend various formal and informal training to refresh their skills, learn new workloads, and remain informed of changing laws and procedures. Sessions like these allow staff to understand the importance of addressing the taxpayer’s immediate need while also educating them to reduce future questions or confusion.

The Filing Division also develops the training concepts and materials to train free tax preparation site coordinators and volunteers through the state on California tax law and return preparation as part of our Volunteer Income Tax Assistance (VITA) program, which assists lower-income individuals, senior citizens, and military personnel, throughout the state of California, in filing personal income tax returns. FTB VITA trainers come from throughout the department, including field offices. The Filing Division also facilitates the central office VITA site, which provides federal and state income tax help and electronic filing support for FTB employees and their families. FTB included VITA in the Governor’s Equity Initiative with a goal of increasing our FTB VITA volunteers to pre-pandemic numbers. Increasing our FTB VITA volunteers will allow FTB to market the VITA program to more communities resulting in an increase in the number of individuals who can utilize and benefit from the VITA program.

The Legal Division continues to focus on its knowledge transfer programs to increase the sharing of knowledge and ensure a highly trained workforce. This effort includes providing cross-training opportunities among the bureaus of the Legal Division, mentoring new staff, and expanding and marketing the information libraries maintained by the Legal Division. The Legal Division has a Professional Development Program which provides regularly reoccurring trainings by subject matter experts on different tax issues. The Legal Division also offers a collaborative program with Audit called “Lunch n’ Learn” where speakers present on tax issues at lunchtime in a more informal setting. Legal staff is also encouraged to participate in other training opportunities offered throughout the enterprise such as Job Knowledge Transfer presentations and online training, as well as continuing to participate in speaking engagements and webinars.

Across FTB, management and the department’s all-volunteer DEIA Team continue to take steps to ensure FTB remains a workplace where employees from all backgrounds, cultures, and personal experiences are welcome and thrive in support of FTB's mission, values, and goals. We believe a strong commitment to DEIA, where all staff feel a sense of belonging and respect, helps foster innovation, improves productivity, and continues to attract top talent by making us an employer of choice. A commitment to DEIA also helps ensure FTB can meet the needs of our highly diverse state. FTB has been rolling out a vendor-provided training suite that includes dozens of new DEIA-focused videos and micro-learning content for our staff. Our DEIA team regularly posts articles and videos on an array of DEIA topics to our DEIA intranet page. The team also plans and supports events that bring DEIA awareness to our workplace, and it maintains a DEIA calendar of events and DEIA resources toolkit available to all staff. Last year, FTB began to develop its own DEIA awareness training–scheduled for release in late 2023–for all employees.

Over a four-month period in early 2023, we conducted training for all supervisors nationwide that provided information and tools for more effective relationships with, and management of, staff in today’s hybrid (telework and office) work environment.

Finally, all FTB personnel who are classified in FTB’s conflict of interest code are required to take an ethics training course provided by the Department of Justice within six months of appointment to a classified position and once every two years thereafter. Additionally, all FTB staff are required to complete annual Privacy, Security, and Disclosure training.

Evaluating FTB Employees

FTB is committed to evaluating and providing feedback to our employees with the goal of helping them to perform at the highest level in their current positions and to advance professionally when promotional or developmental opportunities arise. Our goal is not only to provide all eligible employees with a written performance evaluation annually, but to ensure the evaluation and feedback they receive is valuable. The most important part of the evaluation process is sincere, respectful, and open conversations with employees regarding expectations and performance.

Customer service has always been one of FTB’s highest priorities. In recognition of this priority, FTB continues its practice of evaluating employees during annual reviews based on how well they communicate with taxpayers, tax professionals, and other stakeholders, and the overall quality of the customer service they provide. That includes assessing whether employees have provided customers with accurate, timely, and complete assistance. Our goal is for every employee to exceed each customer’s expectations. Importantly, we do not evaluate employees based on revenue that is produced through additional tax assessments or collections, and FTB does not impose or suggest revenue production quotas or goals. (Please refer to Appendix 4 — Certification Letter.)

We provide our supervisors with tools to assist in writing, online routing, and storing employee performance evaluations. These tools help us reach our goal of every eligible employee receiving a timely evaluation. In addition, we continue to provide tools and training to assist supervisors in having effective one-on-one conversations with their employees to build better connections, provide valuable feedback on performance, and maintain accountability for the expectations that have been set. We continue to reinforce the expectation that every supervisor will have regular one-on-one meetings with each of their employees.

A key component of employee and supervisor meetings is to have continuing discussions on performance expectations and to identify training and development needs. Discussing employee development opportunities is especially critical in today’s environment due to the rising number of employees who are eligible for retirement. It is an important part of our efforts related to workforce and succession planning.

Taxpayer Communication and Education

We strive to provide taxpayers, tax professionals, and external stakeholders with the information they need to file state tax returns completely, accurately, and timely. The department continues to focus on education and outreach efforts, creating useful tools and resources, and improving services.

FTB uses mainstream, trade, and social media to communicate important information to taxpayers and tax professionals. We post information on social media platforms, respond to news media inquiries, create video clips and webinars, and provide public service announcements to educate taxpayers. We constantly look for ways to improve our website, such as by adding self-service options for taxpayers and by ensuring the information they need is available.

New Webpages and Updates

This year, our Digital Services Section created new informational webpages and provided many updates for our customers on a variety of topics, including changes to state and federal tax laws, new tax credits, and the MCTR.

Online Self-Service

Historically, users registering for a MyFTB account need a Personal Identification Number (PIN) to activate their online account. For increased security, FTB mails the PIN to the address of record and the user enters it as the final step in the registration process. Since February 2022, individuals and tax professionals have had the ability to choose how they want to activate their MyFTB account. They can continue to have a PIN letter mailed or they can try to be verified for instant access by answering some personal information questions through our new Real-Time Identity Proofing and Enrollment (RIPE) process.

As of June 30, over 160,000 users registered for a MyFTB account in 2023, including over 2,400 tax professionals. Our number of individual taxpayer registrants has continued to increase compared to the same period in 2022, largely attributable to the implementation of RIPE.

We have over 1.2 million total registrants for MyFTB, including over 53,000 tax professionals. MyFTB continues to provide additional information and functionality. In addition to other activities, taxpayers can view notices and previously filed tax returns, chat about their account or send a message with attachments, protest assessments, and get detailed account information.

Better for Families Act, Publicly Known as the Middle Class Tax Refund (MCTR)

FTB partnered with the State Controller's Office and Money Network Financial, LLC, a Fiserv Inc. company, and other stakeholders to deliver MCTR payments to millions of eligible recipients. These payments provide financial relief for lower- and middle-income Californians due to global inflation.

Eligibility for this program required California taxpayers to file a timely 2020 California income tax return amongst meeting other income and residency qualifications. FTB utilized its robust return processing services to verify taxpayer eligibility, proper identity of taxpayers, and their most current addresses to accurately deliver MCTR payments.

To speed up delivery of the MCTR payments, payments were delivered by direct deposit and by debit card, when the direct deposit option was not available.

The MCTR payment program included the use of sophisticated fraud preventative services implemented by both FTB and Money Network to protect California and its taxpayers.

To enhance customer service, the program included the implementation of several customer service channels utilizing our self-service tools, as well as live customer service agents and chat. These tools included a robust website with user-friendly information and resources for MCTR, an online, easy-to-use tool that asks questions relating to eligibility and provides an estimated payment amount, and an intelligent Interactive Voice Response (IVR) system to provide quick answers to questions about the MCTR program and activation of the debit card.

Delivery of MCTR payments began with direct deposit payments being issued the first week of October 2022. The first debit card payments began being mailed out the last week of October. FTB issued over 95 percent of payments by the end of December with the bulk of the remaining payments getting delivered during January of 2023.

Through 2023, 16.8 million payments were issued to eligible recipients, benefitting more than 32 million Californians. Specifically, the program provided the following during the year:

  • 7.2 million Direct Deposits delivered equaling $4 billion.
  • 9.6 million Debit Cards delivered equaling $5.2 billion.
  • 27.3 million customers served using the FTB and MCTR websites.
  • 30 million customers served using the MCTR IVR, live agent, and Chat Services.

Field Office Appointments

The Franchise Tax Board's field and public counter staff provide tax filing and payment assistance to taxpayers and their authorized representatives concerning PIT and BE Income Tax and Nontax Debt.

FTB field offices continue to serve customers by appointment, and our customers have the option to schedule an in-person appointment online or with the aid of a contact center agent. FTB's automated appointment system also sends text message updates to our customers as their appointment time nears. We found appointments provide an improved customer experience and minimized wait times. As a result, we have maintained a 94 percent approval rating from our public counter customers.

California Earned Income Tax Credit (CalEITC)

To be consistent with new legislation, and to enhance usability, we updated content on our CalEITC webpages, both the CalEITC landing page and CalEITC eligibility and credit information page. We also created new stand-alone information webpages for the state's Young Child Tax Credit (YCTC) and the Foster Youth Tax Credit(FYTC). Our Earned Income Tax Credit calculator was updated to include an estimated credit amount for those indicating they qualify for FYTC.

CalEITC Direct Outreach to Taxpayers

In 2023, FTB mailed more than 340,000 letters to two groups of Californians who appeared to qualify for CalEITC but hadn't claimed it. The letters explained the potential value of the credit and how to claim it.

In May 2023, we sent more than 196,000 letters to Californians who did not file a California state income tax return for tax years 2022 or 2021 but appeared to be eligible for CalEITC for tax year 2021 based on state employment records and one or more state tax returns they filed for tax years 2018 through 2020. The letters explained how to claim the credit and provided related resources, such as links to FTB's free CalFile program, the Volunteer Income Tax Assistance Program (VITA), and our EITC calculator to estimate their potential cash back.

In August 2023, we mailed 147,000 letters to Californians who filed a tax year 2022 California state income tax return, but did not claim CalEITC, to inform them they appear to qualify for the credit. We provided an estimate of the credit amount they might be eligible for and encouraged them to claim the credit by completing form FTB 3514, California Earned Income Tax Credit, and mailing it to us.

These CalEITC outreach efforts reflect one of the strategies identified in an FTB report, required by the enactment of SB 1409, a 2020 state law, that explores ways to increase the uptake of CalEITC.

Emergency Tax Relief for winter storms

We created and consistently updated a new webpage for Emergency Tax Relief to explain the relief provided to Californians impacted by the 2022-23 severe winter storms. Most notably, Californians impacted by 2022-23 winter storms qualified for an extension to file and pay taxes until November 16, 2023, and many of those impacted were eligible to claim a disaster loss on their tax returns. The deadline extension to November 16, 2023, applied to the vast majority of Californians. Two counties–Modoc and Shasta–ultimately had their file and payment deadlines extended to August 15 last year, while in Lassen County, which was not part of a disaster declaration, the deadline remained April 18, 2023.

Our expansion of disaster-related online content in light of the winter storms included a new "Help with California winter storms" page. We also made regular updates of webpages devoted to information on how to claim a disaster loss deduction on your tax return, and to a list of disasters page that provides the names of qualifying disasters and their corresponding codes for tax purposes.

Last year, FTB also issued several news releases relating to, among other things, winter storm disaster relief as the number of impacted counties grew and filing and payment deadlines were extended in most areas.

FTB Website Visits, Page Updates and Accessibility Remediation and Testing

These statistics reflect the January through November period in 2023:

New online resources helped draw a total of 29.5 million visits to, and our website was visited by 12.6 million mobile users.

We updated 945 of our public webpages–about 38 percent of all live pages–including online tax forms to ensure we provide the most current and accurate information.

We added 200 documents to our website after revisions to meet state accessibility standards.

FTB Cannabis Team Outreach

Two new California income tax credits are available for cannabis businesses beginning in taxable year 2023: The Cannabis Equity Tax Credit and The High-Road Cannabis Tax Credit. We updated FTB's Cannabis webpage to include information on these credits and linked to two newly created, dedicated webpages with more detailed information on each credit. We published Tax News articles on this topic and last May, we sent informational letters to California licensed cannabis businesses. The letters provided the recipients with an overview of the tax credits, directed them to our online resources for more detailed information, and offered a dedicated FTB cannabis email address where they can send questions about the credits along with general questions about meeting their income tax obligations.

We also updated and maintained a variety of online resources providing information relating to licensing and tax compliance for cannabis-related activities.

FTB has participated in over 35 in-person and virtual cannabis-related presentations and workshops since 2019, including the National Cannabis Industry Association's Cannabis Business Caucus and Summit, state and local permitting workshops, and various government panels.

We continue to monitor cannabis legislation pending before Congress and the California Legislature that can potentially affect our programs.

Taxpayers' Rights Advocate's Office Education and Outreach

During FY 2022/2023, our Taxpayers' Rights Advocate's Office (TRAO) participated in 42 presentations to taxpayers and tax professionals. The presentations provided information on California tax updates, TRAO services, forms of business ownership, and small businesses tax matters. In general, we have seen a reduction in events over the past few years due to the COVID-19 pandemic and the economy. In addition, the 2023 disaster relief filing extension reduced the requests for our Tax Update presentation. However, we continue to remain flexible to accommodate a variety of requests for in-person, virtual, and hybrid formats.

We collaborated with the California Tax Education Council (CTEC) and delivered a Taxpayer Beware podcast to educate taxpayers about common fraud practices and how our office provides assistance outside of the normal channels.

In 2022, we updated our Taxpayer advocate services and Tax professionals webpages. After the update, we saw a 50 percent increase in reports of systemic issues on the TRAO webpages. The rise in these reports was likely due to the significant volumes of inquiries regarding the Golden State Stimulus and MCTR payments–inquiries that should have been directed to customer service at FTB or its MCTR debit card vendor Money Network. As a result, the TRAO staff was inundated with more inquiries than usual. We are in the process of improving this channel to only accept systemic issues. TRAO will work with FTB's IT staff to incorporate new functionality over the next few years.

TRAO continues to assist taxpayers who request equity relief or the Advocate's Independent Administrative Review. Our technical experts evaluate the requests and work with both taxpayers and tax professionals to remedy eligible cases. Our Small Business Liaison responded to over 1,600 email requests for assistance in 2023, a reduction from 2022. We attribute this reduction to the impacts of COVID-19 and a decrease in the formation of new businesses. The latter is based on our interactions in the field and a slowdown in small business outreach activity. The liaison continues to provide answers to general tax questions and questions about business filing requirements and business ownership types. Since the successful reorganization of our small business webpage in 2022, we believe the decrease in email inquiries also suggests visitors are able to easily obtain information on our website.

Tax News, our monthly technical publication, continues to be a valuable resource for the tax professional community, with nearly 35,000 subscribers. The content remains relevant, timely, and informative due to the support of employees in FTB's business area units, who have taken a proactive approach to writing articles on relevant topics. We continue to partner with other tax agencies and external stakeholders to share information about educational opportunities. We periodically send Tax News Flashes to inform taxpayers and tax professionals of time-sensitive changes to tax law, new programs, and current issues of interest.

This year, we developed an educational video to help the public understand what the TRAO does and who may qualify for our assistance. TRAO published our video in the May 2023 edition of Tax News, on our webpages, and we added it to most of our presentations including the monthly New Employee Orientation trainings to better educate our internal staff. TRAO also published monthly articles on FTB's internal website to keep our teams engaged and aware of our successes.

Public Affairs Education and Outreach

FTB's Public Affairs Office educates taxpayers about filing requirements, eligibility for tax credits, and other important tax issues through interviews with television, radio, and print media outlets, as well as through FTB's website, social media campaigns, videos, printed brochures, press releases, and webinars. FTB's Public Affairs' efforts align with the entire department to communicate information to the news media, taxpayers, tax representatives, and other stakeholders. Over the past year, some of the most common media and taxpayer inquiries Public Affairs received dealt with the MCTR and questions stemming from the severe winter storms tax relief, especially the extension of the file and payment deadlines.

News media interest in MCTR payments, the bulk of which were issued from early October 2022 through January 2023, was strong. From fall 2022 through spring 2023, Public Affairs handled hundreds of MCTR inquiries and interviews in English and Spanish.

Continuing an effort that began during the pandemic to reach more Californians, Public Affairs mainly distributed CalEITC and YCTC outreach materials–flyers, posters, brochures, and social media toolkits–digitally and made them available for download on our website. Some of the materials were available in seven languages: English, Spanish, Mandarin, Vietnamese, Korean, Hmong, and Russian – languages our outreach partners have indicated in recent years would be most helpful. FTB distributed these digital materials directly to CalEITC outreach partners, including nonprofits, such as United Ways of California, as well as state legislative offices, and a host of state and local social service agencies that could deliver the information directly to lower-income Californians likely to qualify for CalEITC. FTB also worked with the Office of State Publishing and CalFresh to include about 400,000 English-Spanish CalEITC informational flyers in state-funded, emergency food boxes that CalFresh distributed in early 2023 to families statewide.

FTB provided statewide foster care agencies, academic institutions, and other outlets with thousands of posters and flyers advertising California's new, cash-back FYTC for current and former foster youth.

FTB Public Affairs continues to be part of, and work closely with, the State Interagency Team (SIT) Reducing Poverty Workgroup to stay abreast of CalEITC/YCTC/FYTC outreach challenges and successes and to help inform SIT members of CalEITC statistical trends and pertinent new tax laws and other matters.

Translation for Limited English Proficient Taxpayers

Translations of CalEITC and other materials into multiple languages is handled by FTB's Multilingual Communications Program. The program provides vital services to our Limited English Proficient (LEP) taxpayers, as well as to our bilingual customer service representatives, and the tax preparers who serve LEP taxpayers.

Our goal is to ensure LEP taxpayers have equal access to the tools and resources available to file tax returns timely, accurately, and pay the correct amount without experiencing delays due to a language barrier.

FTB's website offers 122 webpages in Spanish and three web applications in Spanish, including one application in additional languages:

  • Middle Class Tax Refund Estimator in Spanish.
  • Check Your Refund Status application in Spanish.
  • EITC calculator in Spanish, Chinese, Vietnamese, Korean, and Russian.

Over the past year, we translated into Spanish new or updated FTB public webpages, including:

  • Middle Class Tax Refund webpage.
  • Middle Class Tax Refund Estimator webpage.
  • Health Care Mandate webpage.
  • Golden State Stimulus II webpage.
  • Paycheck Protection Program Loan Forgiveness webpage.
  • Filing Season Tax Tips webpage.
  • Beware of Scams as New Tax Season Begins webpage.
  • Real-time Identify Proofing and Enrollment webpage.

Other translations made over the past year include the following:

  • FTB 3514, 2022 California Earned Income Tax Credit form and instructions, in Spanish.
  • FTB 854, CalEITC Flyer Tax Year 2022, in Spanish, Chinese, Korean, Vietnamese, Russian, and Hmong.
  • FTB 856 A EN-SP, CalEITC Flyer (regular size), with Spanish on opposite side of English.
  • FTB 856 SP, CalEITC Poster Tax Year 2022, in Spanish.
  • FTB 853 EN-SP, Foster Youth Tax Credit Flyer, with Spanish on opposite side of English.
  • FTB 3568 SP, Alternative Identifying Information for the Dependent Exemption Credit, in Spanish.
  • FTB Pub. 1034 SP, Disaster Loss, How to Claim a State Tax Deduction, in Spanish.

We translated five newly created forms into Spanish in 2023 and the second half of 2022:

  • FTB 5009 PIT, Personal Income Tax – Credit Card Payments
  • FTB 5009A BE, Business Entity Tax Corporation – Credit Card Payments
  • FTB 5009B, Business Entity Tax for Limited Liability Company – Credit Card Payments
  • FTB 5009C, Business Entity Tax Partnership – Credit Card Payments
  • FTB 5009D, NonTax Court-Ordered Debt – Credit Card Payments

We also revised FTB 4058 SP, California Taxpayers' Bill of Rights Information for Taxpayers.

We provide access to our programs, services, and facilities in accordance with Title II of the Americans with Disabilities Act (ADA) of 1990. At the taxpayers' request, we provide reasonable accommodations in alternative formats.

We regularly translate major news releases into Spanish. Spanish is the most common non-English language spoken in California. We also offer bilingual Facebook Live videos about tax issues in English-Spanish, and we often translate key social media posts into Spanish and other languages as appropriate.

Nonwage and Real Estate Withholding Outreach and Education

Our Filing Division’s Withholding Services and Compliance Section (WSCS) continued its communication and outreach efforts with external stakeholder groups throughout 2022 and 2023. They delivered virtual and in-person presentations on real estate withholding requirements for traditional, like-kind exchange, and installment sale transactions at a variety of industry conferences and association meetings. WSCS proactively contacted several escrow and title companies that were making consistent mistakes and provided training on how to correctly complete Form 593, Real Estate Withholding Statement. The team delivered their first virtual presentation on Bulk Sales. WSCS also delivered in-person presentations on nonresident withholding requirements to the National Association of Real Property Managers San Diego chapter as well as at the California National Association of Real Property Managers Conference.

Exempt Organizations Education and Outreach

FTB’s Exempt Organizations Unit participated in outreach events sponsored by the California Lawyers Association, CalNonprofits, and an event co-sponsored by Stanford University and Silicon Valley Community Foundation. FTB’s representatives engaged with the public both virtually and in person discussing various aspects of exempt organizations, including:

  • The exemption process, including FTB’s time frames for processing exemption applications.
  • Maintaining compliance with exempt organization filing requirements.
  • FTB efforts to assist nonprofits seeking to dissolve.
  • California conformity with recent federal tax law changes.
  • Various current issues identified by FTB auditors.
  • Other items by audience request.

Increased Enforcement Capabilities

Although FTB encourages voluntary compliance by providing taxpayer education, as well as pre-filing assistance and information, FTB continues to identify ways to improve its enforcement and collection capabilities.


The Audit Division staff works with taxpayers and their representatives to administer and enforce the law effectively to ensure all taxpayers meet their obligations to file correctly and pay the proper amount of tax owed. We use innovative methods to promote these objectives through customer service, education, self-compliance letters, initiatives, and partnerships with federal and state agencies. In performing these activities, we consider the effects of audit activities on taxpayers as well as the increases in timeliness and effectiveness of enforcement actions. All of our work focuses on adherence to the regulations under California R&TC Section 19032, Audit Procedures, to complete audits in a timely manner.

We collaborate with subject matter experts to operate our programs in an efficient manner and to also seek better use of technology and data. We continue to seek new opportunities to form partnerships with taxpayers, their representatives, and other agencies to continue to promote best audit practices.

Addressing California’s Tax Gap

The tax gap is the difference between what is properly owed to the state and what is voluntarily reported and paid timely.

The three components of the tax gap are:

  1. Underreporting, which is under-reporting of income or revenue or the over-reporting of expenses on a timely filed return.
  2. Underpaying, which is the amount of tax reported on a timely filed return that is not timely paid.
  3. Nonfiling, which is the tax not timely paid by those who do not timely file a return.

This year, we estimated California’s tax gap to be approximately $25.5 billion. We based this amount on the IRS's most recent study, released in 2022, with adjustments for California and the California economy. The dollar amount of the tax gap has increased because the economy has expanded, but the percentage of compliance has remained steady.

Addressing the tax gap remains a top priority and we are fully committed to ensuring a fair tax system for all California taxpayers. We address the tax gap, starting with the collection of data, which then drives taxpayer education and outreach to encourage self-compliance, followed by campaigns to identify tax gaps and solutions, followed by compliance efforts.

In 2022, we began our EDR2 project to update our compliance programs and help FTB further address the tax gap. This modernization will capture more data and provide new technology that will enable us to identify potential compliance issues earlier and assist taxpayers with resolving these issues using self-service options.

The new data and current data, coupled with the new EDR2 analytic capabilities, has helped FTB expand education and compliance efforts in targeted areas. Specifically, the analytic models help FTB contact the right taxpayers at the right time, and for the right reason, in both our audit and filing enforcement programs.

We also work to address the tax gap by conducting audits on transactions, such as abusive micro-captive insurance and the syndicated conservation easement transactions. These transactions have become widespread across the nation and are being used by California taxpayers to inflate deductions and thereby reduce their California taxable income.

To further address this ongoing issue, we introduced FTB Notice 2023-02 on May 31, 2023. This initiative aims to provide limited penalty relief to eligible taxpayers who wish to participate in the program. FTB Notice 2023-02 establishes a straightforward process that allows taxpayers to resolve abusive micro-captive insurance and syndicated conservation easement transactions, which may be subject to the noneconomic substance transaction understatement penalty.

To participate, eligible taxpayers have until January 31, 2024, to enter into a closing agreement with FTB. This agreement enables them to reverse the benefits gained from these abusive transactions and submit payment in full for all taxes, interest, and penalties as stipulated in the resolution, or enter into an acceptable payment plan not to exceed twelve months. Accepted taxpayers are eligible for reduced penalties as part of this resolution process.

Criminal Investigations

FTB's ability to close the tax gap involves enforcement action through our Criminal Investigation Bureau (CIB). FTB special agents in CIB are sworn peace officers charged with the investigation of individuals and entities suspected of committing income tax evasion, income tax fraud, and the concealment of assets to evade the collection of tax. Special agents also conduct investigations of related crimes such as money laundering and fraud schemes, including refund fraud and preparer fraud, in which the state of California is a victim.

In the course of investigating suspected violations, FTB special agents gather evidence, interview witnesses, interrogate suspects, and plan and effect search and arrest warrants. CIB works collaboratively with FTB’s Audit, Collections, and Fraud programs, as well as local, state, and federal law enforcement agencies. Once criminal charges are filed, FTB special agents serve as expert witnesses and assist prosecuting attorneys in the preparation and prosecution of their cases.

Accounts Receivable Management (Collections)

The ARM Division is responsible for managing delinquent debts entrusted to FTB, such as personal income tax and franchise and corporate income tax. We also collect various nontax debts, including debts owed to California’s courts and local jurisdictions, delinquent vehicle registration, CalSavers employer penalties, and victim’s restitution orders and fines.

We collect on tax accounts receivable that are established by self-assessment or audit, settlement, and filing enforcement actions. An automated billing system, combined with central and field office collection staff, administers collection activities.

Our collection approach is founded on the principle that we use the least intrusive action first to gain compliance. Our collection strategy is to encourage taxpayers to resolve their debts as quickly as possible through the method best suited for their situation to help them achieve long-term compliance.

The collection staff performs manual collection efforts to ensure that noncompliant taxpayers contribute their fair share to the General Fund. The following are the revenues collected in FY 2022/2023 through FTB’s collection programs.

Tax Programs

Tax Programs Amount
Personal Income Tax $4.4 billion
Business Entity Tax $897.8 million
Total $5.33 billion

Nontax Debt Programs

Nontax Debt Program Amount
Court-Ordered Debt $104 million
Vehicle Registration $278 million
Interagency Intercept Collections $356 million
Total $738 million

Administrative Dissolution

FTB implemented the Administrative Dissolution Program on January 1, 2019, after being given authority, with the enactment of AB 2503, to administer the program for business entities seeking relief, and with the objective to improve compliance. Domestic corporations and domestic LLCs who ceased doing business and have no assets can now request a Voluntary Administrative Dissolution or Cancellation (taxpayer initiated). To date, we have received 30,078 requests for dissolution or cancellation. Of those resolved thus far, 8,771 business entities were approved for administrative dissolution.

On January 1, 2020, FTB implemented a second phase of the program and began evaluating business entities for Administrative Dissolution or Cancellation (FTB initiated), provided they ceased doing business, show suspended for 60 or more consecutive months, and met other established criteria. As to whether this program is a “cure” for suspended corporations, overall, the program is doing what it was intended to do: assist domestic corporations and domestic LLCs registered with the Secretary of State for more than 12 months that have stopped doing business, never did business, and have no assets to dissolve or cancel their business. FTB is pleased with the program and progress in processing 29,332 requests to date to help businesses save money, making it easier to dissolve a business and educate business owners and their representatives.


FTB’s Legal Division supports enforcement efforts by providing consultation and litigation support for positions developed in cooperation with FTB’s enforcement programs. Support activities include providing representation in protest hearings, appeal proceedings before the Office of Tax Appeals (OTA), settlement of cases, supporting Attorney General staff in tax litigation proceedings, and representation in out-of-state bankruptcy and collection proceedings.