Chief Counsel Corner April 2018 Tax News
Chief Counsel Rulings
As part of my ongoing effort to provide an overview of the types of legal guidance available to the public, one I wanted to highlight in particular is the Chief Counsel Ruling. In appropriate situations, private Chief Counsel Rulings can be a very useful tool in helping taxpayers and their representatives report and file properly when they are confronted with novel or unusual issues.
An FTB Chief Counsel Ruling is a written statement issued to a taxpayer by our Chief Counsel that interprets California income or franchise tax law and applies it to a taxpayer's specific set of facts. It corresponds in most ways to an IRS private letter ruling. As explained in FTB Notice 2009-08, we generally follow federal letter ruling procedures as outlined in the first federal Revenue Procedure of each year.
California has some additional restrictions on the types of private rulings we can issue. For example, where state and federal law are the same, and the application of federal law is dispositive of the issue, or when a state-only issue depends primarily on the weighing of multiple factors involving specific facts such as the components of a unitary business or whether a taxpayer is a resident of California for a particular year, we will not issue a Chief Counsel Ruling. We will also not issue a ruling where the tax return has already been filed or the same issue is currently the subject of an audit, protest, appeal, or litigation for a different tax year.
Chief Counsel Ruling requests must identify the taxpayer, provide a complete statement of facts, and when the requestor is a professional preparer or paid representative, must contain the requestor's legal analysis and conclusion. As workload permits, our staff will draft and issue the Chief Counsel Ruling directly to the requestor.
It is important to note that only the named taxpayer who requested it can rely on a particular Chief Counsel Ruling under Revenue and Taxation Code section 21012—it cannot be relied upon by any other taxpayer as precedent or guidance from the FTB applicable to their own unique situation. Copies of CCRs are posted on our website for general information purposes, but they are redacted—sometimes heavily—to preserve taxpayer confidentiality and proprietary information regarding business processes or trade secrets. Thus, taxpayers and/or their representatives who believe that requesting their own CCR could help them file properly should contact the designated author of the posted CCR to informally discuss the possible tax consequences of their particular contemplated action and whether it might be beneficial to secure a CCR of their own. To request a Chief Counsel Ruling, taxpayers or representatives should follow the steps outlined in FTB Notice 2009-08 and mail a written request to:
- Franchise Tax Board
Legal Division (Attn: Chief Counsel Ruling Request)
PO Box 1720
Rancho Cordova, CA