AB 176February 2022 Tax News

Changes to Court-Ordered Debt Collections and Vehicle Registration Collections Earnings Withholding Orders

This change was featured as a Public Service Bulletin (PSB) on the Franchise Tax Board website, December 20, 2022.

Purpose of bulletin

The purpose of this PSB is to advise of a change to Franchise Tax Board (FTB) Court-Ordered Debt Collections and Vehicle Registration Collections earnings withholding order garnishment and financial institution levy exemption amounts for orders issued on or after January 1, 2022.

Background

On September 23, 2021, the Governor signed AB 176 into law. The new law places additional restrictions on the amount of wages FTB can attach. The new law also places additional exemptions on the amount of funds FTB can attach in a deposit account. The new law is effective January 1, 2022.

Additional information

Earnings Withholding Orders (EWO) - Employers

The maximum amount of disposable earnings of a debtor for any workweek that is subject to collection shall not exceed the amount specified in Section 706.050 of the Code of Civil Procedure for orders issued on or after January 1, 2022. This means that employers will process an EWO like they would process an order from a judgment creditor.

Note: this change in California law DOES NOT impact the way employers calculate the amount of wages to withhold for FTB personal income tax EWOTs.

Orders to Withhold (OTW) - Financial Institutions

In addition to the current exemptions, the minimum basic standard of adequate care amount specified in subdivision (a) of Section 704.220 of the Code of Civil Procedure shall not be subject to collection by FTB OTWs for orders issued on or after January 1, 2022. This means that financial institutions will now process OTWs like they would process an OTW from a judgment creditor.

Note: this change in California law does not impact the exemption amounts for FTB personal income tax or corporation/business OTWs

Public inquiries

Please contact Court-Ordered Debt Collections at 916.845.4064 or Vehicle Registration Collections at 888.355.6872 for questions regarding the changes to the Court-Ordered Debt Collections and Vehicle Registration Collections levy exemption amounts for AB 176.

You can also visit ftb.ca.gov and search for court-ordered debt collections or vehicle registration collections for more information. We anticipate our website will be updated in January 2022.