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Tax News
Notes from the Tax Practitioner Stakeholder Specialist

Municipal bond interest - protective claims

FTB will hold protective claims for refund pending action by the United States Supreme Court in Department of Revenue of the Commonwealth of Kentucky et al. v. George W. Davis et ux. In this case, the Supreme Court is expected to rule on the legality of treating interest income from bonds issued within a state as tax exempt, while taxing interest income from other state bonds.

We will defer action on claims that have not yet been disallowed. For protective claims that have been disallowed, we will withdraw those notices of action that have not become final, and restore the claims to active status so final action can be deferred until the Court decides the Kentucky case. Notices of Action do not become final until the time provided for pursuing administrative or court action has expired. On August 27, FTB took action to withdraw the notices of action that have not gone final. As such, no action will be required by these taxpayers to preserve their rights.

Mail protective claims for this issue to this address:

PO BOX 942867
SACRAMENTO CA 94267-2222

Taxpayers whose notices of action have already gone final will not receive a withdrawal notice. Questions relating to these notices may be directed to Ting Lee at (916) 845-7118.

Interested parties meeting on withholding regulations and forms

FTB held an interested parties meeting August 13, 2007 to discuss impending changes to withholding regulations and forms (see "Inside FTB" in this issue for more information). Proposed changes include revising major forms and replacing others. Participating in our interested party meetings is a great way for practitioners to have their input heard and considered when we are evaluating what changes will be most beneficial to all parties involved. Notices of interested party meetings can be found on the FTB Website and are open to all. Teleconferencing is also available for those that cannot attend but would like to participate.

Catching the record-breaker

Here's an interesting issue for all of you baseball fans out there. A New York resident caught the record-breaking ball hit by Barry Bonds in San Francisco - will California be taxing him on his big catch? Though he did catch the ball in California, he may not necessarily sell the ball while in California.

After the IRS decides what the taxable event is, we will make our determination on whether there is a California taxable event based on the IRS decision.