During the hearing of a tax appeal by the State Board of Equalization at its September 22-23 meetings in Culver City (Appeal of Joe L. Santos), a representative of the Franchise Tax Board disclosed that the FTB is charging taxpayers interest for the period of FTB-initiated deadline postponements due to October 2007 wildfires in Southern California. The news came as a surprise to BOE Member Bill Leonard and others.
In an October 29, 2007 press release on the postponements, the FTB did not mention the interest liability that would accrue. The press release said:
"Franchise Tax Board (FTB) today announced that taxpayers impacted by the wildfires in any of the federally declared disaster areas will be given special tax relief.
"California will match the postponement periods announced today by the IRS giving taxpayers impacted by the disaster who have tax returns, payments, or other time sensitive acts due on or after October 21, 2007, through January 31, 2008, an automatic postponement through January 31, 2008. This includes the estimated tax payment for the fourth quarter, normally due on January 15. For complete details regarding tax deadline postponements, refer to the IRS News Release IR-2007-178."
The press release added, "The last thing victims of these fires need to worry about is taxes."
"I remember bragging about your press release that billings are suspended," Mr. Leonard said. "I didn't know that interest continued. I've got a mea culpa to lots of people."
Under this system, Mr. Leonard added, "Government profits from their own delays."
In the Santos case, the FTB did not respond to a protest filed in February 2007 until after the fire postponement, while running the interest clock on the taxpayer. The FTB said the reply would have gone out in October, but was not sent out due to the announced postponement. BOE Member Michelle Steel also took issue with the delay in responding to a taxpayer protest.
Mr. Leonard urged the FTB and BOE to establish timelines for response to the filing of a protest to prevent extra interest being assessed taxpayers.
In the Santos case, Ms. Steel moved to abate interest for the period May 2007 to January 2008. Mr. Leonard seconded the motion. The motion failed on a 2-2 vote, with Board Chair Betty Yee and Deputy State Controller Marcy Jo Mandel, representing Controller John Chiang, voting "no."
Cal-TaxReports, September 28, 2009
© 2009 California Taxpayers'
Association.
All Rights Reserved.