Could California offset a timely overpayment against an underpayment whose assessment period had expired?

Plain-English summary

California internal guidance concluded that an overpayment still within its limitations period could be offset against an underpayment whose assessment period had expired.

The attached audit memorandum read section 6483 asymmetrically: a timely overpayment could reduce a time-barred underpayment, but an overpayment itself barred by limitations could not offset an underpayment that remained open.

The Legal Division memorandum initially questioned that interpretation but adopted it after comparing it to an unpublished appellate decision allowing the state to offset amounts against outstanding tax liability despite an expired limitations period.

Common questions

Could a timely overpayment offset a barred underpayment?

Yes.

Could a barred overpayment offset an open underpayment?

No, under the attached interpretation.

Was the cited appellate decision published?

No. The source described it as unpublished.

Citations and references

• California Revenue and Taxation Code section 6483 — offset authority quoted
• California Revenue and Taxation Code sections 6591 and 6907 — interest computation referenced
• Montgomery Elevator Co. v. State Board of Equalization, October 1990 unpublished decision — offset principle discussed

Source

• Annotated Legal Opinions collection: https://cdtfa.ca.gov/taxes-and-fees/annotations-menu.htm
• Annotation page: https://cdtfa.ca.gov/lawguides/vol2/suta/170-0000-all.html
• Original supporting opinion: https://cdtfa.ca.gov/lawguides/annotations/170-0043.pdf

Original ruling text

State of California

Board of Equalization

170.0043

Memorandum
To:

Appeals Attorneys
Supervising Tax Auditors
Summary Auditors

From:

Donald J. Hennessy

Subject:

Section 6483 – Offsets

Date:

February 27, 1992

I recently participated in a discussion with the Sales and Use Tax Department on the above-referenced section. Attached is a memo by Assistant Principal Tax Auditor William Dunn setting out what I believe to be a correct interpretation of the section. My initial reaction was to question the conclusion that “… overpayments that are not barred by the statute of limitations may be offset by underpayments which are barred by such statute.” But, on further reflection, this appears to be nothing more than a variation on the old rule of law applied by the Court of Appeal in its October 1990 unpublished decision in Montgomery Elevator Co. v. SBE that the state will be permitted to offset sums against outstanding tax liabilities notwithstanding the expiration of an applicable statute of limitations. I often find this offsetting procedure rather baffling, and I would recommend you file the attached memo away for future guidance. DJH:ba

State of California

Board of Equalization

170.0043

Memorandum
To:

Mr. Don Hennessy, Assistant Chief Counsel
Business Taxes Appeals Review Section

Date:

February 21, 1992

Mr. Glenn Bystrom, Principal Tax Auditor
Sales and Use Tax Department
From:

Subject:

William D. Dunn
Assistant Principal Tax Auditor
Section 6483 – Offsets
The other day the three of us discussed Section 6483, Offsets, which I have restated for ease of reference: 6483. Offsets. In making a determination the board may offset overpayments for a period or periods, together with interest on the overpayments, against underpayments for another period or periods against penalties, and against the interest on the underpayments. The interest on underpayment and overpayments shall be computed in the manner set forth in Sections 6591 and 6907. My interpretation of this section has always been that overpayments that are not barred by the statute of limitations may be offset against underpayments which are barred by the statute. However, overpayments which are beyond the statute of limitations may not be offset against underpayments which are not barred by the statute. I understand that the two of you concurred with this interpretation. I had asked for clarification since a recent Decision and Recommendation indicated otherwise. However, the result of that Decision and Recommendation was not affected by the different interpretation; therefore, no request for reconsideration is to be filed.

WDD:maf