State Tax Appeal

California State Tax Appeal

An appeal to the independent California Office of Tax Appeals (OTA), heard by a panel of three administrative law judges, followed — if the taxpayer still disputes the tax — by a pay-first refund action in the Superior Court (Gov. Code § 15670 et seq.; Rev. & Tax. Code §§ 19045, 19324, 6561; Cal. Const. art. XIII, § 32)

IMPORTANT — READ FIRST: How a California Tax Dispute Is Appealed

California abolished the Board of Equalization's tax-appeal role in 2017. Income, franchise,
sales, use, and most excise/fee disputes are now decided by the Office of Tax Appeals
(OTA) — an independent agency, separate from the tax-collecting agencies, created by the
Taxpayer Transparency and Fairness Act of 2017 (Gov. Code §§ 15670–15680) and operating
since January 1, 2018. Appeals are heard by panels of three administrative law judges
(ALJs). Which track you use depends on which agency assessed the tax:

Track 1 — Franchise Tax Board (FTB): personal income tax and corporate franchise/income
tax. The FTB is the taxing agency; it does not hear the formal appeal. Two situations:

1. Deficiency (you owe more). After an audit the FTB mails a Notice of Proposed
   Assessment (NPA). You first file a written protest with the FTB within 60 days
   (Rev. & Tax. Code § 19041). The FTB then issues a Notice of Action. That action becomes
   final 30 days after it is mailed unless you appeal in writing to the OTA within that
   30-day period (§ 19045). Use PART A.

2. Refund (you overpaid). You file a claim for refund with the FTB. If the FTB denies
   it (or you appeal a deemed denial), the denial becomes final 90 days after the notice
   is mailed unless you appeal to the OTA within the 90-day period (§ 19324). Use
   PART A.

Track 2 — California Department of Tax and Fee Administration (CDTFA): sales and use tax
and most fee programs. After an audit, CDTFA mails a Notice of Determination. You file a
petition for redetermination with CDTFA within 30 days (Rev. & Tax. Code § 6561); if you
do not, the determination becomes final. CDTFA's Appeals Bureau issues a Decision; if
it is adverse you then appeal to the OTA within 30 days of that decision. Use PART B.

The OTA decision, and rehearing. A three-ALJ panel decides the appeal on the written
record or after an oral hearing. The taxpayer bears the burden of proof. The decision
becomes final 30 days after it is issued unless a party files a Petition for
Rehearing within 30 days (Cal. Code Regs., tit. 18, §§ 30602, 30604). Only one Petition
for Rehearing is allowed per appeal, on the six enumerated grounds. Use PART C.

There is NO direct appeal of an OTA decision to court. To take the dispute further, a
taxpayer must pay the tax, file a claim for refund, and bring a refund action in the
Superior Court — the "pay first, litigate later" rule of Cal. Const. art. XIII, § 32
(income/franchise: Rev. & Tax. Code § 19382; sales/use: § 6933). See the JUDICIAL REVIEW
note below.

Property tax is different — a decline-in-value or base-year-value dispute goes to the
county assessment appeals board, not the OTA. See the PROPERTY TAX note at the end.

PROCEDURAL ROADMAP — FTB (personal income / corporate franchise & income tax)

PROCEDURAL ROADMAP — CDTFA (sales & use tax and fee programs)

PART A — APPEAL TO THE OFFICE OF TAX APPEALS FROM AN FTB ACTION

BEFORE THE OFFICE OF TAX APPEALS — STATE OF CALIFORNIA

APPEAL — Rev. & Tax. Code § 19045 (deficiency) / § 19324 (refund) · OTA Case No. [assigned by the OTA]

A-1. Action Being Appealed

Appellant appeals the following action of the Franchise Tax Board and requests review by a
panel of three administrative law judges of the Office of Tax Appeals:

• ☐ Notice of Action dated [DATE] on a Notice of Proposed Assessment — appeal
  filed within 30 days (Rev. & Tax. Code § 19045); or

• ☐ Denial of a claim for refund dated [DATE] — appeal filed within 90 days
  (Rev. & Tax. Code § 19324); or

• ☐ Deemed denial of a refund claim (FTB did not act within 6 months) — [explain]; or

• ☐ Other appealable FTB action: [describe] dated [DATE].

The FTB notice was mailed on [DATE MAILED], and this appeal is filed within the
statutory period stated above. [Attach a copy of the FTB notice as Exhibit A.]

A-2. Appellant and Representative

A-3. Tax, Periods, and Amount in Dispute

A-4. Statement of Facts

[State the operative facts in numbered paragraphs: the return(s) as filed, the audit or
review, and the specific adjustments giving rise to the assessment or the refund denial.
Attach the FTB notice and supporting documents as exhibits.]

1. [____]
2. [____]
3. [____]

A-5. Issues Presented and Contentions

1. [Issue 1] — [e.g., whether the income was properly sourced to California; whether the
   taxpayer was "doing business" in California].

2. [Issue 2] — [e.g., whether a deduction, credit, or exemption was wrongly disallowed].

3. [Issue 3] — [e.g., whether the assessment is barred by the statute of limitations;
   whether penalties should be abated for reasonable cause; whether interest was miscomputed].

A-6. Relief Requested

Appellant requests that the Office of Tax Appeals reverse or reduce the assessment (or
allow the claimed refund), abate the related penalties and interest, and grant such
other relief as is appropriate.

A-7. Oral Hearing Election

☐ Appellant requests an oral hearing (in person, at an OTA location, or virtual);
☐ Appellant submits the appeal for decision on the written record without an oral hearing.

A-8. Signature

Dated: [__/__/____]

Signature: _______________________________

[NAME], ☐ Appellant / Officer ☐ Authorized representative
[CAPACITY / FIRM / ADDRESS / PHONE / EMAIL]

PART B — CDTFA PETITION FOR REDETERMINATION AND APPEAL TO THE OTA

B-1. Petition for Redetermination (file with CDTFA within 30 days) — Rev. & Tax. Code § 6561

CALIFORNIA DEPARTMENT OF TAX AND FEE ADMINISTRATION — PETITION FOR REDETERMINATION

Grounds for the petition (state each specifically):

1. [____]
2. [____]
3. [____]

☐ Petitioner requests an oral appeals conference before the CDTFA Appeals Bureau.
☐ Petitioner requests information about the CDTFA Settlement Program.

Dated: [__/__/____] Signature: _______________________________
[NAME / CAPACITY / FIRM / ADDRESS / PHONE / EMAIL]

B-2. Appeal to the OTA (file within 30 days of the Appeals Bureau decision)

BEFORE THE OFFICE OF TAX APPEALS — STATE OF CALIFORNIA

APPEAL FROM A CDTFA DECISION — Cal. Code Regs., tit. 18, § 30203(b) · OTA Case No. [assigned]

1. Appellant appeals the Decision of the CDTFA Appeals Bureau dated [DATE] (attach as
   Exhibit A), which [sustained / partially sustained] a Notice of Determination for the
   liability period [____].

2. This appeal is timely, filed within 30 days of the Appeals Bureau decision.

3. Tax/fee program: [____] Amount in dispute: $[____].

4. Issues presented: [state each disputed issue — e.g., whether the measure of tax was
   overstated; whether resale or exemption certificates were improperly disregarded; whether
   penalties should be abated].

5. Relief requested: that the OTA reverse or reduce the determination and abate related
   penalties and interest.

☐ Oral hearing requested ☐ Submitted on the written record.

Dated: [__/__/____] Signature: _______________________________
[NAME / CAPACITY / FIRM / ADDRESS / PHONE / EMAIL]

PART C — PETITION FOR REHEARING (OTA) — Cal. Code Regs., tit. 18, §§ 30602, 30604

BEFORE THE OFFICE OF TAX APPEALS — STATE OF CALIFORNIA

PETITION FOR REHEARING

1. Appellant petitions for rehearing of the OTA Opinion issued [DATE OF OTA DECISION].
   This petition is filed within 30 days of that decision.

2. Ground(s) for rehearing (check all that apply — § 30604):
   - ☐ An irregularity in the proceedings that prevented fair consideration of the appeal;
   - ☐ An accident or surprise that ordinary caution could not have prevented;
   - ☐ Newly discovered, relevant evidence that could not reasonably have been discovered
   and provided before the decision (attached);

• ☐ Insufficient evidence to justify the decision, or the decision is contrary to
  law;

• ☐ Error in law in the hearing or decision;

• ☐ The decision is not supported by the evidence / based on an erroneous legal theory.
  3. Explanation and materiality: [State how the ground is met and how it materially affected
  Appellant's rights. Attach any newly discovered evidence.]

4. Relief requested: that the OTA grant a rehearing before a new panel.

Dated: [__/__/____] Signature: _______________________________
[NAME / CAPACITY / FIRM / ADDRESS / PHONE / EMAIL]

NOTE — JUDICIAL REVIEW (PAY FIRST, LITIGATE LATER)

California follows the constitutional "pay first" rule: a court may not enjoin the
collection of a state tax, and a taxpayer contesting a tax in court must pay it and sue for
a refund (Cal. Const. art. XIII, § 32). There is no direct appeal of an OTA decision
to a court. After the OTA process, a taxpayer who still disputes the tax must:

• Income / franchise tax (FTB): pay the tax, file (or have on file) a claim for
  refund, and — after the claim is denied — bring a refund action against the FTB in the
  Superior Court (Rev. & Tax. Code § 19382), within the time allowed by § 19384.

• Sales / use tax and fees (CDTFA): pay the tax, file a claim for refund with CDTFA,
  and — after the claim is denied — bring a refund action within 90 days of the notice of
  CDTFA's action on the claim, in a superior court in a city or city-and-county where the
  Attorney General maintains an office (Rev. & Tax. Code § 6933).

NOTE — PROPERTY TAX (ASSESSMENT APPEALS BOARD, NOT THE OTA)

Local property tax disputes do not go to the OTA. A property owner who contests the
assessed value (including a Proposition 8 decline-in-value claim) files an
Application for Changed Assessment with the county assessment appeals board (or the
board of supervisors sitting as the county board of equalization) under Rev. & Tax. Code
§ 1603. The filing deadline is set by county each year — September 15 or November 30
(December 1 when Nov. 30 falls on a weekend) — and no extensions are available.

SOURCES AND REFERENCES

• Gov. Code §§ 15670–15680 (Office of Tax Appeals; Taxpayer Transparency and Fairness Act
  of 2017): https://leginfo.legislature.ca.gov/faces/codes_displaySection.xhtml?lawCode=GOV&sectionNum=15675.

• Rev. & Tax. Code § 19041 (FTB protest — 60 days):
  https://leginfo.legislature.ca.gov/faces/codes_displaySection.xhtml?lawCode=RTC&sectionNum=19041.

• Rev. & Tax. Code § 19045 (FTB Notice of Action — appeal to OTA within 30 days):
  https://leginfo.legislature.ca.gov/faces/codes_displaySection.xhtml?lawCode=RTC&sectionNum=19045.

• Rev. & Tax. Code § 19324 (FTB refund denial — appeal to OTA within 90 days):
  https://leginfo.legislature.ca.gov/faces/codes_displaySection.xhtml?lawCode=RTC&sectionNum=19324.

• Rev. & Tax. Code § 6561 (CDTFA petition for redetermination — 30 days):
  https://leginfo.legislature.ca.gov/faces/codes_displaySection.xhtml?lawCode=RTC&sectionNum=6561.

• Rev. & Tax. Code § 19382 (income/franchise refund suit) / § 6933 (sales/use refund
  suit): https://leginfo.legislature.ca.gov/faces/codes_displaySection.xhtml?lawCode=RTC&sectionNum=6933.

• Cal. Code Regs., tit. 18, div. 4.1 (OTA Rules for Tax Appeals — § 30203 appeal
  deadlines; Ch. 7 §§ 30602/30604 rehearing), current rules effective 6/30/2023:
  https://ota.ca.gov/rules-for-tax-appeals/

• Office of Tax Appeals (official; forms, filing, hearing calendar): https://ota.ca.gov/

• CDTFA (petitions, appeals conference, refund claims): https://cdtfa.ca.gov/ ·
  Franchise Tax Board: https://ftb.ca.gov/