Fixing a taxation bait-and-switch

Orange County Register

State Capitol
In this August 2016 file photo, the dome of the state Capitol glows in the early evening in Sacramento. (AP Photo/Rich Pedroncelli, File)

By: Assemblyman Tyler Diep on February 23, 2020

Innocent until proven guilty.  It’s a phrase we all know.  It’s said in every legal drama on television and by defense attorneys all across America.

In our criminal justice system, the presumption of innocence is a legal and fundamental right where the burden of proof is on the prosecution. This is to protect the people from the government having too much power and being falsely accused for crimes and abuses.

Unfortunately, in our state tax system, it is the exact opposite.  You are presumed guilty from the moment you receive that notice in the mail (side note: please do not ignore those notices; they become worse as time goes on). The burden to prove your innocence is on you.

And we all know how complex our tax system is. Laws change year to year and there are so many different types of taxes: personal income and corporate taxes, sales and use taxes, employment taxes, to name a few.

There are many taxpayers who want to act in good faith, be upright citizens, do the right thing.  However, claiming ignorance or not knowing the full extent of the state tax laws does not relieve you from responsibility.

One way to prevent this scenario is to request written advice from the state’s tax departments.  By law, you can request written advice specific to your situation and receive binding advice.  Advice received verbally, in person or over the phone are considered informal and non-binding.

However, there have been instances where taxpayers who request written advice never hear back from the state’s tax departments.

Take, for example a case from the Office of Tax Appeals, the independent and impartial tax appellate body, in which taxpayers “acted in good faith and took reasonable and prompt action to timely comply with their tax obligations,” which included requesting written advice.

However, the Franchise Tax Board was found to be “neither timely nor helpful” and “no written advice was provided.”  Despite not providing timely or helpful assistance after the taxpayers in question requested written advice, the Franchise Tax Board sent a letter two years later notifying them they were being audited.

The Katz-Harris Taxpayers’ Bill of Rights Act and Revenue and Taxation Code Section 6596 provide relief to taxpayers by affording them binding, written advice when requested under the personal income tax, corporation tax, and sales and use tax laws.

But what good will this do if the tax departments never respond?

That’s why I have authored, along with Assemblymember Mike Gipson, D-Carson, and introduced Assembly Bill 2528. Taxpayers should no longer wait in the dark and wonder if they will receive any advice or advice several years later.

This bill will provide certainty and better customer service to taxpayers by requiring the following: providing an acknowledgement letter 30 days after receiving a request from taxpayers and providing the written advice no later than 180 days after.

The Taxpayers’ Bill of Rights enacted in 1988 was a way for the Legislature to protect taxpayers from harassment and unfairness.

Tax law is full of complexities and contradictions. The success of voluntary compliance is contingent upon making it easier for taxpayers to be able to follow the laws.

We must end this bait and switch and I urge my colleagues in the Legislature to support this bill.

Assemblymember Tyler Diep represents the 72nd District in the California Assembly.