United States: Potential Traps For The Unwary In The California Office Of Tax Appeals Draft Regulations

Last Updated: November 7 2017
Article by Kyle O. Sollie, Mike Shaikh and Yoni Fix

At a Glance...

The California Office of Tax Appeals (the "OTA"), the new tax tribunal that will be assuming some of the functions of the California State Board of Equalization ("BOE"), has issued its initial set of draft regulations. The draft regulations contain some short deadlines and procedural traps for those who are not closely familiar with them. They also raise concerns for taxpayers regarding hearing and discovery rules, facilitation of settlement discussions, and taxpayer's ability to rely on BOE opinions.

Office of Tax Appeals Draft Emergency Regulations

As we previously covered in a prior alert, as part of Governor Jerry Brown's budget bill, A.B. 102 stripped the BOE of most of its tax administrative functions as of July 1, 2018, and of its role as a tax tribunal starting January 1, 2018. The bill did the following:

  • Created a new agency, the California Department of Tax and Fee Administration ("CDTFA"), which has assumed the BOE's administrative and regulatory functions for sales tax and other business taxes and fees;
  • Created the OTA, which will assume the BOE's adjudicative functions on January 1, 2018. The OTA will be composed of administrative law judges ("ALJs") hearing tax appeals in three-judge panels. These ALJs will be attorneys with experience in tax law; and
  • Left responsibility for overseeing certain property tax assessments, utility tax assessments, and tax assessments on insurers in the BOE.

As part of an accelerated transition process, the OTA has issued a draft of its emergency regulations for public comment prior to opening its doors for appeals on January 1, 2018. The draft regulations are scheduled to be discussed at an informal meeting today, November 6, with written comments due by tomorrow.

The draft OTA regulations incorporate language and features taken from the existing BOE Rules for Tax Appeals, the California Administrative Procedure Act (the "APA"), and the 2006 American Bar Association Model State Administrative Tax Tribunal Act.

Procedural traps for the unwary

For the most part, the draft OTA regulations adopt the same language and retain many of the deadlines, which vary in length, set forth in the existing BOE rules. This is because many of the deadlines are established by statute. There are, however, some changes and additions. These changes include some short deadlines of varying lengths and other procedural traps.

Failure to comply with these deadlines may result in the taxpayer's waiver of its rights to an appeal, to file briefs in support of its position, to an oral hearing, to introduce evidence or witnesses at an oral hearing, or to request a rehearing.

The changes in the draft OTA regulations from the existing BOE rules include, for example:

  • After filing an appeal with the OTA within the statutory deadline, the taxpayer's deadline to "perfect" a franchise tax appeal will be reduced from 90 days to 60 days after the date of notice by the OTA.
  • The deadline for submitting a written request for an oral hearing will change from 30 days from the conclusion of briefing to no later than the date of the appellant's reply brief.
  • Each party will be required to return a response to OTA's notice of oral hearing no later than 15 days from the date the notice is mailed.
  • Prehearing conferences may be requested regardless of whether an oral hearing has been requested.
  • Requests for an oral hearing may indicate whether the taxpayer prefers a hearing in Sacramento, Los Angeles, or Fresno. Before this, hearings were usually held in Sacramento and Culver City.

What if I have a pending appeal at the BOE already and a final decision has not been issued yet?

For taxpayers with appeals pending before the BOE, or who will be filing an appeal prior to January 1, 2018, here are some transition rules included in the draft OTA regulations:

  • If the BOE has issued a decision in an appeal which is not final prior to January 1, 2018, for which a party had submitted a timely petition for rehearing with the BOE before January 1, 2018, it will be treated by the OTA as a timely petition for rehearing.
  • If the BOE issued a decision in an appeal which is not final prior to January 1, 2018, before that decision becomes final, any party may submit a petition for rehearing with the OTA pursuant to the draft OTA regulations.
  • If prior to January 1, 2018, the BOE, OTA, or CDTFA has, in writing, set a briefing deadline of January 1, 2018 or later for an appeal, the briefing deadline will continue to be applicable, unless otherwise directed by the OTA.

Some Concerns about the Draft Emergency Regulations

Despite the attempt by the OTA to add more structure and predictability to the appeal and hearing process, the language of the draft OTA regulations raises some concerns for taxpayers.

  • Deferral of OTA Proceedings due to Settlement Discussions – Under the draft OTA regulations, the OTA will postpone OTA proceedings in business tax appeals for 60 days if notified by the CDTFA that a settlement proposal has been submitted by a taxpayer. That 60-day period will only be extended if the CDTFA (not the taxpayer) requests an extension. However, the draft OTA regulations do not have a similarly worded provision in case of franchise tax appeals. Instead, the OTA may postpone, for an unidentified period of time, the OTA proceedings for "reasonable cause," including if a party is seeking time to settle or otherwise resolve the appeal. We believe parity in standards for deferrals is essential for the OTA.
  • Hearing and Discovery Rules – The draft OTA regulations attempt to introduce actual hearing rules, which the BOE has never had, by merely incorporating by reference the hearing procedures under the APA that "are accessible to non-lawyers." For example, any relevant evidence may be admitted if it is "the sort of evidence on which responsible persons are accustomed to rely on in the conduct of serious affairs" regardless of whether such evidence is admissible in civil actions. However, it is unclear where the line is drawn, as the APA contains rules allowing for the issuance of subpoenas and the taking of depositions. Further, despite the introduction of basic evidence rules, there are no rules addressing the availability of discovery by taxpayers, which might prevent taxpayers from obtaining crucial evidence from the California Franchise Tax Board (the "FTB") or the CDTFA. We believe the OTA regulations should contain more specific guidelines for discovery.
  • Reliance on prior BOE Opinions – There is concern regarding taxpayers' ability to continue to rely on BOE opinions given the OTA's treatment of BOE precedential opinions as "persuasive authority" instead of binding precedent. Of further concern is the ease with which the OTA may, and will, as a matter of course, withdraw the precedential status of a BOE or OTA opinion. Also, "any person" or party may request that the OTA designate a published opinion or portion thereof as precedential or request that the precedential designation of a published opinion be removed. Thus, there is the risk that withdrawal requests may be submitted outside the process of an active appeal. There is also risk that the OTA will withdraw the precedential status of BOE opinions on its own initiative. If the OTA were to make substantive BOE decisions non-precedential outside the adjudicative process, it may exceed its statutory authority. As a matter of consistency and predictability, we believe that OTA should exercise restraint in this area and respect BOE precedent as good law. Of course, precedent may change for the same reasons that the BOE overruled precedent in the past. But we believe any deviations from BOE precedent by the OTA should be done in the context of an active appeal, with the concurrence of at least two of the three ALJs (as required per the draft OTA regulations for each holding in an OTA written opinion), and not based on a mere request of a taxpayer or tax agency.

This article is presented for informational purposes only and is not intended to constitute legal advice.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

In association with
Related Topics
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions