In cases deemed appropriate by
the Franchise Tax Board, itself, it may elect to hear and decide petitions
filed pursuant to Section
instead of having this
function performed by the Franchise Tax Board staff. Consideration of said
petitions by the Franchise Tax Board, itself, shall be in open session at a
regularly scheduled meeting.
(1) Definitions.
For purposes of subsection (d) the following definitions apply.
(A) "Brief" means a written document
containing an argument or arguments supporting a party's position.
(B) "Ex-parte communication" means any
communication concerning a petition to or from the Franchise Tax Board, itself,
or Franchise Tax Board member staff, outside the presence of either Franchise
Tax Board staff or the taxpayer without notice to all parties.
(C) "Franchise Tax Board member staff" means
staff employed by any of the three members of the Franchise Tax
Board.
(D) "Franchise Tax Board
staff" means staff employed by the Franchise Tax Board and does not include any
Franchise Tax Board member staff.
(E) "Open session at a regularly scheduled
meeting" means the open session of a regularly scheduled meeting of the
Franchise Tax Board.
(F) "Petition"
means a request by a taxpayer for the Franchise Tax Board, itself, to consider
an alternative apportionment methodology pursuant to Section
25137 at an open session at a
regularly scheduled meeting.
(G)
"Variance action" means a taxpayer's request for Franchise Tax Board staff to
allow
the taxpayer to use an alternative apportionment methodology pursuant to
Section
25137 or a Franchise Tax Board
staff imposed alternative apportionment methodology.
(2) Petitions. The following shall apply to
petitions filed pursuant to subsection (d):
(A) Any records submitted to the Franchise
Tax Board, itself, by either the taxpayer or the Franchise Tax Board staff, as
well as the decision of the Franchise Tax Board, itself, shall be open to
public inspection pursuant to the California Public Records Act, Government
Code sections
7922.505
through
7922.545
and the Bagley-Keene Act, Government Code section
11125.1.
Any records of the Franchise Tax Board staff that are not submitted to the
Franchise Tax Board, itself, shall remain confidential pursuant to Revenue and
Taxation Code section
19542.
(B) The taxpayer shall file its petition with
the Chief Counsel of the Franchise Tax Board explaining why its requested
alternative apportionment methodology pursuant to Section
25137 is appropriate or why
Franchise Tax Board staff's imposed alternative apportionment methodology is
not appropriate. Such petition shall be filed within:
1. Sixty (60) calendar days from the date of
a written adverse variance action determination by Franchise Tax Board
staff;
2. One hundred twenty (120)
calendar days from the date of a claim for refund filed pursuant to Revenue and
Taxation Code section
19301
in which the alternative apportionment methodology is relevant to the taxable
years in the claim for refund;
3.
Sixty (60) calendar days from the date of a protest filed pursuant to Revenue
and Taxation Code section
19041
in which the alternative apportionment methodology is relevant to the taxable
years being protested;
4. Five (5)
calendar days from the date of an appeal filed with the Office of Tax Appeals
in which the alternative apportionment methodology is relevant to the taxable
years on appeal;
5. Sixty (60)
calendar days from the date of a letter of rejection by the Settlement Bureau
of the Franchise Tax Board in which the alternative apportionment methodology
is relevant to the taxable years at settlement; or
6. Sixty (60) calendar days from November 3,
2023.
(C) Within sixty
(60) calendar days from the date of the taxpayer's petition, the Executive
Officer of the Franchise Tax Board, or the Executive Officer's designee, shall
notify the Franchise Tax Board, itself, of the receipt of the taxpayer's
petition.
(D) Within sixty (60)
calendar days from the date of the taxpayer's petition, or the date of
Franchise Tax Board staff's determination as specified in subsection (d)(2)(E),
whichever is later, the Chief Counsel of the Franchise Tax Board shall notify
the taxpayer of the receipt of the taxpayer's petition in writing, which shall
include a briefing schedule as specified in subsection (d)(2)(H).
(E) If Franchise Tax Board staff have not
previously made a determination on the request to use an alternative
apportionment methodology which is the subject of the taxpayer's petition
before the Franchise Tax Board, itself, the Chief Counsel of the Franchise Tax
Board shall ensure Franchise Tax Board staff determines whether the alternative
apportionment methodology is appropriate.
(F) If the taxpayer files an appeal with the
Office of Tax Appeals for the taxable years in which the alternative
apportionment methodology is relevant to the taxable years on appeal, the
taxpayer and Franchise Tax Board staff shall file a joint request to defer
proceedings with the Office of Tax Appeals pending a decision by the Franchise
Tax Board, itself.
(G) If a notice
of proposed deficiency assessment, within the meaning of Revenue and Taxation
Code section
19057(a),
has not been mailed to the taxpayer with respect to the taxable years
pertaining to the petition, the taxpayer shall agree in writing to an extension
of the statute of limitations for the mailing of the notice of proposed
deficiency assessment, until one-hundred and eighty (180) calendar days after
the Franchise Tax Board, itself, has made its decision during an open session
at a regularly scheduled meeting.
(H) The taxpayer shall submit its opening
brief to the Chief Counsel of the Franchise Tax Board within sixty (60)
calendar days from the date of the document notifying
the taxpayer of the
receipt of
the taxpayer's petition.
After the taxpayer has submitted its opening brief,
Franchise Tax Board staff shall have thirty (30) calendar days to submit its
opening brief. Thereafter, the taxpayer shall have thirty (30) calendar days to
submit a reply brief. Further briefing may be required by the Franchise Tax
Board, itself. All briefs are subject to the following requirements:
1. Opening briefs are limited to
double-spaced thirty (30) pages and twelve (12) point font per inch of
paper.
2. Reply briefs are limited
to double-spaced fifteen (15) pages and twelve (12) point font per inch of
paper.
3. All briefs must be filed
by the parties with the Chief Counsel of the Franchise Tax Board.
(I) Upon completion of briefing,
the Franchise Tax Board, itself, may schedule a hearing during an open session
at a regularly scheduled meeting to consider the taxpayer's petition. The
taxpayer shall be notified in writing by the Chief Counsel of the Franchise Tax
Board of the hearing date.
(3) Hearings. The following shall apply to
hearings on petitions filed pursuant to subsection (d):
(A) The parties shall each have twenty (20)
minutes to present their respective positions and an additional ten (10)
minutes for
the taxpayer's reply. The Franchise Tax Board, itself, has the
discretion to allow additional time. Presentations of the parties at the
hearing shall occur as follows:
1. The
taxpayer shall make its opening presentation.
2. Franchise Tax Board staff shall make its
opening presentation following the taxpayer's opening presentation.
3. The taxpayer shall make its reply
presentation following Franchise Tax Board staff's opening
presentation.
(B) A
party seeking to have an expert or percipient witness testify must notify the
other party to the proceeding in writing no later than fifteen (15) calendar
days after the filing of the taxpayer's reply brief, of the identity of the
witness, the general nature of the expected testimony, and the expected
duration of the testimony at the hearing. The Executive Officer of the
Franchise Tax Board, or the Executive Officer's designee, shall notify the
Franchise Tax Board, itself, of any witness, the general nature of the expected
testimony, and the expected duration of the testimony at the hearing.
(C) The Franchise Tax Board, itself, shall
render its decision on the taxpayer's petition during an open session at a
regularly scheduled meeting.
(4) Ex-parte Communication Rule. Except as
provided by this regulation, there shall be no ex-parte communication regarding
any substantive issue in the petition without notice and opportunity for all
parties to participate in the communication.
(A) The ex-parte communication rule beginning
with the notification to the taxpayer and the Franchise Tax Board, itself, of
the receipt of the taxpayer's petition, continues while the petition is pending
with the Franchise Tax Board, itself, and terminates when the Franchise Tax
Board, itself, renders a decision. The Executive Officer of the Franchise Tax
Board, or the Executive Officer's designee, shall notify the Franchise Tax
Board, itself, of the applicability of the ex-parte communication rule to the
petition.
(B) The ex-parte
communication rule does not apply during the pendency of a variance action that
is before Franchise Tax Board staff.
(C) The ex-parte communication rule does not
apply to communications between the Franchise Tax Board, itself, or Franchise
Tax Board member staff, Franchise Tax Board staff, and
the taxpayer or its
representatives during the pendency of a petition if the communication only
relates to the scheduling of a future discussion of the petition, and which
only involves one member of the Franchise Tax Board, itself, at a time. In such
case:
1. The Franchise Tax Board member or
Franchise Tax Board member staff shall invite all parties or their
representatives, but no other Franchise Tax Board members, to participate in a
scheduled telephonic discussion or in-person meeting as soon as
practicable.
2. Any communication
for purposes of arranging this scheduled discussion or in-person meeting shall
only concern the scheduling and not the substance of the petition.
3. All parties or their representatives and
the Franchise Tax Board member or Franchise Tax Board member staff shall
coordinate to make a reasonable effort to arrange a mutually agreeable date,
time, and place to hold the telephonic discussion or in-person meeting. If the
parties cannot agree on a date, time, and place to hold the telephonic
discussion or in-person meeting by five (5) calendar days before the scheduled
telephonic discussion or in-person meeting, then the meeting shall not
occur.
4. If the telephonic
discussion or in-person meeting has been scheduled and one of the parties does
not participate or attend, then the telephonic discussion or in-person meeting
may proceed and will not be considered an ex-parte communication.
5. Regardless of whether all parties actually
participate in the telephonic discussion or attend the in-person meeting, the
Franchise Tax Board member or Franchise Tax Board member staff participating in
the telephonic discussion or attending the in-person meeting must:
a. Document in writing substantive matters
discussed at the telephonic discussion or in-person meeting.
b. Provide to all parties or their
representatives to the petition, but not to other Franchise Tax Board members,
within ten (10) calendar days from the date of the telephonic discussion or
in-person meeting, the documentation pertaining to the substantive matters
addressed and copies of any materials distributed by any of the parties
participating in the telephonic discussion or attending the in-person meeting.
If any party does not participate in the telephonic discussion or in-person
meeting, that party shall have twenty (20) calendar days from the date of the
telephonic discussion or in-person meeting to respond to the substantive
matters discussed and the materials distributed. Such written response shall be
provided to the opposing party.
(D) In the event an ex-parte communication
occurs, the Franchise Tax Board member or Franchise Tax Board member staff
shall document in writing the substance of the ex-parte communication and shall
provide it to the other Franchise Tax Board members and the parties to the
petition during the open session at a regularly scheduled meeting when the
petition is considered by the Franchise Tax Board, itself.
