The California Franchise Tax Board (“FTB”) recently issued a revised draft regulation regarding the procedures for a taxpayer to petition for alternative apportionment under section 25137(d), title 18 of the California Code of Regulations. The updated draft regulation was issued following an interested parties meeting held on November 26, 2018.
Under the proposed procedures, a taxpayer may file a petition with the FTB Chief Counsel asserting why the taxpayer should be entitled to an alternative apportionment methodology or why the alternative apportionment methodology imposed by the FTB is inappropriate. If FTB staff has not previously made a determination regarding the taxpayer’s petition for alternative apportionment, then the FTB Chief Counsel is required to ensure that FTB staff considers and makes a determination regarding whether alternative apportionment is appropriate.
The draft regulation was also modified to address the procedures and deadlines for filing a petition for alternative apportionment with the FTB. Since the existing language of section 25137(d) uses the term “petition” as both an initial request for an alternative apportionment methodology and a request for the FTB to hear a taxpayer’s petition of an adverse variance action determination by FTB staff, the same procedures generally apply to both situations. However, a taxpayer is required to file the petition no later than: 1) 60 days after a written adverse action determination by FTB staff; 2) 120 days from filing a refund claim; or 3) 60 days prior to a scheduled protest hearing.
The revised draft does not modify the requirement under the previous version of the draft regulation requiring a taxpayer petitioning for an alternative apportionment methodology to submit a waiver of confidentiality. The draft regulation also provides detail regarding ex-parte communications, the briefing schedule, and administrative requirements for submission of briefs.
The FTB has scheduled another interested parties meeting for December 4, 2019 to discuss the draft regulation. Taxpayers should continue to monitor the progress of the draft alternative apportionment regulation. Stay tuned for more developments.
Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.
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