Knowledge Center

Wednesday, March 13, 2013

Fiduciary Alert - Fiduciaries Beware: New California Franchise Tax Notice Requirements

Since the 1990s, The California Revenue & Tax Code has had a provision that requires bankruptcy trustees and like fiduciaries to give specific notice to the Franchise Tax Board upon their appointment. Historically, fiduciaries in many cases have merely filed a copy of the federal notice required under Treasury Regulation §301.60663-1. However, the Franchise Tax Board, in response to a number of inquiries by practitioners, determined that a regulation would assist with administration of the statutory section. The regulation was adopted on January 17, 2013 and applies to any receiver, assignee for the benefit of creditors or like fiduciaries who are assigned on or after March 18, 2013. The failure to file the required notice will result in the suspension of the four year statute of limitations for the issuance of proposed deficiency assessments. The suspension of the statute of limitations will allow the Franchise Tax Board an unlimited time in which to assess a tax liability.

The new regulation addresses the following:

  1. Who is required to give notice of qualifications as a fiduciary in a bankruptcy and receivership proceeding;
  2. The manner in which the notice is to be given;
  3. The timing of the notice; and
  4. The specific exemptions from the notice requirement. Bankruptcy trustees, debtors in possession or other similar fiduciaries in bankruptcy matter are specifically excluded from the notice requirement.

Although the regulation is modeled on the federal regulation, it has been modified to eliminate the requirement to give notice in probate cases, as that is addressed in the California Probate Code.

Horwood Marcus & Berk Chartered has extensive experience working with the Settlement Bureau in the event of an assessment. If you have any questions, contact Rick Rein, Marilyn Wethekam or your relationship attorney at Horwood Marcus & Berk Chartered.

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