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Business Taxes Law Guide—Revision 2024
Fee Collection Procedures Law
Revenue and Taxation Code
Division 2. Other Taxes
Part 30. Fee Collection Procedures Law
Chapter 6. Administration and Taxpayers' Bill of Rights
Article 2. The California Taxpayers' Bill of Rights
Section 55332.5
Text of Section Operative January 1, 2023
55332.5. Offers in compromise. (a) Beginning on January 1, 2007, the director of the department, or their delegates, may compromise any final fee liability.
(b) For purposes of this section, "a final fee liability" means any final fee liability arising under Part 30 (commencing with Section 55001), or related interest, additions to fees, penalties, or other amounts assessed under this part.
(c) (1) Offers in compromise shall be considered only for liabilities that were generated from a business that has been discontinued or transferred, where the feepayer making the offer no longer has a controlling interest or association with the transferred business or has a controlling interest or association with a similar type of business as the transferred or discontinued business.
(2) Notwithstanding paragraph (1), a qualified final fee liability may be compromised regardless of whether the business has been discontinued or transferred or whether the feepayer has a controlling interest or association with a similar type of business as the transferred or discontinued business. All other provisions of this section that apply to a final fee liability shall also apply to a qualified final fee liability, and a compromise shall not be made under this subdivision unless all other requirements of this section are met. For purposes of this subdivision, a "qualified final fee liability" means that part of a final fee liability, including related interest, additions to fees, penalties, or other amounts assessed under this part, arising from a transaction or transactions in which the department finds no evidence that the feepayer collected the fee from the purchaser or other person and which was determined against the feepayer under Article 2 (commencing with Section 55061) or Article 3 (commencing with Section 55081) of Chapter 3.
(3) A qualified final fee liability may not be compromised with any of the following:
(A) A feepayer who previously received a compromise under paragraph (2) for a liability, or a part thereof, arising from a transaction or transactions that are substantially similar to the transaction or transactions attributable to the liability for which the feepayer is making the offer.
(B) A business that was transferred by a feepayer who previously received a compromise under paragraph (2) and who has a controlling interest or association with the transferred business, when the liability for which the offer is made is attributable to a transaction or transactions substantially similar to the transaction or transactions for which the feepayer's liability was previously compromised.
(C) A business in which a feepayer who previously received a compromise under paragraph (2) has a controlling interest or association with a similar type of business for which the feepayer received the compromise, when the liability of the business making the offer arose from a transaction or transactions substantially similar to the transaction or transactions for which the feepayer's liability was previously compromised.
(d) The department may, in its discretion, enter into a written agreement that permits the feepayer to pay the compromise in installments for a period not exceeding one year. The agreement may provide that such installments shall be paid by electronic funds transfers or any other means to facilitate the payment of each installment.
(e) A feepayer that has received a compromise under paragraph (2) of subdivision (c) may be required to enter into any collateral agreement that is deemed necessary for the protection of the interests of the state. A collateral agreement may include a provision that allows the department to reestablish the liability, or any portion thereof, if the feepayer has sufficient annual income during the succeeding five-year period. The department shall establish criteria for determining "sufficient annual income" for purposes of this subdivision.
(f) A feepayer that has received a compromise under paragraph (2) of subdivision (c) shall file and pay by the due date all subsequently required returns for a five-year period from the date the liability is compromised, or until the feepayer is no longer required to file returns, whichever period is earlier.
(g) Offers in compromise shall not be considered where the feepayer has been convicted of felony tax evasion under this part during the liability period.
(h) For amounts to be compromised under this section, the following conditions shall exist:
(1) The feepayer shall establish that:
(A) The amount offered in payment is the most that can be expected to be paid or collected from the feepayer's present assets or income.
(B) The feepayer does not have reasonable prospects of acquiring increased income or assets that would enable the feepayer to satisfy a greater amount of the liability than the amount offered, within a reasonable period of time.
(2) The department shall have determined that acceptance of the compromise is in the best interest of the state.
(i) A determination by the department that it would not be in the best interest of the state to accept an offer in compromise in satisfaction of a final fee liability shall not be subject to administrative appeal or judicial review.
(j) (1) Offers for liabilities with a fraud or evasion penalty shall require a minimum offer of the unpaid fee and fraud or evasion penalty.
(2) The minimum offer may be waived if it can be shown that the feepayer making the offer was not the person responsible for perpetrating the fraud or evasion. This authorization to waive only applies to partnership accounts where the intent to commit fraud or evasion can be clearly attributed to a partner of the feepayer.
(k) When an offer in compromise is either accepted or rejected, or the terms and conditions of a compromise agreement are fulfilled, the department shall notify the feepayer in writing. In the event an offer is rejected, the amount posted will either be applied to the liability or refunded, at the discretion of the feepayer.
(l) When more than one feepayer is liable for the debt, such as with spouses or partnerships or other business combinations, including, but not limited to, feepayers who are liable through dual determination or successor's liability, the acceptance of an offer in compromise from one liable feepayer shall reduce the amount of the liability of the other feepayers by the amount of the accepted offer.
(m) Whenever a compromise of fees or penalties or total fees and penalties in excess of five hundred dollars ($500) is approved, there shall be placed on file for at least one year in the office of the director of the department a public record with respect to that compromise. The public record shall include all of the following information:
(1) The name of the feepayer.
(2) The amount of unpaid fees and related penalties, additions to fees, interest, or other amounts involved.
(3) The amount offered.
(4) A summary of the reason why the compromise is in the best interest of the state.
The public record shall not include any information that relates to any trade secrets, patent, process, style of work, apparatus, business secret, or organizational structure, that if disclosed, would adversely affect the feepayer or violate the confidentiality provisions of Section 55381. A list shall not be prepared and releases shall not be distributed by the department in connection with these statements.
(n) A compromise made under this section may be rescinded, all compromised liabilities may be reestablished, without regard to any statute of limitations that otherwise may be applicable, and no portion of the amount offered in compromise refunded, if either of the following occurs:
(1) The department determines that a person did any of the following acts regarding the making of the offer:
(A) Concealed from the department property belonging to the estate of a feepayer or other person liable for the fee.
(B) Received, withheld, destroyed, mutilated, or falsified a book, document, or record or made a false statement, relating to the estate or financial condition of the feepayer or other person liable for the fee.
(2) The feepayer fails to comply with any of the terms and conditions relative to the offer.
(o) A person who, in connection with an offer or compromise under this section, or offer of that compromise to enter into that agreement, willfully does either of the following shall be guilty of a felony and, upon conviction, shall be fined not more than fifty thousand dollars ($50,000) or imprisoned pursuant to subdivision (h) of Section 1170 of the Penal Code, or both, together with the costs of investigation and prosecution:
(1) Conceals from an officer or employee of this state property belonging to the estate of a feepayer or other person liable in respect of the fee.
(2) Receives, withholds, destroys, mutilates, or falsifies a book, document, or record, or makes a false statement, relating to the estate or financial condition of the feepayer or other person liable in respect of the fee.
(p) For purposes of this section, "person" means the feepayer, a member of the feepayer's family, a corporation, agent, fiduciary, or representative of, or another individual or entity acting on behalf of, the feepayer, or another corporation or entity owned or controlled by the fee payer, directly or indirectly, or that owns or controls the feepayer, directly or indirectly.
(q) This section shall remain in effect only until January 1, 2028, and as of that date is repealed.
History—Added by Stats. 2006, Ch. 364 (AB 3076), in effect January 1, 2007. Stats. 2008, Ch. 222 (AB 2047), in effect January 1, 2009, redesignated former subdivision "(c)" to be "(c)(1)" and added paragraphs (2) and (3) in subdivision (c); added subdivisions (d), (e), (f), and (g); relettered former subdivisions (d), (e), (f), (g), (h), (i), (j), (k), (l), and (m) as (h), (i), (j), (k), (l), (m), (n), (o), (p), and (q), respectively; added subdivision (r); and substituted "feepayer" for "fee payer" throughout the section. Stats. 2011, Ch. 15 (AB 109), in effect April 4, 2011, operative October 1, 2011, substituted "pursuant to subdivision (h) of Section 1170 of the Penal Code" for "in the state prison" after "($50,000) or imprisoned" in subdivision (p). Stats. 2012, Ch. 285 (SB 1548), in effect January 1, 2013, substituted "A" for "Any" or "an" for "any" throughout the section; substituted "a" for "no" after "final fee liability, and" and added "not" after "compromise shall", and substituted "fees" for "fee" after "additions to" in paragraph (2) of subdivision (c); revised the last sentence in the last paragraph of subdivision (n); deleted "any" after "from the board" in subparagraph (1)(A) of subdivision (o); deleted "any" after "employee in this state" in paragraph (1) of subdivision (p); added "or financial condition of the feepayer or other person liable in respect of the" after "relating to the estate" in paragraph (2) of subdivision (p); substituted "another" for "any other" in subdivision (q); and substituted "2018" for "2013" in subdivision (r). Stats. 2017, Ch. 272 (AB 525), in effect January 1, 2018, substituted "2023" for "2018" after "until January 1" and deleted ", unless a later enacted statute, that is enacted before January 1, 2018, deletes or extends that date" after "date is repealed" in subdivision (r). Stats. 2022, Ch. 474 (SB 1496), in effect January 1, 2023, substituted "department" for "board" throughout the section; deleted "executive" before "director", deleted "and chief counsel" after "director", deleted "where the reduction of fees is seven thousand five hundred dollars ($7,500) or less" after "liability", and deleted paragraphs (2) and (3) from subdivision (a); substituted "that" for " which" after "agreement" in subdivision (d); deleted "executive" before "director" in first paragraph of subdivision (n); substituted "2028" for "2023" after "January 1," in subdivision (r); deleted subdivision (e) and relettered former subdivisions (f) - (r) as (e) - (q), respectively.
Note.—SEC 1 of Stats 2011, Ch. 15 (AB 109), in effect April 4, 2011, states: "This act is titled and may be cited as the 2011 Realignment Legislation addressing public safety."
Note.—SEC 636 of Stats 2011, Ch. 15 (AB 109) in effect April 4, 2011, states: "This act will become operative no earlier than July 1, 2011, and only upon creation of a community corrections grant program to assist in implementing this act and upon an appropriation to fund the grant program."
Note.—The Community Corrections Grant Program referred to in SEC 636 of Stats. 2011, Ch. 15 (AB 109), as amended by SEC 68 of Stats. 2011, Ch. 39 (AB 117), was created by SEC 3 of Stats. 2011, Ch. 40 (AB 118), operative October 1, 2011.
Text of Section Operative January 1, 2028
55332.5. Offers in compromise. (a) The director of the department, or their delegates, may compromise any final fee liability.
(b) For purposes of this section, "a final fee liability" means any final fee liability arising under Part 30 (commencing with Section 55001), or related interest, additions to fees, penalties, or other amounts assessed under this part.
(c) Offers in compromise shall be considered only for liabilities that were generated from a business that has been discontinued or transferred, where the feepayer making the offer no longer has a controlling interest or association with the transferred business or has a controlling interest or association with a similar type of business as the transferred or discontinued business.
(d) Offers in compromise shall not be considered where the feepayer has been convicted of felony tax evasion under this part during the liability period.
(e) For amounts to be compromised under this section, the following conditions shall exist:
(1) The feepayer shall establish that:
(A) The amount offered in payment is the most that can be expected to be paid or collected from the feepayer's present assets or income.
(B) The feepayer does not have reasonable prospects of acquiring increased income or assets that would enable the feepayer to satisfy a greater amount of the liability than the amount offered, within a reasonable period of time.
(2) The department shall have determined that acceptance of the compromise is in the best interest of the state.
(f) A determination by the department that it would not be in the best interest of the state to accept an offer in compromise in satisfaction of a final fee liability shall not be subject to administrative appeal or judicial review.
(g) (1) Offers for liabilities with a fraud or evasion penalty shall require a minimum offer of the unpaid fee and fraud or evasion penalty.
(2) The minimum offer may be waived if it can be shown that the feepayer making the offer was not the person responsible for perpetrating the fraud or evasion. This authorization to waive only applies to partnership accounts where the intent to commit fraud or evasion can be clearly attributed to a partner of the feepayer.
(h) When an offer in compromise is either accepted or rejected, or the terms and conditions of a compromise agreement are fulfilled, the department shall notify the feepayer in writing. In the event an offer is rejected, the amount posted will either be applied to the liability or refunded, at the discretion of the feepayer.
(i) When more than one feepayer is liable for the debt, such as with spouses or partnerships or other business combinations, including, but not limited to, feepayers who are liable through dual determination or successor's liability, the acceptance of an offer in compromise from one liable feepayer shall reduce the amount of the liability of the other feepayers by the amount of the accepted offer.
(j) Whenever a compromise of fees or penalties or total fees and penalties in excess of five hundred dollars ($500) is approved, there shall be placed on file for at least one year in the office of the director of the department a public record with respect to that compromise. The public record shall include all of the following information:
(1) The name of the feepayer.
(2) The amount of unpaid fees and related penalties, additions to fees, interest, or other amounts involved.
(3) The amount offered.
(4) A summary of the reason why the compromise is in the best interest of the state.
The public record shall not include any information that relates to any trade secrets, patent, process, style of work, apparatus, business secret, or organizational structure, that if disclosed, would adversely affect the feepayer or violate the confidentiality provisions of Section 55381. A list shall not be prepared and releases shall not be distributed by the department in connection with these statements.
(k) A compromise made under this section may be rescinded, all compromised liabilities may be reestablished, without regard to any statute of limitations that otherwise may be applicable, and no portion of the amount offered in compromise refunded, if either of the following occurs:
(1) The department determines that a person did any of the following acts regarding the making of the offer:
(A) Concealed from the department property belonging to the estate of a feepayer or other person liable for the fee.
(B) Received, withheld, destroyed, mutilated, or falsified a book, document, or record, or made any false statement, relating to the estate or financial condition of the feepayer or other person liable for the fee.
(2) The feepayer fails to comply with any of the terms and conditions relative to the offer.
(l) A person who, in connection with an offer or compromise under this section, or offer of that compromise to enter into that agreement, willfully does either of the following shall be guilty of a felony and, upon conviction, shall be fined not more than fifty thousand dollars ($50,000) or imprisoned pursuant to subdivision (h) of Section 1170 of the Penal Code, or both, together with the costs of investigation and prosecution:
(1) Conceals from an officer or employee of this state property belonging to the estate of a feepayer or other person liable in respect of the fee.
(2) Receives, withholds, destroys, mutilates, or falsifies a book, document, or record, or makes a false statement, relating to the estate or financial condition of the feepayer or other person liable in respect of the fee.
(m) For purposes of this section, "person" means the feepayer, a member of the feepayer's family, a corporation, agent, fiduciary, or representative of, or another individual or entity acting on behalf of, the feepayer, or another corporation or entity owned or controlled by the feepayer, directly or indirectly, or that owns or controls the feepayer, directly or indirectly.
(n) This section shall become operative on January 1, 2028.
History—Added by Stats. 2008, Ch. 222 (AB 2047), in effect January 1, 2009, operative until January 1, 2013. Stats. 2011, Ch. 15 (AB 109), in effect April 4, 2011, operative October 1, 2011, substituted "pursuant to subdivision (h) of Section 1170 of the Penal Code" for "in the state prison" after "($50,000) or imprisoned" in subdivision (l). Stats. 2012, Ch. 285 (SB 1548), in effect January 1, 2013, substituted "A" for "Any" or "an" for "any" throughout the section; substituted "A" for "No", added "not" after "list shall", deleted "no" after "prepared and", and added "shall not be" after "releases" in second sentence of last paragraph of subdivision (j); deleted "any" after "from the board" in subparagraph (1)(A) of subdivision (k) and added comma after "record" in paragraph (1)(B) of subdivision (k); deleted "any" after "employee in this state" in paragraph (1) of subdivision (l); substituted "another" for "any other" in subdivision (m); and substituted "2018" for "2013" in subdivision (n). Stats. 2013, Ch. 177 (SB 824), in effect January 1, 2014, added "or financial condition of the feepayer or other person liable in respect of the" after ", relating to the estate" in paragraph (2) of subdivision (l). Stats. 2017, Ch. 272 (AB 525), in effect January 1, 2018, substituted "2023" for "2018" after "January 1," in subdivision (n). Stats. 2022, Ch. 474 (SB 1496), in effect January 1, 2023, substituted "department" for "board" throughout the section; deleted "executive" before "director", deleted "and chief counsel" after "director", deleted "where the reduction of fees is seven thousand five hundred dollars ($7,500) or less" after "liability", and deleted paragraphs (2) and (3) from subdivision (a); deleted "executive" before "director" in first paragraph of subdivision (j); and substituted "2028" for "2023" after "January 1," in subdivision (n)
Note.—SEC 1 of Stats 2011, Ch. 15 (AB 109), in effect April 4, 2011, states: "This act is titled and may be cited as the 2011 Realignment Legislation addressing public safety."
Note.—SEC 636 of Stats 2011, Ch. 15 (AB 109) in effect April 4, 2011, states: "This act will become operative no earlier than July 1, 2011, and only upon creation of a community corrections grant program to assist in implementing this act and upon an appropriation to fund the grant program."
Note.—The Community Corrections Grant Program referred to in SEC 636 of Stats. 2011, Ch. 15 (AB 109), as amended by SEC 68 of Stats. 2011, Ch. 39 (AB 117), was created by SEC 3 of Stats. 2011, Ch. 40 (AB 118), operative October 1, 2011.