Regular Rulemaking Process

The rulemaking procedures and standards in the Administrative Procedure Act (APA) (commencing with Government Code section 11340) apply to the adoption, amendment, and repeal of regulations, unless expressly exempted by statute. The California Department of Tax and Fee Administration (Department) generally adopts, amends, or repeals its regulations in accordance with the APA’s regular rulemaking procedures in Government Code sections 11346.2 through 11348. These procedures require the Department to establish that each regulatory action is reasonably necessary to address the problem (or issue) for which it is proposed.

The regular rulemaking process is prompted by the identification of an issue related to the administration or enforcement of a law that needs to be addressed by the Department through the adoption, amendment, or repeal of one or more regulations. Issues are generally identified based on various reasons, including, the passing of new legislation, a court decision, a change in the interpretation of existing law which has a general impact on tax and fee payers, or the need to provide clarification.

If an informal discussion with interested parties is desired prior to beginning formal rulemaking, the Business Taxes Committee (BTC) obtains approval from the Director and initiates an informal rulemaking process. This process generally includes the issuance of one or more Discussion Papers and, depending on the issue and the amount of public interest, a discussion of the topic in an interested parties meeting.

Discussion Papers generally include background regarding the issue, the Department’s proposal to address the issue, a discussion of the Department’s rationale for the proposal, and the text of the proposed regulation(s) (hereinafter, proposed language or proposed regulation). The BTC posts the Discussion Paper on its website and distributes the material (via internet link or by mail) to interested parties, along with an invitation to discuss the topic, proposed language, or identify and resolve any issues if needed. Interested parties are also encouraged to submit any written comments, including any alternative or additional language, for consideration following the interested parties meeting.

After the interested parties meeting and receipt of comments from interest parties, the BTC and other Department staff will review and consider comments submitted. After the review is completed, BTC will either finalize the proposed regulation language with or without revisions or schedule another interested parties meeting to further discuss unresolved issues or concerns. Once the Department determines that the regulation is ready to be formally proposed, BTC will ask the Director for approval to move forward with formal rulemaking.

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Upon receiving the Director’s approval to proceed with the formal rulemaking process, the BTC facilitates the completion of the documents required to initiate formal rulemaking, which include: the express terms of the proposed regulation; the notice of proposed regulatory action (Notice); the initial statement of reasons; and the Department of Finance (DOF) Form 399, Economic and Fiscal Impact Statement. The BTC works with the Department’s Legal Division to prepare the Notice and initial statement of reasons. The BTC works with the Department’s Research and Statistics Section to prepare Form 399 in accordance with State Administrative Manual sections 6601-6615. The Regulations Coordinator will send Form 399 to DOF for concurrence when the adoption of the regulation will result in local or state agency costs or savings, or in other nondiscretionary local or state revenue increases or decreases. Information provided on the Form 399 may also be included in the formal rulemaking documents.

After the Department receives the Director’s approval to begin the formal rulemaking process and receives concurrence from DOF on Form 399, the Regulations Coordinator submits the Notice for proposed regulation to the Office of Administrative Law (OAL) for publication in the California Regulatory Notice Register, posts the Notice on the Department website, and distributes the Notice to Department staff. The Regulations Coordinator will also mail the Notice or provide a link to the Notice via email, to interested parties identified by BTC and to parties that requested notice of the Department’s regulatory actions. Interested parties may sign up to be added to the Listserv email list to receive notice of the Department’s regulatory actions, at the following link: http://www.cdtfa.ca.gov/subscribe/aprc.aspx.

Upon publication of the Notice for a proposed regulation in the California Regulatory Notice Register, the public has 45 calendar days to provide written comments on the proposed regulatory action.

A public hearing will not be held regarding the adoption of a proposed regulation unless the Notice indicates that a public hearing has been scheduled or an interested party requests a public hearing in writing no later than 15 days prior to the close of the written comment period specified in the Notice. Also, a public hearing will not be held sooner than 45 days after the date the Department’s Notice was published for the proposed regulation.

During a public hearing, the Department will begin the hearing by introducing the topic of the proposed regulation. Following this introduction, interested parties will be invited to make oral comments or submit written comments regarding the proposed regulation.

The Department may continue or postpone a public hearing by notifying the public as to when the hearing will be resumed or rescheduled. The Regulations Coordinator will post the new public hearing date and time on the Department’s website, and mail or email interested parties regarding the new date and time.

The Department’s authority to adopt, amend, and repeal regulations is vested in the Director, and the Director has the discretion to delegate that authority to other Department staff.

The Department must consider any written comments received before the close of the written comment period and any oral and written comments from the public hearing, if held, before the Department decides whether to adopt the proposed regulation.

The Department may adopt the proposed regulation with changes that are non-substantial or solely grammatical in nature, or with changes sufficiently related to the original proposed text that the public was adequately placed on notice that changes could result from the originally proposed regulatory action.

If the Department decides to make sufficiently related changes, the full text of the proposed regulation, with the changes clearly indicated, will be made available to the public for written comment at least 15 days before adoption of the proposed regulation with the changes. The Regulations Coordinator sends the proposed regulation with the changes clearly indicated to all interested parties, including those who commented orally or in writing, and posts it on the Department website.

If the Department decides to make changes to the proposed regulation that are not sufficiently related, the Department must begin the entire rulemaking process again.

If the Department adopts the proposed regulation, with or without changes, the Regulations Coordinator will submit the rulemaking file for the proposed regulation to OAL for approval and filing with the Secretary of State (SOS). A final statement of reasons and updated informative digest must be included in the rulemaking file submitted to OAL for approval. The final statement of reasons must include a response to every timely public comment submitted either orally or in writing regarding the proposed regulation. Also, when the adoption of the proposed regulation has a fiscal impact on local government, state government, or the federal funding of state programs, the Department must have its Form 399 signed by a DOF Program Budget Manager before the rulemaking file is submitted to OAL for approval.

OAL is responsible for the review of regulations as provided in article 6 of the APA (commencing with Government Code section 11349).

OAL has 30 working days to review a proposed regulation adopted through the regular rulemaking process described above, to ensure that the Department satisfied the requirements of the APA and OAL’s regulations. If approved, OAL files the regulation with the SOS. If the regulation is disapproved, OAL will return it back to the Regulations Coordinator for amendment and resubmission within 120 days.

Unless an exception applies, Government Code section 11343.4 states the effective date of an approved regulation is determined by the date the regulation is filed with SOS as follows:

  1. January 1 if the regulation or order of repeal is filed on September 1 to November 30, inclusive.
  2. April 1 if the regulation or order of repeal is filed on December 1 to February 29, inclusive.
  3. July 1 if the regulation or order of repeal is filed on March 1 to May 31, inclusive.
  4. October 1 if the regulation or order of repeal is filed on June 1 to August 31, inclusive.

Exceptions to this rule are: (1) a regulation adopted pursuant to a statute requiring a specific effective date, which is effective on the date prescribed by the statute; (2) a regulation with a later Department-prescribed effective date, which is effective on the date specified by the Department; and (3) a regulation with an earlier effective date prescribed by OAL based upon the Department’s written request demonstrating good cause, which is effective on the date specified by OAL.

When the Legislature provides by statute or the Department makes a finding that the immediate adoption, amendment, or repeal of a regulation is necessary to address an emergency and avoid serious harm to the public peace, health, safety, or general welfare, the Department may adopt, amend, or repeal a regulation on an emergency basis as provided in Government Code section 11346.1. An emergency regulation is only effective for 180 days (unless a longer time is specified in statute). OAL may approve two re-adoptions of an emergency regulation and each approved re-adoption may be effective for no more than 90 days. An emergency regulation is repealed on the date that it ceases to be effective, unless it is certified through the regular rulemaking process described above and submitted to OAL for review prior to that date.

Except as otherwise provided by statute, any person may petition the Department to adopt, amend, or repeal a regulation. The Department must act on such a petition within 30 days of receipt. However, this time may be extended upon agreement of the petitioner. This procedure is set out in Government Code sections 11340.6 and 11340.7.

The Chief Counsel or Chief Counsel’s designee will present the petition and the Legal Division’s recommendation to the Director or Director’s designee. The Director or Director’s designee may grant the petition and set the regulation for public hearing, deny the petition in whole or in part, or take any other action determined to be warranted by the petition.

Any interested party may request reconsideration of the Department’s action on a petition to adopt, amend, or repeal a regulation within 60 days of the Department’s action.

Note For questions about the rulemaking process, please email BTFD-BTC.InformationRequests@cdtfa.ca.gov.