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Franchise Tax Board answers question regarding 20 year statute of limitations for collections!

California’s statute of limitations for collection is 20 years (the federal statute is only 10 years.) When FTB assesses a collection fee while the statute is running on an original assessment, the 20-year state expiration date is extended by restarting the collection period using the date of the subsequent assessment for the collection fee as the new beginning date.

It seems this practice works to circumvent the 20-year statute. Please explain how this practice is supported by current California statute.

Response #1:

Our 20-year collection statute is Revenue and Taxation Code (R&TC) Section 19255.

Under subdivision (c)(1) of RT&C Section 19255, a “tax liability,” as those terms are used in Section 19255, includes both “tax” and “fees.”

Under subdivisions (a) and (c)(2) of RT&C Section 19255, where there is more than one liability for a tax year, the 20-year statute runs from the latest “due and payable” date for those liabilities. (RT&C Section 19255(a) (“after 20 years have lapsed from the date the latest tax liability for a taxable year . . . becomes ‘due and payable’ within the meaning of Section 19221”) and (c)(2) (“If more than one liability is ‘due and payable’ for a particular taxable year, . . . , the ‘due and payable’ date that is later in time shall be the date upon which the 20-year limitation of subdivision (a) commences.”).)

Thus, under RT&C Section 19255, in the case of a tax liability and a collection fee imposed with respect to that tax liability, the 20-year statute contained in Section 19255 will run from the due and payable date of the collection fee.

The following example illustrates how the statute is applied:

  • A taxpayer files a 2014 return on April 15, 2015. The return has a liability that the taxpayer does not pay. The liability is established on FTB’s system on April 17, 2017.

  • Approximately 1 year later, we impose a collection fee related to the 2014 tax liability, which is established on our system on April 20, 2018.

  • Assuming that there are no other facts, the 20-year statute under Section 19255 will run 20 years after the collection fee was established on our system, because the collection fee has the later “due and payable” date.

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