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California Franchise Tax Board - Statute of Limitation for Tax Collection - 20 Years

July 10, 2007

New California Tax Collection Statute Begins to Give Relief to Some Taxpayers

I commented extensively in our past seminars regarding the need for creating a clear and certain collection statute for all California tax debts. By providing clear guidelines and dates for collection of taxes, taxpayers are better able to obtain a fresh start and be released from lifetime of uncertainty with regard to unpaid tax debts. In that regard, we applaud Assemblywoman Judy Chu in her effort, analysis and persistence in guiding this California tax collection bill through the legislative process.

As of May 2007, California Franchise Tax Board wrote off 373,819 accounts during the period of July 1, 2006, through May 30, 2007, inclusive. The total dollar amount of taxes which have been essentially eliminated for collections amount to $3,219,766,558 under the State of California's new tax collection statute which now allows a 20 year statute of limitations for collecting on California State tax debt which was enacted as part of AB 911.

The 20-year statute of limitations on the collection of California tax liabilities, as provided by Revenue and Taxation Code Section 19255, sets the period during which tax may be collected as up to 20 years from the last statutory lien date for each tax year. This new law does not affect Internal Revenue Service - IRS Tax Collections concerning tax debt owed to IRS or other Federal Agencies.

After the 20 year statute of limitations for tax collection, the tax liability for the tax year is written off and is considered time barred from tax collection procedures including tax levy, bank levy, tax lien by the Franchise Tax Board. Before California enacted the new tax law AB 911, there was no statute of limitations on the collection of tax liabilities and the government was allowed to issue tax levy, tax lien, enforce court enforced collections until the full tax amount was paid..

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