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Business Taxes Law Guide – Revision 2024
 

California Department of Tax and Fee Administration

Title 18. Public Revenues
Division 5. California Department of Tax and Fee Administration

Chapter 1. Appeals

Article 4C. Request for Innocent Spouse Relief

Rule 35055

35055. Request for Innocent Spouse Relief.

Reference: Sections 297, 297.5 and 308, Family Code; Section 15570.54, Government Code; Sections 6456, 7202, 7203, 7261, 7262, 7657.5, 8880, 30285, 38454.5, 40105, 41099, 43159.1, 43159.2, 45158, 46159, 50112.6, 55045.1 and 60210.5, Revenue and Taxation Code.

(a) Notwithstanding any other provision in this chapter, the provisions of this regulation are applicable to a request for innocent spouse relief.

(b) Who may request relief. A divorced or separated spouse or registered domestic partner may request innocent spouse relief regarding taxes imposed under the Sales and Use Tax Law, Motor Vehicle Fuel Tax Law, Use Fuel Tax Law, Diesel Fuel Tax Law, Cigarette and Tobacco Products Tax Law, Timber Yield Tax Law, Energy Resources Surcharge Law, Emergency Telephone Users Surcharge Law, Hazardous Substances Tax Law, Integrated Waste Management Fee Law, Oil Spill Response, Prevention and Administration Fees Law, Underground Storage Tank Maintenance Fee Law, and Fee Collection Procedures Law.

(c) Request requirements. An individual seeking relief under subdivision (b) must file a written request for innocent spouse relief that is signed and dated by the individual seeking relief and specifically requests innocent spouse relief. The request must identify the tax from which that relief is sought, include the applicable tax account number, and provide a specific explanation as to why the individual requesting relief believes he or she should not be held responsible for the liability at issue. A completed form provided by CDTFA for use as a request for innocent spouse relief will satisfy these requirements.

(d) Filing requests.

(1) A request for innocent spouse relief may be filed if, at the time relief is requested, the individual requesting relief is no longer married to or is legally separated from the non-requesting spouse or registered domestic partner, or the requesting individual is no longer a member of the same household as the non-requesting spouse or registered domestic partner.

(2) A request for innocent spouse relief and related documents may be filed as set forth in this subdivision, or as otherwise expressly provided on CDTFA's website atwww.cdtfa.ca.gov.

(A) By hand delivery to: Offer in Compromise Section, MIC 52, California Department of Tax and Fee Administration, 450 N Street, Sacramento, CA 95814.

(B) By mail to: Offer in Compromise Section, MIC 52, California Department of Tax and Fee Administration, P.O. Box 942879, Sacramento, CA 94279-0052.

(C) By facsimile to: (916) 322-7940.

(e) Res Judicata. A liability is not eligible for relief under this regulation if that liability was incurred in a calendar month, quarter, or year that has been closed by res judicata.

(f) Limitation period. A liability is not eligible for relief under this regulation unless a timely request for innocent spouse relief is filed with regard to that liability.

(1) A request for innocent spouse relief that is filed with CDTFA no later than one year after CDTFA's first contact with the individual making the request is timely as to all liabilities.

(2) A request for innocent spouse relief that is filed with CDTFA more than one year after CDTFA's first contact with the individual making the request is timely only as to liabilities:

(A) Reported on a return due no more than five years before the filing of the request for innocent spouse relief; and

(B) Assessed by a CDTFA-issued determination or similar billing document for collection of a tax which became final no more than five years before the filing of the request for innocent spouse relief.

(g) Acknowledgment. When the Offer in Compromise Section receives a request for innocent spouse relief, it will:

(1) Mail the individual requesting relief an acknowledgement letter containing the contact information for the Offer in Compromise Section, and include a questionnaire and financial statement for the individual requesting relief to complete and return.

(2) Inform the non-requesting spouse or registered domestic partner that the request has been filed and the basis for the request, and permit the non-requesting spouse or registered domestic partner to submit information to support or counter the request.

(h) Review. The Offer in Compromise Section will review a request for innocent spouse relief to determine whether the individual requesting relief is eligible for innocent spouse relief or other equitable relief from all the liabilities included in his or her request. The Offer in Compromise Section may request additional information from the individual requesting relief if necessary to complete such review.

(i) Bases for relief. An individual requesting innocent spouse relief from liability for any tax, interest, penalties, or other amounts shall be relieved from such liability where all the following requirements are met:

(1) The liability is incurred under the Sales and Use Tax Law, Motor Vehicle Fuel Tax Law, Use Fuel Tax Law, Diesel Fuel Tax Law, Cigarette and Tobacco Products Tax Law, Timber Yield Tax Law, Energy Resources Surcharge Law, Emergency Telephone Users Surcharge Law, Hazardous Substances Tax Law, Integrated Waste Management Fee Law, Oil Spill Response, Prevention and Administration Fees Law, Underground Storage Tank Maintenance Fee Law, or Fee Collection Procedures Law;

(2) The liability is attributable to the non-requesting spouse or registered domestic partner;

(3) The individual requesting relief establishes that he or she did not know of the liability, and that a reasonably prudent person in the requesting individual's circumstances would not have had reason to know of the liability; and

(4) It would be inequitable to hold the requesting individual responsible for the liability, taking into account whether the requesting individual significantly benefited directly or indirectly from the liability, and taking into account all other facts and circumstances.

(j) Attribution.

(1) The determination of the spouse or registered domestic partner to whom items of liability are attributable shall be made without regard to community property laws.

(2) With respect to a liability incurred as a result of a failure to file a return or an omission of an item from the return, attribution to one spouse or registered domestic partner may be determined by whether a spouse or registered domestic partner rendered substantial services as a taxpayer engaged in an activity or transaction that is subject to a tax administered under the laws specified in subdivision (i)(1) and related to the liability. If neither spouse, or if neither registered domestic partner, rendered substantial services as a taxpayer, then the attribution of the liability shall be treated as community property. A liability incurred as a result of an erroneous deduction or credit shall be attributable to the spouse or registered domestic partner who caused the deduction or credit to be entered on the return.

(k) Benefited.

(1) Whether a requesting individual has benefited directly or indirectly from the liability will be determined by a review of all of the available evidence. Normal support is not a significant benefit for purposes of this determination. Normal support is measured relative to each family’s standard of living. The requesting individual will not be deemed to have benefited directly or indirectly from the liability solely as a result of normal support unless his or her lifestyle significantly improved during the periods of liability.

(2) Gifts received by the requesting individual, or lavish or luxury purchases made by either spouse or registered domestic partner may be evidence that the requesting individual benefited directly or indirectly from the liability. Evidence of direct or indirect benefit may consist of transfers of property, including transfers which may be received several years after the calendar quarter in which the liability occurred. For example, if a requesting individual receives from the other spouse or registered domestic partner an inheritance of property or life insurance proceeds which are traceable to the liability, the requesting individual will be considered to have benefited from that liability. Other factors considered may include desertion of the requesting individual by the other spouse or registered domestic partner or that the spouses or registered domestic partners have become divorced or separated subsequent to the periods of liability.

(l) Other equitable relief. A requesting individual may also be relieved of liability for any unpaid tax or deficiency under the laws specified in subdivision (i)(1) for which relief is not available under subdivision (i) if, taking into account all the facts and circumstances, it is inequitable to hold the requesting individual liable for such amount. An individual requesting relief shall only be considered for other equitable relief after the individual files a written request for innocent spouse relief.

(1) Factors that may be considered for the purpose of granting other equitable relief include, but are not limited to:

(A) The requesting individual is separated (whether legally or not) or divorced from the non-requesting spouse or registered domestic partner.

(B) The requesting individual would suffer economic hardship if relief is not granted.

(C) The requesting individual, under duress from the non-requesting spouse or registered domestic partner, did not pay the liability. To substantiate "duress," the requesting individual must provide objective evidence. "Objective evidence" can include, but is not limited to, such documents as police reports, restraining orders, or counseling reports.

(D) The requesting individual did not know and had no reason to know about the items causing the understatement or that the tax would not be paid.

(E) The non-requesting spouse or registered domestic partner has a legal obligation under a divorce decree or agreement to pay the tax. (This obligation will not be considered a positive factor if the requesting individual knew or had reason to know, at the time the divorce decree or agreement was entered into, that the non-requesting spouse or registered domestic partner would not pay the tax.)

(F) The tax for which the requesting individual is requesting relief is attributable to the non-requesting spouse or registered domestic partner.

(2) Factors that may be considered for purposes of denying other equitable relief include, but are not limited to:

(A) The requesting individual will not suffer economic hardship if relief is not granted.

(B) The requesting individual knew or had reason to know about the items causing the understatement or that the tax would be unpaid at the time the requesting individual signed the return.

(C) The requesting individual received a significant benefit from the unpaid tax or items causing the understatement.

(D) The requesting individual has not made a good faith effort to comply with the laws specified in subdivision (i)(1) for the periods for which the individual is requesting relief or for subsequent periods of liability.

(E) The requesting individual has a legal obligation under a divorce decree or agreement to pay the tax.

(F) The tax for which relief is being requested is attributable to the requesting individual.

(m) Written findings. Once its review is completed, the Offer in Compromise Section will mail the individual requesting relief a letter granting or denying innocent spouse relief and other equitable relief, and will explain in that letter why such relief was granted or denied. If the Offer in Compromise Section denies both innocent spouse relief and other equitable relief as to any liability included in a request for innocent spouse relief, the letter will include instructions about how to request review by the Appeals Bureau of that denial of relief.

(n) Failure to timely request appeals conference. If the individual requesting relief does not submit a timely request for appeals conference as provided in subdivision (o), the individual has waived the right to appeal the findings of the Offer in Compromise Section, and those findings become final.

(o) Appeals Conference, Decision, and Finality.

(1) Where the Offer in Compromise Section denies both innocent spouse relief and other equitable relief as to any liability included in a request for innocent spouse relief, the individual requesting relief may appeal that denial by submitting a written request for appeals conference to the Offer in Compromise Section. A request for appeals conference must state the specific grounds upon which the taxpayer contests the findings of the Offer in Compromise Section, must be signed by the taxpayer and include his or her telephone number, and must be submitted in the same manner as provided in subdivision (d)(2) for the filing of the request for innocent spouse relief.

(2) The provisions of article 8 of this chapter are applicable to the appeals conference and issuance of the decision of the Appeals Bureau. For purposes of article 8, the individual requesting relief is the "taxpayer." If the Appeals Bureau decision denies the request for innocent spouse relief, in whole or in part, and the individual requesting relief does not file an appeal to the Office of Tax Appeals within 30 days of the mailing of the Appeals Bureau letter, the individual has waived the right to appeal the decision of the Appeals Bureau, and the decision of the Appeals Bureau becomes final.

(3) When the appeal of the requesting individual is final, whether after the Offer in Compromise Section issues its findings or, if a timely request for appeals conference is submitted, after the Appeals Bureau issues its decision, or if a timely appeal to the Office of Tax Appeals is submitted, after the Office of Tax Appeals issues its decision, the Offer in Compromise Section will mail a letter to the non-requesting spouse or domestic partner stating the results of the requesting individual’s appeal.

(p) Refund. Where a request for relief of innocent spouse is granted as to amounts that have already been paid by the individual requesting relief, the amount can be refunded only as provided in the refund provisions of the applicable tax, as set forth in article 3 of this chapter.

History—New article 4C (regulation 35055) and regulation filed March 19, 2018, as an emergency; effective and operative March 19, 2018. Article and regulation refiled September 17, 2018, as an emergency; effective and operative September 17, 2018. Article and regulation refiled December 17, 2018, as an emergency; effective and operative December 17, 2018. Certificate of Compliance transmitted to OAL on February 20, 2019 and filed March 19, 2019. (The regulation incorporates provisions from regulations 1705.1 and 4903 in division 2 and regulations 5240, 5241, and 5242 in division 2.1.)

Note.—Authority cited: Sections 15570.40 and 15606, Government Code; Section 25215.74, Health and Safety Code; Sections 7051, 8251, 9251, 30451, 34013, 38701, 40171, 41128, 42020, 42103, 43501, 45851, 46601, 50152, 55301 and 60601, Revenue and Taxation Code.