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Business Taxes Law Guide—Revision 2024
Sales And Use Tax Law
Revenue and Taxation Code
Division 2. Other Taxes
Part 1. Sales and Use Taxes
Chapter 8. Administration
Article 3. The California Taxpayers' Bill of Rights*
Section 7093.5
7093.5. Settlement authority. (a) It is the intent of the Legislature that the department, its staff, and the Attorney General pursue settlements as authorized under this section with respect to civil tax matters in dispute that are the subject of protests, appeals, or refund claims, consistent with a reasonable evaluation of the costs and risks associated with litigation of these matters.
(b) (1) Except as provided in paragraph (2), no recommendation of settlement shall be submitted to the director for approval unless and until that recommendation has been submitted by the chief counsel to the Attorney General. Within 30 days of receiving that recommendation, the Attorney General shall review the recommendation and advise the chief counsel in writing of their conclusions as to whether the recommendation is reasonable from an overall perspective. The chief counsel shall, with each recommendation of settlement submitted to the director, also submit the Attorney General's written conclusions obtained pursuant to this paragraph.
(2) (A) A settlement of any civil tax matter in dispute involving a reduction of tax or penalties in settlement, the total of which reduction of tax and penalties in settlement does not exceed eleven thousand five hundred dollars ($11,500), may be approved by the director.
(B) Beginning on July 1, 2029, and each fifth fiscal year thereafter, the department shall adjust the amount specified in subparagraph (A) by increasing that amount by a percentage amount equal to the increase in the California Consumer Price Index, as calculated by the Department of Finance, with the resulting amount rounded to the nearest one hundred dollars ($100). The first adjustment pursuant to this subparagraph shall be a percentage amount equal to the increase in the California Consumer Price Index from January 1, 2024, to January 1, 2029. Subsequent fifth fiscal year adjustments shall cover subsequent five-year periods. The incremental change shall be added to the previously adjusted amount.
(c) Whenever a reduction of tax or penalties or total tax and penalties in settlement in excess of five hundred dollars ($500) is approved pursuant to this section, there shall be placed on file, for at least one year, in the office of the director a public record with respect to that settlement. The public record shall include all of the following information:
(1) The name or names of the taxpayers who are parties to the settlement.
(2) The total amount in dispute.
(3) The amount agreed to pursuant to the settlement.
(4) A summary of the reasons why the settlement is in the best interests of the State of California.
(5) (A) For any settlement approved by the director, except those settlements approved pursuant to paragraph (2) of subdivision (b), the Attorney General's conclusion as to whether the recommendation of settlement was reasonable from an overall perspective.
(B)The public record shall not include any information that relates to any trade secret, patent, process, style of work, apparatus, business secret, or organizational structure that, if disclosed, would adversely affect the taxpayer or the national defense.
(d) The director shall not participate in the settlement of tax matters pursuant to this section, except as provided in subdivision (e).
(e) (1) Any recommendation for settlement shall be approved or disapproved by the director, within 45 days of the submission of that recommendation to the director. Any recommendation for settlement that is not either approved or disapproved by the director within 45 days of the submission of that recommendation shall be deemed approved.
(2) Where the director disapproves a recommendation for settlement, at the discretion of the director and chief counsel, the matter shall be remanded to staff for further negotiation, and may be resubmitted to the director, in the same manner and subject to the same requirements as the initial submission.
(f) All settlements entered into pursuant to this section shall be final and nonappealable, except upon a showing of fraud or misrepresentation with respect to a material fact.
(g) Except as provided in subdivision (c), any settlement considered or entered into pursuant to this section shall constitute confidential tax information for purposes of Section 7056.
(h) The Legislature finds that it is essential for fiscal purposes that the settlement program authorized by this section be expeditiously implemented. Accordingly, Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code shall not apply to any determination, rule, notice, or guideline established or issued by the department in implementing and administering the settlement program authorized by this section.
(i) The amendments made to this section by the act adding this subdivision shall apply to any settlements approved on or after January 1, 2024.
History—Added by Stats. 1992, Ch. 708, in effect September 15, 1992. Stats. 1993, Ch. 75, in effect June 30, 1993, and Ch. 155, in effect July 19, 1993, substituted "1993" for "1992" and "1994" twice for "1993" in subdivision (f). Stats. 1993, Ch. 868, in effect January 1, 1994, substituted "January 1, 1994" for "July 1, 1993" and added second paragraph in subdivision (f). Stats. 1994, Ch. 138, in effect July 7, 1994, added new subdivision (a); renumbered former paragraph (1) of subdivision (a) as paragraph (1) of subdivision (b), deleted "In addition to the authority provided by Section 7093 and" after "(1)" and substituted "Subject" for "subject" after "(1)", therein; deleted former paragraph (3) of subdivision (a) which read, "The members of the board shall not participate in the settlement of these tax matters, except as provided in subdivision (c)."; relettered former subdivision (b) as (c) and added "settlement in" after "tax in" therein; substituted "in dispute" for "involved" in paragraph (2) and substituted "agreed to" for "payable or refundable" in paragraph (3) of subdivision (c); added new subdivision (d); relettered former subdivisions (c), (d), (e), (f), and (g) as (e), (f), (g), (h), and (i), respectively; substituted "(c)" for "(b)" after "subdivision" in subdivision (g); and substituted "in dispute … subdivision" for "disputes existing on January 1, 1994, with respect to which recommendations for settlement, pursuant to paragraph (2) of subdivision (a), are first submitted to the Attorney General no later than June 30, 1994, and are first submitted to the board no later than September 15, 1994. With respect to civil tax matter disputes that did not exist on September 1, 1993, but that existed on January 1, 1994, this section shall apply only to determinations issued during that interval and to payments made pursuant to those determinations." after "tax matter" in subdivision (h). Stats. 2000, Ch. 923 (AB 2894), in effect January 1, 2001, substituted "Except as provided … subject" for "Subject" in subparagraph (1), added "itself," after "to the board," in the first and third sentences of subparagraph (2), and added subparagraph (3) in subdivision (b); added "or penalties … and penalties" after "reduction of tax" in subdivision (c); substituted "For any … itself, the" for "The" in subparagraph (5) of subdivision (c); added ", itself" after "by the board" in the second sentence of subparagraph (1) of subdivision (e); added "considered or" after "any settlement" in the second sentence of subdivision (g); and substituted "matters" for "matter" after "civil tax" in subdivision (h). Stats. 2003, Ch. 605 (SB 1060), in effect January 1, 2004, added ", for at least one year," after "placed on file" in subdivision (c). Stats. 2023, Ch. 511 (SB 889), in effect January 1, 2024, substituted "department" for "State Board of Equalization" in subdivision (a); deleted paragraph (1) of subdivision (b); renumbered former paragraph (2) of subdivision (b) to paragraph (1) of subdivision (b); added "Except as provided in paragraph (2)," before "no recommendation of settlement" in paragraph (1) of subdivision (b); substituted "director for approval" for "board, itself," after "be submitted to the" in paragraph (1) of subdivision (b); deleted "executive director or" in three places in paragraph (1) of subdivision (b); renumbered paragraph (3) to (2) in subdivision (b); added "(A)" to the first sentence of paragraph (2) of subdivision (b); substituted "eleven thousand five hundred dollars ($11,500)" for "five thousand dollars ($5,000)" in subparagraph (A) of paragraph (2) of subdivision (b); substituted "director." for "executive director and chief counsel, jointly. The executive director shall notify the board, itself, of any settlement approved pursuant to this paragraph." After "may be approved by" in subparagraph (A) of paragraph (2) of subdivision (b); added subparagraph (B) to paragraph (2) of subdivision (b); substituted "director" for "executive director of the board" after "in the office of the" in subdivision (c); added "(A)" before "For any settlement" in paragraph (5) of subdivision (c); substituted "director, except those settlements approved pursuant to paragraph (2) of subdivision (b)" for "board, itself" after "approved by the" in subparagraph (A) of paragraph (5) of subdivision (c); added "(B)" before "The public record shall" in paragraph (5) of subdivision (c); substituted "members of the State Board of Equalization" for "director" in subdivision (d); substituted "board, itself" for "director" in two places in paragraph (1) of subdivision (e); substituted "board" for "director" after "recommendation to the" in paragraph (1) of subdivision (e); deleted the last sentence which read "Upon approval of a recommendation for settlement, the mater shall be referred back to the executive director or chief counsel in accordance with the decision of the board" in paragraph (1) of subdivision (e); substituted "Disapproval of a recommendation for settlement shall be made only by a majority vote of the board. Where the board" for "Where the director" in the first sentence of paragraph (2) of subdivision (e); substituted "the" for "at the discretion of the director and chief counsel" after "recommendation for settlement," in paragraph (2) of subdivision (e); substituted "the" for "at the discretion of the director and chief counsel, the" after "recommendation for settlement" in paragraph (2) of subdivision (e); deleted "board" after "be remanded to" in paragraph (2) of subdivision (e); subsituted "submittion, at the discretion of the executive director of chief counsel" for submittion after "as the initial" in subparagraph (2) of subdivision (e); deleted "Any proceedings undertaken by the board itself pursuant to a settlement as described in this section shall be conducted in a closed session or sessions." in subdivision (g); deleted subdivision (h); relettered subdivision (i) to (h); substituted "board" for "department" in subdivision (h); added subdivision (i).
* Article 3 was added by Stats. 1988, Ch. 1574, in effect January 1, 1989.