Taylor Nelson Amitrano LLP Proposal Spurs Proposed Legislation Changes to EDD Levy Procedures

March 31, 2023

SANTA ANA, CALIF. (PRWEB) MARCH 31, 2023

Taylor Nelson Amitrano LLP, a prominent tax controversy firm located in Santa Ana, CA, is pleased to announce that the California legislature is considering a proposed amendment to California Unemployment Insurance Code (“CUIC”) Section 1755 to protect the rights of taxpayers, based on a proposal co-authored by Rami M. Khoury and other members of the firm. The proposed legislation would require financial institutions to hold funds in a taxpayer’s account(s) for at least 10 business days after receiving a levy (called a “withholding order” under California law) on the taxpayer’s account(s) before sending levied funds to the Employment Development Department (“EDD”). The proposed legislation would also extend the deadline by which financial institutions are required to send levied-upon funds to the EDD.

Under current law, once the EDD serves a levy upon a financial institution, the financial institution is not required to hold the amounts in the account before sending the funds to the EDD. Thus, it is possible that the financial institution will send the levied-upon funds to the EDD before the taxpayer is even aware that the EDD has levied on the taxpayer’s account(s). The taxpayer can be deprived of any opportunity whatsoever to persuade the EDD to release the levied-upon funds based on hardship, a claim of exemption from levy, or the failure of the EDD to follow proper procedures.

In addition, under current law, the financial institution must remit the levied funds to the EDD “within five days of the service of the levy” to avoid a risk of being held liable itself to the EDD for the amount held in the account(s). Thus, financial institutions are incentivized to immediately send funds to the EDD after receiving a levy from the EDD, at the expense of the rights of their customer, the taxpayer.

The absence of any time period for which financial institutions must hold funds after receiving a levy from the EDD is unfair to California taxpayers and deprives them of their basic rights as California taxpayers. Following an EDD levy on their financial accounts, taxpayers should have the opportunity to persuade the EDD to release funds subject to levy before those funds are sent to the EDD. For example, the taxpayer could challenge to the procedural validity of the levy, could claim that the funds in the account are exempt from levy, or could claim that failure to release levied upon funds would create undue financial hardship for the taxpayer.

The short 5 day deadline by which financial institutions must send levied-upon funds to the EDD likewise is unfair to California taxpayers. It places financial institutions who receive levies from the EDD in a position of having to protect their own interests at the expense of the basic rights of their customers by quickly sending funds to the EDD after receiving an EDD levy.

The proposed amendments to CUIC 1755 in California Assembly Bill No. 1389 (AB-1389) dated February 17, 2023 protect basic taxpayer rights, while also giving financial institutions the flexibility that they need to avoid impinging on the basic rights of their customers. First, these proposed amendments require financial institutions to hold levied-upon funds for a minimum of 10 business days before levied funds are sent to the EDD by financial institutions. Taxpayers can use this 10 business day period to talk to the EDD about the levy and seek administrative relief from the levy before any funds are sent to the EDD.

Second, the proposed amendments extend the deadline by which a financial institution is required to remit funds to the EDD in response to a levy from five days after the levy is received to 14 business days after the levy is received. Accordingly, financial institutions receiving a levy on a customer’s account from the EDD must hold the levied upon funds for a minimum of 10 business days and could hold the funds for as long as 14 business days without running the risk of personal liability to the EDD for the funds in the levied-upon account.

The proposed amendments track a proposal made by attorneys at Taylor Nelson Amitrano LLP as members of a delegation of California tax attorneys that presents proposals for changes to California tax laws each year. The attorneys at Taylor Nelson Amitrano LLP take pride in protecting the rights of taxpayers by submitting proposals for legislative and administrative changes that protect the rights of taxpayers. The firm is a full-service tax controversy firm. If you or your business is experience difficulties with the EDD, IRS, FTB or CDTFA, the firm stands ready to assist you.

###