It’s a Shame to Not Pay Your Taxes

taylorlaw | 09/16/2015

taylorapril15-e1441088561181Pursuant to California Revenue and Taxation Code Section 19195, the Franchise Tax Board must publish, twice a year, a list of the top 500 taxpayers (individuals and corporations) who owe the FTB more than $100,000 in tax.  The legislative intent is to close the tax gap but to the lay person the purpose of the list is apparent – shame those taxpayers into paying.  But does it work?

First, the FTB must send notification by certified mail to taxpayers who are vetted for the list 30 days prior to posting their information. This is to allow the taxpayer an opportunity to resolve their tax account before being published on the wall of shame. How does a taxpayer resolve an account to avoid publication?  The FTB considers the following as resolution of a delinquent tax account for purposes of avoiding inclusion in the list:

  • Payment of the delinquent taxes in full
  • Entering a formal installment agreement to pay the delinquent tax balance
  • Submitting an offer in compromise
  • Bankruptcy 

If the vetted taxpayer does not resolve the delinquent tax account, and they are included in the published list, there are other consequences worth noting. Aside from your name being published, the delinquent tax amount owed is listed as well as the status of any occupational and/or professional license granted by the state. The license information is important because under Business and Professions Code Section 494.5 taxpayers published on this list may have their occupational and/or professional licenses suspended. For those taxpayers who don’t have such licenses, don’t worry!  The state has you covered as well.  Your driver’s license is subject to suspension.  If you’re a business that happens to rely on contracts for acquisition of goods and services with state agencies, you can say goodbye to those deals as well thanks to Public Contract Code 10295.4. 

So back to my original question:  Does it work?  According to the most recent update on the list (8/28/15) the state has collected $1,904,477 in delinquent taxes with a total of 5 delinquent taxpayers who have paid in full since the publication of the current list.  This program was implemented in 2007 and the FTB reports it has recovered more than $447 million in tax revenue as of August 3, 2015.   I’d say the answer is yes, it works! 

If you have received notification that the FTB wants you on their top 500 list, contact our office for assistance. 

Stateside is a collection of articles on California Tax Law written by Joyce E Cheng, EA.