On Sept. 11, 2007, the California State Board of Equalization (“SBE”) department staff held a public hearing on its proposal to repeal existing SBE Rules of Practice regarding income and franchise tax appeals, and to adopt new Rules of Practice. The SBE hears administrative appeals from actions of the California Franchise Tax Board (“FTB”). Appeals of FTB actions are heard by a five-member Board made up of four elected members from four districts in California, and the California State Controller as an ex-officio member.

The new proposed regulations carry over some former rules, clarify other former rules, and establish new rules concerning the SBE’s procedures for hearing appeals from actions of the FTB.

The highlights of the SBE’s new proposed regulations include the following:


The SBE will take jurisdiction to hear and decide a timely filed appeal from the action of the FTB in most instances. The notable exceptions are:

  • Whether a California statute is invalid or unenforceable under the Federal or California Constitutions (unless a federal or California appellate court has already made such a determination)
  • Whether a provision of the California Constitution is invalid or unenforceable under the Federal Constitution (unless a federal or California appellate court has already made such a determination)
  • Whether a liability has been or should have been discharged in bankruptcy;
  • Whether the FTB violated the Information Practices Act, the Public Records Act, or any similar provision of the law
  • Whether the taxpayer is entitled to a remedy for the FTB’s actual or alleged violation of any substantive or procedural right, unless the violation affects the adequacy of a notice, the validity of an action from which a timely appeal was made, or the amount at issue in the appeal



  • Under the proposed regulations, if a taxpayer files an incomplete appeal, the SBE staff is required to notify the taxpayer and give it 90 days (not including extensions) to perfect a written appeal.
  • Generally, a taxpayer’s perfected appeal is its opening brief, unless an extension(s) is granted by SBE staff. Once the taxpayer’s opening brief is filed, the FTB has 90 days to file its opening brief, unless an extension(s) is granted by SBE staff. Once the FTB files its opening brief, the taxpayer has 30 days to file its reply brief, unless an extension is granted by SBE staff. If the FTB wishes to file a reply brief to the taxpayer’s reply brief, it must get the written permission of the SBE staff. Permission will be granted only if:
  • The taxpayer’s reply brief raises new facts, arguments or evidence that are essential to resolution of the appeal
  • The briefing filed to date has provided sufficient information for the SBE to decide the case
  • The facts and issues in the appeal require additional discussion or clarification because of their complexity If the FTB is granted permission to file a reply brief, a taxpayer will then be allowed 30 days to file a supplemental brief in response.
  • If there is a defect in a taxpayer’s brief because it is not in the correct format, the SBE staff has the discretion to give the taxpayer written notice of the defect and allow 10 days to cure the defects in the brief.
  • Taxpayers and the FTB are allowed to file documents electronically pursuant to instructions provided on the SBE Department’s website.
  • Non-parties are allowed to file briefs (i.e., amicus briefs), whether unsolicited or at the request of SBE staff. However, no more than one amicus brief can be submitted by a party (i.e., no “reply” amicus briefs), unless permitted by SBE staff. All amicus briefs must be filed prior to the conclusion of the briefing.

Oral Hearing

  • The proposed regulations clarify that all taxpayers have the right to file a written request for an oral hearing.
  • Taxpayers and their representatives, constituents, FTB staff, and SBE staff may contact any SBE Board member at any time prior to the oral hearing regarding any case.
  • The SBE staff can order a pre-hearing conference if the information on file with the SBE is not adequate for the SBE to decide the appeal. Furthermore, either a taxpayer or the FTB can request a pre-hearing conference, which can only be denied if the SBE staff determines the conference would be unproductive.
  • Generally, 35 minutes is reserved for each oral hearing. However, additional time can be requested to present complex matters if the Chair of the Board agrees to such an addition.
  • Taxpayers can request and the Board can permit portions of the Board hearings to be conducted during closed session to protect taxpayer’s trade secrets and other confidential research, development, or commercial information, the disclosure of which would cause unwarranted annoyance, embarrassment or oppression under the same grounds as a protective order would be granted in the California courts.

SBE Decisions

The SBE issues three types of decisions: Letter Decisions (not citable as precedent), Summary Decisions (not citable as precedent) and Formal Opinions (citable as precedent). Under the proposed regulations, the SBE staff is to determine if a decision will be issued as a Formal Opinion using the same standards that are set forth in the California Rules of Court for certifying an appellate decision for publication. Thus, a decision will be issued as a Formal Opinion if it:

  • Establishes a new rule of law, applies an existing rule to a set of facts significantly different from those stated in published opinions, or modifies, or criticizes with reasons given, an existing decision;
  • Resolves or creates an apparent conflict in the law
  • Involves a legal issue of continuing public interest
  • Makes a significant contribution to legal literature by reviewing either the development of a common law rule, or the legislative or judicial history of a provision of a constitution, statute, or other written law

The SBE Department staff took written and oral public comments on the proposed regulation at the Sept. 11 hearing. It will now take the public comments and issue a report. After that, the final proposed regulation will be presented to the California Office of Administrative Law for approval. A final version of the regulation should be codified before the end of November 2007.