California To Collect Debts From Out-Of-State Residents

The California offset program has been expanded to allow reciprocal agreements for California to collect debts from out-of-state residents. The Delinquent Taxpayer Accountability Act added Revenue and Taxation Code Section 19377.5, granting the Franchise Tax Board (FTB) the authority to enter into reciprocal agreements with other states to offset refunds to pay personal income tax (PIT) debts owed to the partner state.

In May 2013, FTB sent out 11,000 Multistate Refund Offset Notices to PIT taxpayers with delinquent California income tax liabilities and a New York state address. To avoid offset, the letters instructed the New York residents to either pay their California balance in full or provide evidence that the debt is not past due or not legally enforceable. The letters also stated that if they did not respond within 30 days, FTB would submit their balance due to the New York State Department of Taxation and Finance to offset eligible income tax refunds due to them. Currently, the only state that FTB partners with is New York.

If you receive a Multistate Refund Offset Notice, have two choices – you can call me at 619-689-8680 or the California Franchise Tax Board at 916/845-2867 for more information.