California’s state tax system involves five different departments:
(1) the Franchise Tax Board (FTB)
(2) California Department of Tax and Fee Administration (CDTFA)
(3) the Employment Development Department (EDD)
(4) State Board of Equalization (SBE)
(5) Office of Tax Appeals (OTA)
Although the EDD is the largest tax agency in California, the FTB is probably the most well-known. The FTB’s mission is to help taxpayers file tax returns timely, accurately, and to pay the correct amount of fund services important to Californians. The Board consists of the Controller, the Director of the Department of Finance, and the Chairperson of the State Board of Equalization. By statute, the Board retains all the duties, powers, purposes, responsibilities, and jurisdiction of the former Franchise Tax Commissioner. The FTB appoints an executive officer who is then confirmed by a two-thirds vote in the Senate.
The CDTFA was established in 2017 as part of the state budget accord and it took over most of the duties, powers and responsibilities that were previously held by the State Board of Equalization. The law requires CDTFA’s headquarters to be in Sacramento, and the Governor appoints a Director, the Chief Deputy Director, and the Chief Counsel. The CDTFA is responsible for administering the State’s sales and use tax, fuel and tobacco taxes, as well as a variety of other taxes and fees that fund specified state programs. In addition, it is the stated mission of CDTFA to make life better for Californians by fairly and efficiently collecting the revenue that supports essential public services of the state.
The EDD is the one of the largest state departments with employees at hundreds of service locations. For more than 70 years, EDD has connected millions of job seekers and employers in an effort to build the economy in California. According to the Unemployment Insurance Code, the EDD is vested with the duties, purposes, responsibilities, and jurisdiction that had previously been exercised by the State Department of Benefit Payments. The EDD is administered by an Executive Officer and is vested with the duties, purposes, responsibilities, and jurisdiction previously exercised by the Director of Benefit Payments. The EDD is required to investigate, examine, and make reports for the parties that are responsible for the administration and public funds for services that are administered by the EDD.
The State Board of Equalization, or SBE, is the only tax agency that is found in the California Constitution. The SBE is governed by a five-voting member board, which are designated as the State Controller, as well as four members who are elected to four-year terms. No SBE member can serve more than two terms.
The Office of Tax Appeals was created by the Taxpayer Transparency and Fairness Act of 2017. The mission of the OTA is to provide a fair, objective, and timely process for appeals from California taxpayers. The OTA is under the control of a director who is appointed by the Governor, and the Governor also gets to appoint a Chief Deputy Director and a Chief Counsel. The Director is subject to confirmation by the California State Senate and the Director is required to administer and direct the day-to-day operations of OTA, including staffing, the hearing offices, and the appeals hearings so that taxpayer appeals can be heard and resolved in a timely and efficient manner.
Each OTA office establishes a Tax Appeals Boards, and each of these panels of tax appeals consist of three administrative law judges (ALJ) and the ALJs are designated by the OTA Director. These ALJs have to be active members of the state bar, at least for the prior five years, and they have to have knowledge and experience regarding the administration and operation of both federal and state tax and fee laws. Also, these ALJs are required to subscribe and follow the Code of Judicial Ethics that’s been adopted by the California Supreme Court. The OTA has the authority to handle all the appeals that were transferred from the State Board of Equalization to the Office of Tax Appeals.
You can find the full transcript of the audio in today’s podcast here.