Make the California Top 500 Delinquent Taxpayer List and Lose Your Professional LIcense

By of MillarLaw A Professional Corporation On Sunday, April 22, 2018

In FRANCESCHI V. YEE, the Ninth Circuit Court of Appeals affirmed the right of the State of California to publish a list of the Top 500 Delinquent Tapayers and to suspend their drivers and professional licenses.

“This action challenges the constitutionality of Section 19195 of the California Revenue and Taxation Code and Section 494.5 of the California Business and Professions Code. Section 19195 establishes a public list of the top 500
delinquent state taxpayers who owe in excess of $100,000. In turn, Section 494.5 provides for suspension of the driver’s license of a taxpayer on the delinquent list until full payment of the tax obligation is arranged.”

According to the court, California taxpayer’s are given ample opportunity to contest the liability and work out payment arrangements prior to their names being placed on the “Top 500 List”. The court found:

‘California’s Revenue and Taxation Code sets forth a framework under which a delinquent taxpayer, like Franceschi, has multiple opportunities to challenge deficiency assessments. Cal. Rev. & Tax Code § 19031, et seq. At the outset, the FTB is required to send the taxpayer notice of the proposed deficiency assessment for any tax deficiency it proposes to assess. Id. § 19033(a). The taxpayer may then file a protest within sixty days. Id. § 19041(a). If the
taxpayer files a protest, the FTB must reconsider the assessment and, if the taxpayer so requests, grant the taxpayer a hearing on the deficiency. Id. § 19044(a). If the deficiency is not resolved at this stage, a taxpayer has further recourse by appealing to the State Board of Equalization. Id. § 19045.
After the State Board of Equalization rules on the matter, a  still dissatisfied taxpayer can then petition the State Board of Equalization for rehearing. Id. § 19048.

Still further, a taxpayer has an additional opportunity to be heard on the validity of his or her tax delinquency by paying the taxes and filing a claim for refund with the FTB. Id. § 19382. Utilization of this procedure here would have
permitted Franceschi to both challenge the original assessments and to retain his driver’s licence while doing so. If the FTB denied the claim he could have sued for a refund in California Superior Court. Franceschi concedes that he did
not avail himself of any of these multiple remedial
procedures.

If, however, a taxpayer like Franceschi fails to protest the NPA within sixty days, the proposed deficiency assessment becomes final. Id. § 19042. Once the assessment becomes final, the FTB can demand payment and the amount owed
becomes a lien on the taxpayer’s real property in California. Id. §§ 19049, 19221.”

Still  even if the taxpayer does not respond to any of the prior opportunities to resolve a tax debt the FTB issues one last Notice before placing eligible taxpayers on the “Top 500 List”

“If within thirty days after this notice, the delinquent taxpayer does not remit the amount due or make arrangements with the FTB for payment, the delinquent taxpayer is named on the Top 500 List. Id.”

Upon making the “Top 500 List” the delinquent taxpayer will face suspension of their driving privileges and suspension of any professional licenses.  Aas the court recognized, the taxpayer still has an opportunity to avoid suspension:

Important for this appeal, effective January 1, 2012, Section 494.5 was enacted to provide that a state governmental licensing entity “shall suspend” a license if a licensee’s name is included on the Top 500 List.2 Cal. Bus. & Prof. Code § 494.5(a)(1). Specifically, Section 494.5 provides that, on at least ninety days’ notice, the California Department of Motor Vehicles “shall suspend” the driver’s
license of any licensee whose name is included on the Top 500 List. Id. § 494.5(a)(2), (b)(1), (f)(1).3 Within this notice period, a delinquent taxpayer can challenge inclusion and seek to avoid revocation of a driver’s license by (1) presenting a written submission that the tax delinquency was paid, (2) entering into a payment agreement, or (3) demonstrating financial hardship. Id. § 494.5(h).” (Emphasis added)

As Franchesi was a practicing lawyer the court also observed:

“Furthermore, the State Bar of California “may recommend to refuse
to issue, reactivate, reinstate, or renew a license and may recommend to
suspend a license if a licensee’s name” is included on the Top 500 List.
Id. § 494.5(a)(3), (b)(1).”

In affirming the publication of the “Top 500 List” the court  essentially said that the State of California has an obligation to collect tax lawfully owed and tha taxpayer’s have an obligation to file tax returns and pay their   tax or work out an agreement with the state.  The court held that California satisfies standards of “Due process” and :Equal Protection” in publishing the “List”. Implicitly the court recognized that the publication of the “List”  followed by license suspension may be the only remedy left short of criminal charges to get the attention of certain taxpayer’s.

Not all names on the list are evil people, many have just fallen on hard time or were poorly advised but it is important that anyone on the “List” know that they may still have options and for those not yet on the “List” it  is time to seek skilled professional advice.