An Offer in Compromise (OIC) is a proposal to pay the California Department of Tax and Fee Administration (CDTFA) an amount for less than the full amount owed.

OIC program is for taxpayers or feepayers that do not have, and will not have in the foreseeable future, the income, assets, or means to pay their tax liability in full. You qualify for the program if you meet all of the following criteria:

• Have a final tax or fee liability on a closed account.
• Are no longer associated with the business that incurred the liability or a similar type of business.
• Do not dispute the amount of tax or fee you owe.
• Cannot pay the full amount you owe in a reasonable amount of time.

Effective January 1, 2009 through January 1, 2023, the CDTFA will also consider an OIC for open and active businesses that have not received reimbursement from the taxes, fees, or surcharges owed; successors of businesses that may have inherited tax liabilities from their predecessors; and consumers, who are not required to hold a seller’s permit, but incurred a use tax liability.

Getting Started

The following documentation must be submitted with the Offer in Compromise Application or your application may be returned as incomplete. Please submit copies only. We will not return any documentation that you send us. Additional documentation may be required and requested as the evaluation of the Offer in Compromise proceeds.

CHECK LIST OF REQUIRED ITEMS FOR THE ENTITY MAKING THE OFFER

Verification of Income and Expenses -Year-to-date income and expense statements, cash flow statements, profit and loss statements, a balance sheet, and any other related documents. If entity is subject to annual audit of its financial statements, please submit audited financial statements.

 Bank Information -Bank statements for savings and checking accounts for the last twelve months. Final statement for any accounts closed within that time. Investment account statements showing the value of stocks, bonds, and mutual funds.

Current Lease or Rental Agreements -Include all lease agreements, including property where you are the lessor or lessee.

Real Property Information -Mortgage statements, escrow settlement statements, or copies of grant deeds for any property currently owned, sold, or gifted in the last five years.

Vehicle Information -Copies of loan/lease statements for any vehicles.

IRS/FTB/EDD Information -Complete copies of Internal Revenue Service (IRS) and Franchise Tax Board (FTB) returns for the past three (3) years. Please include all attached schedules. If applicable, copy of IRS, FTB, or Employment Development Department (EDD) Offer in Compromise and acceptance letter or documentation of other IRS/FTB/EDD arrangements.

Legal Documents – Copies of judgments, pending lawsuits, trust documents, and bankruptcy documents.

Authorization to Release Financial Information to the Board of Equalization – A form will be mailed to you if it is needed to verify financial information.

Power of Attorney -A power of attorney is required if a designated representative submits this offer or if you want us to direct questions or requests for information to your representative. Form BOE-392, Power of Attorney, may be used. If your offer is related to sales and use tax, please submit your completed and signed application to your designated compliance representative at your local district office.

 If your offer is related to special taxes or fees, submit your application and refer questions to the special taxes division that administers your account. If your offer is related to timber taxes, submit your application and refer questions to the Property Taxes Department. Phone numbers for the district offices, special taxes, and property taxes are located on page S5B of this application.

If you submit a deposit of the amount offered, designate the payment as an “OIC Deposit” on the face of the check and include your seller’s permit or BOE account number(s). If you submit the application without the deposit, you will be notified when it is required.

Generally, an OIC will be accepted when the amount offered is more than the CDTFA can expect to collect within a reasonable period of time, typically from five to seven years.

For closed out accounts, you cannot have an interest or association with the same business or a similar type of business as the transferred or discontinued business for which you seek a compromise. Effective January 1, 2009 through January 1, 2023, the CDTFA will also consider an OIC for open and active businesses that have not received reimbursement from the taxes, fees or surcharges owed; successors of businesses that may have inherited tax liabilities from their predecessors; and consumers, who are not required to hold a seller’s permit, but incurred a use tax liability.

What About Partnerships?

For open businesses, all partners must submit an OIC application and make full disclosure of their business and personal financial information in order to be considered for an OIC.

Is This the Same as my IRS/ California Franchise Tax Board Offer in Compromise?

No. Your CDTFA offer will be evaluated separately from your IRS or FTB offer.

Can I Make Payments on the Offered Amount?

Yes. Effective January 1, 2009 through January 1, 2023, if you are unable to fund your offer with a lump-sum payment, you may enter into a written agreement to pay the offered amount with payments over a period not to exceed one year. However, the terms of the payment agreement are at the discretion of the OIC Section and are determined by your current and future financial situation.

Can Prior Payment be Credited to the Offered Amount?

No. Prior payments are not credited to the offered amount unless you have entered into a written agreement with the OIC Section to fund the offer with installment payments. However, prior payments and the offered amount compared to the total liability are taken into consideration when evaluating your OIC.

Does Collection Activity Stop While My Offer is Being Considered?

Most collection actions will be suspended while your OIC is being considered. However, if delaying collection activity jeopardizes the CDTFA’s ability to collect the tax, the CDTFA may continue with collection efforts. You may also be required to continue payments if you are currently in an Installment Payment Agreement while applying for an OIC. You may want to refer to Publication 54, Collection Procedures, for additional information concerning the CDTFA’s collection process.

Can I get Tax Relief If I File Bankruptcy?

Part or all of your taxes may be dischargeable under the bankruptcy code. If this is a consideration, you may want to seek legal advice.

I bought a Business That Was Assessed a Liability Incurred by the Previous Owner

Yes. Effective January 1, 2009 through January 1, 2023, if you inherited a liability as a “successor” of a business for your predecessor’s tax or fee liability, the liability is eligible for an OIC, as long as you were not part of the predecessor’s business. However, if you were notified by the CDTFA through a Sales Tax Clearance Request or through an open escrow, that the predecessor had a liability prior to purchasing the business, your OIC will not be considered. For example, you initiated an escrow to purchase the business and were notified that a liability existed. If the escrow is cancelled and you later purchase the business without obtaining a tax clearance from the CDTFA, you were aware of the liability prior to your purchase and circumvented payment to the CDTFA. Therefore, the CDTFA will not compromise your successor liability.

For More information visit the California Department of Tax and Fee Administration here