On November 13, 2023, the FTB issued FTB Notice 2023-03 which extends the period for participating in the FTB’s resolution program to January 31, 2024. On May 31, 2023, the FTB issued FTB Notice 2023-02 which sets forth the procedures for taxpayers to participate in the FTB’s resolution program for taxpayers who engaged in Micro-Captive Insurance and/or Syndicated Conservation Easement Transactions. The FTB’s program provides for vary degrees of penalty relief depending upon where a taxpayer is in the FTB’s enforcement process. For example, a taxpayer who has not yet been contacted by the FTB can receive more penalty relief than a taxpayer who has already been contacted for an audit.
Pursuant to the FTB’s program, taxpayers need to concede to reverse the tax benefits that they received from engaging in the subject transactions. In return, taxpayers receive varying degrees of penalty relief. However, taxpayers must also enter into a closing agreement for the taxpayers’ acceptance of the FTB’s terms of the FTB’s resolution program. Many of the transactions that the FTB is seeking to enforce are also the subject of IRS audits. Some are currently the subject of pending litigation in the US Tax Court. The federal resolution of a taxpayer’s transaction could be more favorable than the terms of the FTB’s settlement program. However, a closing agreement is final and binding on both taxpayers and the FTB. Consequently, taxpayers who enter into closing agreements as part of the FTB’s resolution program would not be able to take advantage of a federal resolution that is more favorable than the terms of their signed closing agreements.
FTB Notice 2023-02 provided a deadline of November 17, 2023, for taxpayers to avail themselves of the FTB’s resolution program. However, FTB Notice 2023-03 has extended the deadline to January 31, 2024.
Syndicated conservation easements are complex transactions. If you are a California resident who engaged in a syndicated conservation easement transaction, you may want to consult with a tax attorney to help determine if the FTB’s resolution program is advantageous for you.