(a) The Franchise Tax Board may, in cases of financial hardship, enter into installment payment agreements with any taxpayer under which that taxpayer is allowed to make payment of any liability imposed or collected under Part 10 (commencing with Section 17001), Part 11 (commencing with Section 23001), or this part, including any additions to tax, interest, penalties, fees, and any other amounts relating to the imposed liability, in installment payments, pursuant to the agreement, if the Franchise Tax Board determines that the agreement will facilitate full or partial collection of the liability.

(b) In the case of a liability of an individual under Part 10 (commencing with Section 17001) or this part, the Franchise Tax Board shall enter into an agreement to accept the full payment of the liability in installments if, as of the date the individual offers to enter into the agreement, all of the following apply:

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(1) The aggregate amount of the liability (determined without regard to interest, penalties, additions to the tax, and additional amounts) does not exceed twenty-five thousand dollars ($25,000).

(2) The taxpayer (and, if the liability relates to a joint return, the taxpayer’s spouse) has not during any of the preceding five taxable years done any of the following:

(A) Failed to file any return of liability imposed under Part 10 (commencing with Section 17001) or this part.

(B) Failed to satisfy any term of an installment agreement under this section for payment of any liability imposed by Part 10 (commencing with Section 17001) or this part.

(3) The Franchise Tax Board determines that the taxpayer is financially unable to pay the liability in full when due, and the taxpayer submits any information as the Franchise Tax Board may require to make this determination.

(4) The agreement requires full payment of the liability within five years.

(5) The taxpayer agrees to comply with the provisions of this part and Part 10 (commencing with Section 17001) for the period the agreement is in effect.

(c) (1) (A) Failure by a taxpayer to comply fully with the terms of the installment payment agreement shall render the agreement null and void, unless the Franchise Tax Board determines that the failure was due to a reasonable cause, and the total amount of tax, interest, and all penalties shall be immediately due and payable. Except in any case where the Franchise Tax Board finds collection of the tax to which an installment payment agreement relates to be in jeopardy, or there is a mutual consent to terminate, alter, or modify the agreement, the agreement shall not be considered null and void, or otherwise terminated, unless both of the following occur:

(i) A notice of termination is provided to the taxpayer not later than 30 days before the date of termination.

(ii) The notice includes an explanation of why the Franchise Tax Board intends to terminate the agreement.

(B) This paragraph shall apply only to agreements entered into before January 1, 2024.

(2) (A) (i) The Franchise Tax Board may alter, modify, or terminate an agreement entered into under this section if any of the following apply:

(I) Information that the taxpayer provided to the Franchise Tax Board before the date the agreement was entered into was inaccurate or incomplete.

(II) The Franchise Tax Board determines that the collection of any liability to which an agreement under this section relates is in jeopardy.

(III) The Franchise Tax Board determines that the financial condition of a taxpayer with whom the Franchise Tax Board has entered into an agreement has significantly changed.

(IV) The taxpayer fails to make an installment payment at the time the installment payment is due under the agreement.

(V) The taxpayer fails to file a required tax return under this part or pay any other liability at the time that the liability is due.

(VI) The taxpayer fails to provide a financial condition update upon the Franchise Tax Board’s request.

(ii) The Franchise Tax Board may modify or alter an agreement under this section to add a liability that the taxpayer fails to pay at the time that the liability is due.

(iii) If a taxpayer is currently in an installment agreement under subdivision (a) or (b), the Franchise Tax Board may require financial hardship to alter or modify the installment agreement.

(iv) (I) Except as provided in subclause (II), the Franchise Tax Board shall not alter, modify, or terminate any agreement under this paragraph unless both of the following occur:

(ia) A notice of the alteration, modification, or termination is provided to the taxpayer not later than 30 days before the date of that action.

(ib) The notice includes an explanation of the rationale of the Franchise Tax Board for altering, modifying, or terminating the agreement.

(II) In any case where the Franchise Tax Board finds collection of the liability to which an installment payment agreement relates to be in jeopardy, the Franchise Tax Board may terminate the installment agreement and issue demand for immediate payment of the liability or the deficiency declared to be in jeopardy.

(B) This paragraph shall apply only to agreements entered into on or after January 1, 2024.

(d) No levy may be issued on the property or rights to property of any person with respect to any unpaid liability:

(1) During the period that an offer by the taxpayer for an installment agreement under this section for payment of the unpaid liability is pending with the Franchise Tax Board.

(2) If the offer is rejected by the Franchise Tax Board, during the 30 days thereafter and, if a request for review of the rejection is filed within the 30 days, during the period that the review is pending.

(3) During the period that the installment agreement for payment of the unpaid liability is in effect.

(4) If the agreement is terminated by the Franchise Tax Board, during the 30 days thereafter (and, if a request for review of the termination is filed within the 30 days, during the period that the review is pending).

(5) This subdivision shall not apply with respect to any of the following:

(A) Any unpaid liability if either of the following occurs:

(i) The taxpayer files a written notice with the Franchise Tax Board that waives the restriction imposed by this subdivision on levy with respect to the liability.

(ii) The Franchise Tax Board finds that the collection of that liability is in jeopardy.

(B) Any levy that was first issued before the date that the applicable proceeding under this subdivision commenced.

(C) At the discretion of the Franchise Tax Board, any unpaid liability for which the taxpayer makes an offer of an installment agreement subsequent to a rejection of an offer of an installment agreement with respect to that unpaid liability (or to any review thereof).

(D) The period of limitation under Section 19371 shall be suspended for the period during which the Franchise Tax Board is prohibited under this subdivision from making a levy.

(e) The Taxpayers’ Rights Advocate shall establish procedures for an independent departmental administrative review for the rejection of the offer of an installment payment and for installment payment agreements that are rendered null and void, or otherwise terminated under this section, for taxpayers that request that review. This administrative review shall not be subject to Chapter 4.5 (commencing with Section 11400) of Part 1 of Division 3 of the Government Code. Unless review is requested by the taxpayer within 30 days of the date of rejection of the offer of an installment agreement or termination of the installment agreement, this administrative review shall not stay collection of the liability to which the installment payment agreement relates.

(f) The Franchise Tax Board shall review a representative sample of existing installment agreements entered into under this section at least once every two years to ensure taxpayers are in compliance with the terms of the agreement.

(g) (1) The Franchise Tax Board may prescribe regulations as necessary or appropriate to carry out the purposes of this section.

(2) The Administrative Procedure Act (Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code) shall not apply to any standard, criterion, procedure, determination, rule, notice, guideline, or any other guidance established or issued by the Franchise Tax Board pursuant to this section.

(Amended by Stats. 2023, Ch. 209, Sec. 1. (AB 1765) Effective January 1, 2024. Note: Subd. (g) was added by Stats. 2005, Ch. 211.)