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SUCCESSFULLY NEGOTIATING A TAX SETTLEMENT –
EVEN IN THIS ECONOMY
California Tax Policy Conference
San Diego, California
November 2, 2012
Jeffrey M. Vesely
Pillsbury Winthrop Shaw Pittman LLP
703905117
2 |
Cutting a Deal
Are you really willing to settle?
Are you prepared to go to the mat in litigation?
Are you prepared to make it look like you are willing to go to the
mat?
What are you willing to give up?
Do you have flexibility regarding terms of a settlement?
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Cutting a Deal (Cont.)
Why settle? Evaluate pros and cons Evaluate the relative merits of the issues
Be realistic Don’t let it get personal Assess the strengths and weaknesses of the facts and legal arguments Are the equities on your side
Use of resources and expenses related to continuing the controversy Effect on future years Effect on other issues Are the issues continuing?
4 |
Cutting a Deal (Cont.)
When to settle?
At audit?
At protest?
At appeal?
In court?
Cutting a Deal (Cont.)
When to settle?
Before litigation costs start mounting
After discovery is complete
After a victory
Just prior to end of state’s fiscal year
On the courthouse steps
5 |
6 |
Cutting a Deal (Cont.)
Alternatives to payment of large refunds
Refund payment over time
Combine refund with abatement of taxes for other years
Consider NOL and credit carryovers
Consider future years’ tax exposures
7 |
Cutting a Deal (Cont.)
Alternatives to payment of large refunds (cont.)
Apply refund to other taxes
Hold funds as tax deposit
Apply refund credits to future years
Closing agreement as to certain issues for future years
Audit
Should you consider entering into a pre-filing agreement with respect
to certain issues?
Should you consider entering into a closing agreement with respect to
specific issues?
Evaluate pros and cons
8 |
Administrative Review Process
Should you consider entering into a closing agreement during the
administrative review process outside the Settlement Bureau?
Evaluate pros and cons
9 |
10 |
Settlement Bureau
Advantages to the Settlement Bureau
Cases generally move more quickly through the system
Nine Month Rule (FTB)
May minimize extensive information requests
Some issues are settled administratively which in the past had to be
litigated
Allows for splitting of issues
Less expensive than judicial litigation
11 |
Settlement Bureau
Disadvantages to the Settlement Bureau
Process is somewhat cumbersome due to the various levels of approval
Does not apply to cases at audit
FTB/SBE policies on settlements and litigating hazards
Only dealing with FTB/SBE Staff
In Court, the Attorney General’s Office is directly involved
Public disclosure of settlement results
12 |
Settlement Bureau
Should You Consider Going to Settlement? Why? When?
Timing
Early vs. late in Protest/Petition process
Should you wait for the hearing officer to issue his/her
decision?
Do you have issues you do not want to compromise?
Do you want to minimize inquiries by the hearing officer?
13 |
Settlement Bureau
Should You Consider Going to Settlement? Why? When? (cont.)
Do you have evidentiary problems?
Do you have difficult issues?
Will FTB/SBE settle refund claims?
Should you narrow the issues or keep as many issues on the
table as possible?
14 |
Settlement Bureau
Should You Consider Going to Settlement? Why? When? (cont.)
Should you keep as much tax in dispute as possible?
Should you settle specific issues or entire tax years?
What about Federal RARs?
Court
Formal Procedures
Early Settlement Program
Mandatory Settlement Conference
Alternative Dispute Resolution
Arbitration
Mediation
15 |
Court
Informal Procedures
Involvement of Attorney General’s Office
Effect of Third Party Conferees
Use of Closing Agreements
16 |
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Questions
