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SUCCESSFULLY NEGOTIATING A TAX SETTLEMENT – EVEN IN THIS ECONOMY

Learn effective strategies and best practices for negotiating tax settlements, regardless of the economic climate. This session at the California Tax Policy Conference in San Diego will cover key factors to consider, such as willingness to settle, flexibility in terms, and evaluating the strengths and weaknesses of your case. Discover alternatives to paying large refunds and explore settlement options at various stages of the process, including audit, protest, appeal, and court. Gain insights on entering into pre-filing and closing agreements, as well as the advantages and disadvantages of utilizing the Settlement Bureau. Additionally, explore formal and informal procedures in court, involvement of the Attorney General's Office, and the use of closing agreements.

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SUCCESSFULLY NEGOTIATING A TAX SETTLEMENT – EVEN IN THIS ECONOMY

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  1. 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?

  3. 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?

  5. 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

  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

  8. 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

  9. Administrative Review Process • Should you consider entering into a closing agreement during the administrative review process outside the Settlement Bureau? • Evaluate pros and cons

  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?

  15. Court • Formal Procedures • Early Settlement Program • Mandatory Settlement Conference • Alternative Dispute Resolution • Arbitration • Mediation

  16. Court • Informal Procedures • Involvement of Attorney General’s Office • Effect of Third Party Conferees • Use of Closing Agreements

  17. Questions

  18. Jeffrey M. Vesely Pillsbury Winthrop Shaw Pittman LLP San Francisco jeffrey.vesely@pillsburylaw.com (415) 983-1075

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