Reed Smith Client Alerts

The Franchise Tax Board posted a twenty-day notice to elicit public comments on its proposed revisions to California’s alternative apportionment petition regulation. Notably, the proposed revisions to the regulation contain timelines for petitioning the FTB three-member board in situations where a taxpayer receives an adverse decision on its petition from FTB staff.  Public comments are due by January 18, 2021.


The general parameters for California’s alternative apportionment petition process are contained in Regulation 25137. California has adopted a unique process for deciding alternative apportionment petitions, both those initiated by taxpayers and those initiated by the Franchise Tax Board (the “FTB”). Petitions may be reviewed and decided by FTB staff (which may include review by an auditor, protest hearing officer, or by a special “25137 Committee” housed within the FTB (collectively, FTB Staff) or may also be decided by the three members of the FTB (after a decision by FTB Staff).1

While the process in California is complex, historically the procedural guidance on the process has been sparse. The current regulatory language merely states that in cases deemed appropriate by the Board, it may elect to hear and decide a Section 25137 petition in addition to consideration by FTB Staff. Petitions to the Board are considered in open sessions at a regularly scheduled Board meetings. Due to the ambiguity about the petition review process, the FTB began an informal rulemaking process in June of 2017, and has since held several interested-parties meetings to discuss drafts of proposed revisions to Regulation 25137.  

The Twenty-day notice

On December 29, 2020, the FTB issued a twenty-day notice for purposes of soliciting public comment for its proposed amendments to Regulation 25137. Written comments are due by January 18, 2021.

Following the close of this twenty-day comment period, FTB Staff intends to present the newly revised proposed draft regulation language to the Board to request permission to proceed with the formal Administrative Procedures Act regulatory process.

The FTB’s proposed revisions to Regulation 25137 include the following:

  • Filing deadlines: A taxpayer seeking review of a Section 25137 petition by the Board or appealing an adverse Section 25137 decision made by FTB staff, must file a petition with the FTB Chief Counsel within:
  • 60 days from the date of an adverse written Section 25137 decision by FTB staff;
  • 120 days from the date of filing a refund;