Offer in Compromise
What is an Offer in Compromise?
An Offer in Compromise (OIC) is a proposal to pay the Board of Equalization (Board) an amount that is less than the full tax or fee liability due.
Do you qualify for the OIC program?
The OIC program is for taxpayers or feepayers that do not have, and will not have in the foreseeable future, the income, assets, or means to pay their tax liability in full. You qualify for the program if you meet all of the following criteria:
- Have a final tax or fee liability on a closed account.
- Are no longer associated with the business that incurred the liability or a similar type of business.
- Do not dispute the amount of tax or fee you owe.
- Cannot pay the full amount you owe in a reasonable amount of time.
Effective January 1, 2009 through January 1, 2013, the Board will also consider an OIC for open and active businesses that have not received reimbursement from the taxes, fees, or surcharges owed; successors of businesses that may have inherited tax liabilities from their predecessors; and consumers, who are not required to hold a seller’s permit, but incurred a use tax liability.
How do you apply?
You must complete an OIC Application (form BOE-490 for individuals or form BOE-490-C for all other entities) and submit it with the supporting documentation listed on the second page of the application to the Board of Equalization collector assigned to your account. If your account is not assigned to a collector, please contact your local district office or division that administers your account. For more specific information on the OIC process, you may contact the OIC Section at 916 322-7931.
If you have liabilities with multiple state tax agencies, it may be helpful to use the Multi-Agency application (/pdf/de999ca.pdf ). This application can be used to apply for OIC programs with BOE, EDD, and FTB without duplication of forms or other paperwork. If you use the Multi-Agency application, you will still need to negotiate separate payment arrangements with each agency.
How are OIC's evaluated?
Although each case is evaluated based on its own unique set of facts and circumstances, the Board will give the following factors strong consideration:
- The taxpayer's ability to pay
- The amount of equity in the taxpayer's assets
- The taxpayer's present and future income
- The taxpayer's present and future expenses
- The potential for changed circumstances
Generally, we approve an OIC when the amount offered represents the most the Board can expect to collect within a reasonable period of time. The OIC must be in the State's best interest.
Please note: If you have been assessed a fraud penalty, a minimum offer of the outstanding tax and fraud penalty is required for processing. However, if you have been convicted of a felony tax evasion, an offer will not be considered.
When do you pay?
You should not submit the offered funds until the Board requests them. If the OIC section recommends acceptance of your offer, staff will contact you in writing and ask you to pay the full amount offered. Your funds will be held as a deposit, and credit interest will not be paid to you on the deposited amount if your offer is denied and subsequently refunded. In some cases, you may also be asked to pay court fees for a Stipulation for Judgment.
Questions and Answers
Publication 56 answers several of the most commonly asked questions. Many practitioners use this tri-fold as a helpful handout for their clients.
Additional questions and answers can be found on the Offer in Compromise - Frequently Asked Questions Page.
If you dispute Board's staff's decision regarding the amount of tax or fee you owe, you can usually contest that decision by filing an appeal (filing deadlines apply). Or you may pay the liability and then file a Claim for Refund, BOE-101 (filing deadlines apply). If you have a petition for redetermination, administrative protest, or claim for refund pending, you may qualify for the Settlement Program. You may want to refer to Publication 17, Appeals Procedures, for additional information concerning the Board's appeal process. If you want to make payments instead of paying the liability in full, you should contact the collector assigned to your case. You may want to refer to Publication 54, Tax Collection Procedures, for additional information concerning the Board's collection process.