Rimokh v. California Franchise Tax Board CA2/4

Filed 11/5/24 Rimokh v. California Franchise Tax Board CA2/4

NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS

California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying

on opinions not certified for publication or ordered published, except as specified by rule 8.1115(a).

This opinion has not been certified for publication or ordered published for purposes of rule

8.1115(a).

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

SECOND APPELLATE DISTRICT

DIVISION FOUR

JACK RIMOKH et al., B329492

Plaintiffs and Appellants, Los Angeles County

Super. Ct. No.

v. 21STCV33765

CALIFORNIA FRANCHISE TAX

BOARD,

Defendant and Respondent.

APPEAL from a judgment of the Superior Court of Los

Angeles County, Michael P. Linfield, Judge. Affirmed.

The Law Offices of Joseph A. Broyles and Joseph A. Broyles

for Plaintiffs and Appellants.

Rob Bonta, Attorney General, Tamar Pachter, Senior

Assistant Attorney General, Michael D. Gowe, Supervising

Deputy Attorney General, Elizabeth Vann, Deputy Attorney

General, for Defendant and Respondent.

INTRODUCTION

Jack Rimokh and Joelle Rimokh (collectively, the Rimokhs)

sued the California Franchise Tax Board (FTB) seeking a refund

of monies allegedly overpaid for the 2008 and 2009 tax years. In

support of their claim, they alleged FTB failed to timely mail a

notice of proposed deficiency assessment (NPA), which they

contend was required by Revenue and Taxation Code1 section

19059, subdivision (a). Consequently, they alleged, FTB was

prohibited from assessing or collecting any additional taxes based

on their amended 2008 and 2009 state income tax returns. The

Rimokhs filed those amended returns after the Internal Revenue

Service (IRS) audited their 2008 and 2009 federal tax returns and

increased their federal income tax liability for each year.

The trial court granted summary judgment in favor of FTB,

concluding FTB did not have to issue NPAs to the Rimokhs for

the 2008 or 2009 tax years because it did not assess a deficiency

for either year. Thus, the trial court concluded the limitations

periods set forth in section 19059 did not apply and rejected the

Rimokhs’ assertion that they were entitled to a refund based on

FTB’s noncompliance with that statute. We affirm.

BACKGROUND

After receiving an extension, the Rimokhs filed a joint state

tax return for the 2008 tax year on October 15, 2009. They also

obtained an extension for the next year and filed a joint return

for the 2009 tax year on October 15, 2010. By the latter date, they

had no outstanding tax liability for the 2008 and 2009 tax years,

1 All undesignated statutory references are to the Revenue

and Taxation Code.

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having paid all taxes and interest due based on the information

reported in their returns.

The IRS began audits of the Rimokhs’ 2008 and 2009

federal income tax returns on November 29, 2012 and February

24, 2011, respectively. Subsequently, on January 24, 2018, the

Rimokhs and the IRS entered into a closing agreement2

addressing their tax liability for the 2008 and 2009 tax years.

Pursuant to the closing agreement, on May 25, 2018, the IRS

assessed approximately $6.5 million and $7.2 million in

additional federal income tax for the 2008 and 2009 tax years,

respectively. Then, on July 9, 2018, the IRS notified FTB’s Audit

Division of its adjustments to the Rimokhs’ 2008 and 2009 federal

income tax returns.

As a result of the IRS’s audit and its adjustments to their

federal income tax returns, the Rimokhs filed amended state tax

returns for the 2008 and 2009 tax years on July 15 and July 13,

2018, respectively. For the 2008 tax year, their amended return

reported that, compared to their original return, they earned

approximately $16.7 million in additional income and owed $1.7

million in additional state income tax. For the 2009 tax year, the

Rimokhs’ amended return reported that, compared to their

original return, they earned approximately $18.4 million in

additional income and owed approximately $1.9 million in

additional state income tax. The additional tax liability reported

2 “A closing agreement is a written agreement between an

individual and the Commissioner [of Internal Revenue] which

settles or ‘closes’ the liability of that individual with respect to

any internal revenue tax for a taxable period.” (Miller v. Internal

Revenue Service (In re Miller) (Bankr. 9th Cir. 1994) 174 B.R.

791, 796.)

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on the amended returns did not include statutorily-mandated

interest accruing on the balances due for either tax year.

After examining the IRS’s adjustments to the Rimokhs’

federal income tax obligations for 2008 and 2009, a technician for

FTB issued NPAs for both years. The NPA for the 2008 tax year

proposed to assess additional taxes, penalties, and interest

totaling $1,505.91. For the 2009 tax year, the NPA proposed to

assess additional taxes, interest, and penalties totaling

$3,151,445.94. Both NPAs were dated July 15, 2020 and stated

the proposed assessments were “based on information provided to

[FTB] by the [IRS].”

In mid-September 2020, the Rimokhs protested the NPAs,

arguing they should be “dismiss[ed] . . . for lack of standing”

because they were not mailed within the requisite time period set

forth in section 19059, subdivision (a). FTB withdrew the NPAs

on September 23, 2020.

In conjunction with its review of the protests and its

decision to withdraw the NPAs, FTB also analyzed the Rimokhs’

amended 2008 and 2009 returns. It accepted the tax liabilities

reported on those returns and reconciled the Rimokhs’ prior

payments against their remaining tax liabilities, penalties, and

interest due. Ultimately, FTB determined the Rimokhs satisfied

their tax liability for the 2008 tax year in December 2017, but

owed a balance of approximately $1.3 million for the 2009 tax

year. Thus, on the same date it withdrew the NPAs, FTB issued a

“State Income Tax Balance Due Notice” informing the Rimokhs

that they owed a balance of approximately $1.3 million on their

2009 state income tax account. FTB calculated this balance by

subtracting an overpayment it received for the 2008 and 2009 tax

years in December 2017 from the sum of the amount owed per

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the Rimokhs’ amended return and the interest accrued since

April 15, 2010.

Through various payments made between December 2017

and December 2020, as well as FTB’s transfer of an overpayment

it received for the 2015 tax year, the Rimokhs paid off their

balance for the 2009 tax year on December 21, 2020. Two of the

payments were accompanied by notations indicating they were

intended for amounts due under the NPAs previously issued and

withdrawn. Specifically, in July 2020, the Rimokhs made an

electronic payment to FTB of $1,505.91 for the 2008 NPA. And on

December 21, 2020, they made an electronic payment of

$1,238,095.90 for the 2009 NPA. FTB credited both payments to

the balance on the Rimokhs’ account for the 2009 tax year.

In February 2021, the Rimokhs filed claims for refunds for

the 2008 and 2009 tax years. FTB records reflect it took no action

on their claims.

Consequently, in September 2021, the Rimokhs filed a

complaint asserting a single claim for refund of tax under

sections 19382 and 19385. They allege they are entitled to

refunds of $1,505.91 plus interest for the 2008 tax year and

$3,234,534.96 plus interest for the 2009 tax year because FTB’s

assessments of those taxes in September 2020, which they paid

under protest, “were made after the expiration of the applicable

statute of limitation . . . .”

The parties filed cross-motions for summary judgment.

Following a hearing, the trial court granted FTB’s motion, denied

the Rimokhs’ motion, and entered summary judgment in favor of

FTB. In so doing, the trial court first observed that, under the

relevant statutory provisions, FTB must issue an NPA only when

it determines the tax liability reported on a taxpayer’s return is

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less than the amount due by law. Consequently, the trial court

reasoned, the limitations periods for issuing NPAs do not apply

where, as here, FTB accepts the taxpayers’ calculation of the

taxes they believe they owe as reported on their returns.

Accordingly, the court determined that because no NPAs were

required in this case, the limitations periods for issuing NPAs –

including section 19059, subdivision (a) – did not apply and,

therefore, the Rimokhs were not entitled to a refund based on

FTB’s failure to issue NPAs within the period enumerated in

section 19059.

The Rimokhs timely appealed the judgment.

DISCUSSION

I. Standard of Review

“A party is entitled to summary judgment only if there is no

triable issue of material fact and the party is entitled to judgment

as a matter of law. (Code Civ. Proc., § 437c, subd. (c).) A

defendant moving for summary judgment must show that one or

more elements of the plaintiff’s cause of action cannot be

established or that there is a complete defense. (Id., subd. (p)(2).)

If the defendant meets this burden, the burden shifts to the

plaintiff to present evidence creating a triable issue of material

fact. (Ibid.) A triable issue of fact exists if the evidence would

allow a reasonable trier of fact to find the fact in favor of the

party opposing summary judgment. (Aguilar v. Atlantic Richfield

Co. (2001) 25 Cal.4th 826, 850.)

“We review the trial court’s ruling on a summary judgment

motion de novo, liberally construe the evidence in favor of the

party opposing the motion, and resolve all doubts concerning the

evidence in favor of the opponent. (Miller v. Department of

Corrections (2005) 36 Cal.4th 446, 460.) We must affirm a

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summary judgment if it is correct on any of the grounds asserted

in the trial court, regardless of the trial court’s stated reasons.”

(Grebing v. 24 Hour Fitness USA, Inc. (2015) 234 Cal.App.4th

631, 636-637.)

II. Analysis

Seeking reversal of the summary judgment, the Rimokhs

maintain they are entitled to a refund, arguing FTB failed to

comply with section 19059, subdivision (a) and, consequently,

improperly collected the balance due per the notice issued in

September 2020. In support of their position, they argue section

19059, subdivision (a) requires FTB to issue an NPA within a

certain timeframe to collect any additional taxes due on an

amended return filed after an IRS audit results in increased state

tax liability. As discussed below, we reject the Rimokhs’

contention, as it misapplies the statutes governing whether and

when FTB must issue an NPA.

Generally, individuals who earn personal income above a

certain threshold in California must file with FTB a return

reporting their estimate of the amount of state income tax they

owe for the preceding tax year. (See §§ 18501, subd. (a), 18621,

18566.) A taxpayer’s estimate of tax liability, however, is not

conclusive of the tax due because “the amount payable is fixed by

the formal assessment of taxes, and it is the FTB, not the

taxpayer, that makes that determination.” (Goldman v.

Franchise Tax Bd. (2012) 202 Cal.App.4th 1193, 1203-1204.) On

this point, section 19032 states: “As soon as practicable after the

return is filed, the [FTB] shall examine it and shall determine

the correct amount of the tax.” In so doing, FTB ascertains

whether there is a “deficiency” by evaluating whether “the tax

disclosed by the taxpayer on an original or amended return,

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including an amended return reporting federal adjustments

pursuant to [s]ection 18622, is less than the tax disclosed by its

examination . . . .” (§ 19033, subd. (a); § 19043, subd. (a) [defining

“deficiency” as “the amount by which the tax imposed [under the

law] exceeds” the sum of “[t]he amount shown as the tax by the

taxpayer on an original or amended return” plus “[t]he amounts

previously assessed (or collected without assessment) as a

deficiency, over–[¶] . . . [t]he amount of rebates . . . made”].)

If FTB discovers a deficiency (i.e., it discovers the tax due

under the law is higher than the amount reported on a return),

“it shall mail notice to the taxpayer of the deficiency proposed to

be assessed.” (§ 19033, subd. (a).) Section 19057, subdivision (a)

provides the general rule for when an NPA must be issued,

stating: “Except in the case of a false or fraudulent return and

except as otherwise expressly provided in this part, every notice

of a proposed deficiency assessment shall be mailed to the

taxpayer within four years after the return was filed.” If FTB

does not issue an NPA within this limitations period, it cannot

assess or collect a deficiency on that return. (Ibid.)

Under certain circumstances, however, the deadline by

which FTB must issue an NPA may be extended. One such

circumstance is when the IRS, or other authorized federal official,

makes an adjustment to a taxpayer’s federal tax return, which

increases the taxpayer’s state income tax liability. In this

scenario, the taxpayer must notify FTB of the adjustments made

“within six months after the date of each final federal

determination of the” adjustments. (§ 18622, subd. (a).) Another

circumstance is when a taxpayer files an amended federal income

tax return, which increases their state income tax liability. (Id.,

subd. (b).) In that situation, the taxpayer must file an amended

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state return within six months after filing their amended federal

return. (Ibid.)

Section 19059 applies when a taxpayer complies with

section 18622.3 With respect to the first scenario described above,

section 19059, subdivision (a) states: “If a taxpayer is required by

subdivision (a) of [s]ection 18622 to report a change or correction

by the Commission of Internal Revenue or other officer of the

United States or other competent authority and does report the

change or correction within six months after the final

determination, or the [IRS] reports that change or correction

within six months after the final determination, a notice of

proposed deficiency assessment resulting from those adjustments

may be mailed to the taxpayer within two years from the date

when the notice is filed with the [FTB] by the taxpayer or the

[IRS], or within the periods provided in [s]ection 19057, 19058, or

19065,[4] whichever period expires later.” Subdivision (b) applies

3 The parties do not dispute that the Rimokhs complied with

section 18622 by filing their amended 2008 and 2009 state

returns within a week after the IRS informed FTB of its

adjustments to their federal returns for those tax years. In any

event, we note that where a taxpayer does not comply with

section 18622, section 19060—as opposed to 19059—sets the

deadline by which FTB must issue an NPA.

4 As noted above, section 19057 sets forth the general four-

year limitations period for when an NPA must be mailed.

(§ 19057, subd. (a).) Section 19058 extends the limitations period

to six years in cases where “the taxpayer omits from gross income

an amount properly includable therein which is in excess of 25

percent of the amount of gross income stated in the return . . . .”

And section 19065 extends the limitations period when “any

taxpayer agrees with the United States Commissioner of Internal

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to the second scenario, stating: “If a taxpayer is required by

subdivision (b) of [s]ection 18622 to file an amended return and

does file the return within six months of filing an amended

return with the Commissioner of Internal Revenue, a notice of

proposed deficiency assessment in excess of the self-assessed tax

on the amended return, and resulting from the adjustments may

be mailed to the taxpayer within two years from the date when

the amended return is filed with the [FTB] by the taxpayer, or

within the periods provided in [s]ection 19057, 19058, or 19065,

whichever period expires later.” (§ 19059, subd. (b).)

As set forth above, neither section 19059 nor the other

relevant statutes require FTB to issue an NPA “[i]n order to

assess the tax reported on [an] amended tax return” filed

pursuant to section 18622, as the Rimokhs contend. Instead, FTB

must issue an NPA only if, upon examination, it discovers a

deficiency (i.e., that the taxpayer’s income tax liability under the

law is higher than their self-reported liability). (§ 19033, subd.

(a).) The deadline by which FTB must do so depends on the

circumstances, and is governed by several different statutes,

including section 19059. But where FTB accepts the tax liability

reported on an amended return, and does not seek to impose

additional tax as a deficiency on top of the amount self-reported,

FTB need not issue an NPA. (See §§ 19033, subd. (a), 19057,

Revenue for an extension or renewals thereof of the period for

proposing and assessing deficiencies in federal income taxes for

any given year,” and requires an NPA to be mailed within “four

years after the return was filed or six months after the date of

the expiration of the agreed period for assessing deficiencies in

the federal income tax, whichever period expires later.”

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subd. (a).) Under those circumstances, since no NPA is required,

the deadlines in section 19059 do not apply. (See § 19059.)

That is precisely the situation in this case. Here, the

undisputed evidence demonstrates that, after the Rimokhs filed

amended state returns for 2008 and 2009 following the IRS’s

adjustments to their federal returns for those years, FTB did not

seek to assess or collect a deficiency for either year. Instead, FTB

accepted the Rimokhs’ calculation of their tax liabilities,

reconciled their prior payments against those liabilities plus

penalties and interest due, and determined they had a balance

due of approximately $1.3 million for the 2009 tax year as of

September 2020. Because FTB did not find a deficiency with

respect to the amended state returns, it was not required to issue

an NPA before using payments received from the Rimokhs to

satisfy the balance due. Therefore, the Rimokhs are not entitled

to a refund based on FTB’s failure to issue NPAs within the time

provided in section 19059, subdivision (a), as that deadline has no

application in this case.

As briefly noted above, the Rimokhs offer a starkly

different interpretation of section 19059. According to them,

section 19059 dictates both whether and when FTB must file an

NPA to assess and collect taxes based on an amended return. On

this point, they assert subdivision (a) of the statute applies where

a taxpayer has filed an amended state tax return as a result of an

“involuntary” adjustment to their federal return due to an IRS

audit, and requires FTB to issue an NPA within its two-year

limitations period whenever FTB seeks to assess and collect any

taxes stemming from that amended return. By contrast, they

argue subdivision (b) applies where a taxpayer must file an

amended state return after “voluntarily amend[ing] his federal

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tax return,” and requires FTB to issue an NPA within the

specified time period only when it seeks to collect taxes exceeding

the amount reported by the taxpayer on the amended return.

We reject the Rimokhs’ interpretation of section 19059 as

unsupported by the statute’s plain language. On its face, the

statute does not differentiate between amended returns filed on a

“voluntary” or “involuntary” basis. (§ 19059.) Nor does it specify

whether and when an NPA must be mailed, as the Rimokhs

contend. Instead, section 19059 reflects it is limited to addressing

the latter issue. The statute presupposes an NPA is required and

sets the deadlines by which it must be mailed, depending on

whether the taxpayer has taken action under section 18622,

subdivision (a) or (b). (See § 19059.) Whether FTB must mail an

NPA at all is governed by section 19033, subdivision (a), rather

than section 19059. As noted above, section 19033, subdivision (a)

states an NPA need only be mailed “[i]f the [FTB] determines

that the tax disclosed by the taxpayer on an original or amended

return, including an amended return reporting federal

adjustments pursuant to [s]ection 18622, is less than the tax

disclosed by its examination . . . .” (Italics added.)

Having concluded, based on its clear and unambiguous

language, that section 19059 does not apply here, we need not

address the Rimokhs’ arguments predicated upon the statute’s

legislative history or FTB’s publications. “‘Our fundamental task

[in interpreting a statute] is to determine the Legislature’s intent

and give effect to the law’s purpose. [Citation.] We begin by

examining the statute’s words “‘because they generally provide

the most reliable indicator of legislative intent.’ [Citation.] If the

statutory language is clear and unambiguous our inquiry ends.”’

[Citation.] In that case, the plain meaning of the statute is

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controlling, and ‘“resort to extrinsic sources to determine the

Legislature’s intent is unnecessary.”’” (Lopez v. Sony Electronics,

Inc. (2018) 5 Cal.5th 627, 633-634.)5

Finally, we reject the Rimokhs’ argument predicated on

Ordlock v. Franchise Tax Bd. (2006) 38 Cal.4th 897 (Ordlock).

There, our Supreme Court clarified the relationship between

section 19057, subdivision (a), which sets forth the general four-

year limitations period in which an NPA must be issued, and

sections 19059 and 19060, the statutes describing when an NPA

must be issued after the IRS adjusts a taxpayer’s federal taxable

income and/or tax liability. (Ordlock, at pp. 902, 910.) In so doing,

it did not address the issue presented here, namely, whether FTB

must file an NPA within section 19059, subdivision (a)’s two-year

limitations period when FTB does not seek to assess or collect a

deficiency arising from an amended return filed under section

18622, and instead collects on the balance due per the taxpayer’s

self-reported liability on the amended return. (See id. at pp. 901-

902.) It is well-settled that “[a] case is not authority for a

proposition not considered therein or an issue not presented by

its own particular facts.” (McConnell v. Advantest America, Inc.

(2023) 92 Cal.App.5th 596, 611.) Thus, the Rimokhs’ reliance on

Ordlock is misplaced.

In sum, on the undisputed facts in this case, we agree with

the trial court that section 19059 does not apply and, therefore,

the Rimokhs are not entitled to a refund based on FTB’s

noncompliance with the inapplicable statute. Accordingly, the

trial court correctly granted summary judgment in favor of FTB.

5 For these reasons, the Rimokhs’ motion for judicial notice,

filed on October 4, 2024, is denied.

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DISPOSITION

The judgment is affirmed. Respondent shall recover its

costs on appeal.

NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS

CURREY, P. J.

We concur:

COLLINS, J.

MORI, J.

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