How Long Can the California Franchise Tax Board Collect My Taxes?

August 7th, 2025

If you do business or reside in California, you should be aware of how long the FTB can collect any of your past due tax obligations. The legal term for this collection period is the Statute of Limitations. You likely think it’s a reasonable amount of time- probably 10 years, like the IRS, right? Unfortunately, despite the reasonableness of this guess, the State gets far longer to collect. Once your tax is “due and owing”, the FTB can collect for 20 years! Not only that, but the Statute of Limitations can be tolled (stopped) by disaster declarations, being in bankruptcy or being on an installment agreement, among other events.

Tolling exists to give the State a remedy for periods during which they cannot collect; the remedy is that the State simply gets more time to collect. However, State law includes paying the liability off over time on an installment agreement as a tolling event. Since tolling is to allow the State a remedy for when they cannot collect-- how is paying the State voluntarily stopping the FTB from collecting? Stop being so reasonable!

The FTB is stopped from levying, that is, seizing a bank account or other enforced collection during the pendency of an installment agreement. This is a weak reason to toll the statute, given that you are voluntarily paying during that period. Also, what is your incentive to enter into an installment agreement if it works against you? The 20-year period stops for the entire time the installment agreement is in force. It is not a problem if you pay the liability off, but if you can’t do so, you’ve inadvertently extended the time within which the State can collect. Not good news, but wait, it’s about to get much worse. Unlike the IRS, which has a set date (the date of tax assessment) that begins the 10-year collection limitation period, the State has a “reset” button. Any time you incur another tax liability, and it becomes “due and payable” while there are other balance due periods, the FTB gets to look to the collection period for the most recent year for all your liabilities! Using this law, the FTB can extend the Statute of Limitations if you are assessed a deficiency for a later year or file a balance due tax return.

Here is an example: Your withholding for 2001 and 2002 was insufficient to pay the taxes you report on your returns for these years. The FTB assesses the taxes which become “due and payable” on April 15, 2002, and April 15, 2003, respectively. Assuming you do nothing that would toll the Statute of Limitations on collection, the collection statutes should expire on April 15, 2022, and April 15, 2023. However, if you filed a tax return showing a balance due for 2007, which became “due and payable” on April 15, 2008, while the earlier years were still unpaid, the FTB would consider the collection Statute of Limitations for all three years to be that of the 2007 year, or April 15, 2028. Suddenly, the State gets an additional 5 and 6 years to collect! This strange rule gives the FTB the power to collect far beyond when any rational person would think that the statute should be expired.

The tax rules in California are complicated. Call us at 310-208-6200 or visit www.bragertaxlaw.com to help you make sense of where you are- before the tax Zombies appear.