FTB’s Dreaded Top 500 List

Twice a year the California Franchise Tax Board (FTB) puts together a list that they call the “Top 500 Delinquent Taxpayers.” One list comes out in April during tax season, and it is updated in October near the extension deadline. It is a list of the 500 highest state tax liabilities along with the individuals and companies who owe them. The list was last updated on October 14th and can be accessed here. Right now these 500 liabilities add up to around $394 million.

I know I tend to get hung up on semantics (isn’t that what lawyers do?) but I think the title of this list is a bit harsh. The term “delinquent,” when used to describe an individual, almost always has a criminal connotation. The Oxford dictionary, for example, defines the term in this manner: “(typically of a young person) tending to commit crime, particularly minor crime.” Webster’s definition is similar: “doing things that are illegal or immoral.” I don’t know how many taxpayers on this list have been convicted (or even accused) of a crime; I would guess few of them have. As we know, failing to pay all your taxes when they become due, in and of itself, is not a crime.

In tax jargon the term “delinquent” usually means something different. Tax attorneys, accountants, and tax collection agencies typically use this word when referring to overdue payments or past due accounts. When “delinquent” is used to describe an account (rather than a person) then it carries a connotation of tardiness rather than criminality. Therefore, if the FTB must use the term “delinquent,” it really should be used to describe an account rather than a taxpayer. I would be in favor of changing the title of the list to “Top 500 Delinquent Tax Accounts.”

Having said that, these people have been given fair warning. Besides the various preliminary letters and notices, they are given one last chance to clear things up (or at least begin the process) before the top 500 list is published. According to the FTB website:

In August, FTB sent letters to taxpayers scheduled to appear on the list. Of these taxpayers, 96 made arrangements to pay their tax debt. Another 296 individuals and 108 businesses did not pay, resulting in their inclusion on the list.

The FTB states that they have collected more than $582 million through this program since it was started in 2007. I’m not sure how they can tell what part of the revenue they receive is a result of this program and what part would have been paid regardless of inclusion on the list. I would also be interested in studying the unintended consequences of the list, like how, and to what degree, this list has negatively impacted these peoples’ careers. Although, having done a quick Google search, I don’t think the list usually appears in mainstream news outlets. I also researched a few of the top names and I suspect that their reputations have already been tarnished by other financial problems, and their FTB tax debts are just one piece to the puzzle.

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