California Franchise Tax Board’s Financial Institution Record Match (“FIRM”) Program Gains Traction

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Pursuant to a budget trailer bill chaptered into law on March 24, 2011, the California Franchise Tax Board (“FTB”) has the authority to operate and administer the Financial Institution Records Match (“FIRM”) program. Governed by California Revenue and Taxation Code section 19622, FIRM is an automated data match program which will be used by the FTB to identify accounts of delinquent tax debtors held at financial institutions doing business in California. Modeled after the Financial Institution Data Match program, which is mandated by federal law for the collection of delinquent child support debts and also administered by the FTB, FIRM is an enforcement tool that will be used to collect delinquent taxes and non-tax debts of individuals and business entities.

To effectuate the FIRM program, financial institutions must provide to the FTB on a quarterly basis the name, record address and other addresses, social security number or other taxpayer identification number, and other identifying information for each delinquent tax debtor. Under the current draft regulation, financial institutions can comply with the FIRM program by one of two methods. Under the first method, a financial institution will submit a data file to the FTB containing records of all open accounts held by the financial institution. FTB will then match this information against its own records. This method is only available to financial institutions that do not have the technical ability to process the data exchange or the ability to employ a third party to process the data exchange. Under the second method, the FTB will furnish delinquent tax debtor files to the financial institution.

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