Any civil employment tax matter dispute arising under Article 8 (commencing with Section 1126), Article 9 (commencing with Section 1176), or Article 11 (commencing with Section 1221), may be settled under the following conditions:
(a)
(1)
The director may approve a settlement of a civil employment tax matter in dispute involving a reduction of tax or penalties, or both, that does not exceed the amount specified in subparagraph (A) of paragraph (3). However, once an appeal of an employment tax matter dispute has been filed with the appeals board, the appeal has been assigned to an administrative law judge, and a notice of hearing has been issued,
approval of the settlement by the assigned administrative law judge shall be obtained. If the decision of the administrative law judge has been appealed, approval of the appeals board shall be obtained. A proposed settlement shall be grounds for continuance of the scheduled hearing until the Attorney General has completed a review of the proposed settlement. “Civil employment tax matters in dispute” means those matters that are the subject of protests, appeals, or refund claims.
(2)
Except as provided by subparagraph (A) of paragraph (3), each proposed settlement shall be submitted to the Attorney General. Within 30 days of receiving that proposed settlement, the Attorney General shall review the recommendation and advise, in writing, of their conclusions as to whether the recommendation is reasonable from an overall perspective. If
the Attorney General determines that the settlement is reasonable from an overall perspective, the director, and the administrative law judge or the appeals board, as applicable, may then determine if a settlement will be approved.
(3)
(A)
A settlement of any civil employment tax matter dispute involving a reduction of tax or penalties, or both, in settlement, the total of which reduction of tax or penalties, or both, in settlement does not exceed eleven thousand five hundred dollars ($11,500), may be approved by the director, and the administrative law judge or the appeals board, as applicable, without prior submission to the Attorney General.
(B)
On January 1 of each calendar year beginning on January 1, 2025, the Employment Development Department
shall increase the amount specified in subparagraph (A). That adjustment shall be made as follows:
(i)
The Department of Industrial Relations shall transmit annually to the Employment Development Department the percentage change in the California Consumer Price Index, as modified for rental equivalent home ownership for all items, from June of the prior calendar year to June of the current calendar year, no later than August 1 of the current calendar year.
(ii)
The Employment Development Department shall then:
(I)
Compute the percentage change in the California Consumer Price Index from the later of June 2024 or June of the calendar year prior to the last increase in the amount specified in this subparagraph.
(II)
Compute the inflation adjustment factor by adding 100 percent to the percentage change so computed, and converting the resulting percentage to the decimal equivalent.
(III)
Multiply the amount specified in subparagraph (A) for the immediately preceding calendar year, as adjusted under this subparagraph, by the inflation adjustment factor determined in subclause (II), and round off the resulting product to the nearest one hundred dollars ($100).
(b)
The director may recommend to the appeals board a settlement of a civil employment tax matter dispute involving a reduction in tax or penalties, or both, exceeding the amount specified in subparagraph (A) of paragraph (3) of subdivision (a) and arising under
Article 8 (commencing with Section 1126), Article 9 (commencing with Section 1176), or Article 11 (commencing with Section 1221). Each proposed settlement shall be submitted to the Attorney General in the same manner as described in subdivision (a).
(c)
Whenever a reduction of tax or penalties or total tax and penalties in excess of five hundred dollars ($500) is approved pursuant to this section, there shall be placed on file in the office of the director a public record with respect to that settlement. The public record shall include, but need not be limited to, all of the following information:
(1)
The name or names of the taxpayers who are parties to the settlement.
(2)
The total amount involved.
(3)
The amount payable or refundable pursuant to the settlement.
(4)
A summary of the reasons why the settlement is in the best interests of the state.
(5)
The Attorney General’s conclusion as to whether the recommendation of settlement was reasonable from an overall perspective.
The public record shall not include any information that relates to any trade secret, patent, process, style of work, apparatus, business secret, or organizational structure that, if disclosed, would adversely affect the taxpayer or the national defense.
(d)
All settlements entered into pursuant to this section shall be final and nonappealable,
except upon a showing of fraud or misrepresentation with respect to a material fact.
(e)
Any proceedings undertaken by the appeals board relating to a settlement as described in this section shall be conducted in a closed session or sessions. Except as provided in subdivision (c), any settlement entered into pursuant to this section shall constitute confidential tax information.
(f)
Any settlement of a civil employment tax matter arising out of a disagreement between the department and the employing unit on the status of a worker as an employee or an independent contractor may also include an agreement on the prospective classification of that worker and any worker similarly situated for employment tax purposes, except as provided in subdivision (g).
(g)
If a settlement includes a commitment on the prospective status of workers or reporting responsibilities of the employer, then the following shall apply:
(1)
The settlement shall not operate to deprive workers of their eligibility for unemployment, workers’ compensation, or disability insurance benefits.
(2)
The commitment concerning the status of workers or reporting responsibilities of the employer will terminate if there is a change in material facts, a change in an applicable statute, or a ruling by the appeals board on the workers or employer subject to the settlement that is contrary to the commitment.
(h)
For purposes of this section, settlement is
defined as a
compromise on the amount of the tax liability, consistent with the reasonable evaluation of the costs and risks associated with litigation of these matters.
(i)
The amendments to this section made in the 1997 portion of the 1997–98 Regular Session shall become operative January 1, 1998.
