FTB Notice 2023-02 Resolution of Micro-Captive Insurance and Syndicated Conservation Easement Transactions

New: As of 7/3/23, an updated version of the Closing Agreement has been published. If you previously downloaded the Closing Agreement prior to 7/3/23, please discard the prior version of the Closing Agreement and complete the revised Closing Agreement, linked throughout this page.

Overview

On May 31, 2023, FTB issued FTB Notice 2023-02. The Notice provides taxpayers the opportunity to resolve Micro-captive Insurance (MCI) and Syndicated Conservation Easement (SCE) Transactions that may be subject to the NEST penalty, and receive reduced penalties by entering into a FTB Notice 2023-02 Closing Agreement (Closing Agreement) to reverse their deductions and related transaction costs.

On November 13, 2023, FTB issued FTB Notice 2023-03, which extended the period for participating in the resolution program to January 31, 2024.

Extended Participation Period

Eligible Taxpayers may participate in the resolution program from July 10, 2023 through January 31, 2024.

Eligible Taxpayers

Include:

  1. Taxpayers currently under examination by the FTB or under examination by the Internal Revenue Service (IRS) or at IRS appeals with respect to their participation in Eligible Transactions.
  2. Taxpayers who have received a notice of proposed assessment from FTB with respect to their participation in an Eligible Transaction and are at protest with FTB or are at appeal before the Office of Tax Appeals.
  3. Taxpayers in litigation with the IRS with respect to Eligible Transactions, but do not include taxpayers who are in litigation with the FTB regarding an Eligible Transaction.
  4. Taxpayers who are a direct or indirect partner in a partnership that is currently under examination by the IRS or FTB or that is in litigation with the IRS.
  5. A partnership that is required to report final federal adjustments pursuant to RTC section 18622.5, or which has reported such adjustments, with respect to Eligible Transactions.
  6. A "tiered partner," as defined under RTC section 18622.5(b)(12), of a partnership.

For more information regarding Partners and Partnerships please refer to Notice 2023-02.

Closing Agreements filed before July 10, 2023, or after January 31, 2024, will not be eligible for the penalty relief provided by the Notice 2023-02 program.

Procedures for Participation

To take advantage of the penalty reduction, you must complete the following steps from July 10, 2023 through January 31, 2024:

  1. Follow the Closing Agreement Instructions to complete and submit a signed Closing Agreement that concedes all claimed tax benefits relating to the Eligible Transaction(s).
  2. Pay the taxes, interest, and reduced penalty.
  3. Mail the Closing Agreement and all required attachments along with payment or indicate a request for an installment payment arrangement on the Closing Agreement.
    4. If using the US Mail, please address as follows:

    ABS 389 NOTICE 2023-02 COORDINATOR – MS F340
    Franchise Tax Board
    PO Box 1673
    Sacramento, CA 95812-9900
    If using a private carrier, please address as follows:

    ABS 389 NOTICE 2023-02 COORDINATOR – MS 340
    Franchise Tax Board
    Sacramento, CA 95827-1500

How to Pay

For payment options, please visit Payment options.

If paying by check, money order, or cashier's check:

  1. Make check, money order, or cashier's check to Franchise Tax Board.
  2. Write the Taxpayer name, FTB ID or Business Entity ID, and tax year(s) on your payment.
  3. Write Notice 2023-02 on your payment.
  4. Attach the check, money order, or cashier's check to the Closing Agreement.

If you are subject to mandatory e-Pay or electronic funds transfer, you are not eligible to submit the payment by check with the Notice 2023-02 Closing Agreement.

To determine if you are required to pay electronically:

If you have a financial hardship, you may request on the Notice 2023-02 Closing Agreement to enter into an installment payment arrangement with the FTB to pay the full amount over a period not to exceed 12 months.

The FTB will not execute a submitted Closing Agreement without payment in full or the acceptance of a valid installment payment arrangement.

Frequently Asked Questions

For more information please refer to our FAQs.

Contact us about Notice 2023-02

TaxShelter@ftb.ca.gov
FTB MCI and SCE Resolution Hotline
916-845-3030
9 AM to 4 PM (PT) weekdays, except state holidays