Bakersfield FTB Attorney
The California Franchise Tax Board operates statewide, but the FTB issues I see for Bakersfield and Kern County clients have a specific local character — agriculture, oil and gas, and the out-of-state landowners who receive California-source income and don't always realize they have California filing obligations. Here is what I typically see in this market and how I approach it.
What the FTB Does and How It Reaches Bakersfield Taxpayers
The California Franchise Tax Board is California's primary income tax authority — it taxes California residents on their worldwide income and nonresidents on income sourced to California.
If you lived in California at any point during the year, the FTB can tax all your income for that period. If you're a nonresident with California-source income — royalties from California oil wells, income from California farmland, wages from a California employer — the FTB has a claim on that income regardless of where you live. The nonresident California-source income obligation is one of the most commonly overlooked filing requirements I see for Kern County landowners who've relocated out of state.
FTB audits are typically triggered by information-matching: the FTB receives 1099s, K-1s, and royalty statements and checks them against what was reported. A mismatch generates a notice. For California-source income recipients who aren't filing California returns, the FTB may open a filing enforcement case directly. A second trigger is a federal audit adjustment — under the information-sharing agreement between the IRS and FTB, a federal audit finding almost always produces an FTB examination.
The FTB collection statute is 20 years under Cal. R&TC § 19255. The IRS has 10 years. That longer window matters for Kern County landowners and business owners with older FTB balances — debts that feel historical are often still well within the FTB's collection period. The FTB's enforcement tools include intercepting California tax refunds, issuing an Order to Withhold against bank accounts, sending an Earnings Withholding Order to employers, suspending California driver's and professional licenses, and recording a Notice of State Tax Lien against California real property, all without a court order.
Common FTB Issues in Bakersfield
Agricultural Income and Farm Tax Issues
California conforms to most federal farm tax rules but has specific FTB issues around California-sourced agricultural income, passive activity limitations, and farm loss treatment.
The Central Valley is one of the most productive agricultural regions in the world, and farm income questions are a regular part of FTB practice in Kern County. The core FTB issue for farming operations usually involves one of three things: how farm losses are treated under California's conformity to federal passive activity rules (IRC § 469), how the FTB handles farm rental income versus active farming income, and how California-source agricultural income is treated when the landowner moves out of state.
On passive activity: if you own California farmland that is rented to a tenant farmer under a cash rent arrangement, the FTB treats that income as passive activity rental income under California's conformity rules. Farm losses from a passive farming operation generally can't offset your active income. To treat farming as active, you need to meet the material participation requirements under the regulations — hours worked, level of decision-making, and other factors the FTB looks at carefully in an audit.
Water rights income is a related issue. Kern County is a major California water rights market, and payments received for the use of water rights appurtenant to California agricultural land are California-source income subject to FTB taxation, regardless of where the recipient lives. I see this come up when farmland has been sold or partially sold but the seller retained certain water rights, and the water payments continue flowing to an out-of-state recipient who doesn't realize they still have a California filing obligation.
Oil and Gas Royalty Income
Kern County royalty income from oil and gas production is California-source income, subject to FTB taxation for nonresidents regardless of where the royalty recipient lives.
Kern County is one of California's primary oil-producing regions, and royalty income from Kern County wells is a significant income item for a large number of landowners, many of whom live outside California. California-source income for nonresidents is taxable by the FTB under Cal. R&TC § 17951, and royalty income from California mineral rights is squarely California-source income. The income has California as its source because the mineral resource is physically located in California.
The FTB filing requirement for nonresidents receiving California royalty income is often not well understood. If your California-source gross income exceeds the California filing threshold (which is relatively low — in 2025, $19,310 for a single filer under 65), you're required to file a California nonresident return (Form 540NR) and pay California income tax on the California-source portion. Royalty payers issue 1099s that go to the FTB, so the FTB has visibility into royalty payments made to nonresidents. When a nonresident isn't filing California returns, the FTB will eventually open a filing enforcement case.
For nonresident royalty recipients who have years of unfiled California returns, the right approach is usually to come into compliance proactively rather than wait for the FTB to act. The FTB can estimate tax for unfiled years, and its estimates are typically high. Filing the actual returns, even late, is almost always better than letting the FTB issue estimates.
Out-of-State Landowners and California Filing Obligations
Out-of-state landowners receiving California-source income — including farm rent, oil royalties, and partnership income from California entities — owe California income tax on that income even if they have no other connection to California.
This is the issue I probably see most often with Kern County referrals. The pattern is consistent: a family inherited Kern County farmland or oil rights decades ago, the family moved to Texas or Oklahoma or Arizona, and for years they've received California-source income (farm rent, royalty payments, pass-through income from a family partnership that owns California property) without filing California nonresident returns. When the FTB eventually matches the 1099s and K-1s it's received against its records, it issues a Demand for Tax Return or opens a filing enforcement case.
At that point, the family faces back taxes, interest, and potentially substantial penalties for the years they didn't file. The right response is usually to file the outstanding returns, report the California-source income correctly, and negotiate with the FTB on penalties. California has a voluntary disclosure program that can reduce penalties if you come in before the FTB contacts you. The FTB's Voluntary Disclosure Program is worth considering for multi-year nonfilers.
FTB Audits After IRS Adjustments
Under Cal. R&TC § 18622, if the IRS adjusts your federal return, you must notify the FTB within six months of the final federal determination. For Kern County farm and oil income, where depletion calculations and Schedule F deductions are often complex and sometimes generate IRS audit activity, failing to notify the FTB of a federal adjustment leaves the FTB's limitations period open indefinitely for that issue. I see cases each year from this region where a federal audit from several years ago produced FTB liability because no one filed the required California report of federal changes.
FTB Audit Defense
An FTB audit begins with a written notice identifying the issues under review and requesting documentation.
Correspondence audits are handled entirely by mail. The FTB identifies the issues, requests records, and you respond. For farm income and oil royalty audits, the FTB's document requests typically include Schedule F or K-1 source records, royalty statements, lease agreements, and any documents showing the nature and source of income items. Field audits — assigned for larger dollar cases — involve more in-depth examination and sometimes interviews.
If the audit goes against you, the FTB issues a Notice of Proposed Assessment (FTB 4107). You have 60 days from the NPA date to file a written protest. The protest is your complete legal and factual response to the FTB's proposed adjustments. After the FTB reviews the protest, it issues a Notice of Action. If that doesn't resolve the matter, you can appeal to the Office of Tax Appeals (OTA) in Sacramento.
The 60-day protest window is firm. Missing it converts the NPA into a final assessment.
FTB Collections Defense
Once a final FTB assessment exists, the FTB has 20 years to collect it under Cal. R&TC § 19255 — and for Kern County landowners, that often means the FTB has claims against California real property.
A Notice of State Tax Lien is the FTB's first formal collection step after assessment. It attaches to California real property and is a public record, no court order required. For Kern County landowners with FTB balances, a lien on their California farmland or mineral rights can affect the ability to sell or transfer the property, or to get agricultural financing secured by the land.
The FTB can also issue an Order to Withhold against bank accounts and an Earnings Withholding Order to employers. For nonresident royalty recipients, the FTB's most direct collection tool is the Order to Withhold — it reaches bank accounts wherever they are, as long as the bank has a California branch or operations.
Resolution options include installment agreements, currently not collectible status, and California's Offer in Compromise program under Cal. R&TC § 19443. For Kern County landowners whose assets are concentrated in California real estate and mineral rights — relatively illiquid assets — and whose current cash income doesn't support paying the full FTB balance, the OIC is worth analyzing seriously. The FTB's evaluation looks at your actual ability to pay, not just the face value of your assets.
California Residency and Source Income Issues
California-source income is taxable to nonresidents regardless of where they live, and for Kern County, the most common California-source items are farm income, oil and gas royalties, and income from California-based family partnerships.
The FTB's residency rules in FTB Publication 1031 govern whether you're a California resident (taxed on worldwide income) or nonresident (taxed only on California-source income). For many Bakersfield and Kern County clients, the question isn't residency — it's whether income from California property they own constitutes California-source income they need to report. The answer under Cal. R&TC § 17951 is yes: income from California real property and California mineral rights is California-source income regardless of where the recipient lives.
The practical implication: if you've inherited California farmland or oil rights and moved to another state, you likely have California income tax obligations that need to be addressed. The longer unfiled returns go unaddressed, the more the problem compounds through interest accrual and potential penalties.
About Sam Brotman
I'm Sam Brotman, a tax attorney and CPA based in San Diego. I hold a JD and an LL.M. in Taxation. I've represented more than 400 clients in tax audits and disputes, with over $1 billion resolved across federal and state tax controversy — including FTB matters throughout California.
FTB matters are conducted almost entirely in writing, which means geography isn't a barrier. I handle FTB audits, protests, OTA appeals, voluntary disclosure filings, and collection resolutions for clients anywhere in California. If you have an FTB notice, an oil royalty question, an unfiled California return issue, or a collections problem, I'm happy to discuss it. Book a free 15-minute call and we'll work through where things stand.
Frequently Asked Questions
What is the difference between a California FTB audit and an IRS audit?
The FTB audits California state income tax returns; the IRS audits federal returns. The agencies share information under a formal agreement, so a federal adjustment almost always triggers an FTB examination. FTB auditors issue a Notice of Proposed Assessment (FTB 4107); the IRS uses a 30-day letter and Form 4549. Unresolved FTB protests go to the Office of Tax Appeals (OTA) in Sacramento. For Kern County farm and oil income, the California and federal issues often involve the same transactions but require separate analysis — California's conformity rules on depletion and passive activity don't always track the federal rules exactly.
How long does the FTB have to audit me?
Four years from the later of the return due date or filing date under Cal. R&TC § 19057, generally. A substantial income understatement (over 25%) extends this to six years. No time limit applies to unfiled or fraudulent returns — and for out-of-state landowners who haven't filed California nonresident returns, there is no limitations period running at all until a return is filed. Failing to report a federal adjustment to the FTB under Cal. R&TC § 18622 within six months of a final federal determination also leaves the FTB's window open indefinitely for that issue.
Can the FTB garnish my wages or levy my bank account?
Yes. The FTB issues an Order to Withhold to financial institutions and an Earnings Withholding Order to employers, both without a court judgment. It also intercepts California tax refunds, suspends driver's and professional licenses, and records a Notice of State Tax Lien against California real property. The 20-year collection statute under Cal. R&TC § 19255 means old FTB balances don't disappear — a ten-year-old assessment is well within the FTB's collection window.
Does California have an Offer in Compromise program?
Yes, under Cal. R&TC § 19443. You submit a financial disclosure and a settlement offer; the FTB accepts it if collecting the full balance is realistically unlikely. California doesn't require the IRS's 20% non-refundable deposit at submission. For Kern County landowners whose assets are largely illiquid California real estate and mineral rights, the OIC is a real option — the FTB evaluates your actual ability to pay, not just the assessed value of your property.