(a) If the Franchise Tax Board makes or allows a refund or credit that it determines to be erroneous, in whole or in part, the amount erroneously made or allowed may be assessed and collected after notice and demand pursuant to Section 19051 (pertaining to mathematical errors), except that the rights of protest and appeal shall apply with respect to amounts assessable as deficiencies without regard to the running of any period of limitations provided elsewhere in this part. Notice and demand for repayment must be made within two years after the refund or credit was made or allowed, or during the period within which the Franchise Tax Board may mail a notice of proposed deficiency assessment, whichever period expires the later. Abatement of interest on an amount due under this section is governed by subdivision (c) of Section 19104.
(b) (1) This section shall also apply to a misdirected refund. For purposes of this subdivision, a “misdirected refund” means a direct deposit refund that was deposited in the account of a person other than the taxpayer entitled to that refund. A misdirected refund does not include any refund caused by Franchise Tax Board error, which is an erroneous refund under subdivision (a).
(2) This subdivision shall only apply if the Franchise Tax Board determines that all of the following conditions have been satisfied:
(A) A taxpayer filed a tax return that designated one or more direct deposit refunds.
(B) The taxpayer, tax preparer, or electronic return originator entered an incorrect financial institution account or routing number that resulted in all or a portion of the refund not being received, directly or indirectly, by the taxpayer due the refund.
(C) The taxpayer did not receive the refund.
(D) The recipient of the misdirected refund was not entitled to the refund.
(3) Before any credit of the misdirected refund is allowed to the taxpayer, the taxpayer shall provide one or more of the following to the Franchise Tax Board, upon written request by the board:
(A) An affidavit from the taxpayer that the taxpayer notified the financial institution that the taxpayer, tax preparer, or electronic return originator entered an incorrect financial institution account or routing number and that the state-issued refund was directly deposited into an account not owned, directly or indirectly, by the taxpayer entitled to the refund.
(B) An affidavit from the taxpayer indicating that neither the taxpayer nor the taxpayer’s representative has custody or control, directly or indirectly, over the account at the financial institution that received the direct deposit refund.
(C) An affidavit from the taxpayer indicating that neither the taxpayer nor the taxpayer’s representative has received reimbursement of the refund moneys from any source.
(4) The Franchise Tax Board shall mail notice and demand for repayment as prescribed in subdivision (a) to the recipient of the misdirected refund at the last known address.
(5) Effective on the date the notice and demand for repayment to the recipient is mailed to the recipient, the taxpayer’s account shall be credited with the amount of the misdirected refund.
(6) This subdivision shall apply to any misdirected refund deposited on or after January 1, 2009.
(Amended by Stats. 2008, Ch. 234, Sec. 3. Effective January 1, 2009.)