The California Office of Tax Appeals is facing growing pressure from tax professionals to use the full extent of its authority and stop acting like a passive reviewer of other state tax agencies. Instead, they want the tribunal to become a true check on aggressive interpretations by the Franchise Tax Board and the California Department of Tax and Fee Administration.
The debate intensified after an opinion from Attorney General Rob Bonta confirmed that the tribunal can refuse to apply tax regulations that conflict with state law in individual cases. California Attorney General Yet, practitioners say the OTA is still moving too cautiously.
For taxpayers and advisers navigating California’s complex tax landscape, how boldly the OTA uses this power could shape audit strategies, settlement talks and the odds of success on appeal for years to come.
You can learn more about the tribunal’s role and procedure on the official California Office of Tax Appeals website and read the state’s legal leadership profile of Attorney General Rob Bonta.
What Has Changed For The OTA?
For years, the OTA signaled that it lacked authority to question or override regulations issued by the Franchise Tax Board (FTB) or CDTFA, even when taxpayers argued that a regulation stretched beyond what the statute actually says. In cases like Janus Capital and other early decisions, the tribunal largely deferred to agency rules.
That posture was shaken on July 31, 2025, when Rob Bonta issued Opinion No. 23-701. In that opinion, the Attorney General concluded that:
- OTA panels may examine whether a tax regulation conflicts with the governing statute as applied to a taxpayer’s facts
- If a conflict exists, the OTA may decline to apply that regulation in that specific appeal
- At the same time, the OTA cannot formally strike down or invalidate a regulation statewide; its power is limited to refusing to follow it in the case in front of it
In short, the tribunal doesn’t become a mini–Supreme Court, but it is no longer a mere rubber stamp when agency rules clash with the law.
Why Tax Professionals Want The OTA To Be Bolder
State and local tax practitioners view the Attorney General’s opinion as a green light for more aggressive statutory challenges in OTA appeals. Commentators have described the ruling as confirmation that the OTA is “not just a rubber stamp” and have urged taxpayers to directly argue that certain FTB or CDTFA regulations overreach or conflict with statute.
From their perspective, a more assertive California tax tribunal would:
- Provide a real check on agencies that have long interpreted gray areas in their own favor
- Offer a faster and less costly path to relief than litigating solely in superior court
- Improve uniformity and fairness in how contested regulations are applied across cases
But so far, practitioners say, the OTA has taken only incremental steps. Many appeals still treat regulations as controlling unless the conflict is glaring, and some panels appear reluctant to fully test the boundaries of their new authority.
Where The Line Is Drawn
The Attorney General’s opinion and subsequent commentary make clear that the tribunal’s power has limits. According to the analysis:
- The OTA may decline to apply a regulation if it conflicts with the statute in the context of the specific taxpayer’s appeal
- It may not issue sweeping declarations that a regulation is invalid in all circumstances
- It must still give “appropriate deference” to the interpretation of the rulemaking agency, even as it conducts its own statutory analysis
That framework means the hardest work will be done case by case, with panels weighing legislative text, regulatory language and factual nuance rather than issuing a single blockbuster ruling.
What This Means For Taxpayers
For businesses and individuals contesting California tax assessments, the emerging OTA landscape offers both opportunity and responsibility:
- New strategic leverage
Taxpayers can now build appeals around arguments that a regulation, as applied, goes beyond the statute, rather than limiting themselves to factual disputes or narrow interpretations of the rule. - Need to build the record early
Practitioners are advising clients to raise potential statute–regulation conflicts during audits, protests and settlement talks with FTB or CDTFA, so that those issues are clearly preserved for OTA review. - Greater uncertainty in the short term
Until more decisions are issued, it may be difficult to predict when a panel will be willing to refuse to follow a regulation. Different panels may draw the line in different places, creating an evolving body of precedent.
The Next Phase For California Tax Appeals
The California Office of Tax Appeals now sits at a crossroads. It has confirmation from the Attorney General that it can decline to apply conflicting regulations. Tax professionals are openly urging it to use that authority more often and more visibly. At the same time, the tribunal is clearly wary of being seen as a full-fledged court striking down agency rules.
How the OTA chooses to proceed will influence:
- The balance of power between California’s tax agencies and the appellate body reviewing them
- The predictability of California’s tax system for businesses deciding where to invest
- The willingness of taxpayers to pursue appeals rather than settling under unfavorable regulatory interpretations
If the tribunal embraces a more confident role while staying within its legal limits, it could become a powerful venue for reconciling statutes, regulations and taxpayer rights in one of the most complex state tax environments in the country. If it remains cautious, those fights will continue to be pushed into the courts, prolonging uncertainty for everyone involved.
Either way, the era of the OTA as a purely deferential forum appears to be ending — and taxpayers are watching closely to see how boldly it steps into its expanded role.
