California Franchise Tax Board Charges Penalties on Taxes not owed California

I have been a tax preparer for 38 years.  The FTB now has decided that if you are owed a refund and you file late, they will charge you a late filing penalty equal to 25% of the original tax liability BEFORE deducting the overpayments you made.  So they are charging taxes and penalties on monies that you've already paid them.  There has to be a law against this and why hasn't a class action suit been filed. 

Case in point, my client's original tax liability on his return was $2233.  He paid the FTB $3015.  They owed him $782.  Because he filed late, they charged him 25% of $2233 = $558.25 even though he not only paid that amount during the 2011 tax year, but also overpaid.  So they had extra money to use and owed it back to them.  What ever happened to the 3-year filing limit if you were due a refund?  They actually got to use his overpayment for an extra 5 months free of charge.  So they penalized him for that. 

Where are you, Jarvis?