BILL ANALYSIS
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THIRD READING
Bill No: AB 17XXXX
Author: Assembly Budget Committee
Amended: 7/23/09 in Senate
Vote: 21
WITHOUT REFERENCE TO COMMITTEE
PRIOR VOTE NOT RELEVANT
SUBJECT : Budget Act of 2009: revenue accelerations
SOURCE : Author
DIGEST : Senate Floor Amendments of 7/23/09 delete the
prior version of the bill expressing the intent of the
Legislature to enact statutory changes relating to the 2009
Budget Act.
This bill now provides the necessary statutory changes in
the area of revenue accelerations in order to amend the
2009 Budget Act.
ANALYSIS : This bill makes various amendments related to
tax administration that accelerate the collection of
revenue:
Implements Governor's May Revise proposals which:
1.Increase tax withholding schedules by 10 percent.
Currently, many taxpayers owe tax in excess of that
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withheld by their employer, and for these taxpayers, the
increase would result in withholding more closely
matching their final tax liabilities. The final tax owed
by the taxpayer is unchanged, and, as under existing law,
taxpayers may modify their withholding to reflect their
individual circumstances if they wish.
2.Require individual and corporate taxpayers to accelerate
estimated payments by remitting 30 percent of their
estimated annual income or corporate tax liabilities in
April, 40 percent in June (compared to existing law
requirements of 30 percent each in April and June).
Comments
Increased withholding . Existing law requires that
employers withhold a portion of employees' wages and remit
them to the Employment Development Department. The amounts
withheld are based on tables provided by the Franchise Tax
Board to EDD. By law, these tables are designed so that
withholding of wage payments cover the taxpayer's full
liability arising from the wage payments. However, in many
instances, taxpayers with significant income from non-wage
sources, or with wage income from a spouse, owe significant
taxes on their final returns. This measure raises the
required amount of withholding by 10 percent, and makes
conforming changes for payments related to stock options
and bonuses. Taxpayers are permitted to modify their
withholding if they wish.
Accelerated estimated taxes . Individuals with non-wage
income and corporations are required to remit quarterly
estimated tax payments toward their annual liabilities.
Through last year, the majority of taxpayers - those using
the regular installment method - were required to remit
four quarterly payments, each worth 25 percent of their
estimated full-year tax liability. SBX1 28 (Senate Budget
and Fiscal Review Committee), Chapter 1, First
Extraordinary Session/2008, accelerated the payment
schedule beginning January 1, 2009, so that the April and
June payments are now equal to 30 percent of estimated
liabilities, and September and December are each equal to
20 percent of estimated liabilities. This measure further
accelerates the schedules - requiring payments equal to 30
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percent of estimated liabilities in April, 40 percent in
June, zero in September, and 30 percent in December. It
also makes conforming changes for taxpayers using the
annualized income installment method and those making
payments beginning after the first quarter of the year.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: No
As shown in the accompanying table, the revenue
acceleration measures would raise GF collections by $2.3
billion in 2009-10 and $193 million in 2010-11.
Revenue Impact of Compliance and Acceleration Provisions
(In millions)
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| | 2009-10 | 2010-11 |
|-----------------------------------+----------+---------|
|Governor's proposal - withholding | $1,700| $98|
|-----------------------------------+----------+---------|
|Governor's proposal - estimated | 610| 95|
|payments | | |
|-----------------------------------+----------+---------|
|Total: | $2,310|$193 |
| | | |
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DLW:nl 7/23/09 Senate Floor Analyses
SUPPORT/OPPOSITION: NONE RECEIVED
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