BILL ANALYSIS ------------------------------------------------------------ |SENATE RULES COMMITTEE | AB 17XXXX| |Office of Senate Floor Analyses | | |1020 N Street, Suite 524 | | |(916) 651-1520 Fax: (916) | | |327-4478 | | ------------------------------------------------------------ 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 CONTINUED AB 17XXXX Page 2 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 AB 17XXXX Page 3 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) -------------------------------------------------------- | | 2009-10 | 2010-11 | |-----------------------------------+----------+---------| |Governor's proposal - withholding | $1,700| $98| |-----------------------------------+----------+---------| |Governor's proposal - estimated | 610| 95| |payments | | | |-----------------------------------+----------+---------| |Total: | $2,310|$193 | | | | | -------------------------------------------------------- DLW:nl 7/23/09 Senate Floor Analyses SUPPORT/OPPOSITION: NONE RECEIVED **** END ****