BILL ANALYSIS                                                                                                                                                                                                    



                                                                       



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          |SENATE RULES COMMITTEE            |                AB 17XXXX|
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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)

           -------------------------------------------------------- 
          |                                   | 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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