BILL ANALYSIS                                                                                                                                                                                                    



                                                                  AB 17 X4
                                                                  Page  1

           (Without Reference to File)
           
          CONCURRENCE IN SENATE AMENDMENTS
          AB 17 X4 (Budget Committee)
          As Amended  July 23, 2009
          Majority vote
           
           ----------------------------------------------------------------- 
          |ASSEMBLY:  |     |(July 9, 2009)  |SENATE: |     |(July 23,      |
          |           |     |                |        |     |2009)          |
           ----------------------------------------------------------------- 
                    (vote not relevant)                  (vote not  
          available)
           
           Original Committee Reference:     RLS.  

           SUMMARY:   Contains two provisions aimed at accelerating revenues  
          to the General Fund (GF).

           The Senate amendments  delete the Assembly version of this bill,  
          and instead:

          1)Implement the Governor's May Revise proposals which:

             a)   Increase tax withholding schedules by 10%.  Currently,  
               many taxpayers owe tax in excess of that 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; and, 

             b)   Require individual and corporate taxpayers to accelerate  
               estimated payments by remitting 30% of their estimated  
               annual income or corporate tax liabilities in April, 40% in  
               June (compared to existing law requirements of 30% each and  
               April and June. 

           FISCAL EFFECT  :  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)








                                                                  AB 17 X4
                                                                  Page  2

           ----------------------------------------- 
          |                           |2009-1|2010-1|
          |                           |0     |1     |
          |---------------------------+------+------|
          |Governor's proposal -      |$1,700|   $98|
          |withholding                |      |      |
          |---------------------------+------+------|
          |Governor's proposal -      |   610|    95|
          |estimated pmts.            |      |      |
          |---------------------------+------+------|
          |Total:                     |$2,310|$193  |
          |                           |      |      |
           ----------------------------------------- 

           


          AS PASSED BY THE ASSEMBLY  , this was a vehicle for the budget  
          trailer bill.


           COMMENTS:

          1)Increased withholding  .  Existing law requires that employers  
            withhold a portion of employees' wages and remit them to the  
            Employment Development Department (EDD).  The amounts withheld  
            are based on tables provided by the FTB to EDD.  By law, these  
            tables are designed so that withholding of wage payment 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%, and makes  
            conforming changes for payments related to stock options and  
            bonuses.  Taxpayers are permitted to modify their withholding  
            if they wish.

           2)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% of their estimated full-year tax  
            liability.  SB 28 X1 (Budget and Fiscal Review Committee),  
            Chapter 1, Statutes of 2007-08 First Extraordinary Session,  








                                                                  AB 17 X4
                                                                  Page  3

            accelerated the payment schedule beginning January 1, 2009, so  
            that the April and June payments are now equal to 30% of  
            estimated liabilities, and September and December are each  
            equal to 20% of estimated liabilities.  This measure further  
            accelerates the schedules - requiring payments equal to 30% of  
            estimated liabilities in April, 40% in June, zero in  
            September, and 30% 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.
           

          Analysis Prepared by  :   Adam Dondro / BUDGET / (916) 319-2081


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