BILL ANALYSIS
AB 1530
Page 1
Date of Hearing: August 26, 2010
ASSEMBLY COMMITTEE ON REVENUE AND TAXATION
Anthony Portantino, Chair
AB 1530 (Skinner) - As Amended: June 30, 2010
Majority vote. Fiscal committee.
SUBJECT : Tax Administration: Franchise Tax Board: collection
of restitution orders.
SUMMARY : Provides the Franchise Tax Board (FTB) with express
authority to collect restitution orders awarded to the FTB in
criminal proceedings in the same manner and with the same
priority as tax liabilities. Specifically, this bill :
1)Allows FTB to collect restitution orders or any other amounts
awarded to FTB by a court of competent jurisdiction in
criminal proceedings in the same way that FTB collects tax
liabilities.
2)Specifies that the provisions of the Personal Income Tax (PIT)
Law, the Administration of the Franchise and Income Tax Law,
the Taxpayers' Bill of Rights, and the Corporation Tax (CT)
Law shall apply to amounts collected under this bill, unless a
conflict exists.
3)Allows taxpayers, notwithstanding the payment priority
established under existing law, to designate voluntary
restitution payments as payments for a PIT liability or
amounts authorized to be collected by the FTB under this bill.
4)Provides that for all amounts authorized to be collected that
are due and payable to the FTB before, on, or after January 1,
2011, all of the following shall apply:
a) Interest shall accrue for the collection amounts at the
rate of restitution orders (10% per year) or tax penalties,
whichever is greater, from and after the date the amounts
are established on the records of the FTB;
b) Collection amounts shall not be bound by statutes of
limitation;
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c) The FTB may file Notices of State Tax Lien at any time
until the amount is paid in full; and,
d) The FTB may retain an amount to compensate for its
investigatory costs out of the restitution amount.
EXISTING LAW :
1)Allows all persons who suffer losses as a result of criminal
activity to seek and secure restitution from the persons
convicted of the crimes causing the losses.
2)Authorizes the FTB to administer the PIT Law and CT Law and to
refer cases for criminal prosecution for certain offenses.
Provides that the court may award restitution for the
following crimes:
a) Failure to file returns;
b) Forging a spouse's signature;
c) False, fraudulent, or deceptive conduct;
d) Tax evasion;
e) Conversion of a taxpayer refund by a tax preparer; and,
f) Employer's failure to collect or deposit tax.
3)Authorizes the FTB to file an action in civil court for a
civil judgment under the Code of Civil Procedure.
4)Allows the FTB to collect criminal restitution fines under the
Court Ordered Debt (COD) program, in addition to fines, state
or local penalties, and forfeitures, in amounts that exceed
$100 in the aggregate and are more than 90 days delinquent.
Restitution orders must be imposed by a governmental entity
that:
a) Is authorized to collect on behalf of the state or
victim;
b) Is responsible for distributing the restitution order
collections; and,
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c) Ensures that it coordinates with any other related
collection activities that may occur during that debt.
5)Allows FTB to collect these amounts using wage garnishments,
bank levies, and Notices of State Tax Liens when an amount is
due and payable, and the taxpayer has not complied with the
obligation to pay the amount due. Garnishments and levies are
treated like warrants issued as part of the civil process.
6)Establishes a priority for payment of debts when multiple
debts are owed by the same taxpayer and are collected by the
FTB in the following order:
a) Child support delinquencies;
b) Payment of taxes, additions to tax, penalties and
interest;
c) Delinquent wages;
d) Delinquent vehicle license fees;
e) Amounts due under the COD program;
f) Amounts referred for collection under the Cal-OSHA
targeted inspection program;
g) Delinquent penalties collected for the Department of
Industrial Relations;
h) Delinquent fees collected for the Department of
Industrial Relations; and,
i) Delinquencies referred by the Student Aid Commission.
FISCAL EFFECT : The FTB staff estimates that, as a result of
this bill, the collections by FTB will increase by $50,000 in
fiscal year (FY) 2009-10, $100,000 in FY 2010-11, and $100,000
in FY 2011-12.
COMMENTS :
1)Author's Statement . The author states that, "This bill would
provide the FTB express authority to collect orders of
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restitution awarded to the department for the State in
criminal proceedings in the same manner as tax debts.
Authorizing the FTB to use its efficient electronic tax
collection tools would improve the process of collecting
orders of restitution awarded to the FTB and ensure prompt
follow up on debts by allowing the tax collection system to
monitor accounts for assets that could lead to satisfaction of
the debt. Orders of restitution consist primarily of the
taxes, penalties, and interest owed to the FTB and should be
collected as such."
2)The Purpose of this Bill . According to the sponsor, this bill
is intended to improve the collection process for orders of
restitution awarded to the FTB in criminal proceedings.
3)Background . Under existing law, the FTB, like any other
victim, can seek restitution for economic losses incurred as a
result of a specified crime. Generally, the economic loss
suffered by FTB in criminal proceedings is the amount of state
income tax, plus any applicable penalties, interest, and costs
of investigation and/or prosecution, that the person convicted
of a crime failed to pay. Since an order of restitution
issued by a court is not a tax or a tax penalty, it is unclear
whether the FTB may use its existing administrative tax
collection tools in collecting that order.
Currently, the FTB could collect its restitution orders either
via the COD provisions or as a civil money judgment using
collection remedies available under the Code of Civil
Procedure. Restitution orders awarded to FTB in federal cases
do not meet the requirements for referral under the COD
provisions. Furthermore, as pointed out by the FTB in its
analysis of this bill, the FTB does not use COD to collect any
of its orders of restitution because of the following two
reasons. First of all, the billing notices that the FTB
issues to taxpayers who owe both tax and restitution would be
inaccurate because the balances are maintained on two separate
systems - a billing system and a collection system. The
collection of a restitution order requires higher level of
collection expertise than the average COD account that relies
primarily on automated processes. Secondly, the COD system
does not assess interest; it is the state agency that refers
the debt to the FTB for collection that calculates the amount
of accrued interest and provides this information to the FTB.
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An existing process for enforcing a civil money judgment is
generally time consuming and cumbersome. Those statutory
procedures can delay the collection of the restitution orders
and the FTB must rely on the availability of external
resources to collect amounts owed as a civil money judgment.
Depending on the nature of the assets involved, the civil
process can take anywhere from 90 days to one year from the
date of seizure to the date of the auction to complete.
The FTB estimates that, annually, it receives approximately 40
criminal orders of restitution valued at $15 million. AB 1530
would expressly authorize the FTB to collect restitution
orders, which are awarded to the FTB by a court in criminal
proceedings, in the same manner and with the same priority as
regular tax liabilities.
REGISTERED SUPPORT / OPPOSITION :
Support
Franchise Tax Board (sponsor)
Opposition
None on file
Analysis Prepared by : Oksana G. Jaffe / REV. & TAX. / (916)
319-2098