BILL ANALYSIS                                                                                                                                                                                                    



                                                                            
         AB 1530
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        CONCURRENCE IN SENATE AMENDMENTS
        AB 1530 (Skinner)
        As Amended  June 30, 2010
        Majority vote
         
         
         ---------------------------------------------------------------------- 
        |ASSEMBLY: |     |(June 1, 2009)  |SENATE: |30-2 |(August 24, 2010)    |
         ---------------------------------------------------------------------- 
             (vote not relevant)


         ------------------------------------------------------------------------ 
        |COMMITTEE VOTE:  |9-0  |(August 26, 2010)   |RECOMMENDATION: |concur    |
        |                 |     |                    |                |          |
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        Original Committee Reference:   NAT. RES.  

         SUMMARY  :  Authorizes the Franchise Tax Board (FTB) to collect  
        restitution orders and any other amounts imposed by a court for  
        criminal offenses, as provided.  Allows FTB to retain specified  
        amounts for costs of investigation incurred by the FTB, and revises  
        provisions establishing a priority for application of amounts  
        collected by the FTB when a debtor has more than one debt and the  
        amount collected is insufficient to satisfy the total amount owing.  
         

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

        1)Allow 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 it collects tax liabilities.

        2)Specify 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)Allow 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  








                                                                            
         AB 1530
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          collected by the FTB under this bill.   

        4)Provide that for all amounts authorized to be collected before,  
          on, or after January 1, 2011, all of the following shall apply:

           a)   Interest shall accrue for the above collections at the  
             greater rate of restitution orders (10% per year) or tax  
             penalties, which are computed according to a statutory  
             formula;

           b)   Collection amounts shall not be bound by statutes of  
             limitation;  

           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)Authorizes the FTB to administer the PIT Law and CT Law.  The FTB  
          may refer cases for criminal prosecution for certain offenses,  
          and the court may require the 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.

        2)Authorizes the FTB to file an action in civil court for a civil  
          judgment under the Code of Civil Procedure.

        3)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  








                                                                            
         AB 1530
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          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, 

           c)   Ensures that it coordinates with any other related  
             collection activities that may occur during that debt.

        4)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 paid.  Garnishments and levies  
          are treated like warrants issued as part of the civil process.

        5)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.

         AS PASSED BY THE ASSEMBLY  , this bill required the Air Resources  
        Board to adopt protocols for the evaluation, measurement, and  
        verification of any greenhouse gas reduction measure that relies on  
        energy efficiency, in consultation with the Public Utilities  








                                                                            
         AB 1530
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        Commission, California Energy Commission, and energy efficiency  
        experts.

         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  
          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  








                                                                            
         AB 1530
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          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. 

        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.  

         
        Analysis Prepared by  :   Oksana Jaffe / REV. & TAX. / (916) 319-2098  



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