BILL ANALYSIS                                                                                                                                                                                                    

                                                                  AB 2433
                                                                  Page  1

          Date of Hearing:   April 21, 2010

                           ASSEMBLY COMMITTEE ON INSURANCE
                                 Jose Solorio, Chair
                 AB 2433 (Ruskin) - As Introduced:  February 19, 2010
          SUBJECT  :   Employment tax information

           SUMMARY  :   Allows the Director of the Employment Development  
          Department (EDD) to share certain employment tax information  
          with the State Board of Equalization.  Specifically,  this bill  :

          1)Authorizes the Director of EDD to provide the State Board of  
            Equalization with employment tax information that will assist  
            in the administration of tax programs.

          2)Specifies that the information provided shall be limited to  
            the exchange of employment tax information essential for tax  
            administration purposes to the extent permitted by federal law  
            and regulations.

           EXISTING LAW  :

          1)Authorizes EDD to collect personal income taxes required to be  
            withheld by employers. 

          2)Requires employers to send unemployment insurance (UI)  
            contributions to EDD to finance the Unemployment Fund and pay  
            regular UI benefits.  

          3)Requires EDD to collect from employers the employee wage  
            deductions to the Disability Fund.  This Fund pays the costs  
            of the state Disability Insurance (DI) Program.  

          4)Authorizes the Director of EDD to permit the use of  
            information in his or her possession for specified purposes  
            including sharing information with various government agencies  
            and local governments.  

           FISCAL EFFECT  :   Undetermined.

           COMMENTS  :   

           1)Purpose.   The purpose of this bill is to authorize the State  
            Board of Equalization (Board) to admit into evidence EDD  


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            confidential employment tax information in hearings and court  
            proceedings in order to resolve disputes regarding the Board's  
            administration of a fee or tax law, the amount owed by a  
            taxpayer or feepayer, or the amount to be refunded.  

          2)Background.   Under existing law, the EDD may exchange certain  
            information with state agencies.  The author and the Board  
            state that the Board is authorized to receive certain  
            confidential information and it has an existing reciprocal  
            sharing agreement for the exchange of information.  As an  
            authorized receiver, the Board currently uses EDD's  
            confidential information to verify a feepayer's reported  
            number of employees for both the environmental fee and the  
            occupational lead poisoning prevention fee.  The applicability  
            and amount of the fee for both programs is based, in part, on  
            the size of a feepayer's employee workforce.  The Board also  
            uses EDD's information to discover unregistered feepayers and  
            underreported taxes and/or fees, and to verify refunds.  In  
            addition, the EDD information is useful for collection  
            purposes and as a basis for claims in bankruptcy.

          However, one section of law (Unemployment Insurance Code Section  
            1094) specifies that unless specifically authorized by law,  
            the information obtained by EDD in the administration of the  
            Unemployment Insurance Code is confidential, not open to the  
            public, and shall be for the exclusive use of the Director of  
            EDD in discharge of his or her duties.  That section of law  
            also provides that the information released to authorized  
            entities, such as the Board, is not admissible as evidence in  
            any action or special proceeding, other than those actions or  
            special proceedings authorized by a specified section of law  
            (Unemployment Insurance Code Section 1095) or by another  
            provision of the Unemployment Insurance Code.

          Currently, Section 1095 of the Unemployment Insurance Code  
            authorizes certain state, local, and federal agencies to use  
            the EDD confidential information as evidence in an action or  
            proceeding.  Some of the currently authorized uses include  
            determining entitlement to general assistance, investigating  
            disability income, administering child support programs,  
            investigating workers' compensation insurance fraud, and  
            verifying employment history.  

          3)Arguments in Support.   The Author and the Board state that in  
            the past the Board relied upon interagency agreements with EDD  


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            in which the Board believed the EDD information could be used  
            in "any action or special proceeding," as long as it was  
            presented in summary form.  Recently, the EDD reiterated to  
            Board staff that provisions of Section 1094 of the  
            Unemployment Insurance (UI) Code specify that the confidential  
            information released to authorized entities cannot be admitted  
            as evidence in "any action or special proceeding" unless  
            specifically authorized by Section 1094 or 1095 of the UI  
            Code.  It is now clear that the Board needs specific statutory  
            authority to admit into evidence EDD's employment tax  
            information in any action or special proceeding.

          The Author and the Board state that EDD's information is  
            necessary to arriving at the correct resolution of a fee  
            dispute heard by the Board in an administrative hearing or  
            litigated in a court proceeding.  Also, this bill will ease  
            the compliance burden on employers, as the use of EDD  
            information is less burdensome than providing access to their  
            payroll records.  

          State Board of Equalization

          None received.
          Analysis Prepared by  :    Manny Hernandez / INS. / (916) 319-2086