BILL ANALYSIS Senate Committee on Labor and Industrial Relations Mark DeSaulnier, Chair Date of Hearing: June 9, 2010 2009-2010 Regular Session Consultant: Gideon L. Baum Fiscal:Yes Urgency: No Bill No: AB 2433 Author: Ruskin Version: As Introduced February 19, 2010 SUBJECT Unemployment insurance: use of information for tax purposes. KEY ISSUE Should the Legislature give the Board of Equalization access to employer and payroll information held by the Employment Development Department? PURPOSE To give the Board of Equalization access to Employment Development Department payroll and employer information in order to appropriately assess and refund certain fees and combat the underground economy. ANALYSIS Existing law authorizes the Employment Development Department (EDD) to collect personal income taxes required to be withheld by employers. Existing law requires employers to remit Unemployment Insurance (UI) contributions and to collect the employee wage deductions to the Disability Fund. EDD uses these funds to finance the Unemployment Insurance and Disability Insurance (DI) Programs. Existing law requires that, unless specifically provided in this code, the information obtained in the administration of the UI Program and DI program are confidential and must be used for the exclusive use and information of the director of EDD in discharge of his or her duties. Any person violating the confidentiality of this information is guilty of a misdemeanor. Existing law permits the director of EDD to provide unemployment insurance tax and benefit information to certain governmental entities specified in law. This bill would authorize the Director of EDD to provide the State Board of Equalization (BOE) with employment tax information that will assist in the administration of tax programs. This bill also specifies that the information provided must be limited to the exchange of employment tax information essential for tax administration purposes to the extent permitted by federal law and regulations. COMMENTS 1. Need for this bill? AB 2433 is sponsored by the Board of Equalization (BOE) and was approved by the Board on a unanimous 5-0 vote. Under current law, all information gathered by EDD in the administration of the Unemployment Insurance and Disability Insurance programs is confidential, unless explicitly listed in statute. Currently, while governmental entities as disparate as Bureau for Private Postsecondary and Vocational Education, the Division of Labor Standards Enforcement, and tax officials in Mexico have access to this information, the BOE does not. In the past, BOE has an interagency agreement with the EDD that allows the Board to look at employer data, but prohibits the use of that data in court proceedings in order to maintain confidentiality as required by existing law. BOE requires employer and payroll data from EDD in order to appropriately Hearing Date: June 9, 2010 AB 2433 Consultant: Gideon L. Baum Page 2 Senate Committee on Labor and Industrial Relations assess and refund the environmental fee and the occupational lead prevention fee, as well as uncover employers illegally avoiding the payment of taxes and fees. BOE also requires access to EDD data as a basis for claims in bankruptcy court. However, without access to this information for use in court proceedings, BOE is required to audit employer payroll records for data that EDD already has. These payroll audits are also disruptive for the employer. This bill would allow BOE to access the EDD's employment records and utilize those records for the necessary administration of the environmental fee and occupational lead prevention fee, as well as the ability to utilize those records in court proceedings, when necessary. 2. Proponent Arguments : The author and the Board of Equalization (BOE) state that in the past BOE relied upon interagency agreements with the Employment Development Department (EDD) in which BOE 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 statute specifies that the confidential information released to authorized entities cannot be admitted as evidence in "any action or special proceeding" unless specifically authorized by law. The author and BOE state that EDD's information is necessary to arriving at the correct resolution of a fee dispute heard by BOE 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. 3. Opponent Arguments : None on file. 4. Prior Legislation : AB 604 (Kuykendall), Statutes of 1998, Chapter 766, required that the information obtained in the administration of the UI Hearing Date: June 9, 2010 AB 2433 Consultant: Gideon L. Baum Page 3 Senate Committee on Labor and Industrial Relations Program and DI program is confidential and must be used for the exclusive use and information of the director of EDD in discharge of his or her duties. SUPPORT State Board of Equalization - Sponsor OPPOSITION None on File. * * * Hearing Date: June 9, 2010 AB 2433 Consultant: Gideon L. Baum Page 4 Senate Committee on Labor and Industrial Relations