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