BILL ANALYSIS
AB 2538
Page 1
Date of Hearing: April 21, 2010
ASSEMBLY COMMITTEE ON INSURANCE
Jose Solorio, Chair
AB 2538 (Niello) - As Introduced: February 19, 2010
SUBJECT : Unemployment insurance: notification of eligibility
SUMMARY : Allows the Employment Development Department (EDD) to
serve a notice of levy by electronic means and by first-class
mail in the event of delinquent payroll taxes, provides EDD with
the authority to seek prosecution of violations of the
unemployment insurance laws in the county where the alleged
offense occurred, and removes the requirement that Disability
Insurance (DI) benefits must be paid by check. Specifically,
this bill :
1)Authorizes the Director of EDD to collect delinquent tax
contributions or penalties from a person or an employing unit
no later than three years after these taxes or penalties
become delinquent by levy served personally or by first-class
mail to any person who has possession of any personal property
belonging to the delinquent person or employing unit.
2)Specifies that if the levy is made on a deposit or personal
property in the possession or control of a bank or savings and
loan association, the notice of levy shall be delivered or
mailed to the centralized processing unit or location
designated by that bank or savings and loan association where
the credits or other property are held.
3)Authorizes EDD to serve notice to an "address" for any bank or
savings and loan by means of magnetic media, electronic
transmission, or other electronic technology. "Address" is
defined as a telephone or modem number, facsimile machine, or
any other reference number designated by the bank or savings
and loan to receive data by electronic means.
4)Specifies that the place of trial for violations of the laws
governing the Unemployment Insurance (UI) Program and the
Disability Insurance (DI) Program shall be the county of
residence or principal place of business of the defendant, or
in any county where the defendant was transacting business
that resulted in the alleged violations.
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5)Repeals obsolete references in two sections of law (Sections
2626 and 2629 of the Unemployment Insurance Code) that
formerly determined eligibility for, and the amount of, DI
benefits in connection with people who were covered under the
workers' compensation program.
6)Repeals the requirement that the Director of EDD pay DI
benefits by checks drawn on a disability benefit payment
account.
EXISTING LAW :
1)Authorizes the Director of EDD to collect delinquent tax
contributions or penalties from a person or an employing unit
no later than three years after these taxes or penalties
become delinquent by levy served personally or by certified
mail to any person who has possession of any personal property
belonging to the delinquent person or employing unit.
2)Specifies that if the levy is made on a deposit or personal
property in the possession or control of a bank or savings and
loan association, the notice of levy shall be delivered or
mailed to the branch or office of the bank or savings and loan
association at which the deposit or personal property is held.
3)Specifies that the place of trial for violations of the laws
governing the Unemployment Insurance (UI) Program and the
Disability Insurance (DI) Program shall be the county of
residence or principal place of business of the defendant.
4)References obsolete provisions in two sections of law that
formerly established eligibility and benefit levels in the DI
Program when a person completed a vocational rehabilitation
plan, received a maintenance allowance, or received permanent
disability indemnity under the workers' compensation system.
5)Requires the Director of EDD to deposit moneys from the
Disability Fund into a bank or public depository in order to
pay DI benefits by checks drawn on a disability benefit
payment account.
FISCAL EFFECT : Undetermined.
COMMENTS :
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1)Purpose . According to the author, the purposes of this bill
are to:
a) Allow EDD to serve a notice of levy either by electronic
means and/or by first-class mail;
b) Provide EDD with the authority to prosecute criminal
violations in the county where the alleged offense
occurred;
c) Remove the statutory requirement that DI benefits must
be paid by check; and
d) Delete obsolete references to sections of law that have
been repealed.
2)Background. According to the author and the sponsor of the
bill, EDD, the current process of serving the Notice of Levy
(NOL) personally or by certified mail is time consuming and
expensive. Certified mail costs $3.24 per NOL compared with
44 cents for first-class mail, or minimal cost if sent
electronically.
Current law only allows for the prosecution of violations of the
California Unemployment Insurance Code to take place in the
county where the defendant resides or conducts business.
According to EDD, in 2007 and 2008 prosecutors cited
limitations in current law as the cause for rejecting several
EDD criminal investigative cases. The suspects in these cases
were owners of construction and other businesses who were
suspected of payroll tax fraud. However, their actions took
place in counties other than the place of their business.
The EDD currently issues UI and DI benefits to eligible
claimants by check. It is more expensive to issue individual
checks to claimants than the use of electronic payments such
as direct deposit.
The Unemployment Insurance Code contains outdated references to
sections of the Labor Code that formerly determined
eligibility for, and the amount of, DI benefits to claimants
that had been eligible for benefits under the workers'
compensation system.
3)Arguments in Support. According to the author and the
sponsor, this bill proposes to align the Notice of Levy (NOL)
with other state tax agencies such as the Franchise Tax Board
and the Board of Equalization which are authorized to send
NOL's to financial institutions by first-class mail, or
AB 2538
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electronic transmission, instead of certified mail. This bill
would enhance EDD's ability to increase collections and
decrease costs. Each year, EDD collects more than $42 billion
in payroll taxes, including nearly $35 billion in Personal
Income Taxes.
Amending current law to allow for greater flexibility in the
location for prosecuting cases would enhance EDD's ability to
help law enforcement agencies prosecute cases and recover tax
payments due the state. This bill would assist local district
attorneys as cases could be prosecuted in locations where the
crime occurred.
EDD plans to negotiate a contract for direct deposit and debit
card services in connection with the Unemployment Insurance
(UI) Program. This bill would give EDD the legal authority to
also issue DI payments by direct deposit or debit cards.
These would provide eligible claimants with a faster and more
convenient way to receive payments, and a more secure and less
costly means for EDD to disburse these payments.
4)Technical correction recommended. The bill proposes to add a
reference to a non-existent section of law (in Section 3 of
the bill). It appears that the correct reference is a code
section added by this bill (Section 1755.1 of the Unemployment
Insurance Code). Thus, it is recommended that on page 4, line
19 of the bill, the number "1755.5" be replaced with the
number "1755.1".
REGISTERED SUPPORT / OPPOSITION :
Support
Employment Development Department (Sponsor)
Opposition
None received.
Analysis Prepared by : Manny Hernandez / INS. / (916) 319-2086