BILL ANALYSIS                                                                                                                                                                                                    



                                                                  AB 2538
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          CONCURRENCE IN SENATE AMENDMENTS
          AB 2538 (Niello)
          As Amended  June 30, 2010
          Majority vote
           
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          |ASSEMBLY:  |63-0 |(May 28, 2010)  |SENATE: |34-0 |(August 9,     |
          |           |     |                |        |     |2010)          |
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           Original Committee Reference:    INS.
           
           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, and provides EDD  
          with the authority to seek prosecution of violations of the  
          unemployment insurance laws in the county where the alleged  
          offense occurred.  

           The Senate amendments  delete the provision of the bill that  
          would have removed the requirement that disability insurance  
          (DI) benefits be paid by check.

           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 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  








                                                                  AB 2538
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            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. 

           AS PASSED BY THE ASSEMBLY  , this bill:

          1)Authorized 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)Specified 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)Authorized 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)Specified that the place of trial for violations of the laws  
            governing the Unemployment Insurance (UI) Program and the 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.  

          5)Repealed obsolete references in two sections of law  
            (Unemployment Insurance Code Sections 2626 and 2629) that  
            formerly determined eligibility for, and the amount of, DI  
            benefits in connection with people who were covered under the  
            workers' compensation program.









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          6)Repealed the requirement that the Director of EDD pay DI  
            benefits by checks drawn on a disability benefit payment  
            account.  

           FISCAL EFFECT  :   Savings of less than $100,000 (federal) to  
          convert from certified mail to first class mail for delinquency  
          notices.

           COMMENTS  :

          1)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; and,

             c)   Delete obsolete references to sections of law that have  
               been repealed.

          2)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 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)According to the author and the sponsor, this bill proposes to  








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            align the NOL with other state tax agencies such as the  
            Franchise Tax Board and the Board of Equalization which are  
            authorized to send NOLs to financial institutions by  
            first-class mail, or 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.

          4)AB 2188 (Bradford and Niello) of this legislative session  
            proposes to remove the requirement to pay state DI benefits by  
            check and, thus, allow the electronic payment of these  
            benefits.  AB 2188 contains an urgency clause.  

           
          Analysis Prepared by  :    Manny Hernandez / INS. / (916) 319-2086  




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