BILL ANALYSIS AB 2538 Page 1 CONCURRENCE IN SENATE AMENDMENTS AB 2538 (Niello) As Amended June 30, 2010 Majority vote ----------------------------------------------------------------- |ASSEMBLY: |63-0 |(May 28, 2010) |SENATE: |34-0 |(August 9, | | | | | | |2010) | ----------------------------------------------------------------- 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 Page 2 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. AB 2538 Page 3 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 AB 2538 Page 4 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 FN: 0005654