BILL ANALYSIS                                                                                                                                                                                                    



                                                                       



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          |SENATE RULES COMMITTEE            |                  SB 1028|
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                                 THIRD READING


          Bill No:  SB 1028
          Author:   Correa (D)
          Amended:  As introduced
          Vote:     21

           
           SENATE REVENUE & TAXATION COMMITTEE  :  5-0, 4/14/10
          AYES:  Wolk, Walters, Alquist, Ashburn, Padilla


          SUBJECT  :    State Board of Equalization:  administration:  
          interest

           SOURCE  :     State Board of Equalization


           DIGEST  :    This bill allows the Board of Equalization to  
          impose interest on a daily basis on a late payment, or late  
          prepayment, of a tax, fee or surcharge provided the late  
          payment or prepayment is only one day late.

           ANALYSIS  :    Existing law imposes penalties and interest on  
          persons who pay their tax and fee obligations after the due  
          date.  The penalty is 10 percent of the tax, plus monthly,  
          simple interest on those unpaid taxes from the date the tax  
          was due to the date it was paid. In the case of a late  
          prepayment, the law imposes a six-percent penalty.  As of  
          January 1, 2010, the interest rate for late payments is  
          seven percent.  Interest accrues on any unpaid tax on a  
          monthly basis regardless if the payment is late three days  
          or 29 days.  In other words, if a taxpayer is three days  
          late on a tax payment interest accrues for the entire  
          month, not for just the three days.
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                                                               SB 1028
                                                                Page  
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          Existing law authorizes the Board of Equalization (BOE) to  
          relieve a late payment penalty when the Board finds that  
          the taxpayer's failure to make a timely payment was due to  
          reasonable cause and circumstances beyond the person's  
          control. 

          Existing law, generally, does not allow the BOE to relieve  
          accrued interest on late payments.  However, the BOE may  
          relieve interest in cases of a disaster or where the  
          failure to pay the tax in a timely manner was due to an  
          unreasonable error or delay by a BOE employee.   
          Additionally, existing law authorizes the BOE to deem  
          timely tax payments sent via the United States Postal  
          Service or through a bona fide commercial delivery service  
          if those payments are one day late, thereby relieving the  
          taxpayer of the monthly interest.

          This bill:

          1. Authorizes the BOE to modify, after meeting as a public  
             body and taking into account all facts and  
             circumstances, the method of computing interest on a  
             late payment, or prepayment, of a tax, fee, or surcharge  
             by accruing interest on a daily basis, instead of  
             monthly, provided:

             A.    The payment or prepayment of the tax was made  
                one, and only one, day after the date the tax or  
                prepayment was due.

             B.    The person was granted relief from all  
                penalties that applied to that payment of tax or  
                prepayment.

             C.    The person files a request for an oral hearing  
                before the BOE. 

          2. Disallows the modification of interest computation for  
             any payment made pursuant to a deficiency determination,  
             a determination where no return has been filed, or a  
             jeopardy determination.  Furthermore, the bill defines  
             "modified adjusted daily rate" in accordance with the  
             definition of "adjusted rate per annum" as defined by  







                                                               SB 1028
                                                                Page  
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             Revenue and Taxation Code divided by 365.  

           FISCAL EFFECT  :    Appropriation:  No   Fiscal Com.:  Yes    
          Local:  No

          The BOE estimates that this bill results in a revenue loss  
          of less than $10,000 annually.

           SUPPORT  :   (Verified  5/5/10)

          Board of Equalization (source)
          Cal-Tax
          California Chamber of Commerce
          California Business Properties Association
          California Manufacturers and technology Association
          Michelle Steel, Board Member, Third District, Board of  
          Equalization

           ARGUMENTS IN SUPPORT  :    According to the author's office,  
          this bill gives the BOE authority to mpose only one day's  
          interest on a payment made only one day late, in special  
          circumstances and on a case-by-case basis.  This bill is  
          intended to encourage timely payments of taxes, fees and  
          surcharges while providing taxpayers with fairness and  
          relief in specified circumstances.


          DLW:do  5/5/10   Senate Floor Analyses 

                         SUPPORT/OPPOSITION:  SEE ABOVE

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