BILL ANALYSIS Ó
Senate Appropriations Committee Fiscal Summary
Senator Christine Kehoe, Chair
AB 242 (Perea)
Hearing Date: 08/25/2011 Amended: 06/29/2011
Consultant: Mark McKenzie Policy Vote: G&F 9-0
_________________________________________________________________
____
BILL SUMMARY: AB 242 would conform to specified provisions
enacted by federal healthcare reform legislation in 2010,
implement numerous non-controversial changes to tax laws
administered by the Board of Equalization (BOE), and explicitly
allow BOE and the State Controller's Office (SCO) to collect
orders of restitution awarded to the BOE in criminal proceedings
in the same manner as tax liabilities.
_________________________________________________________________
____
Fiscal Impact (in thousands)
Major Provisions 2010-11 2011-12 2012-13 Fund
Healthcare Conformity
Student loan exclusions$400 $500 $350 General
Tribal benefits exclusion $50 $150
$80General
Small employer plans negligible revenue loss General
BOE provisions
Technical provisions negligible revenue loss General
BOE admin: restitution $106 General
Back restitution collections ($865)*
($865)*General
Ongoing restitution collections ($568)*
($1,136)* General
*(revenue gains)
_________________________________________________________________
____
STAFF COMMENTS: SUSPENSE FILE. AS PROPOSED TO BE AMENDED.
Tax Conformity
Generally, when changes are made to federal tax laws, state
legislation is needed to conform to those federal changes. The
purpose of conformity is to simplify preparation of California
income tax returns and the administration of state income tax
laws. Current state law provides modified conformity to the
Internal Revenue Code as of January 1, 2009 for federal laws
AB 242 (Perea)
Page 1
enacted after January 1, 2005 and before January 1, 2009 ÝSB 401
(Wolk), Chapter 14 of 2010]. AB 242 would make changes to state
tax laws to conform to the following provisions of the federal
2010 Patient Protection and Affordable Care Act (Public Law
111-148):
Increase by $1,000 the exclusion from gross income for
qualified adoption expenses paid or reimbursed by an employer
under an adoption assistance program for taxable years on or
after January 1, 2010. Staff notes that the federal
provisions that provide this exclusion are not effective for
taxable years after December 31, 2011, so the revenue impact
ends after the 2011-12 fiscal year. The Committee may wish to
consider not conforming to this provision, given the limited
duration.
Expand the exclusion from gross income for amounts received
under the National Health Services Corps loan repayment and
forgiveness programs on or after January 1, 2010. These
programs benefit certain health professionals who participate
in programs that increase availability of health care services
in underserved or health professional shortage areas.
Exclude from gross income the value of qualified healthcare
benefits provided to a member of an Indian tribe, the member's
spouse, or the member's dependents after March 30, 2010.
Allow certain small employers with 100 or fewer employers to
provide a simple cafeteria plan on or after January 1, 2011
without following nondiscrimination requirements that would
otherwise apply. Nondiscrimination requirements generally
prevent disproportionate benefits to highly compensated
employees.
Allow benefits offered under a Small Business Health Options
Program to be part of a cafeteria plan on or after January 1,
2014. This would allow small businesses cafeteria plans to
include health plans that are part of a benefit exchange.
Staff notes that the Franchise Tax Board's report "Summary of
March, 2010, Federal Health Care Acts," which is available on
their website, includes a detailed discussion of federal and
state laws that would be affected by this bill.
BOE Provisions
AB 242 would enact the following five changes to provisions
administered by the BOE:
Authorize BOE to reimburse a new vehicle manufacturer for use
tax refunded to a lessee when a vehicle is returned to the
AB 242 (Perea)
Page 2
manufacturer under the Lemon Law. Current law only specifies
BOE reimbursement for returned purchases, not leases.
Delete a requirement that retailers and lenders file a
specified form with BOE prior to claiming a bad debt in cases
where the accounts held by a lender have been found worthless
and were written off by the lender.
Make a technical change to statutes that allow an exception to
the rebuttable presumption that a vehicle, vessel, or aircraft
that is brought into the state within 12 months of purchase
was acquired for use in the state, for purposes of the use
tax.
Allow a taxpayer to file a claim for reimbursement of bank
charges and third party check charges incurred by the taxpayer
as a result of an erroneous processing or collection action by
BOE.
Provide the BOE and SCO with the express authority to collect
orders of restitution granted to BOE in criminal proceedings
in the same manner as tax liabilities are collected.
Currently, restitution orders issued by a court may only be
collected as civil judgments because they are not considered
tax liabilities, even though the reason for restitution is
related to a taxpayer's failure to pay a tax liability.
Staff notes that existing law, as enacted by AB 1530 (Skinner),
Chapter 359 of 2010, authorizes Franchise Tax Board (FTB) to
collect restitution orders granted to FTB in criminal
proceedings in the same manner and with the same priority as tax
liabilities. AB 242 would provide BOE with comparable
authority. BOE indicates that it would incur one-time costs of
approximately $106,000 to modify computer systems and processes
to incorporate orders of restitution into taxpayer accounts.
BOE estimates the authority provided in AB 242 would allow them
to collect approximately five percent of outstanding restitution
amounts, or over $1.7 million. BOE also estimates ongoing
revenue increases of approximately $1.14 million related to
future restitution orders, representing 20 percent of average
restitution amounts awarded annually.
PROPOSED COMMITTEE AMENDMENTS delete adoption assistance
conformity provisions, thereby eliminating $1.5 million in
General Fund costs in 2010-11 and $1.2 million in 2011-12.
AB 242 (Perea)
Page 3