BILL ANALYSIS Ó ------------------------------------------------------------ |SENATE RULES COMMITTEE | AB 1307| |Office of Senate Floor Analyses | | |1020 N Street, Suite 524 | | |(916) 651-1520 Fax: (916) | | |327-4478 | | ------------------------------------------------------------ THIRD READING Bill No: AB 1307 Author: Skinner (D) Amended: 8/31/11 in Senate Vote: 21 SENATE GOVERNANCE & FINANCE COMMITTEE : 6-3, 6/29/11 AYES: Wolk, DeSaulnier, Hancock, Hernandez, Kehoe, Liu NOES: Huff, Fuller, La Malfa SENATE BUSINESS, PROF. & ECON. DEV. COMMITTEE : 5-2, 7/6/11 AYES: Price, Corbett, Hernandez, Negrete McLeod, Vargas NOES: Emmerson, Walters NO VOTE RECORDED: Correa, Wyland SENATE APPROPRIATIONS COMMITTEE : Senate Rule 28.8 ASSEMBLY FLOOR : 49-27, 5/23/11 - See last page for vote SUBJECT : Board of Equalization: administration: collections SOURCE : Board of Equalization DIGEST : This bill authorizes the Contractors State License Board to refuse to issue, reinstate, reactivate, or renew a license or to suspend the license of a contractor for the failure of the licensee to resolve all outstanding final liabilities assessed by the Board of Equalization (BOE), if the licensee has not entered into an installment payment agreement for that liability and is in compliance CONTINUED AB 1307 Page 2 with that agreement, and allows BOE access to the information filed by employers with the Employment Development Department regarding new employees for the purpose of tax or fee enforcement. Senate Floor Amendments of 8/31/11 delete the provision of this bill that allowed BOE to suspend professional licenses for failure to pay tax. ANALYSIS : Existing law, the Business and Professions Code (BPC): 1. Licenses and regulates more than 300,000 contractors under the Contractors State License Law by the Contractors State License Board (CSLB) within the Department of Consumer Affairs. The CSLB is under the direction of the Registrar of contractors (Registrar). 2. Authorizes the Registrar to refuse to issue, reinstate, reactivate, or renew a license or to suspend the license of a contractor for the failure of the licensee to resolve all outstanding final liabilities, including taxes, additions to tax, penalties, interest, and any fees assessed by CSLB, the Department of Industrial Relations, the Employment Development Department (EDD), or the Franchise Tax Board (FTB). (BPC Section 7145.5) A. Prohibits a qualifying person and any other personnel named on the license, whose license has been suspended due to outstanding final liabilities with the State, as specified, from serving in any capacity other than as a nonsupervising bona fide employee until that debt is satisfied. B. Provides that the license of any other renewable licensed entity with any of the personnel of record that have been assessed an outstanding liability, as specified, will be suspended until the debt has been satisfied or until the same personnel of record disassociate themselves from the renewable licensed entity. C. Allows the refusal or suspension of a license only if the registrar of CSLB has mailed a notice at least CONTINUED AB 1307 Page 3 60 days prior to the suspension that indicates that the license will be suspended by a certain date, as specified. Existing law, the Revenue and Tax Code (RTC): 1. Requires any person desiring to engage in business as a seller in California to apply for a seller's permit with BOE. A seller's permit is valid for as long at the seller maintains a business and remains in good standing with the BOE. (RTC Section 6066) 2. Provides that the BOE may revoke the seller's permit of a person who fails to comply with any provision of the sales and use tax law, including fulfilling the payments of amounts due. The BOE must first provide an opportunity for a hearing in which that person may show why the seller's permit should not be revoked. (RTC Section 6070) 3. Provides that a seller whose permit has been revoked or suspended may renew their permit after paying a $100 reinstatement fee to the BOE. (RTC Section 6069) Existing law, the Unemployment Insurance Code (UIC): 1. Provides for the payment of unemployment compensation benefits to eligible unemployed individuals, and requires EDD to implement and administer the unemployment insurance system in the state. 2. Requires each employer to file with the EDD a report of wages paid to his/her workers and to furnish to each employee a written statement showing, among other things, the total amount of wages, and total wages subject to personal income tax, as specified. (UIC Section 1088) 3. Requires each employer to file with the EDD specified information on new employees, and authorizes the use of that information for specified purposes including, among other things, providing employer or employee information to FTB for the purpose of tax enforcement. (UIC Section 1088.5) CONTINUED AB 1307 Page 4 This bill: 1. Authorizes the CSLB to additionally refuse to issue, reinstate, reactivate, or renew a license or to suspend the license of a contractor for the failure of the licensee to resolve all outstanding final liabilities assessed by the BOE. 2. Specifies that the Registrar shall not refuse to issue, reinstate, reactivate, renew or suspend a contractor's license for outstanding final liabilities to the BOE, if the licensee has entered into an installment payment agreement for that liability with the BOE and is in compliance with that agreement. 3. Authorizes the FTB to disclose delinquent tax debtor information provided to the FTB by the BOE to designated financial institutions for the purpose of matching debtor records to accountholder records at those financial institutions, and provides that the unauthorized use of this data is a misdemeanor. 4. Allows the BOE access to the information filed by employers with EDD regarding new employees for the purpose of tax or fee enforcement. Prior/Related Legislation AB 2456 (Nakanishi), Chapter 122, Statutes of 2006, prohibits the qualifying person, and any other personnel named on the license whose license has been suspended due to outstanding final liabilities with the State, from serving in any capacity other than as a nonsupervising bona fide employee. SB 886 (Corbett), 2011-12 Session, relates to sprinkler fitters licensing and amends Section 7145.5 to add the State Fire Marshall to the list of agencies that the Registrar could suspend or revoke a license if the contractor owed money to the agency. FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes Local: No CONTINUED AB 1307 Page 5 SUPPORT : (Verified 9/1/11) Board of Equalization (source) OPPOSITION : (Verified 9/1/11) Board of Equalization member, George Runner California Taxpayers Association ARGUMENTS IN SUPPORT : In sponsoring this bill, BOE states: "California's sales and use tax system is one based on the principal of voluntary compliance. Most retailers are honest and generally comply with the tax laws. However, the BOE's number of overdue accounts receivable, as well as the overall balance, continues to increase - further complicating the state's budget woes. Within the last three-year period, the BOE's accounts receivable balances for unpaid final liabilities (liabilities that are due and not under appeal) have nearly doubled. As of the end of 2010, these outstanding liabilities totaled over $1.5 billion. "Recent economic turmoil is one factor contributing to this increase. However, other reasons include the fact that some businesses purposefully fail to remit the tax, such as when a taxpayer diverts the sales tax reimbursement collected from a customer for his or her own purposes instead of remitting the tax to the State. Those businesses that fail to pay their tax liabilities have in many cases an unfair competitive advantage over taxpayers who comply with the law and pay their fair share. "This bill would provide additional tools that would assist the BOE in reducing its growing outstanding accounts receivable balances from taxpayers' failure to remit the taxes that are owed, and would assist in reducing the unfair competitive advantage these tax debtors have over law-abiding taxpayers." CONTINUED AB 1307 Page 6 ASSEMBLY FLOOR : 49-27, 5/23/11 AYES: Alejo, Allen, Ammiano, Atkins, Beall, Block, Blumenfield, Bonilla, Bradford, Brownley, Buchanan, Butler, Charles Calderon, Campos, Carter, Cedillo, Chesbro, Davis, Dickinson, Eng, Feuer, Fong, Fuentes, Gatto, Gordon, Hall, Hayashi, Roger Hernández, Hill, Hueso, Huffman, Lara, Bonnie Lowenthal, Ma, Mendoza, Mitchell, Monning, Pan, Perea, V. Manuel Pérez, Portantino, Skinner, Solorio, Swanson, Torres, Wieckowski, Williams, Yamada, John A. Pérez NOES: Achadjian, Bill Berryhill, Conway, Donnelly, Fletcher, Beth Gaines, Garrick, Grove, Hagman, Halderman, Harkey, Huber, Jeffries, Jones, Knight, Logue, Mansoor, Miller, Morrell, Nestande, Nielsen, Norby, Olsen, Silva, Smyth, Valadao, Wagner NO VOTE RECORDED: Cook, Furutani, Galgiani, Gorell AGB:kc 9/1/11 Senate Floor Analyses SUPPORT/OPPOSITION: SEE ABOVE **** END **** CONTINUED