BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                      



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          |SENATE RULES COMMITTEE            |                  AB 1307|
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                                 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 
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          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 

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                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)

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          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

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           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."



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           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

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