BILL ANALYSIS Ó
AB 1307
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Date of Hearing: September 8, 2011
ASSEMBLY COMMITTEE ON REVENUE AND TAXATION
Henry T. Perea, Chair
AB 1307 (Skinner) - As Amended: August 31, 2011
Majority vote. Fiscal committee.
SUBJECT : State Board of Equalization: administration:
collections
SUMMARY : Contains various provisions designed to increase the
State Board of Equalization's (BOE's) ability to collect
outstanding tax and fee liabilities. Specifically, this bill :
1)Authorizes the Registrar of Contractors to suspend (or refuse
to issue, reinstate, or renew) a license if the licensee has
failed to resolve all outstanding final liabilities, including
taxes, penalties, interest, and fees, assessed by the BOE.
This authorization shall not apply, however, if the licensee
has entered into an installment payment agreement with the BOE
and is in compliance with the agreement's terms.
2)Authorizes the BOE to refuse to issue a seller's permit to any
applicant with an outstanding final liability with the BOE for
any amount due under the Sales and Use Tax (SUT) Law.
3)Authorizes the BOE to refuse to issue a seller's permit to a
business entity applicant controlled by any person with an
outstanding final liability with the BOE, as specified.
4)Provides that a liability will not be deemed "outstanding" if
the person has entered into an installment payment agreement
and is in full compliance with the agreement's terms.
5)Requires the BOE to give applicants written notice of any
permit denial.
6)Allows denied applicants to submit a written request for
reconsideration of the BOE's decision.
7)Requires the BOE to consider offers in compromise when
determining whether to issue a seller's permit.
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8)Provides that information on newly hired employees collected
by the Employment Development Department (EDD) may be provided
to the BOE for tax and fee enforcement purposes.
EXISTING LAW :
1)Authorizes the Registrar of Contractors to suspend (or refuse
to issue, reinstate, or renew) a license if the licensee has
failed to resolve all outstanding final liabilities, including
taxes, penalties, interest, and fees, assessed by the
Contractors' State License Board, the Department of Industrial
Relations, the EDD, or the Franchise Tax Board (FTB).
2)Requires any person desiring to engage in business as a seller
in California to apply for a seller's permit with the BOE.
3)Provides that information collected by the EDD pursuant to
Unemployment Insurance Code Section 1088.5 may be provided to
the FTB for tax enforcement purposes.
FISCAL EFFECT : The following represents the BOE's estimate of
revenues associated with each of this bill's provisions:
1)Denial or Suspension of a Contractor's License : Would
increase the BOE's ability to collect on $51 million in
outstanding state and local SUT liabilities owed by
construction contractors.
2)Refusal of Seller's Permits : Would result in minor increases
in the collection of state and local SUT liabilities due to
taxpayers entering into installment payment agreements.
3)New Employee Registry Data : Would result in a $500,000
increase in collections of outstanding liabilities, primarily
in the SUT program.
COMMENTS :
1)The author has provided the following statement in support of
this bill:
California's tax system is in large part one based on
the Ýprinciple] of voluntary compliance, and most
taxpayers are honest and generally comply with the tax
laws.
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The ÝBOE] is charged with administering and collecting
the state and local sales and use taxes and other
special taxes and fees.
In recent years, however, BOE's number of overdue
accounts receivable, as well as the overall balance,
has grown dramatically with respect to the taxes and
fees the BOE administers. Within the last three-year
period, the BOE's accounts receivable balances for
unpaid final liabilities have nearly doubled. ÝAs] of
the end of 2010, these outstanding liabilities totaled
over $1.5 billion. The BOE requires a few statutory
changes to assist them in properly and effectively
collecting the taxes and fees already due to the
State.
2)The BOE, which is sponsoring this bill, notes the
following in its staff analysis:
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.
3)Committee Staff Comments:
a) New provisions : Committee staff notes that, as
originally heard in this Committee, this bill contained
only the provisions authorizing the BOE to refuse to issue
a seller's permit to applicants with an outstanding final
liability with the BOE.
b) Denial or suspension of a contractor's license :
Existing law authorizes the Registrar of Contractors to
suspend (or refuse to issue, reinstate, or renew) a license
if the licensee has failed to resolve all outstanding final
liabilities, including taxes, penalties, interest, and
fees, assessed by the Contractors' State License Board, the
Department of Industrial Relations, the EDD, or the FTB.
The BOE, however, is not currently listed among these
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agencies. Thus, under current law, the Contractors' State
License Board is not authorized to suspend or deny a
contractor's license for a licensee's failure to pay any
BOE-related liabilities. This bill would provide the
Contractors' State License Board with this explicit
authority.
The BOE notes, "This additional collection tool would only
be used as a last resort effort to bring a contractor into
compliance." BOE also notes, "Before the contractor's
license is suspended or denied under this provision, the
law would require that the CSLB's registrar provide a
preliminary notice to the licensee of its intent to suspend
or deny on a date certain at least 60 days prior to the
date of the suspension or denial."
c) New employee registry data : Unemployment Insurance Code
Section 1088.5 currently requires all employers to report
information on newly hired employees who work in this state
to the EDD. The information reported includes each
employee's full name, address, social security number, and
first date of work. Employers are also required to provide
their own business name and address, state employer
identification number, and federal employer identification
number. This EDD report is generally referred to as the
"new employee registry."
Under current law, new employee registry data may be
provided to FTB for purposes of tax collection. This bill,
in turn, provides the BOE with parallel authority.
The BOE notes, "According to the FTB, the new employee
registry has been a valuable enforcement resource in
allowing that agency to identify delinquent taxpayers and
begin collection action shortly after those taxpayers have
started a new job. The BOE believes this information could
be valuable for its collection efforts as well."
REGISTERED SUPPORT / OPPOSITION :
Support
State Board of Equalization (sponsor)
Opposition
AB 1307
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None on file
Analysis Prepared by : M. David Ruff / REV. & TAX. / (916)
319-2098