BILL ANALYSIS Ó
AB 1424
Page 1
Date of Hearing: May 2, 2011
ASSEMBLY COMMITTEE ON REVENUE AND TAXATION
Henry T. Perea, Chair
AB 1424 (Committee on Revenue and Taxation) - As Introduced:
March 22, 2011
Majority vote. Fiscal committee.
SUBJECT : Tax administration: collection: lenders: vessels:
vehicles
SUMMARY : Implements various technical, non-controversial tax
proposals sponsored by the State Board of Equalization (BOE).
Specifically, this bill :
1)Amends the Civil Code to allow the BOE to reimburse a
manufacturer of a new motor vehicle for the use tax refunded
to a buyer or lessee when the new motor vehicle is reacquired
by the manufacturer pursuant to California's "Lemon Law."
2)Amends the Sales and Use Tax (SUT) Law to remove the
requirement that retailers and lenders file an election form
with the BOE prior to claiming a bad debt in the case of
accounts held by a lender that have been found worthless and
written off by the lender.
3)Amends the SUT Law to make a technical clarification to the
repair, retrofit, and modification exception related to the
12-month rebuttable presumption for vessels purchased outside
this state.
4)Amends the SUT Law to 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 action or collection action by the BOE.
5)Provides the BOE and the State Controller's Office (SCO) with
express authority to collect orders of restitution awarded to
the BOE in criminal proceedings in the same manner as tax
liabilities.
EXISTING LAW:
AB 1424
Page 2
1)Requires the BOE to reimburse a manufacturer for an amount
equal to the sales tax included in a restitution under
California's Lemon Law.
2)Requires retailers and lenders to file an electronic form with
the BOE designating which party is entitled to claim the bad
debt loss.
3)Provides that only a repair facility licensed by the county in
which it is located is able to qualify the owner for the
exception to the rebuttable presumption that any vehicle,
vessel, or aircraft that is brought into California within 12
months of purchase was acquired for use in California.
4)Allows 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 levy or notice to withhold.
5)Provides that orders of restitution are enforceable in the
same manner as if the order were a civil judgment. BOE's
orders of restitution may be collected either (a) by referring
the restitution order to the Franchise Tax Board (FTB) for
collection under the Court-Ordered Debt (COD) program, or (b)
as a civil money judgment. When the BOE and the SCO collect
an order of restitution as a civil money judgment, both
agencies must use the collection remedies available to any
creditor under the Code of Civil Procedure which require
obtaining a levy or a lien.
FISCAL EFFECT : Except for the Order of Restitution provisions,
this measure would have a negligible impact on state and local
revenues. Specifically:
Orders of Restitution : The BOE estimates:
1)That the BOE will incur one-time costs of $106,000.
2)Collecting $1,136,435 per year in additional restitution
COMMENTS :
1)This bill is sponsored by the BOE. The BOE has provided the
following comments in support of the provisions contained in
this measure:
AB 1424
Page 3
a) Lemon Law: Use Tax Reimbursement: "This bill simply
makes conforming changes to California's Lemon Law in light
of" applicable case law.
b) Bad Debt Election Form Requirement Repeal : "The BOE has
been administering these provisions for approximately 10
years, and these signed election forms have not been of any
assistance in verifying the validity of the claims for bad
debt losses, nor provided any valuable benefit to the BOE's
audit program. The BOE sees no compelling reason to
continue warehousing these election forms, or for burdening
taxpayers with filing this paperwork with the BOE.
Instead, the bill would require that the election form
simply be retained by both the retailer and the lender."
c) Vessels Purchased Outside this State : "Most local
jurisdictions in California require businesses to hold a
business license. However, when a business is located
within the city's jurisdiction, generally, if a business
license is required, the city, rather than the county,
licenses the business. Also, in some instances, a business
located within an unincorporated area of a county, is not
required to hold a business license at all (such as in
Shasta County, Santa Clara County, and San Diego County).
Consequently, the specific wording of the statute requiring
that the repair facility be licensed to do business by the
county in which it is located is not always fitting. This
could inadvertently subject a purchaser to use tax when the
purchaser brings a vessel purchased outside this state back
into California within the first 12 months of ownership and
uses a repair facility that either is not required to hold
a business license, or has an appropriate business license,
but not one issued by a county.
"This bill would clarify that as long as the repair
facility has a permit with the BOE and is licensed by the
city, county, or city and county, if so required, the
taxpayer's vessel purchase would meet the criteria for the
exception related to the 12-month rebuttable presumption,
and would not be subject to use tax (assuming all other
requirements not pertinent to this discussion are met)."
d) Claim for Bank Charge Reimbursement : "Occasionally, an
erroneous BOE action has resulted in the imposition of bank
or third party check charges and the particular erroneous
AB 1424
Page 4
BOE action was not technically a result of a BOE levy or
notice to withhold. For example, because of a BOE error, a
taxpayer's account has been double-debited when an
electronically-transferred payment made in connection with
an installment payment agreement was credited erroneously
by the BOE to another taxpayer's account. Due to the
double payment, the taxpayer's account had insufficient
funds, which resulted in bank fees for overdrafts. While
the BOE is able to reverse the erroneous debit, the law
contains no express statutory authority to reimburse the
taxpayer for any bank-imposed fees or third party check
charges the taxpayer may have incurred due to the error.
"It is only fair and equitable to reimburse taxpayers for
bank and third party check charges when those charges are
directly attributable to a BOE error, and to no fault of
the taxpayer. This proposed change is consistent the
intent of the original legislation that authorized the BOE
to reimburse taxpayers for such charges stemming from BOE
errors. Also, these proposed amendments are consistent with
provisions in Revenue and Taxation Code Section 21018
administered by the FTB."
e) Orders of Restitution : The BOE states that this law
would, "Streamline and accelerate the BOE's collection
process on orders of restitution," and "Utilize the
efficient collection tools available to both the BOE and
SCO for tax administration, thereby improving the
collection process for orders of restitution awarded to the
BOE in criminal proceedings."
REGISTERED SUPPORT / OPPOSITION :
Support
Board of Equalization (Sponsor)
Opposition
None on file
Analysis Prepared by : Myriam Bouaziz and M. David Ruff / REV. &
TAX. / (916) 319-2098
AB 1424
Page 5