BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                      



           ------------------------------------------------------------ 
          |SENATE RULES COMMITTEE            |                  AB 1424|
          |Office of Senate Floor Analyses   |                         |
          |1020 N Street, Suite 524          |                         |
          |(916) 651-1520         Fax: (916) |                         |
          |327-4478                          |                         |
           ------------------------------------------------------------ 
           
                                         
                                 THIRD READING


          Bill No:  AB 1424
          Author:   Perea (D)
          Amended:  8/31/11 in Senate
          Vote:     21

           
           SENATE GOVERNANCE & FINANCE COMMITTEE  :  6-3, 7/6/11
          AYES:  Wolk, DeSaulnier, Hancock, Hernandez, Kehoe, Liu
          NOES:  Huff, Fuller, La Malfa

           SENATE APPROPRIATIONS COMMITTEE  :  6-3, 8/25/11
          AYES:  Kehoe, Alquist, Lieu, Pavley, Price, Steinberg
          NOES:  Walters, Emmerson, Runner
           
          ASSEMBLY FLOOR  :  Not relevant


           SUBJECT  :    Franchise Tax Board:  delinquent tax debt

           SOURCE  :     Author


           DIGEST  :    This bill requires both the Franchise Tax Board 
          and the Board of Equalization to expand public lists of tax 
          delinquents to include the 500 largest tax delinquencies 
          and provide for the suspension of professional, 
          occupational and driver's licenses of those whose names 
          appear on the lists.

           ANALYSIS  :    Existing law requires the Franchise Tax Board 
          (FTB) to annually publish, and the Board of Equalization 
          (BOE) to quarterly publish, a list of the 250 largest tax 
          delinquencies of more than $100,000 in taxes owed.  A 
                                                           CONTINUED





                                                               AB 1424
                                                                Page 
          2

          delinquency would be defined as an amount owed under state 
          tax laws administered by each agency and recorded as a 
          notice of state lien in any county recorder's office.  A 
          delinquency would not be included on the list if: it is 
          currently under litigation; payment arrangements have been 
          agreed to by both the taxpayer and the agency; the taxpayer 
          has filed for bankruptcy protection; or FTB has not 
          rejected a proposal for resolution of the delinquency, as 
          specified.  Existing law also requires BOE and FTB to 
          provide 30-day advance notice by certified mail to allow a 
          taxpayer the opportunity to make arrangements to resolve 
          the delinquency prior to inclusion on the list, and 
          provides a mechanism for removal of a delinquency from the 
          list.

          This bill is intended to increase tax compliance and 
          enforcement in order to reduce the tax gap.  This bill:

          1. Increases the BOE and FTB public lists of the top 250 
             tax delinquencies to the top 500 tax delinquencies and 
             require FTB to publish its list twice a year.  FTB's 
             list would also include information on any professional 
             or occupational licenses held by each tax delinquent.

          2. Provides for the suspension of occupational, 
             professional, and driver's licenses of tax delinquents 
             who appear on the public list of the 500 largest tax 
             delinquencies.

          3. Requires specified state governmental licensing entities 
             to refuse to issue or renew a license, and to suspend a 
             license if a licensee's name appears on the public list.

          4. Provides that suspension or refusal to renew a license 
             does not constitute denial or discipline of a licensee 
             for purposes of any reporting requirements to the 
             National Practitioner Data Bank and and shall not be 
             reported to the National Practitioner Data Bank or the 
             Healthcare Integrity and Protection Data Bank.

          5. Prescribes notice requirements, timeframes for 
             compliance, and a process for challenging the submission 
             of a name on the lists in order to provide due process 
             to those who may be subject to license suspension.

                                                           CONTINUED





                                                               AB 1424
                                                                Page 
          3


          6. Requires BOE and FTB to create release forms that 
             provide for the removal of a person from the tax 
             delinquency lists upon payment of unpaid taxes or entry 
             into an installment agreement, or in cases of financial 
             hardship within three business days.

          7. Prohibits a state agency from entering into a contract 
             for goods or services with a contractor whose name 
             appears on the tax delinquency lists.

          8. Authorizes BOE and FTB to enter into reciprocal 
             agreements with the Internal Revenue Service or other 
             states to provide for the collection of tax debts.

          This bill requires the Attorney General, the Department of 
          Insurance, the Department of Motor Vehicles, the State Bar, 
          the Department of Real Estate, and any other state agency, 
          board, or commission that issues an occupational or 
          professional license to administer provisions related to 
          license suspensions.  
          
           FISCAL EFFECT  :    Appropriation:  No   Fiscal Com.:  Yes   
          Local:  Yes

          According to the Senate Appropriations Committee:

                          Fiscal Impact (in thousands)

           Major Provisions       2011-12     2012-13     2013-14      Fund  

          FTB: tax revenue collections             ($19,000)  
          ($24,000)            ($26,000)           General
          BOE: tax revenue collections             ($264)     
          ($528)($528)         General*
          FTB administration   $750      $600      $600       General
          BOE administration   $75       $125      $125       General
          DMV: license suspensions       $400      $98        
          $91Special**
          DCA, DRE, CDI, CHP   Unknown, likely moderate costs for 
          each                 Special***          state entity to 
          administer license suspensions

           *   Staff notes that total sales and use tax revenue gains 

                                                           CONTINUED





                                                               AB 1424
                                                                Page 
          4

              are estimated at approximately $1.1 million annually.  
              Figures shown reflect only the General Fund portion.
           **  Motor Vehicle Account
           *** Various Special Funds

           SUPPORT  :   (Verified  8/31/11)

          California/Nevada Community Action Partnership
          California Tax Reform Association
          Jericho
          SEIU 1000
          Western Center on Law and Poverty

           OPPOSITION  :    (Verified  8/31/11)

          California Association of Realtors
          California Chapter of the American Fence Association
          California Fence Contractors Association
          California Landscape Contractors Association
          Engineering Contractors Association
          Flasher Barricade Association
          Marin Builders Association

           ARGUMENTS IN SUPPORT  :    The author's office indicates that 
          each year $6.5 billion of taxes owed to California go 
          unpaid.  As of May 2011, the top 250 delinquent taxpayers 
          owe more than $180 million dollars in delinquent personal 
          income and business taxes, with individual debts ranging 
          from $300,000 to over $14 million.  The current budget 
          problems have forced difficult cuts on education, public 
          safety, health and human services and many other programs 
          that hurt some of the most vulnerable Californians.  Since 
          2007, the Top 250 list has enabled the state to collect $81 
          million in owed taxes.  This bill would give the FTB 
          additional authority to collect the full amount owed by the 
          most delinquent taxpayers.  Nearly 90 percent of 
          Californians pay their taxes, however, to allow individuals 
          to avoid paying their fair share, places an undue burden on 
          those who do.  This bill takes the necessary steps to hold 
          the Top 500 debtors accountable and enable the FTB and BOE 
          to recover the substantial amount of money owed to 
          California.

           ARGUMENTS IN OPPOSITION  :    The California Association of 

                                                           CONTINUED





                                                               AB 1424
                                                                Page 
          5

          Realtors is opposed for several reasons, including (1) 
          suspending the license of an individual impedes the ability 
          of that individual to earn the compensation needed to feed, 
          clothe and house themselves as well as members of their 
          family; (2) suspending the license prevents the individual 
          from having the income necessary to pay their tax debts; 
          (3) the alleged tax debtor may have a legitimate dispute 
          regarding the amount of the tax and it is unfair to suspend 
          a license pending resolution of the dispute; (4) there is 
          no nexus between an individual's tax debt and the 
          individual's license - an individual's license should be 
          suspended only for wrongdoing related to the 
          license; and (5) the state already has several mechanisms 
          at its disposal to collect the tax debt.


          AGB:mw  8/31/11   Senate Floor Analyses 

                         SUPPORT/OPPOSITION:  SEE ABOVE

                                ****  END  ****
          























                                                           CONTINUED