BILL ANALYSIS Ó
Senate Appropriations Committee Fiscal Summary
Senator Christine Kehoe, Chair
AB 1424 (Perea)
Hearing Date: 08/25/2011 Amended: 08/18/2011
Consultant: Mark McKenzie Policy Vote: G&F 6-3
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BILL SUMMARY: AB 1424 would require both the Franchise Tax Board
(FTB) and the Board of Equalization (BOE) 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.
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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
eachSpecial***
state entity to administer license
suspensions
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* Staff notes that total sales and use tax revenue gains are
estimated at approximately $1.1 million annually. Figures shown
reflect only the General Fund portion.
**Motor Vehicle Account
*** Various Special Funds
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STAFF COMMENTS: SUSPENSE FILE. AS PROPOSED TO BE AMENDED.
Existing law requires the FTB to annually publish, and the BOE
to quarterly publish, a list of the 250 largest tax
delinquencies of more than $100,000 in taxes owed. A
delinquency would be defined as an amount owed under state tax
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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 would
provide 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. Among other things, this bill
would:
Increase 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.
Provide for the suspension of occupational, professional, and
driver's licenses of tax delinquents who appear on the public
lists.
Require 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 lists.
Prescribe 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.
Require 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.
Prohibit a state agency from entering into a contract for
goods or services with a contractor whose name appears on the
tax delinquency lists.
Authorize 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 would require the Attorney General, the Department of
Insurance (CDI), the Department of Motor Vehicles (DMV), the
State Bar, the Department of Real Estate (DRE), and any other
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state agency, board, or commission that issues an occupational
or professional license to administer provisions related to
license suspensions. Each of these entities would be required
to revise application forms, collect the social security numbers
of applicants for purposes of matching names on BOE and FTB
lists, and administer the prescribed due process provisions
prior to suspending licenses. The DMV indicates that it would
incur one-time programming costs of $400,000 and ongoing
administrative costs of nearly $100,000 for .7 PY of staff time.
Administrative costs incurred by the other specified entities
are currently unknown, but likely minor to moderate, depending
on the number of licensees who appear on the lists. Staff notes
that the bill authorizes state governmental licensing entities
to impose a fee on a licensee whose license has been suspended,
not to exceed administrative costs incurred. Most of the
occupational and professional licensing entities are likely to
suspend very few licenses in any given year, so it is unclear
whether fees charged to those whose licenses are suspended would
be sufficient to cover costs. FTB indicates, for example, that
42 of the individuals on the current list of 250 tax delinquents
possess an occupational license.
Since the publication of the top 250 tax delinquencies by the
BOE and FTB in 2007, the state has collected an additional $81
million in income and corporate taxes, and over $5 million in
taxes owed to the BOE. Increasing the list to include the top
500 tax delinquencies in conjunction with additional collection
tools is anticipated to increase tax revenue collections by
approximately $25 million annually.
The BOE indicates that the current list of 250 sales and use tax
accounts of over $100,000 amounts to over $400 million in
aggregate tax delinquencies. Expanding the list to 500
delinquent accounts is expected to add $100 million in
outstanding delinquencies to the list, for a total of over $500
million. BOE estimates that increasing the list of tax
delinquencies and providing authority to suspend professional,
occupational, and driver's licenses could generate an additional
$1.1 million in annual state and local sales and use tax
collections, of which $528,000 would be attributable to the
General Fund. BOE would incur administrative staffing costs of
approximately $75,000 in 2011-12 and ongoing costs of $125,000
to manage the list of tax delinquencies.
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FTB estimates first year implementation costs would be $750,000
and ongoing annual costs would be approximately $600,000. These
amounts do not include costs to manage reciprocal collections
with the IRS or other states because any costs would be
contingent upon other states enacting legislation that provides
similar authority. As of May of 2011 the top 250 delinquent
taxpayers owed more than $180 million in personal income and
corporate taxes, with individual debts ranging from $300,000 to
over $14 million. FTB estimates that this bill would result in
increased tax collections of $19 million in 2011-12, $24 million
in 2012-13, and $26 million in 2013-14.
PROPOSED COMMITTEE AMENDMENTS would:
Specify that any governmental entity that discloses on a
website that a person's license has been denied or suspended
as a result of the bill would also note that the only reason
the license was denied or suspended is for failure to pay
taxes.
Require the internet disclosure of a license suspension or
revocation to be purged from a government website within three
business days of that licensee's removal from the certified
list of tax delinquencies.
Make several other minor and technical changes.