BILL ANALYSIS Ó
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|SENATE RULES COMMITTEE | AB 1424|
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THIRD READING
Bill No: AB 1424
Author: Perea (D)
Amended: 9/2/11 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.
Senate Floor Amendments of 9/2/11 clarify who the
provisions of the bill apply to, exempt certain entities,
and add a definition.
CONTINUED
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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
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. Makes the requirement to issue, reactivate, reinstate or
renew a license permissive for the State Bar of
California and the Alcoholic Beverage Control Board.
4. Clarifies that licenses may not be suspended in proven
cases of hardship.
5. Defines "identifying information" as the name, social
security number, or taxpayer identification, and last
known address of the persons appearing on the list of
the 500 largest tax delinquencies.
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6. 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.
7. 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.
8. 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.
9. Prohibits a state agency from entering into a contract
for goods or services with a contractor whose name
appears on the tax delinquency lists.
10.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)
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($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
are estimated at approximately $1.1 million annually.
Figures shown reflect only the General Fund portion.
** Motor Vehicle Account
*** Various Special Funds
SUPPORT : (Verified 9/6/11)
California/Nevada Community Action Partnership
California Tax Reform Association
Consumer Federation of California
Jericho
SEIU 1000
Western Center on Law and Poverty
OPPOSITION : (Verified 9/6/11)
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
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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
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 9/6/11 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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