BILL ANALYSIS Ó SB 901 Page 1 Date of Hearing: August 28, 2012 ASSEMBLY COMMITTEE ON JUDICIARY Bob Wieckowski, Chair SB 901 (Steinberg) - As Amended: August 22, 2012 As Proposed to Be Amended SUBJECT : TAXATION: UNDOCUMENTED IMMIGRANTS: CALIFORNIA OPPORTUNITY AND PROSPERITY ACT KEY ISSUE : SHOULD CALIFORNIA ESTABLISH A VOLUNTARY PILOT PROGRAM THAT MAY ENCOURAGE CERTAIN IMMIGRANTS TO PAY STATE INCOME TAXES AND THAT POTENTIALLY ALLOWS QUALIFYING PARTICIPANTS TO WORK AND REMAIN IN CALIFORNIA AT THE DISCRETION OF FEDERAL AUTHORITIES RESPONSIBLE FOR IMMIGRATION ENFORCEMENT? SYNOPSIS This laudable, author-sponsored bill seeks to enact the California Opportunity and Prosperity Act (COPA), legislation that would authorize until 2018 a pilot program intended to encourage certain immigrants in California to file state income tax returns, which could potentially generate a substantial amount of new tax revenue for the state. In order to incentivize participation in the program, this bill would have the Governor request the federal government not to expend resources on enforcement of immigration laws against qualifying program participants and their employers, potentially allowing participants to work and remain in California at the discretion of federal authorities. According to the author, the bill is intended to influence the federal government's exercise of prosecutorial discretion in immigration enforcement, and that the primary benefit participants may receive is the expectation that federal immigration authorities will classify them, if the need ever should arise, in the so-called "lowest priority tier" in the federal government's recently implemented tiered system of enforcement. The author states that the bill "seeks to mirror the Obama administration's latest statements on immigration policy," citing recent United States Immigration and Customs Enforcement (ICE) and Homeland Security memoranda that set forth how, in the exercise of prosecutorial discretion, each agency should refocus its enforcement resources and priorities. SB 901 Page 2 Proponents of the bill, including many immigrant advocates, community organizations and elected officials, contend that the possibility for program participants to remain and work in California, despite being undocumented, is an attractive incentive that will encourage participation and increase state tax receipts, perhaps generating as many as one million new taxpayers who would contribute an estimated $325 million annually in new revenue. This analysis concludes, however, that because the federal government is exclusively authorized to regulate immigration and immigrants, this bill cannot unfortunately guarantee program participants protection from immigration enforcement. Although the bill has no registered opposition, some immigrant advocates have expressed concern that the bill potentially creates an illusory promise of safe harbor to immigrants considering applying to the program. In addition, there are remaining questions about the bill's safeguards against possible disclosure or unauthorized use of information identifying undocumented participants. This bill was previously approved by the Revenue and Taxation Committee by a 5-1 vote. FISCAL EFFECT : Unknown. According to the Franchise Tax Board (FTB), this measure would not impact state revenues, and would likely result in minor fiscal costs. According to the Legislative Analyst's Office analysis of a similar ballot initiative, the measure would result in an unknown net change in annual state tax revenues through fiscal year 2017-18, but probably without a significant impact on overall General Fund revenues, and annual state administrative costs through FY 2017-18 in the hundreds of thousands or low millions of dollars, supported by required participant fees. SUMMARY : Establishes a voluntary program to encourage certain immigrants to pay state income taxes, and requests the federal government not to expend resources on enforcement of immigration laws against program participants. Specifically, this bill : 1)Defines "qualified person" as a natural person who meets all of the following criteria: a) Is not eligible to receive a social security number (SSN). b) Filed a state income tax return with a valid individual SB 901 Page 3 taxpayer identification number (ITIN) for the most recent taxable year that a return was required to be made, as specified. c) Is not employed by a public entity, including, but not limited to, the federal government, the State of California, or any political subdivision of the state. d) Declares that he or she is able to speak and understand English or is enrolled in, or has applied to enroll in, an English-as-a-second-language class, except as provided. e) Has not been convicted of a felony under California law. f) Is not a public charge, within the meaning of 8 U.S.C. section 1182(a)(4). g) Declares that he or she has been a resident of California continuously since at least January 1, 2008. h) Consents to a fingerprint background check, the disclosure of any information necessary to confirm program eligibility, and the disclosure of his or her name and federal ITIN to the FTB. 2)Requires the California Department of Justice (DOJ), until January 1, 2018, to administer the program established by this bill, including, among other things: a) Prescribe an application for program admission. b) Upon receipt of an application, investigate and determine whether the applicant meets the definition of a qualified person. c) Provide confirmation of admission and collect fees, as specified. 3)Requires the FTB to prepare and submit an annual report to the Legislature that details the tax receipts collected from program participants, without disclosing identifying information of any specific participant. 4)Provides that all identifying information of applicants or qualified persons in the program must be kept confidential and exempt from disclosure under the California Public Records Act, and must not be disclosed for any purpose. 5)Requires all records relating to the program that contain any individual identifying information be destroyed on January 1, 2019, or as soon as practicable thereafter, except as provided. SB 901 Page 4 6)Authorizes and directs the Governor on or after July 1, 2013, to request that the President direct the Department of Homeland Security, the ICE, and other relevant federal agencies not to expend resources during the term of the program on either of the following: a) The apprehension, detention, or removal of a program participant or the participant's spouse or eligible dependent, unless the participant, spouse, or eligible dependent meets one of the priority enforcement criteria set forth in the then-existing ICE policy on civil immigration enforcement. b) The prosecution of a person for employing a qualified person pursuant to 8 U.S.C. section 1324a. 7)Authorizes and directs the Governor on or after July 1, 2013, to request that the President provide any available waivers, exemptions, or authorizations necessary to provide a safe harbor for individuals and businesses from federal civil and criminal liability arising out of a qualified person's participation in the program or the employment of a qualified person during the term of the program. 8)Declares that these provisions shall remain in effect only until January 1, 2020, and are repealed as of that date. EXISTING LAW : 1)Provides for the regulation of immigration exclusively by the federal government. (E.g., LULAC v. Wilson, 908 F. Supp. 755, 786-87 (C.D. Cal. 1995).) 2)Authorizes the removal of aliens from the United States who were inadmissible at the time of their entry, have been convicted of certain crimes, have engaged in unauthorized work, or meet other criteria set by federal law. (8 U.S.C. section 1227.) 3)Provides that an agency's decision not to prosecute or enforce is a decision generally committed to an agency's absolute discretion (Heckler v. Chaney, 470 U.S. 821, 835 (1985), and that such prosecutorial discretion also applies to immigration enforcement activities. (Reno v. American-Arab Anti-Discrimination Comm., 525 U.S. 471, 478-79 (1999).) SB 901 Page 5 4)Prohibits an employer from employing any person whose immigration status makes them ineligible for work and imposes fines ranging from $250 to $10,000 for each undocumented worker, and criminal penalties for habitual violators ranging from a $3,000 fine to six months in prison. (8 U.S.C. section 274A.) 5)Pursuant to the Immigration Reform and Control Act of 1986 (IRCA), imposes sanctions on employers who knowingly hire or continue to employ undocumented workers, and requires every employer to verify the employment authorization status of prospective employees. (8 U.S.C. section 1324a, subd. (a).) 6)Provides that, notwithstanding any other provision of federal, state, or local law, no person or agency may prohibit or restrict a federal, state, or local government entity from doing any of the following with respect to information regarding the immigration status of any individual: a) Sending such information to, or requesting or receiving such information from, the Immigration and Naturalization Service. b) Maintaining such information. c) Exchanging such information with any other federal, state, or local government entity. (8 U.S.C. section 1373, subd. (b).) COMMENTS : This author-sponsored bill seeks to enact the California Opportunity and Prosperity Act, legislation that would authorize a pilot program intended to encourage certain immigrants in California to file state income tax returns and potentially generate a substantial amount of new tax revenue for the state. In order to incentivize participation in the program, this bill would have the Governor request that the federal government not expend resources enforcing immigration laws against qualifying program participants and their employers, potentially allowing participants to work and remain in California at the discretion of federal authorities. Those wishing to participate in the program would submit an application to the DOJ, who determines admission of qualified applicants by applying eligibility criteria specified by this bill. As proposed to be amended, the pilot program could admit its first applicants in 2014 and stop accepting applicants at the end of 2018, before authority for the program expires in 2020. SB 901 Page 6 Stated need for the bill : On their website ( www.calopportunity.org ), proponents of COPA state that this bill "would establish a framework for long-term law-abiding residents that will bring them out of the shadows and free them to be part of the California dream. COPA is based upon successful elements of the bipartisan Immigration and Control Act of 1986 (IRCA) championed by President Ronald Reagan." According to the author, this bill "gives qualified unauthorized residents who pay state income taxes the option to enter a program whose participants may gain relief from federal enforcement and whose labor may be decriminalized. Ultimately, this measure paves the way for California to formalize the federal government's stance on immigration reform." Brief summary of the proposed pilot program : The COPA program has two essential components, a tax component and an immigration relief component. The tax component is relatively simple, and described in more detail in the analysis of the Revenue and Taxation Committee, who previously heard and approved this bill. This analysis instead focuses on the legal issues associated with the main thrust of the bill-namely, the potential provision of "safe harbor" or other relief from federal immigration enforcement to individuals, most of whom are expected to be undocumented aliens, who voluntarily apply for participation and agree, among other things, to file state income tax returns (pursuant to existing tax law that allows this). Proponents of the bill contend that the possibility for program participants to enhance their ability to remain and work in California, despite being undocumented, is an attractive incentive that will make it worth their while to enroll in the program and start paying state taxes. According to the author, COPA "could generate as many as one million new taxpayers who would contribute an estimated $325 million annually to fund needed education, police, fire, and health services in California." Although the bill has no formal opposition, there remain many open questions about the bill, including: (1) whether the bill may be preempted by federal law because of its focus on immigration; (2) whether the bill confers any meaningful immigration-related benefits to program participants; and (3) unexplored questions regarding the possible disclosure or unauthorized use of identifying information of participants. SB 901 Page 7 Federal Preemption : Federal preemption carries particular force in the context of immigration because the federal government has broad, undoubted power over immigration and the status of aliens. (See, e.g., Toll v. Moreno, 458 U. S. 1, 10 (1982). Because this bill delves so closely into the subject of immigration, it is important to consider whether this bill may be preempted by federal law should it ultimately become law in California. Under the Supremacy Clause of the United States Constitution (Article VI, Clause 2), federal law may either expressly or implicitly preempt state or local law. (Hillsborough County v. Automated Med. Labs., 471 U.S. 707, 713 (1985).) In cases of express preemption, Congress "maŬkes] its intent known through explicit statutory language." (English v. Gen. Elec. Co., 496 U.S. 72, 78-79 (1990).) Implied preemption, on the other hand, arises in one of two circumstances-field preemption and conflict preemption. Field preemption occurs when a state or municipality purports to "regulate conduct in a field that Congress intended the Federal Government to occupy exclusively." (Id.) The intent to displace state law altogether can be inferred from a framework of regulation "so pervasive . . . that Congress left no room for the States to supplement it" or where there is a "federal interest . . . so dominant that the federal system will be assumed to preclude enforcement of state laws on the same subject." (Rice v. Santa Fe Elevator Corp., 331 U. S. 218, 230 (1947).) Under conflict preemption, a state law is preempted when it conflicts with federal law, including cases where "compliance with both federal and state regulations is a physical impossibility," (Florida Lime & Avocado Growers, Inc. v. Paul, 373 U. S. 132, 142-143 (1963)), or, alternatively, where the state law "stands as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress." (Rice, 331 U.S. at 230.) Enforcement of immigration laws relating to detention and removal. Under this bill, the Governor is required to request that the President direct federal immigration authorities "not to expend resources . . . on the apprehension, detention, or removal of a qualified person in the program (or his spouse or dependent), unless the qualified person meets one of the priority enforcement criteria set forth in the-then existing ICE policy on civil immigration enforcement." In addition, the President is requested to "provide any available waivers, SB 901 Page 8 exemptions, or authorizations necessary to provide a safe harbor for individuals . . . from federal civil and criminal liability arising out of a qualified person's participation in the program." An argument can be made that these provisions are preempted by implied preemption because one objective of the bill appears to be to help shield program participants from federal enforcement of immigration laws that provide for the detention and removal of undocumented immigrants. The regulation of immigration and immigrants, legal and illegal, is "unquestionably exclusively a federal power." (De Cana v. Bica, 424 U.S. 351, 354 (1976).) Moreover, Congress has occupied the field in this area and specified which aliens may be removed from the country and the procedures for doing so. (See 8 U.S.C. section 1227.) Were the bill to actually regulate or attempt to regulate in this area, such effort would almost certainly be foreclosed under field preemption. However, the bill seemingly does not enter that field of regulation because it does not provide a program participant with any assurance of relief from federal enforcement of immigration laws, nor does the bill interfere with the ability of federal officials to exercise their authority. Instead the bill simply conveys our state's request to the President and federal immigration authorities to exercise their prosecutorial discretion in a particular way, but without regulating or usurping undisputed federal authority to enforce the laws at their discretion. Enforcement of law prohibiting employment of undocumented persons. Under this bill, the Governor's request to the President to direct federal officials not to expend resources also extends to the prosecution of an employer for employing a qualified program participant. In addition, the President is requested to "provide any available waivers, exemptions, or authorizations necessary to provide a safe harbor for individuals and businesses from federal civil and criminal liability arising out of . . . the employment of a qualified person." Like the previous example, the bill requests but does not require federal authorities to exercise enforcement discretion under IRCA in a certain manner. Congress enacted IRCA as a comprehensive framework for "combating the employment of illegal aliens." (Hoffman Plastic SB 901 Page 9 Compounds, Inc. v. NLRB, 535 U. S. 137, 147 (2002).) Among other things, IRCA imposes sanctions on employers who knowingly hire or continue to employ undocumented workers, and requires every employer to verify the employment authorization status of prospective employees. (See 8 U.S.C. section 1324a(a)(1).) With respect to the bill's provisions encouraging exercise of discretion to not prosecute employers for employing program participants, potentially in violation of IRCA, a court could find implied preemption if it concludes that the bill intrudes into the comprehensive framework for regulating employers occupied by IRCA. In addition, conflict preemption may be an issue if a court finds that potentially relieving an employer of liability for employing an unauthorized worker "stands as an obstacle" to the purposes and objectives of Congress in enacting IRCA to combat the employment of aliens. However, as discussed above, this bill imposes no new regulatory requirements upon employers, and does not create any conflict for employers to comply with both IRCA and this bill, should this bill become state law. It simply requests that federal authorities exercise their discretion in a particular way. Benefits for Program Participants : The discussion above highlights the fact that immigration policy and the authority to enforce immigration laws lie squarely in the domain of the federal government. This bill, however, incentivizes undocumented persons to enroll in a state program with the proverbial carrots of potential "relief from immigration enforcement" and "decriminalization of labor," to closely paraphrase the author's words. Because the state cannot legislate or directly affect enforcement of immigration laws, it is reasonable to ask what benefits individuals can expect to realize if they choose to enroll in this program. In response to inquiries by the Committee, the author asserts that the primary benefit that participants may receive is the expectation that federal immigration authorities will classify them, if the need ever should arise, in the so-called "lowest priority tier" in the federal government's recently implemented tiered system of enforcement. According to the author, the bill is intended to influence the federal government's exercise of prosecutorial discretion in immigration enforcement and "seeks to mirror the Obama administration's latest statements on immigration policy," citing recent memoranda by the Director of ICE (June 17, 2011) and the Secretary of Homeland Security (June 15, 2012) that set forth how, in the exercise of prosecutorial SB 901 Page 10 discretion, each agency should refocus its enforcement resources and priorities. The author also notes that nothing in the bill seeks to change federal immigration law per se, nor seeks to provide a pathway to citizenship. Because the state cannot command or require particular enforcement discretion in the solely federal arena of immigration, in order to achieve the objective of "lowest priority tier" treatment, this bill takes the unusual step of having the Governor request the President to direct federal immigration officials not to expend resources on various immigration enforcement activities, for the duration of the program. It is prudent to consider whether this bill might have the Governor request the President to do something that the President may not have the legal authority to do. If the President lacks such authority, then that calls into question whether this bill is capable of conferring the type of favorable treatment and benefits that the author quite admirably aspires to provide. Prosecutorial discretion in immigration enforcement. As the U.S. Supreme Court recently explained in Arizona v. U.S., a principal feature of the immigration system is the broad discretion exercised by immigration officials. (132 U.S. 2492, 2499 (2012).) The Court "has recognized on several occasion over many years that an agency's decision not to prosecute or enforce, whether through civil or criminal process, is a decision generally committed to an agency's absolute discretion." (Heckler v. Chaney, 470 U.S. 821, 835 (1985).) Therefore, it is readily apparent that this bill requests the President to do something within his authority, namely to direct agencies under his executive control to allocate use of their resources to reflect certain priorities in the federal government's strategic approach towards immigration enforcement. Employment prohibitions. With respect to employment of unauthorized aliens, IRCA imposes sanctions on employers who knowingly hire or continue to employ undocumented workers, and other federal law prohibits any employer from employing a person whose immigration status makes them ineligible for work. The bill appears to be predicated on the President having the authority to isolate one group of persons-here, employers of program participants-and provide so-called "safe harbor" from liability under IRCA. The Committee's research did not reveal any such authority under IRCA. Thus, it is possible that this SB 901 Page 11 bill requests the President to exceed his authority by taking steps to exempt a certain class of persons from liability under a federal law that does not apparently provide for any such exemptions. Concluding comments. This bill offers the possibility of safe harbor and relief from enforcement to the extent that the federal government chooses to exercise its discretion to do so. However, because the federal government is exclusively authorized to regulate immigration and immigrants, this bill necessarily cannot guarantee program participants or their employers protections from immigration enforcement. The President, who may not be the same individual currently in office, could refuse the Governor's request. Even if the President makes the requested directive to immigration authorities, those officials still retain the right to enforce the immigration laws at their discretion, including the possible removal of program participants. At least one immigrant advocate group has expressed its concern that the bill potentially creates an illusory promise of safe harbor to immigrants considering applying to the program. In its letter to the committee, Chinese for Affirmative Action (CAA) does not formally oppose the bill, but nevertheless states the following concern: Safe harbor -- the primary desired benefit to be afforded to participants -- is premised on a successful request from the Governor to the U.S. Department of Homeland Security to not pursue enforcement and deportation actions against participants. Because the State of California has no formal or binding power to prevent the federal government from pursuing deportation actions, the promise of safe harbor as a result of AB901 is most likely to be illusory. Though there nonetheless may be other value in such a request being made by the Governor, they would be accompanied by significant risks. . . . includ(ing) imparting a false sense of protection and security for California immigrants, and facilitating the exploitation of immigrants by unscrupulous individuals who offer access to this program for personal financial gain. What unforeseen problems could arise from the possible disclosure or unauthorized use of information identifying SB 901 Page 12 undocumented persons? Under this bill, individuals wishing to participate in the program must submit an application to the DOJ, which determines admissibility to the program based on specific criteria. In order to administer the program, DOJ presumably must maintain a database of individuals who have been admitted and who remain eligible for participation. Furthermore, in order for this program to achieve its stated objective of providing immigration-related benefits to participants, the identifying participant information necessarily must be shared with federal immigration officials. Without such information, it would be impossible for those authorities to know what tier of enforcement to apply, for example, in a removal proceeding against a person enrolled in the state program. The benefits of the program are possible only when those who may benefit are known to the federal authorities able to exercise discretion in enforcement proceedings. With respect to safeguarding confidential information, the bill provides that all identifying information of program applicants and participants must be held confidential and exempt from disclosure under the California Public Records Act. In addition, the bill prohibits such information from being "disclosed for any purpose, except as provided . . . or as otherwise required by state or federal law." The author also notes that there are existing federal laws that prevent any sharing of tax information with any other government agency, particularly with ICE, and that the bill's Public Record Act exemption language was carefully crafted in consultation with both FTB and DOJ attorneys to survive challenge. Despite the very laudable goals of, and protections provided for in, the bill, some immigrant advocates have expressed concern about unforeseen problems that could arise from the possible disclosure or unauthorized use of this information, whether the disclosure is compelled by court order, inadvertently leaked, or stolen by hackers. For example, the Asian Law Caucus, who does not formally oppose the bill, wrote a letter to the Committee expressing the following concern: SB 901 will collect and store information on California's undocumented population without sufficient safeguards for confidentiality and privacy. This has the potential to become extremely hazardous for those individuals who choose to participate. The SB 901 Page 13 confidentiality and privacy of undocumented individuals must be taken very seriously. For example, given programs like U.S. ICE's controversial Secure Communities fingerprint program and the Next Generation Identification Program, there is a likelihood that U.S. Department of Homeland Security in the immediate or long-term future may seek access to this database of undocumented immigrants for purposes that may be punitive in nature for participants. CAA also states, "Unfortunately, there are federal statutes - 8 USC sections 1373 and 1644 - that limit state and local governments from interfering with the voluntary flow of immigration information. These may encourage state employees to share information with respect to undocumented individuals without appropriate negative consequence." Finally, there are several additional privacy-related questions that deserve more thoughtful consideration than is possible in this analysis: 1)Sec. 19540(b) of the bill prohibits disclosure for any purpose, but allows a broad exception to nondisclosure "as otherwise required by state or federal law." What are the other as-yet unidentified state or federal laws that may require disclosure of a person's identifying information in this context, and for what purpose? 2)If a program participant's identifying information is disclosed or released beyond what is authorized by this bill, does that person have any recourse against the person/entity that disclosed it? What about against a 3rd party that subsequently uses the information for a different unauthorized purpose? 3)Could DOJ be liable for any problem arising from unauthorized disclosure of confidential information? 4)Would a program participant have any recourse against the federal government for use of the information not authorized by this bill (for example, use of the information for the purpose of immigration enforcement)? Author's Amendments : In order to address certain operational SB 901 Page 14 concerns raised by DOJ, the author has proposed amendments to be taken in this Committee to: (1) postpone the start date of the program until January 1, 2014; (2) remove the requirement that a photograph accompany each application; and (3) revise the required background check to reflect only state-level criminal offender record information. These amendments appear below: On page 3, line 26-27, delete "the United States," On page 3, line 27, delete ", or any other state" On page 3, delete lines 28 through 31 inclusive. On page 3, delete "(7)" and insert "(6)" On page 3, delete "(8)" and insert "(7)" On page 3, delete "(9)" and insert "(8)" On page 3, delete "(10)" and insert "(9)" On page 4, line 18, delete "A" and insert "On or after January 1, 2014, a" On page 4, line 20, delete "The application shall require that an" and delete lines 21-22. On page 5, line 3, delete "2013" and insert "2014" On page 5, line 12, delete "2014" and insert "2015" Pending Related Legislation: AB 1081 (Ammiano) seeks to prohibit local police from detaining anyone on an immigration hold if the person is not charged with or has not been convicted of a serious or violent crime. This bill has passed both houses and is pending the Governor's signature. AB 1092 (Fuentes) is nearly identical in content to this bill, and is currently in the Senate Rules Committee. REGISTERED SUPPORT / OPPOSITION : Support ANAHUAK Youth Sports Association Central American Resource Center SB 901 Page 15 Comite de Festejos Centroamericanos Latino and Latina Roundtable of San Gabriel and Pomona Valley Pomona Speaks/ Habla Community Coalition Pueblo y Salud, Inc. Puerto el Triunfo, Inc. Southwest Voter Registration Education Project William C. Velasquez Institute Over 50 elected officials and representatives of community organizations Opposition None on file Analysis Prepared by : Anthony Lew / JUD. / (916) 319-2334