BILL ANALYSIS Ó
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UNFINISHED BUSINESS
Bill No: SB 1015
Author: Senate Budget and Fiscal Review Committee
Amended: 6/13/12
Vote: 21
PRIOR VOTES NOT RELEVANT
ASSEMBLY FLOOR : Not available
SUBJECT : Taxation Administration and Compliance Budget
Trailer Bill
SOURCE : Author
DIGEST : This bill makes various changes to state laws
regarding tax administration and compliance necessary for
the implementation of the Budget Act of 2012.
Assembly Amendments delete the Senate version of the bill
which contained intent language only and add the above
language instead.
ANALYSIS : Under existing law, the state is authorized to
issue a withholding order for taxes to collect an
outstanding state tax liability, including any penalties,
accrued interest, and costs in accordance with state law
and regulation. Currently, "state tax liability" is
defined to mean an amount for which the state has a state
tax lien created pursuant to specified provisions. Under
existing law, the Franchise Tax Board (FTB) imposes certain
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penalties in connection with tax avoidance and partially
conforms to federal law in this respect, but not with
respect to erroneous refund claims. Current law requires
multistate corporations to apportion income among the
states based on specified criteria. From 1993 through
2010, corporations were required to apportion income using
a four-factor formula based on the relative proportion in
California of property value, payroll cost and sales
revenue (weighted twice). Existing law allows the FTB to
use automatic data exchanges to identify accounts of
delinquent tax debtors held at financial institutions doing
business in California.
This bill includes the following provisions:
1. Changes the ability of FTB to impose earnings
withholding . Expedites and reduces the costs associated
with the earnings withhold process by expanding the term
"state tax liability" to include any liability under the
Personal Income Tax Law, Corporation Tax Law, or
specified franchise and income tax provisions that is
due and payable and that remains unpaid. The proposal
would save the administrative costs associated with
recording a lien. It would also allow the tax agency to
collect tax liabilities that are over 10 years old.
(Tax debts over 10 years old expire unless renewed by
recording a lien.) The change is expected to result in
additional General Fund (GF) revenues of $11 million in
the current year and $27 million in 2012-13.
2. Imposes a penalty on certain erroneous refund claims .
Alters state tax law to achieve additional conformity
with federal law by imposing a penalty for filing an
erroneous claim for refund, when the claim lacks a
reasonable basis. The corresponding federal treatment
imposes a penalty if a claim for refund is made for an
excessive amount unless there is a reasonable basis for
the claim. This bill closes a loophole in the general
accuracy-related penalty framework by imposing a penalty
is equal to 20% of the excessive amount. The new policy
is intended to further restrict the potential use of
refund requests when the reason for refund is not
substantiated. The estimated revenue impact is $1
million in 2011-12 and $3 million in 2012-13.
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3. Confirms existing law with respect to the apportionment
of income . Confirms that current law with respect to
apportionment of corporation income is pursuant to an
original return, repeals all provisions related to the
Multistate Tax Compact resulting in budgetary savings of
about $0.5 million, and adopts non-inference language
regarding this action.
4. Expands the use of a Financial Institution Records Match
(FIRM) . Authorizes the expansion of the FIRM program to
the Employment Development Department (EDD) and Board of
Equalization (BOE). The 2011 Budget Act authorized the
FTB to operate and administer FIRM and utilize automated
data exchanges to identify accounts of delinquent tax
debtors held at financial institutions doing business in
California. The FTB estimated that the use of FIRM
would generate $30 million in additional GF revenues in
2011-12. Expanding the FIRM program to tax programs
administered by the EDD and BOE is expected to result in
additional GF revenues of $4 million in 2011-12 and $11
million in 2012-13.
Comments
According to the Senate Budget and Fiscal Review Committee,
this bill facilitates the collection of tax liabilities
that remain unpaid by changing the existing earnings
withholding procedures; imposing a penalty on the filing of
refund claims with no reasonable basis; confirming the
income apportionment method for multistate corporations;
and expanding the existing FIRM program from FTB to include
taxes programs administered by the EDD and the BOE.
FISCAL EFFECT : Appropriation: Yes Fiscal Com.: Yes
Local: Yes
According to the Senate Budget and Fiscal Review Committee,
this bill will result in additional GF revenues of $16
million in 2011-12 and $41 million in 2012-13.
DLW:m 6/15/12 Senate Floor Analyses
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SUPPORT/OPPOSITION: NONE RECEIVED
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