BILL ANALYSIS Ó ------------------------------------------------------------ |SENATE RULES COMMITTEE | SB 1015| |Office of Senate Floor Analyses | | |1020 N Street, Suite 524 | | |(916) 651-1520 Fax: (916) | | |327-4478 | | ------------------------------------------------------------ UNFINISHED BUSINESS Bill No: SB 1015 Author: Senate Budget and Fiscal Review Committee Amended: 6/25/12 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 and insert the above language. 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. Existing law requires multistate corporations to apportion income among the states based on specified criteria. From CONTINUED SB 1015 Page 2 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 Franchise Tax Board 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 Franchise Tax Board 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 revenues of $11 million in the current year and $27 million in 2012-13. 2. 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, and adopts non-inference language regarding this action. 3. Expands the Use of a Financial Institution Records Match . Authorizes the expansion of the Financial Institutions Records Match (FIRM) program to the Employment Development Department and Board of Equalization. The 2011 Budget Act authorized the Franchise Tax Board 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 Franchise Tax Board estimated that the use of FIRM would generate $30 million in additional General Fund revenues in 2011-12. CONTINUED SB 1015 Page 3 Expanding the FIRM program to tax programs administered by the Employment Development Department and Board of Equalization is expected to result in additional General Fund revenues of $4 million in 2011-12 and $11 million in 2012-13. Comments This bill facilitates the collection of tax liabilities that remain unpaid by changing the existing earnings withholding procedures; confirming the income apportionment method for multistate corporations; and expanding the existing Financial Institutions Records Match program from Franchise Tax Board to include taxes programs administered by the Employment Development Department and the Board of Equalization. FISCAL EFFECT : Appropriation: Yes Fiscal Com.: Yes Local: Yes According to the Senate Budget and Fiscal Review Committee, this bill will result in additional General Fund revenues of $15 million in 2011-12 and $38 million in 2012-13. AGB:m 6/27/12 Senate Floor Analyses SUPPORT/OPPOSITION: NONE RECEIVED **** END **** CONTINUED