BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                      



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          |SENATE RULES COMMITTEE            |                  SB 1015|
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                              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 
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          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.  

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             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

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