BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                      



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          |SENATE RULES COMMITTEE            |                  SB 1548|
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                                 THIRD READING


          Bill No:  SB 1548
          Author:   Wyland (R)
          Amended:  5/8/12
          Vote:     21

           
           SENATE GOVERNANCE & FINANCE COMMITTEE  :  8-0, 4/25/12
          AYES:  Wolk, Dutton, DeSaulnier, Fuller, Hancock, 
            Hernandez, Kehoe, La Malfa
          NO VOTE RECORDED: Liu

           SENATE APPROPRIATIONS COMMITTEE  :  Senate Rule 28.8


           SUBJECT  :    Board of Equalization:  offer in compromise

           SOURCE  :     Board of Equalization


           DIGEST  :    This bill extends the sunset, from January 1, 
          2013 to January 1, 2018, on the Board of Equalizations 
          (BOE) authority to accept offers in compromise from firms 
          currently in operation.

           ANALYSIS  :    The Legislature first allowed the Franchise 
          Tax Board to accept offers in compromise (SB 94, Chesbro, 
          Chapter 931, Statutes of 1999), then later authorized the 
          Board of Equalization to do so for final tax liabilities 
          for owners of defunct businesses under the Sales and Use 
          Tax Law, the Use Fuel Tax Law, and the Underground Storage 
          Tank Maintenance Fee Law (AB 1458, Kelley, Chapter 152, 
          Statutes of 2002).   The Legislature then extended the 
          authority for the BOE to make offers in compromise for 
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          final tax liabilities under the Cigarette and Tobacco 
          Products Law, Alcoholic Beverage Tax Law, Timber Yield Tax 
          Law, Energy Resources Surcharge Law, Emergency Telephone 
          Users Surcharge Law, Hazardous Substances Tax Law, 
          Integrated Waste Management Fee Law, Fee Collection 
          Procedures Law, Diesel Fuel Tax Law, and the Oil Spill 
          Response Prevention and Administration Fees law (AB 3076, 
          Assembly Revenue and Taxation Committee, Chapter 364, 
          Statutes of 2006).  

          Under the BOE and Franchise Tax Board (FTB) programs, the 
          taxpayer must establish that the amount offered in payment 
          is the most that can be expected to be paid or collected 
          and they do not have reasonable prospects of acquiring 
          increased income or assets that would enable them to 
          satisfy a greater amount of the tax liability than the 
          amount offered.  BOE and FTB can reestablish the final tax 
          liability should the taxpayer have sufficient annual income 
          during the succeeding five-year period following the date 
          of the compromise.  When BOE and FTB determine that a 
          taxpayer concealed assets or falsified, withheld, 
          destroyed, or mutilated any book, document, or record 
          relating to their financial condition, they may reestablish 
          all compromised liabilities and the taxpayer may be found 
          guilty of a felony crime,  fined up to $50,000, and 
          imprisoned.

          In 2007, the Legislature expanded the program to allow BOE 
          to accept offers in compromise for businesses currently in 
          operation, as many taxpayers were surprised when BOE audits 
          uncovered transactions that the taxpayer didn't know were 
          taxable, so they never charged consumers the tax (AB 2047, 
          Horton, Chapter 222, Statutes of 2008).

          This bill extends the sunset, from January 1, 2013 to 
          January 1, 2018, on the BOE's authority to accept offers in 
          compromise from firms currently in operation.  This bill 
          applies to the Sales and Use Tax Law, Cigarette and Tobacco 
          Products Law, Use Fuel Tax Law, Alcoholic Beverage Tax Law, 
          Emergency Telephone Users Surcharge Law, Fee Collection 
          Procedures Law, Diesel Fuel Tax Law, and the Oil Spill 
          Response Prevention and Administration Fees law.

           Comments

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          When the Senate Revenue and Taxation Committee, the 
          predecessor to the Senate Governance and Finance Committee, 
          approved AB 2047 in 2008, it inserted a sunset to review 
          the authority granted by the bill to accept offers from 
          firms still in operation.  According to BOE, they have 
          accepted a total of eight offers from firms that were not 
          defunct when they made the offer, seven of which are still 
          in operation.   The total amount collected was $532,668, 
          and the BOE forgave approximately $357,000 when accepting 
          those offers.  

           FISCAL EFFECT  :    Appropriation:  No   Fiscal Com.:  Yes   
          Local:  Yes

          According to BOE, SB 1548 results in revenue increases of 
          $286,034 per year.  

           SUPPORT  :   (Verified  5/8/12)

          Board of Equalization (source) 
          BOE Member George Runner
          California Chamber of Commerce
          California Growers Association
          California Taxpayers' Association
          Grass Valley/Nevada Chamber of Commerce
          Industry Manufacturing Council
          Laguna Beach Chamber of Commerce
          Los Angeles Area Chamber of Commerce
          National Federation of Independent Business
          Orange Chamber of Commerce

           ARGUMENTS IN SUPPORT  :    According to the author's office, 
          "Offer in Compromise ÝOIC] programs are mechanisms that 
          government agencies use to help taxpayers settle 
          outstanding tax liabilities that they could not pay in full 
          without having to declare bankruptcy.  The goal of 
          establishing an OIC program is to incentivize taxpayers to 
          negotiate with the government agency to pay a reduced 
          amount to settle their tax liability.  This approach allows 
          the taxpayer to keep their business open, which creates 
          further economic development.  At the same time, OIC 
          programs increase the likelihood that tax liabilities will 
          be collected, even if for a reduced amount.  Both the 

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          Internal Revenue Service (IRS) and the California Franchise 
          Tax Board (FTB) operate OIC programs for both taxpayers and 
          businesses."


          AGB:nl  5/9/12   Senate Floor Analyses 

                         SUPPORT/OPPOSITION:  SEE ABOVE

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